10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-33672

PALISADE BIO, INC.

(Exact name of registrant as specified in its charter)

Delaware	52-2007292
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
7750 El Camino Real, Suite 5200 Carlsbad, California	92009
(Address of principal executive offices)	(Zip Code)

(858) 704-4900

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	PALI	Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 10, 2022, there were 77,080,169 shares of common stock, $0.01 par value, outstanding.

Palisade Bio, Inc.

Table of Contents

		Page
PART I -	FINANCIAL INFORMATION	1
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)	3
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	37
Item 4.	Controls and Procedures	37
PART II -	OTHER INFORMATION	40
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	73
Item 3.	Defaults Upon Senior Securities	73
Item 4.	Mine Safety Disclosure	73
Item 5.	Other Information	73
Item 6.	Exhibits	74
SIGNATURES		77

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PART I

FINANCIAL INFORMATION

ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Palisade Bio, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

	September 30,			December 31,
	2022			2021
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	13,985		$	10,495
Prepaid expenses and other current assets		1,173			1,011
Total current assets		15,158			11,506
Restricted cash		26			26
Right-of-use asset		324			109
Other noncurrent assets		746			868
Property and equipment, net		12			3
Total assets	$	16,266		$	12,512
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	1,725		$	1,323
Accrued liabilities		1,242			463
Accrued compensation and benefits		93			511
Current portion of lease liability		101			112
Debt		352			87
Total current liabilities		3,513			2,496
Warrant liability		84			2,651
Lease liability, net of current portion		239			—
Total liabilities		3,836			5,147
Commitments and contingencies (Note 10)
Stockholders' equity:
Series A Convertible Preferred Stock, 7,000,000 shares authorized, $0.01 par value; 200,000 issued and outstanding at September 30, 2022 and December 31, 2021		2			2
Common stock, $0.01 par value; 300,000,000 shares authorized as of September 30, 2022 and December 31, 2021, 77,080,169 and 14,239,177 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		771			143
Additional paid-in capital		116,839			101,862
Accumulated deficit		(105,182	)		(94,642	)
Total stockholders' equity		12,430			7,365
Total liabilities and stockholders' equity	$	16,266		$	12,512

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

1

Palisade Bio, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except share and per share amounts)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Operating expenses:
Research and development	$	1,928		$	624		$	4,204		$	1,630
In-process research and development		—			—			—			30,117
General and administrative		2,075			2,392			7,259			6,080
Restructuring costs (Note 10)		410			—			410			—
Total operating expenses		4,413			3,016			11,873			37,827
Loss from operations		(4,413	)		(3,016	)		(11,873	)		(37,827	)
Other income (expense):
Gain on forgiveness of PPP loan		—			—			—			279
Loss on issuance of secured debt		—			—			—			(686	)
Gain on change in fair value of warrant liability		385			12,764			2,403			17,939
Gain on change in fair value of share liability		—			18			—			91
Interest expense		(4	)		(26	)		(10	)		(2,393	)
Other income		41			20			50			36
Loss on issuance of LBS Series 1 Preferred Stock		—			—			—			(1,881	)
Loss on issuance of warrants		—			(1,673	)		(1,110	)		(3,247	)
Total other income (expense)		422			11,103			1,333			10,138
Net (loss) income	$	(3,991	)	$	8,087		$	(10,540	)	$	(27,689	)
(Loss) income per common share:
Basic	$	(0.08	)	$	0.42		$	(0.37	)	$	(3.50	)
Diluted	$	(0.08	)	$	0.42		$	(0.37	)	$	(4.13	)
Weighted average shares used in computing (loss) income per common share:
Basic		48,709,846			12,100,292			28,634,209			7,902,104
Diluted		48,709,846			12,106,771			28,634,209			7,952,998
Net (loss) income attributable to common shares - basic	$	(3,991	)	$	5,118		$	(10,540	)	$	(27,689	)
Net (loss) income attributable to common shares - diluted	$	(3,991	)	$	5,119		$	(10,540	)	$	(32,808	)

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

2

Palisade Bio, Inc.

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands, except share amounts)

(Unaudited)

	Three Months Ended September 30, 2022
	Series B Convertible Preferred Stock					Preferred Stock				Common Stock				Additional Paid-in Capital			Accumulated Deficit			Total Stockholders' Equity (Deficit)
	Shares			Amount		Shares		Amount		Shares		Amount
Balance, June 30, 2022		—		$	—		200,000	$	2		21,880,169	$	220	$	105,180		$	(101,191	)	$	4,211
Net loss		—			—		—		—		—		—		—			(3,991	)		(3,991	)
Stock-based compensation expense		—			—		—		—		—		—		252			—			252
Issuance of Class A Units and Class B Units in August 2022 Public Offering, net of issuance costs of $2,293 (Note 6)		1,460			—		—		—		49,360,000		493		11,465			—			11,958
Issuance of common stock upon conversion of Series B Convertible Preferred Stock		(1,460	)		—		—		—		5,840,000		58		(58	)		—			—
Balance, September 30, 2022		—		$	—		200,000	$	2		77,080,169	$	771	$	116,839		$	(105,182	)	$	12,430

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

3

Palisade Bio, Inc.

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands, except share amounts)

(Unaudited)

	Three Months Ended September 30, 2021
	Series C Convertible Preferred Stock				Preferred Stock				Common Stock				Additional Paid-in Capital		Accumulated Deficit			Total Stockholders' Equity (Deficit)
	Shares		Amount		Shares		Amount		Shares		Amount
Balance, June 30, 2021		—	$	—		200,000	$	2		11,398,698	$	114	$	94,242	$	(103,802	)	$	(9,444	)
Net income		—		—		—		—		—		—		—		8,087			8,087
Issuance of common stock and warrants in private placement, net of issuance costs of $67		—		—		—		—		1,509,896		15		5,126		—			5,141
Conversion of share liability to common stock		—		—		—		—		12,500		1		32		—			33
Conversion of restricted stock units to common stock		—		—		—		—		8,817		—		—		—			—
Stock-based compensation expense		—		—		—		—		—		—		103		—			103
Balance, September 30, 2021		—	$	—		200,000	$	2		12,929,911	$	130	$	99,503	$	(95,715	)	$	3,920

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

4

Palisade Bio, Inc.

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands, except share amounts)

(Unaudited)

	Nine Months Ended September 30, 2022
	Series B Convertible Preferred Stock					Preferred Stock				Common Stock				Additional Paid-in Capital			Accumulated Deficit			Total Stockholders' Equity (Deficit)
	Shares			Amount		Shares		Amount		Shares		Amount
Balance, December 31, 2021		—		$	—		200,000	$	2		14,239,177	$	143	$	101,862		$	(94,642	)	$	7,365
Net loss		—			—		—		—		—		—		—			(10,540	)		(10,540	)
Stock-based compensation expense		—			—		—		—		—		—		946			—			946
Issuance of common stock upon warrant exercises		—			—		—		—		3,994,302		40		1,234			—			1,274
Issuance of common stock and warrants in May 2022 Registered Direct Offering, net of issuance costs of $634 (Note 6)		—			—		—		—		3,646,690		37		1,390			—			1,427
Issuance of Class A Units and Class B Units in August 2022 Public Offering, net of issuance costs of $2,293 (Note 6)		1,460			—		—		—		49,360,000		493		11,465			—			11,958
Issuance of common stock upon conversion of Series B Convertible Preferred Stock		(1,460	)		—		—		—		5,840,000		58		(58	)		—			—
Balance, September 30, 2022		—		$	—		200,000	$	2		77,080,169	$	771	$	116,839		$	(105,182	)	$	12,430

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

5

Palisade Bio, Inc.

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands, except share amounts)

(Unaudited)

	Nine Months Ended September 30, 2021
	Series C Convertible Preferred Stock						Preferred Stock					Common Stock				Additional Paid-in Capital			Accumulated Deficit			Total Stockholders' Equity (Deficit)
	Shares			Amount			Shares			Amount		Shares		Amount
Balance, December 31, 2020		11,674,131		$	9,503			—		$	—		2,774,502	$	28	$	51,396		$	(68,026	)	$	(16,602	)
Net loss		—			—			—			—		—		—		—			(27,689	)		(27,689	)
Issuance of common stock to vendor		—			—			—			—		118,833		1		1,183			—			1,184
Issuance of common stock warrants related to promissory note		—			—			—			—		—		—		16			—			16
Issuance of LBS Series 1 Preferred shares upon conversion of senior secured debt		—			—			786,957			—		—		—		2,421			—			2,421
Issuance of LBS Series 1 Preferred shares		—			—			4,516,611			—		—		—		—			—			—
Conversion of LBS Series 1 Preferred stock to common shares upon Merger		—			—			(5,303,568	)		—		5,303,568		53		(53	)		—			—
Conversion of LBS Series C Convertible Preferred shares to common shares upon Merger		(11,674,131	)		(9,503	)		—			—		317,420		3		9,500			—			9,503
Issuance of common shares to former shareholders of Seneca upon Merger		—			—			—			—		2,884,375		29		28,699			—			28,728
Acquisition of Seneca Series A Convertible Preferred Stock upon Merger		—			—			200,000			2		—		—		—			—			2
Equity warrant put rights activated upon Merger		—			—			—			—		—		—		(51	)		—			(51	)
Expiration of put rights on equity classified warrants		—			—			—			—		—		—		26			—			26
Issuance of common stock and warrants in private placement, net of issuance costs of $67		—			—			—			—		1,509,896		15		5,126			—			5,141
Conversion of share liability to common stock		—			—			—			—		12,500		1		32			—			33
Conversion of restricted stock units to common stock		—			—			—			—		8,817		—		—			—			—
Stock-based compensation expense		—			—			—			—		—		—		1,208			—			1,208
Balance, September 30, 2021		—		$	—			200,000		$	2		12,929,911	$	130	$	99,503		$	(95,715	)	$	3,920

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

6

Palisade Bio, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

	Nine Months Ended September 30,
	2022			2021
Net loss	$	(10,540	)	$	(27,689	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1			2
In-process research and development		—			30,117
Noncash transaction costs shared with Seneca		—			(135	)
Noncash lease expense		140			122
Gain on forgiveness of PPP loan		—			(279	)
Accretion of debt discount and non-cash interest expense		—			2,334
Loss on issuance of LBS Series 1 Preferred Stock		—			1,881
Loss on issuance of secured debt		—			686
Loss on issuance of warrants		1,110			3,247
Change in fair value of warrant liabilities		(2,403	)		(17,939	)
Change in fair value of share liability		—			(91	)
Stock-based compensation		946			1,208
Other		(213	)		(191	)
Changes in operating assets and liabilities:
Other receivables		—			84
Prepaid and other assets and other noncurrent assets		744			(1,264	)
Accounts payable and accrued liabilities		706			(2,145	)
Accrued compensation		(418	)		(1,544	)
Operating lease liabilities		(127	)		(122	)
Net cash used in operating activities		(10,054	)		(11,718	)
Cash flows from investing activities:
Cash acquired in connection with the Merger		—			3,279
Acquisition related costs paid		—			(3,333	)
Net cash used in investing activities		—			(54	)
Cash flows from financing activities:
Payments on debt		(524	)		(949	)
Proceeds from issuance of debt		—			1,250
Proceeds from issuance of LBS Series 1 Preferred Stock		—			19,900
Proceeds from issuance of common stock and warrants		14,401			5,209
Redemption of warrants		—			(99	)
Payment of equity issuance costs		(333	)		—
Payment of debt issuance costs		—			(148	)
Net cash provided by financing activities		13,544			25,163
Net (decrease) increase in cash, cash equivalents and restricted cash		3,490			13,391
Cash, cash equivalents and restricted cash, beginning of period		10,521			739
Cash, cash equivalents and restricted cash, end of period	$	14,011		$	14,130
Reconciliation of cash, cash equivalents and restricted cash to the balance sheets:
Cash and cash equivalents		13,985			14,104
Restricted cash		26			26
Total cash, cash equivalents and restricted cash	$	14,011		$	14,130
Supplemental disclosure of cash flows:
Interest paid	$	10		$	61
Right-of-use assets obtained in exchange for lease liabilities	$	355		$	—
Supplemental disclosures of non-cash investing and financing activities:
Equity issuance costs included in accounts payable and accrued liabilities	$	683		$	67
Issuance of common stock for the cashless exercise of warrants	$	1,274		$	—
Fair value of warrants issued to placement agent	$	55		$	—
Fair value of warrants issued to underwriter agent	$	459		$	—
Issuance of common stock upon conversion of Series B Convertible Preferred Stock	$	58		$	—
Insurance financing arrangements included in prepaid and other assets	$	784		$	772
Purchase of property and equipment included in accounts payable and accrued liabilities	$	10		$	—
Transaction costs shared with Seneca	$	—		$	135
Acquisition costs related to stock issuance	$	—		$	1,184
Issuance of common stock to former Seneca stockholders	$	—		$	28,728
Conversion of LBS Series C Convertible Preferred stock into common stock	$	—		$	9,503
Net assets acquired in the Merger	$	—		$	2
Acquisition related vesting of RSU’s assumed in the Merger	$	—		$	41
Acquisition related fair value change in warrant liability assumed in the Merger	$	—		$	51

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

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PALISADE BIO, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Organization, Business and Financial Condition

The Merger

On April 27, 2021, Leading Biosciences, Inc. (“LBS”) became a wholly owned subsidiary of Seneca Biopharma Inc. (“Seneca”) in accordance with the terms of the agreement and plan of merger and reorganization, dated as of December 16, 2020, (the “Merger Agreement”) by and among Seneca, Townsgate Acquisition Sub 1, Inc., a wholly owned subsidiary of Seneca (“Merger Sub”), and LBS, pursuant to which Merger Sub merged with and into LBS, with LBS surviving as a wholly owned subsidiary of Seneca (the “Merger”). Concurrent with the closing of the Merger, LBS outstanding common stock, common stock warrants and options for the purchase of LBS common stock were exchanged for Seneca common stock, Seneca common stock warrants, and options for the purchase of Seneca common stock, at a ratio of 0.02719 shares of LBS common stock equivalents to one share of Seneca common stock equivalents (the “Exchange Ratio”). On April 27, 2021, in connection with the Merger, Seneca filed a certificate of amendment to its amended and restated certificate of incorporation to affect a 1-for-6 reverse stock split of its common stock (the "Reverse Stock Split"). The par value and the authorized shares of the common stock were not adjusted as a result of the Reverse Stock Split. The final Exchange Ratio incorporated the effect of this Reverse Stock Split, and all issued and outstanding common stock have been retroactively adjusted to reflect this Reverse Stock Split for all periods presented. All issued and outstanding shares of LBS common stock and shares of common stock underlying convertible preferred stock, options and warrants prior to the effective date of the Merger have been retroactively adjusted to reflect the Exchange Ratio for all periods presented herein these condensed consolidated financial statements.

Unless the context otherwise requires, references to the “Company,” “Palisade,” “Palisade Bio,” the “combined organization,” “we,” “our” or “us” in this report refer to Palisade Bio, Inc. and its subsidiaries after completion of the Merger. In addition, references to “Seneca” or “LBS” refer to these entities prior to the completion of the Merger.

Description of Business

The Company is a clinical stage biopharmaceutical company advancing therapies that aim to aid patients suffering with acute and chronic gastrointestinal complications stemming from post-operative digestive enzyme damage. The Company's lead asset LB1148, is a protease inhibitor with the potential to both reduce abdominal adhesions and help restore bowel function following surgery. The Company believes that its investigational therapies have the potential to address the many health conditions and complications associated with the chronic disruption to the gastrointestinal epithelial barrier.

Liquidity and Going Concern

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 losses and negative cash flows from operations since its inception. At September 30, 2022, the Company had an accumulated deficit of $105.2 million and cash and cash equivalents of $14.0 million. The Company expects to continue to incur losses into the foreseeable future. The successful transition to attaining profitable operations is dependent upon achieving a level of revenues adequate to support the Company’s cost structure.

Historically, the Company has funded its operations primarily through a combination of debt and equity financings. Management anticipates continuing to raise capital from the sale of its securities or through agreements, such as entering into potential partnering events for Company’s existing technology. However, no assurance can be given as to whether the Company will achieve these objectives. Based on the Company’s current business plan, management believes that existing cash and cash equivalents will not be sufficient to fund the Company’s obligations for at least 12 months from the date of issuance of these financial statements. The Company’s ability to execute its operating plan depends on its ability to obtain additional funding through equity offerings, debt financings or potential licensing and collaboration arrangements. The condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and settlement of liabilities in the normal course of business. However, the Company’s current working capital, anticipated operating expenses

8

and net operating losses raise substantial doubt about its ability to continue as a going concern for a period of one year following the date that these condensed consolidated financial statements are issued. The condensed consolidated financial statements do not include any adjustments for the recovery and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The Company plans to continue to fund its operations through cash and cash equivalents on hand, as well as through future equity offerings, debt financings, other third-party funding, and potential licensing or collaboration arrangements. Refer to Note 6, Stockholders' Equity, for discussion of the recent financings undertaken by the Company. There can be no assurance that additional funds will be available when needed from any source or, if available, will be available on terms that are acceptable to the Company. Even if the Company raises additional capital, it may also be required to modify, delay or abandon some of its plans which could have a material adverse effect on the Company’s business, operating results and financial condition and the Company’s ability to achieve its intended business objectives. Any of these actions could materially harm the Company’s business, results of operations and future prospects.

COVID-19

In April 2020, as a result of impacts and risks associated with the COVID-19 pandemic (COVID-19), the Company paused enrollment and program activities surrounding the Company’s clinical trials of its lead therapeutic candidate, LB1148, due primarily to slower enrollment. The Company's phase 2 clinical study for the prevention of post-surgical abdominal adhesions re-started in February 2022, and in June 2022 the Company initiated its phase 3 clinical study for the return of bowel function. Notwithstanding, the Company paused enrollment in this phase 3 clinical study pending the determination of next steps for the study. The Company cannot predict how legal and regulatory responses to ongoing concerns about COVID-19 or other major public health issues will impact the Company’s business, nor can it predict potential adverse impacts related to the availability of capital to fund the Company’s operations. Any of these factors, alone or in combination with others, could harm the Company’s business, results of operations, financial condition or liquidity. However, the magnitude, timing, and duration of any such potential financial impacts cannot be reasonably estimated at this time.

2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

In management’s opinion, the accompanying interim condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, which are necessary to present fairly the Company's financial position, results of operations and cash flows. The interim results of operations are not necessarily indicative of the results that may occur for the full year. Certain information and note disclosures normally included in the consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to instructions, rules and regulations prescribed by the U.S. Securities and Exchange Commission (“SEC”). The Company believes that the disclosures provided herein are adequate to make the information presented not misleading when these condensed consolidated financial statements are read in conjunction with the condensed consolidated financial statements and notes included in the Company’s financial statements filed on the Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on March 17, 2022.

The accompanying condensed consolidated financial statements prior to the closing of the Merger are representative of LBS’s operations as LBS was determined to be the accounting acquirer for financial reporting purposes. The condensed consolidated financial statements subsequent to the closing of the Merger include the accounts of the Company and its wholly owned subsidiaries, Leading Biosciences, Inc. and Suzhou Neuralstem Biopharmaceutical Co., Ltd. All the entities are consolidated in the Company's condensed consolidated financial statements and all intercompany activity and transactions, if any, have been eliminated.

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 condensed consolidated financial statements relate to clinical trial accruals, and the valuation of derivative liabilities and stock-based compensation instruments. Although these

9

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.

Segment Information

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, the Chief Executive Officer, in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business as one operating segment which consists of research and development activities.

Cash and Cash Equivalents

Cash and cash equivalents represent cash available 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 September 30, 2022 and December 31, 2021, the Company held restricted cash of $26,000, 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 condensed 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. As of September 30, 2022, deferred equity issuance costs of $81,000 were included in prepaid and other assets in the condensed consolidated balance sheet. There were no deferred equity issuance costs as of December 31, 2021. These costs will be netted against additional paid-in capital as a cost of the future equity issuances to which they relate.

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 nor has the Company experienced any losses in these accounts.

Convertible Preferred Stock

The Company’s Series C Convertible Preferred Stock has been classified as temporary equity, in accordance with authoritative guidance of ASC 480-10-S99 for the classification and measurement of potentially redeemable securities, as the Series C Convertible Preferred Stock are redeemable for cash or other assets upon the occurrence of an event that is not solely within the Company’s control, including the liquidation, sale or transfer of control of the Company.

In connection with the Merger, the Series C Convertible Preferred Stock converted to common stock.

Fair Value of Financial Instruments

The Company’s financial instruments consist principally of cash and cash equivalents, restricted cash, accounts payable, accrued liabilities, and derivative liabilities. The carrying amounts of financial instruments such as cash equivalents, restricted cash, accounts payable, and accrued liabilities approximate their related fair values due to the short-term nature of these instruments. The carrying value of the Company’s debt approximates its fair value due to the market rate of interest, which is based on level 2 inputs. The Company’s derivative financial instruments are carried at fair value based on level 3 inputs as defined below.

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

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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:

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

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

(3)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 financial instruments can be found at Note 5, 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, including warrants, to determine if such instruments are derivatives, or contain features that qualify as embedded derivatives, or otherwise require liability classification under U.S. GAAP. The Company values its derivatives using the Black-Scholes option-pricing model or other acceptable valuation models, including the Monte-Carlo simulation model. Derivative instruments 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 re-assessed 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 warrants, including options or warrants to non-employees in exchange for consulting or other services performed.

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 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 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 condensed 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.

Research and Development Costs

Research and development expenses consist primarily of salaries and other personnel related expenses including stock-based compensation costs, preclinical costs, clinical trial costs, costs related to acquiring and manufacturing clinical trial materials, and contract services. All research and development costs are expensed as incurred.

Clinical Trial Expenses

Expenses related to clinical studies are based on estimates of the services received and efforts expended pursuant to the Company’s contract arrangements. The financial terms of these agreements are subject to negotiation, vary from contract to contract, and may result in uneven payment flows. 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

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clinical expense. 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. In accruing service fees, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. 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. As of September 30, 2022 and December 31, 2021, the Company has accrued for $257,000 and $158,000, respectively, in clinical trial expenses for which services have been provided but the Company has not yet been invoiced as of the balance sheet date. Clinical trial expenses are included in research and development expenses in the condensed consolidated statements of operations.

Patent Costs

Costs related to filing and pursuing patent applications (including direct application fees, and the legal and consulting expenses related to making such applications) are expensed as incurred, as recoverability of such expenditures is uncertain. These costs are included in general and administrative expenses in the condensed consolidated statements of operations.

Debt Issuance Costs

Debt issuance costs incurred to obtain debt financing are deferred and are amortized over the term of the debt using the effective interest method. Debt issuance costs are recorded as a reduction to the carrying value of the debt and are amortized to interest expense in the condensed consolidated statements of operations.

Income Taxes

The Company follows ASC 740, Income Taxes, or ASC Topic 740 (“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 condensed 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

Stock-based compensation expense represents the cost of the estimated grant date fair value of employee and non-employee stock option grants recognized over the requisite service period of the awards, which is usually the vesting period, on a straight-line basis. The Company recognizes forfeitures as they occur as a reduction of expense. The Company estimates the fair value of employee and non-employee stock option grants using the Black-Scholes option pricing model.

Net (Loss) Earnings Per Common Share

Basic (loss) earnings per common share is computed by dividing net (loss) income available to common stockholders by the weighted average number of shares of common stock outstanding during the period. The Company's Series B Convertible Preferred Stock and certain of the Company's outstanding warrants (See Note 7) contain non-forfeitable rights to dividends with the common stockholders, and therefore are considered to be participating securities. These Series B Convertible Preferred Stock and the 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 when the Company is in a net income position, such as the three months ended September 31, 2021. When in a net income position, diluted earnings per share is computed using the more dilutive of the two-class method or the if-converted and treasury stock methods.

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Basic and diluted loss per common share for the three and nine months ended September 30, 2022 and the nine months ended September 30, 2021 were calculated under the if-converted and treasury stock methods. For the three and nine months ended September 30, 2022 and the nine months ended September 30, 2021, basic and diluted loss per common share were the same as all common stock equivalents were anti-dilutive for both periods. Basic and diluted earnings per share during the three months ended September 30, 2021 were calculated under the two-class method. Certain of the Company's liability classified warrants were dilutive in the second quarter of 2021 resulting in a dilutive impact for the nine months ended September 30, 2021.

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Basic net (loss) income per common share:
Net (loss) income	$	(3,991	)	$	8,087		$	(10,540	)	$	(27,689	)
Undistributed earnings allocated to participating securities		—			(2,969	)		—			—
Net (loss) income attributable to common shares - basic	$	(3,991	)	$	5,118		$	(10,540	)	$	(27,689	)
Weighted average shares used in calculating basic (loss) income per share		48,709,846			12,100,292			28,634,209			7,902,104
Basic net (loss) income per common share	$	(0.08	)	$	0.42		$	(0.37	)	$	(3.50	)
Diluted net (loss) income per common share:
Net (loss) income	$	(3,991	)	$	8,087		$	(10,540	)	$	(27,689	)
Change in fair value of warrants		—			—			—			(5,119	)
Undistributed earnings allocated to participating securities		—			(2,968	)		—			—
Net (loss) income attributable to common shares - diluted	$	(3,991	)	$	5,119		$	(10,540	)	$	(32,808	)
Weighted-average shares outstanding		48,709,846			12,100,292			28,634,209			7,902,104
Effect of potentially dilutive securities		—			6,479			—			50,894
Weighted average shares used in calculating diluted (loss) income per share		48,709,846			12,106,771			28,634,209			7,952,998
Diluted net (loss) income per common share	$	(0.08	)	$	0.42		$	(0.37	)	$	(4.13	)

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

	September 30,
	2022		2021
Stock options		2,586,976		799,562
Warrants for common stock		122,924,912		8,491,006
Series A Convertible Preferred Stock		6,479		—
Total		125,518,367		9,290,568

Comprehensive Income (Loss)

Comprehensive income (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 income (loss) was the same as its reported net income (loss) for all periods presented.

Recently Adopted Accounting Pronouncements

In August 2020, FASB issued Accounting Standards Update ("ASU") 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) — Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity ("ASU- 2020-06"), which, among other things, provides guidance on how to account for contracts on an entity’s own equity. This ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. Specifically, the ASU eliminated the need for the Company to assess whether a contract on the entity’s own equity (1) permits settlement in unregistered shares, (2) whether counterparty rights rank higher stockholder’s rights, and (3) whether collateral is required. In addition, the ASU requires incremental disclosure related to contracts on the entity’s own equity and clarifies the treatment of certain financial instruments accounted for under this ASU on earnings per share. This ASU may be applied on a full retrospective of modified retrospective basis. For smaller reporting companies, this ASU is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption of the ASU is permitted for fiscal years beginning after December 15, 2020, including interim periods within

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those fiscal years. The Company early adopted this standard on January 1, 2022 and determined that it had no impact on the accounting for its liability-classified warrants as of the date of adoption.

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The ASU introduced a new credit loss methodology, the Current Expected Credit Losses (“CECL”) methodology, which requires earlier recognition of credit losses, while also providing additional transparency about credit risk. The CECL methodology utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for loans, held-to maturity debt securities, trade receivables and other receivables measured at amortized cost at the time the financial asset is originated or acquired. After the issuance of ASU 2016-13, the FASB issued several additional ASUs to clarify implementation guidance, provide narrow-scope improvements and provide additional disclosure guidance. In November 2019, the FASB issued an amendment making this ASU effective for fiscal years beginning after December 15, 2022 for smaller reporting companies. The Company plans to adopt this standard as of January 1, 2023 and does not expect the adoption will have a significant impact on its consolidated financial statements and related disclosures.

3. Revision of Previously Issued Financial Statements for Correction of Immaterial Errors

In connection with the preparation of the Company's condensed consolidated financial statements required to be included in this Quarterly Report on Form 10-Q as of and for the nine months ended September 30, 2022, management identified a classification error, between current assets (prepaid expenses and other current assets) and noncurrent assets (other noncurrent assets), in the Company's historical financial statements, resulting in a conclusion that for comparability purposes a correction should be made to the Company's consolidated financial statements as of December 31, 2021. The Company has revised its balance sheet as of the year ended December 31, 2021 accordingly and included such revisions herein. Based on an analysis of quantitative and qualitative factors, the Company concluded this error was not material to its consolidated financial position as of December 31, 2021 and had no impact on the Company’s results of operations, including net (loss) earnings per share or cash flows as presented in the Company’s previously issued financial statements. As a result, amendment of such reports is not required.

The adjustment to “prepaid expenses and other current assets” and “other noncurrent assets” within the Company’s consolidated balance sheet as of the year ended December 31, 2021 are as follows:

	December 31, 2021
	As Reported		Adjustment			As Adjusted
ASSETS
Current assets:
Cash and cash equivalents	$	10,495	$	—		$	10,495
Prepaid expenses and other current assets		1,879		(868	)		1,011
Total current assets		12,374		(868	)		11,506
Restricted cash		26		—			26
Right-of-use asset		109		—			109
Other noncurrent assets		—		868			868
Property and equipment, net		3		—			3
Total assets	$	12,512	$	—		$	12,512

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4. Balance Sheet Details

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

	September 30,		December 31,
	2022		2021
Prepaid insurance	$	807	$	540
Other receivables		20		150
Prepaid subscriptions and fees		205		215
Prepaid software licenses		54		78
Deferred equity issuance costs		81		—
Prepaid other		6		28
	$	1,173	$	1,011

Accrued liabilities consisted of the following (in thousands):

	September 30,		December 31,
	2022		2021
Accrued accounts payable	$	482	$	195
Accrued clinical trial costs		257		158
Accrued director stipends		111		110
Accrued severance and benefits (Note 10)		392		—
	$	1,242	$	463

Other noncurrent assets consisted of the following (in thousands):

	September 30,		December 31,
	2022		2021
Prepaid insurance, less current portion	$	734	$	868
Other noncurrent assets		12		—
	$	746	$	868

5. Fair Value Measurements

The Company has issued warrants that are accounted for as liabilities in accordance with ASC 815. Estimating fair values of liability-classified financial instruments requires the development of estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques are highly volatile and sensitive to changes in the trading market price of the Company’s common stock. Because liability-classified financial instruments are initially and subsequently carried at fair value, the Company’s financial results will reflect the volatility in these estimate and assumption changes. Changes in fair value are recognized as a component of other income (expense) in the condensed consolidated statement of operations.

In connection with the transactions contemplated by the Merger, on December 16, 2020, the Company entered into a securities purchase agreement (the "Securities Purchase Agreement") with an investor (the "Investor") pursuant to which, among other things, warrants to purchase 858,892 shares of the Company’s common stock (“Senior Secured Promissory Note Warrants”) were issued.

On May 20, 2021, pursuant to the terms of the Securities Purchase Agreement, the Company issued to the Investor warrants to purchase 4,995,893 shares of common stock at an exercise price of $4.70 per share (the “May 2021 Warrants”). In June 2021, pursuant to the reset provisions of the Securities Purchase Agreement, the number of shares of common stock underlying the May 2021 Warrants increased to 5,303,568 shares and the exercise price was reduced to $3.88 per share. All of the outstanding May 2021 Warrants were exercised in the fourth quarter of 2021 and the first quarter of 2022 in exchange for 5,303,568 shares of the Company's common stock in a series of exercises by the Investor. As of September 30, 2022, there are no May 2021 Warrants outstanding.

On July 21, 2021, the Company and the Investor entered into an agreement to waive certain provisions of the previous Security Purchase Agreement (the "July 2021 Waiver Agreement"). As part of the July 2021 Waiver Agreement, the Investor agreed to waive the reset provisions of the Senior Secured Promissory Note Warrants and the May 2021 Warrants such that the number of shares and exercise price in effect immediately prior to the effective date of the

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Waiver Agreement shall no longer be subject to price-based resets. The waiver of the reset provision of the Senior Secured Promissory Note Warrants and the May 2021 Warrants is considered a modification to those warrants and as a result, the underlying warrants were re-valued using a Black-Scholes based valuation model, which resulted in a favorable change in the fair value of the underlying warrants of $3.9 million. As consideration for the July 2021 Waiver Agreement, the Company issued the Investor additional warrants to purchase 1,100,000 shares of the Company's common stock at an exercise price of $3.63 per share (the "July 2021 Warrants"). The initial fair value of the July 2021 Warrants was determined to be $1.7 million and is included in loss on issuance of warrants at the condensed consolidated statements of operations for the three and nine months ended September 30, 2021.

On January 31, 2022, the Company and the Investor entered into an agreement to irrevocably waive any adjustment to the exercise price of the Senior Secured Promissory Note Warrants and the May 2021 Warrants held by the Investor from and after January 31, 2022 ("the Effective Date") for the Company's issuances of equity or equity-linked securities at a price below the exercise price of the warrants (the "January 2022 Waiver Agreement"). The waiver of any adjustments to the exercise price of the Senior Secured Promissory Note Warrants and the May 2021 Warrants is considered a modification to those warrants. The modification was determined to have no impact on the valuation of the warrants.

As consideration for the foregoing, pursuant to the January 2022 Waiver Agreement, the Company issued the Investor an additional warrant to purchase up to 2,250,000 shares of the Company’s common stock (the “January 2022 Warrants”). The initial fair value of the January 2022 Warrants was determined to be $1.1 million and is included in loss on issuance of warrants in the condensed consolidated statements of operations for the nine months ended September 30, 2022. The initial fair value was determined using a Monte Carlo simulation model that considered: (i) the starting stock price of $1.17, (ii) certain key event dates such as expected capital financings, if any, (iii) an expected re-levered volatility of 93.0 percent, (iv) an estimated risk-free interest rate of 1.65 percent, (v) an estimated contractual term of approximately 5.5 years, and (vi) a zero percent dividend rate.

As of September 30, 2022, the fair value of the Senior Secured Promissory Note Warrants of $2,000 was determined using a Black-Scholes valuation model that used the following assumptions: (i) a stock price of $0.10, (ii) an exercise price per share of $3.88, (iii) an estimated risk-free interest rate of approximately 4.17 percent, (iv) an estimated contractual term of 3.86 years, (v) volatility of 75.5%, and (vi) a zero percent dividend rate.

As of September 30, 2022, the fair value of the July 2021 Warrants in the amount of $16,000 was determined using a Monte Carlo simulation model that considered: (i) a starting stock price of $0.10, (ii) an expected re-levered volatility of 104.9 percent; (iv) an estimated risk-free rate of 4.13 percent, (v) estimated contractual terms of approximately 4.31 years, and (vi) a zero percent dividend rate.

As of September 30, 2022, the fair value of the January 2022 Warrants in the amount of $63,000 was determined using a Monte Carlo simulation model that used the following assumptions: (i) a starting stock price of $0.10, (ii) an expected re-levered volatility of 104.2 percent; (iii) an estimated risk-free rate of 4.08 percent, (iv) estimated contractual terms of approximately 4.83 years, and (v) a zero percent dividend rate.

The following table summarizes the activity of the Company’s Level 3 warrant liabilities during the three and nine months ended September 30, 2022 and 2021 (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
Warrant Liabilities	2022			2021			2022			2021
Fair value at beginning of period	$	469		$	20,526		$	2,651		$	1,830
Initial fair value at the original issuance date		—			1,672			1,110			25,417
Equity classified warrant put feature activated		—			—			—			51
Change in fair value during the period		(385	)		(12,764	)		(2,403	)		(17,939	)
Fair value of warrants exercised		—			—			(1,274	)		—
Seneca liability classified warrants assumed		—			—			—			200
Expiration of equity classified warrant put feature		—			—			—			(26	)
Settlement of liability-classified warrants		—			—			—			(99	)
Fair value at end of period	$	84		$	9,434		$	84		$	9,434

Seneca had certain common stock purchase warrants that were originally issued in connection with May 2016 and August 2017 offerings that are accounted for as liabilities whose fair value was determined using Level 3 inputs. The May 2016 warrants expired in the second quarter of 2021. As a result of the Merger, the put right was activated on the August 2017 offering warrants and these warrants were valued at their put right value using a Black-Scholes option

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pricing model. The Company settled the put feature for 7,813 of these warrants during the quarter ended June 30, 2021. The put right became inactive in July 2021 and the remaining warrants were valued using a Black-Scholes option pricing model. The gains resulting from the changes in the fair value of the liability classified warrants are classified as a gain on change in fair value of warrant liability in the accompanying condensed consolidated statements of operations.

In connection with the May 2022 Registered Direct Offering (see Note 6, Stockholders' Equity), the Company issued to certain investors warrants to purchase up to 3,646,690 shares of its common stock and warrants to purchase up to 218,801 shares of the Company's common stock that were issued to the placement agent. All of these warrants were classified as equity as of the date of issuance of May 10, 2022.

In connection with the August 2022 Public Offering (see Note 6, Stockholders' Equity), the Company issued to certain investors warrants to purchase up to 110,400,000 shares of its common stock and warrants to purchase up to 3,312,000 shares of the Company's common stock that were issued to the underwriter of the offering. All of these warrants were classified as equity as of the date of issuance of August 16, 2022.

6. Stockholders’ Equity

Classes of Stock

Prior to the completion of the Merger, LBS was authorized to issue 6,797,500 shares of $0.01 par value common stock and 33,594,625 shares of $0.001 par value Series C Convertible Preferred Stock. In connection with the Merger, the issued and outstanding Series C Convertible Preferred Stock shares in the amount of 11,674,131 were converted to 317,420 shares of the Company's common stock.

Common Stock

As of September 30, 2022 and December 31, 2021, the Company was authorized to issue 300,000,000 shares of $0.01 par value common stock. Each share of common stock shall entitle the holder thereof to one (1) vote on each matter submitted to a vote at a meeting of stockholders.

On October 6, 2022, the shareholders of the Company approved an amendment to the Company’s Amended and Restated Certificate of Incorporation to decrease the number of authorized shares of common stock of the Company from 300,000,000 to 280,000,000, which will take effect upon the filing of an amendment to the Company's Certificate of Incorporation, which has not yet occurred.

Preferred Stock

As of September 30, 2022 and December 31, 2021, the Company was authorized to issue 7,000,000 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") and 200,000 of which are issued and outstanding.

In connection with the August 2022 Public Offering (see below), the Company's Board of Directors designated 1,460 shares of the Company's preferred stock as $0.01 par value Series B Convertible Preferred Stock. Each share of Series B Convertible Preferred Stock will be convertible at any time at the holder’s option into one share of the Company's common stock, which conversion ratio will be subject to adjustment for stock splits, stock dividends, distributions, subdivisions and combinations. Subject to certain limitations, if the volume weighted average price of the Company's stock during any 30 consecutive trading day period exceeds 300% of the conversion price, the average daily dollar trading volume for such 30 consecutive trading period $500,000 per trading day and the holder is not in possession of any material non-public information, the Company may force each holder of Series B Convertible Preferred Stock to convert all of their shares of Series B Convertible Preferred Stock. The Series B Convertible Preferred Stock carries no voting rights and is not eligible for any dividends paid by the Company on shares of the Company's common stock, other than dividends in the form of the Company's common stock. The Series B Convertible Preferred Stock was classified as permanent equity as of the date of issuance, in accordance with authoritative guidance of ASC 480-10-S99 for the classification and measurement of potentially redeemable securities. As of September 30, 2022, all of the shares of the Series B Convertible Preferred stock issued in connection with the August 2022 Public Offering (see below) has been converted into shares of the Company's common stock and there were no shares issued or outstanding.

As of September 30, 2022, the Company's Series A Convertible Preferred Stock issued in the amount of 200,000 is convertible into 6,479 shares of common stock.

Reverse Stock Split

On October 4, 2022, the shareholders of the Company approved an amendment to the Company’s Amended and Restated Certificate of Incorporation to effect, at the discretion of the Company’s Board of Directors, a reverse split

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of the Company’s common stock, at a ratio not less than 1-for-10 and not greater than 1-for-50, with the exact ratio to be set within that range at the discretion of the Board of Directors and to be effected before the day prior to the 2023 annual meeting of shareholders, without further approval or authorization of the Company's shareholders. The Company's Board of Directors has not yet effected this reverse stock split.

May 2022 Registered Direct Offering

On May 6, 2022, the Company entered into securities purchase agreements with certain investors pursuant to which it agreed to sell and issue, in a registered direct offering (the “May 2022 Registered Direct Offering”), an aggregate of 3,646,690 shares of its common stock, par value $0.01 per share, at a purchase price per share of $0.55 and, in a concurrent private placement, also agreed to sell and issue to such purchasers warrants (the “May 2022 Purchase Warrants”) to purchase up to 3,646,690 shares of common stock at an exercise price of $0.7105 per share.

In connection with the May 2022 Registered Direct Offering and concurrent private placement transaction, the Company engaged a placement agent. The Company issued placement agent warrants (“May 2022 Placement Agent Warrants”) to purchase an aggregate of 218,801 shares of its common stock. The May 2022 Placement Agent Warrants have an exercise price of $0.7105 per share. The May 2022 Placement Agent Warrants and the May 2022 Purchase Warrants are referred to collectively as the May 2022 Warrants.

The aggregate net proceeds from the May 2022 Registered Direct Offering of $1.4 million consisted of aggregate consideration of $2.0 million less equity issuance costs of approximately $0.6 million. The fair value of the May 2022 Placement Agent Warrants was recognized as an equity issuance cost.

The shares of common stock (but not the warrants or the shares of common stock underlying such warrants) offered in the Registered Offering were offered and sold by the Company pursuant to a "shelf" registration statement on Form S-3, including a base prospectus, previously filed with and declared effective by the SEC on April 26, 2022. The May 2022 Warrants and shares of common stock underlying such warrants were later registered for resale on a separate registration statement on Form S-1.

August 2022 Public Offering

On August 12, 2022, Company, entered into an Underwriting Agreement (the “Underwriting Agreement”) with Ladenburg Thalmann & Co. Inc. (the “Underwriter”), pursuant to which the Company agreed to issue and sell, in a registered public offering by the Company (the "August 2022 Public Offering"), (a) 42,160,000 Class A Units, with each Class A Unit consisting of one share of the Company’s common stock, par value $0.01 per share, a Series 1 warrant with a term of one year from the date of issuance (a “Series 1 Warrant”) to purchase one share of the Company's common stock at an exercise price per share of $0.25, and a Series 2 warrant with a term of five years from the date of issuance (a “Series 2 Warrant”) to purchase one share of the Company's common stock at an exercise price per share of $0.25, with each Class A Unit to be offered to the public at an offering price of $0.25 per Class A Unit and (b) 1,460 Class B Units (the “Class B Units”, and collectively with the Class A Units, the “Units”), with each Class B Unit consisting of one share of Series B Convertible Preferred Stock, convertible into 4,000 shares of the Company's common stock, a Series 1 Warrant to purchase 4,000 shares of the Company's common stock, and a Series 2 Warrant to purchase 4,000 shares of common stock, with each Class B Unit offered to the public at an offering price of $1,000 per Class B Unit. Each Series 1 Warrant and Series 2 Warrant included in the Class B Units entitles its holder to purchase 4,000 shares of Common Stock at an exercise price per share of $0.25. All shares of the Series B Convertible Preferred Stock have been converted into shares of the Company's common stock as of September 30, 2022.

In addition, pursuant to the Underwriting Agreement, the Company granted the Underwriter a 45-day option (the “Overallotment Option”) to purchase up to (i) 7,200,000 additional shares of the Company's common stock, (ii) 7,200,000 additional Series 1 Warrants and/or (iii) 7,200,000 additional Series 2 Warrants, solely to cover over-allotments. The Underwriter fully exercised the Overallotment Option on August 12, 2022.

On August 16, 2022, the Company closed on the August 2022 Public Offering, pursuant to which the Company agreed to issue and sell (i) 49,360,000 shares of common stock (which includes 7,200,000 shares of Common Stock sold pursuant to the exercise of the Overallotment Option), (ii) 1,460 shares of Series B convertible preferred stock, (iii) 55,200,000 Series 1 Warrants (which includes 7,200,000 Series 1 Warrants sold pursuant to the exercise of the Overallotment Option), and (iv) 55,200,000 Series 2 Warrants (which includes 7,200,000 Series 2 Warrants sold pursuant to the exercise of the Overallotment Option). The warrants became exercisable beginning on the date of stockholder approval of the exercisability of the warrants, which was received on October 6, 2022. Gross proceeds from the August 2022 Public Offering, including the Overallotment Option, were $13.8 million and net proceeds were

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approximately $11.5 million after deducting equity issuance costs of $2.3 million, which includes the underwriter discount, professional fees, and the fair value of the Underwriter Warrants (see Note 7).

7. Common Stock Warrants

From time to time, the Company issues warrants to its investors, creditors and various other individuals. The Company’s outstanding common stock warrants that are classified as equity warrants are included as a component of stockholder’s equity at the date of grant at the relative fair value at that grant date. Common stock warrants accounted for as liabilities are included in non-current liabilities. The warrants have an exercise price ranging from $0.25 to $694.80 per share and generally expire between one and ten years after the date of issuance. The Company had common stock warrants outstanding of 122,924,912 and 7,181,741, at September 30, 2022 and December 31, 2021, respectively.

January 2022 Waiver Agreement

On January 31, 2022, the Company and the Investor entered into the January 2022 Waiver Agreement (See Note 5, Fair Value Measurements). In addition to irrevocably waiving any adjustment to the exercise price of the Senior Secured Promissory Note Warrants and the May 2021 Warrants held by the Investor from and after the Effective Date for the Company's issuances of equity or equity-linked securities at a price below the exercise price of the warrants, the January 2022 Waiver Agreement also includes agreement by the parties to, among other things, (i) restrict the Investor's ability to sell the Company's securities through a "leak out" provision whereby sales are restricted by applying a volume limitation, (ii) shorten the notice period for the Investor’s participation rights related to certain future securities offerings, (iii) restrict the Company’s ability to conduct a primary offering of its securities for a specified period of time, and (iv) provide registration rights for the shares underlying the January 2022 Warrant.

As consideration for the foregoing, pursuant to the January 2022 Waiver Agreement, the Company issued the Investor the January 2022 Warrants. The January 2022 Warrants are exercisable beginning six months following the Effective Date and expire five and a half years from the Effective Date. The exercise price for the January 2022 Warrant is $1.10 (the closing price of the Company’s common stock on January 28, 2022), subject to customary adjustments for stock splits, stock dividends, stock combinations, reclassifications and similar transactions.

May 2021 Warrant Exercises

In the three months ended March 31, 2022, the Investor exchanged the remaining 3,994,302 May 2021 Warrants into shares of the Company’s common stock in cashless exercises. Following these exercises, the May 2021 Warrants were fully exercised. As of September 30, 2022, there are no May 2021 Warrants outstanding.

May 2022 Registered Direct Offering Warrants

In connection with the May 2022 Registered Direct Offering (see Note 6, Stockholders' Equity), on May 10, 2022 the Company issued the May 2022 Purchase Warrants. The May 2022 Purchase Warrants are not exercisable until six months following the date of issuance and expire five and a half years from the date of issuance. The May 2022 Purchase Warrants were classified as equity. Concurrently, the Company issued the May 2022 Placement Agent Warrants. The May 2022 Placement Agent Warrants are not exercisable until six months following the date of issuance and expire five years from the date of issuance.

August 2022 Public Offering Warrants

In connection with the August 2022 Public Offering (see Note 6, Stockholders' Equity), on August 16, 2022 the Company issued the Series 1 Warrants and the Series 2 Warrants. Both the Series 1 Warrants and the Series 2 Warrants became exercisable beginning on the date of stockholder approval of the exercisability of the warrants, which was received on October 6, 2022. The Series 1 Warrants expire one year from the date of issuance and the Series 2 Warrants expire five years from the date of issuance. The Series 1 Warrants and the Series 2 Warrants were classified as equity. Concurrent with the August 2022 Public Offering, the Company issued the Underwriter Warrants. The Underwriter Warrants are immediately exercisable and expire five years from the date of issuance.

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The following table summarizes warrant activity for the nine months ended September 30, 2022:

	Number of Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Warrants outstanding, December 31, 2021		7,181,741		$	5.96		4.45
Granted		119,827,491			0.28		3.04
Exercised		(3,994,302	)		3.88		4.11
Forfeited, expired or cancelled		(90,018	)		81.37		—
Warrants outstanding, September 30, 2022		122,924,912			0.44		3.04

8. Equity Incentive Plans

In 2013, LBS adopted the 2013 Employee, Director, and Consultant Equity Incentive Plan, (as amended and restated, the “2013 Plan”). Upon the closing of the Merger, each outstanding, unexercised and unexpired LBS option under the 2013 Plan, whether vested or unvested, was assumed by the Company and converted into an option to purchase common stock of the Company and became exercisable by the holder of such option in accordance with its terms, with (i) the number of shares of common stock subject to each option multiplied by the Exchange Ratio and (ii) the per share exercise price upon the exercise of each option divided by the Exchange Ratio. In connection with the closing of the Merger, no further awards will be made under the 2013 Plan.

In April 2021, in connection with the closing of the Merger, the Company’s stockholders approved the Palisade Bio, Inc. 2021 Equity Incentive Plan (the “2021 EIP Plan”). The maximum number of shares of the Company’s common stock available for issuance under the 2021 EIP Plan will not exceed 1,502,583 shares. In addition, such aggregate number of shares of the Company's common stock available for issuance will automatically increase on January 1 of each year for a period of ten years commencing on January 1, 2022 and ending on (and including) January 1, 2031, in an amount equal to 4% of the total number of shares of the Company's common stock outstanding on December 31st of the preceding year; provided, however, that the board of directors of the Company may act prior to January 1st of a given year to provide that the increase for such year will be a lesser number of shares of common stock. As of September 30, 2022, there were 717,010 shares of the Company's common stock available for issuance under the 2021 EIP Plan.

Also in April 2021, the Company stockholders approved the Palisade Bio, Inc. 2021 Employee Stock Purchase Plan (the "2021 ESPP"). The 2021 ESPP was adopted in order to provide eligible employees of the Company an opportunity to purchase shares of the Company's common stock. The maximum number of shares of the Company’s common stock available for issuance under the 2021 ESPP will not exceed 693,500 shares. In addition, such aggregate number of shares of the Company's common stock available for issuance will automatically increase on January 1 of each year for a period of ten years commencing on January 1, 2022 and ending on (and including) January 1, 2031, in an amount equal to 1% of the total number of shares of the Company's common stock outstanding on December 31st of the preceding year; provided, however, that the board of directors of the Company may act prior to January 1st of a given year to provide that the increase for such year will be a lesser number of shares of common stock. As of September 30, 2022, there have been no shares issued under the ESPP.

In November 2021, the Company's compensation committee of the board of directors of the Company adopted the Palisade Bio, Inc. 2021 Inducement Award Plan (the "2021 Inducement Plan"). The 2021 Inducement Plan was adopted in order to grant share-based awards to individuals not previously employed by the Company, as an inducement to join the Company. Subject to certain changes in the capitalization of the Company, as provided in the 2021 Inducement Plan document, the aggregate number of shares of the Company's common stock that may be issued under the 2021 Inducement Plan will not exceed 750,000 shares of common stock. As of September 30, 2022, there are 308,250 shares of the Company's common stock available for issuance under the 2021 Inducement Plan.

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Stock Options

The Company believes that stock options align the interests of its employees, consultants and directors with the interests of its stockholders. 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, a term as determined by the Company's board of directors but generally not to exceed ten-years, and generally vest in equal proportions each quarter over three years. Vesting would 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 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 plans allow for the issuance of both incentive stock options and non-statutory stock options.

The fair value of options granted in the nine months ended September 30, 2022 and September 30, 2021 is estimated as of the grant date using the Black-Scholes option pricing model using the assumptions in the following table:

	Nine Months Ended September 30,
	2022			2021
Weighted-average exercise price per share	$	0.81		$	17.72
Weighted-average expected term (years)		5.81			5.00
Weighted-average risk-free interest rate		2.30	%		0.88	%
Weighted-average expected dividend yield		—			—
Weighted-average volatility		73.66	%		76.05	%

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 biotechnology 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 Plan and the 2021 Inducement Plan for the nine months ended September 30, 2022:

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2021		1,956,855	$	7.32		8.12	$	—
Granted		792,600		0.81		9.50		—
Exercised		—		—		—		—
Forfeited, expired or cancelled		162,479		—		—		—
Outstanding at September 30, 2022		2,586,976		5.65		7.83		—
Vested and expected to vest at September 30, 2022		2,586,976		5.65		7.83		—
Exercisable at September 30, 2022		1,392,169		9.20		5.64		—

The weighted-average grant-date fair value of options granted during the nine months ended September 30, 2022 was $0.52 per share. The fair value of the options vested during nine months ended September 30, 2022 was approximately $0.95 million.

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Share-Based Compensation Expense

The allocation of stock-based compensation for all stock awards is as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Research and development expense	$	63	$	26	$	174	$	349
General and administrative		189		77		772		859
Total	$	252	$	103	$	946	$	1,208

As of September 30, 2022, the unrecognized compensation cost related to outstanding options was $1.1 million, which was expected to be recognized over a weighted-average period of approximately 2.02 years.

Officer Settlement Agreements

The Company’s former Chief Development Officer was terminated in February 2021. As part of the separation and settlement agreement, the Company’s board of directors agreed to (i) accelerate vesting by four months for the former employee’s outstanding options and (ii) allow up to seven years from the termination date for the former employee to exercise all vested options. The Company concluded the actions taken by the Company resulted in modification accounting for the stock options. The Company determined the incremental fair value of the modified stock options was $225,000, which was expensed to research and development expenses in the condensed consolidated statements of operations during the three months ended March 31, 2021.

9. Collaborations and License Agreements

Co-Development and Distribution Agreement with Newsoara

LBS has entered into a co-development and distribution agreement with Newsoara Biopharma Co., Ltd. (“Newsoara”), a joint venture established with Biolead Medical Technology Limited, as amended, (the “Co-Development Agreement”). Pursuant to the 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 “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 Licensed Products only include the Company's lead drug candidate, LB1148. 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 Co-Development Agreement obligates Newsoara to initially use LBS as the exclusive supplier for all of Newsoara’s requirements for Licensed Products in the Territory. During the term of the Co-Development Agreement, Newsoara may request to manufacture the Licensed Product 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.

In consideration of the rights granted to Newsoara under the Co-Development Agreement, Newsoara paid LBS a one-time upfront fee of $1.0 million. In addition, Newsoara is obligated to make (i) payments 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 Co-Development Agreement. For the three and nine months ended September 30, 2022 and September 30, 2021, there were no milestone payments earned from Newsoara under the Co-Development Agreement.

The Co-Development Agreement will expire upon the later of the expiration date of the last valid claim of any licensed patent covering the Licensed Products in the Territory. In addition, the 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.

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License Agreements with the Regents of the University of California

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. The licensed assets are related to the Company’s products and assays under development. Along with the one-time license issue fees paid, the Regents are entitled to annual license maintenance fees in the mid-four digit dollar range per license until such time that the Company is commercially selling a licensed product. In addition, the Company is obligated to make payments under each of the respective licenses upon the achievement of certain development, regulatory, and commercial milestones, as well as tiered and minimum annual sales royalties.

In conjunction with the Co-Development Agreement with Newsoara, the Company is obligated to pay the Regents a portion of the sublicense income equal to 30 percent of one-third of the upfront payment and milestone payments received. As of September 30, 2022 and December 31, 2021 sublicensing payables of approximately $40,000 and $81,000, respectively, were included in accounts payable.

10. Commitments and Contingencies

Corporate Office Lease

On May 12, 2022, the Company entered into a new, non-cancelable facility operating lease (the "Corporate Office Lease") of office space for its corporate headquarters, replacing its existing corporate headquarters lease that expired on July 31, 2022. The Corporate Office Lease is for 2,747 square feet of an office building in Carlsbad, California. The initial contractual term is for 39-months commencing on June 1, 2022 and expiring on August 31, 2025. The Company has the option to renew the Corporate Office Lease for an additional 36-month period at the prevailing market rent upon completion of the initial lease term. The Company has determined it is not reasonably certain that it will exercise this renewal option.

Commencing on June 1, 2022, the Company is subject to contractual monthly lease payments of $10,850, plus certain utilities, for the first 12 months with 3 percent escalations at the first, second and third lease commencement anniversaries. The Corporate Office Lease is subject to conditional abatement of fifty percent (50%) of such base rent during the second, third and fourth full calendar months of the initial lease term, as set forth in the lease agreement, as well as a $28,000 tenant improvement allowance.

The Corporate Office Lease is also subject to additional variable charges for common area maintenance, insurance, taxes and other operating costs. This additional variable rent expense is not estimable at lease inception. Therefore, it is excluded from the Company’s straight-line expense calculation at lease inception and is expensed as incurred.

As of September 30, 2022, the Company recognized an operating right-of-use asset related to the Corporate Office Lease in the amount of $324,000 and a current and noncurrent operating lease liability related to the Corporate Office Lease of $101,000 and $239,000, respectively, calculated using a discount rate of 10.75%. As of September 30, 2022, the total remaining future minimum lease payments associated with the Corporate Office Lease of approximately $395,000, less imputed interest of $55,000, will be paid over the remaining lease term of approximately 2.9 years.

The Company recognized operating lease expense associated with its Corporate Office Lease and its predecessor corporate headquarters lease of approximately $49,000 and $157,000 in the three and nine months ended September 30, 2022, respectively.

Maturities of the Company's operating lease liabilities as of September 30, 2022 are as follows:

Year ending December 31,
2022 (remaining)	$	43
2023		133
2024		137
2025		82
Total operating lease payments		395
Less: imputed interest		(55	)
Total operating lease obligations	$	340

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Insurance Financing Arrangements

Consistent with past practice, on May 9, 2022 and May 24, 2022, the Company entered into agreements to finance certain insurance policies which renewed in April 2022 and May 2022. The financing arrangements entered into on May 9, 2022 and May 24, 2022 have stated interest rate of 3.82% and 6.92%, respectively, and are payable over a 9-month period and 10-month period, respectively, with the first payment commencing May 27, 2022. The insurance financing arrangements are secured by the associated insurance policies. As of September 30, 2022 and December 31, 2021, the aggregate remaining balance under the Company's insurance financing arrangements was $0.4 million and $0.1 million, respectively.

Restructuring Costs

In order to better utilize the Company’s resources on the implementation of its refocused clinical programs and corporate strategy, on September 9, 2022 the Company committed to a cost-reduction plan. This cost-reduction plan consisted of an approximately 20% reduction in workforce force to better align the Company’s resources on its clinical studies, including its lead asset, LB1148.

Associated with the reduction in workforce, the Company has recognized restructuring costs of $410,000 at the condensed consolidated statements of operations for the three and nine months ended September 30, 2022, consisting of severance and benefits payments pursuant to employment agreements and the execution of severance and release agreements. As of September 30, 2022, the Company has recognized a liability in the amount of approximately $392,000 associated with the restructuring in accrued liabilities at the condensed consolidated balance sheets. The Company expects to substantially complete the remaining cash payments of the employee severance and benefits incurred by the end of the first quarter of 2023.

Although the Company will continue to identify other cost-saving opportunities in its normal course of business, it does not expect to incur any other significant costs associated with the cost reduction-plan announced on September 9, 2022.

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 September 30, 2022, which will have, individually or in the aggregate, a material adverse effect on its business, liquidity, financial position, or results of operations. Litigation, however, is subject to inherent uncertainties, and an adverse result in such matters may arise from time to time that may harm the Company’s business.

Indemnification

In accordance with the Company’s amended and restated memorandum and articles of association, the Company has indemnification obligations to its officers and directors for certain events or occurrences, subject to certain limits, while they are serving in such capacity. There have been no claims to date, and the Company has a directors and officers liability insurance policy that may enable it to recover a portion of any amounts paid for future claims.

11. Related Party Transactions

Yuma Regional Medical Center

On August 19, 2021, the Company issued to Yuma Regional Medical Center ("Yuma"), a related party, a warrant to purchase up to 377,474 shares of Common Stock at a price of $3.45 per share, subject to certain adjustments (the "August 2021 Warrants"). The August 2021 Warrants, which have been registered for resale, are immediately exercisable and have an expiration date of August 26, 2026.

Director stipends

Unpaid cash stipends owed to the Company's directors for their annual board service are recorded on the Company’s condensed consolidated balance sheets within accrued liabilities. These liabilities were $111,250 and $110,000 as of September 30, 2022, and December 31, 2021, respectively.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Statements in this Quarterly Report that are not strictly historical are forward-looking statements and include statements about products in development, the Company's in-licensing/acquisition strategy, the Company's out-licensing sales strategy, results and analyses of pre-clinical studies, clinical trials and studies, research and development expenses, cash expenditures, financing or funding sources, and alliances and partnerships, among other matters. You can identify these forward-looking statements because they involve the Company's 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, as are other factors, in the Company’s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 17, 2022 and our Quarterly Reports on Form 10-Q filed with the SEC on May 13, 2022 and August 15, 2022, and in the Company's subsequent filings with the SEC as well as in the section of this Quarterly Report entitled “Risk Factors” and elsewhere herein. The Company does 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.

The Company recommends investors read this entire Quarterly Report on Form 10-Q, including the “Risk Factors” section, the condensed consolidated financial statements, and related notes. As used in this Quarterly Report, unless the context otherwise requires, the words “we,” “us,” “our,” the “Company” and “Palisade” refers to Palisade Bio, Inc. and its subsidiary, post-Merger. Also, any reference to “common shares” or “common stock,” refers to the Company's $0.01 par value common stock. Any reference to “Series A Preferred Stock” refers to the Company's Series A 4.5% Convertible Preferred Stock. Any reference to “Series B Preferred Stock” refers to the Series B Convertible Preferred Stock. Any reference to “Leading Biosciences, Inc.” or “LBS” refers to the Company’s operations prior to the completion of the Merger. The information contained herein is current as of the date of this Quarterly Report (September 30, 2022), unless another date is specified.

The Company's Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is provided, in addition to the accompanying condensed consolidated financial statements and notes, to assist you in understanding the Company's results of operations, financial condition and cash flows. The MD&A is organized as follows:

•Executive Overview — Discussion of the Company's business and overall analysis of financial and other items affecting the Company in order to provide context for the remainder of MD&A.

•Results of Operations — Analysis of the Company's financial results comparing the three and nine months ended September 30, 2022 and 2021.

•Liquidity and Capital Resources — An analysis of cash flows and discussion of the Company's financial condition and future liquidity needs.

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Executive Overview

The Company is a clinical-stage biopharmaceutical company focused on discovering, developing, and commercializing innovative oral therapies that target serious diseases associated with the breakdown of the mucosal barrier protecting the gastrointestinal (“GI”) tract. The Company's goal is to be an industry leader in developing therapies to treat these diseases and to improve the lives of patients suffering from such diseases.

On April 27, 2021, Seneca Biopharma, Inc. (“Seneca”) completed its previously announced merger transaction with Leading BioSciences, Inc. (“LBS”) in accordance with the terms of the Agreement and Plan of Merger, dated as of December 16, 2020 (the “Merger Agreement”), by and among Seneca, Townsgate Acquisition Sub 1, Inc., a wholly owned subsidiary of Seneca (“Merger Sub”), and LBS, pursuant to which Merger Sub merged with and into LBS, with LBS surviving as a wholly owned subsidiary of Seneca (the “Merger”). Immediately prior to the effective time of the Merger, LBS merged with and into Merger Sub and LBS continued to exist as the surviving corporation. Concurrent with the closing of the Merger, on April 27, 2021 the Company effected a 1-for-6 reverse stock split (“Reverse Stock Split”) of its common stock. Stockholders’ equity and all references to share and per share amounts in the accompanying consolidated financial statements have been retroactively adjusted to reflect the 1-for-6 reverse stock split for all periods presented. Immediately following the Merger, Seneca changed its name to “Palisade Bio, Inc.”

The Company's approach is founded on the discovery that damage to the intestinal epithelial barrier can result in the leakage of digestive enzymes from the GI tract that can damage tissues and promote inflammation, causing a broad array of acute and chronic conditions.

The Company is focused on developing a portfolio of oral product candidates to treat conditions driven by protease (intestinal enzymes) leakage through the intestinal epithelial barrier, including by surgical complications and inflammatory conditions. The below graphic illustrates the protease leakage resulting from a compromised intestinal epithelial barrier:

 

The Company's lead therapeutic candidate, LB1148, is a novel oral liquid formulation of the well-characterized digestive enzyme inhibitor tranexamic acid (“TXA”), with the potential to both reduce abdominal adhesions and accelerate the return of bowel function following surgery. LB1148 is currently being developed for administration prior to surgeries that are at risk of disrupting the intestinal epithelial barrier. By inhibiting the activity of digestive proteases, the Company believes that LB1148 has the potential to reduce the formation of adhesions in gastrointestinal (GI) tissues, accelerate the time to the return of normal GI function.

The Company believes that LB1148, if successfully developed and approved, may have the ability to become a suitable treatment option across a broad range of acute and chronic conditions associated with GI barrier dysfunction.

Beyond the Company's initial therapeutic focus on GI-related pathology triggered by major surgeries, the Company believes that protease-based therapeutics hold promise in meeting a number of unmet needs resulting from chronic protease leak. By leveraging our expertise in protease-mediated diseases and dysregulation of the intestinal epithelia

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barrier, the Company's strategy is to create a broad portfolio of innovative oral therapeutics that target serious diseases associated with the breakdown of this barrier.

Prevention of Post-Surgical Abdominal Adhesions: GI Surgery

Status of the U.S. Phase 2 Adhesions Study

Going forward, the Company will prioritize the advancement of its U.S. Phase 2 adhesions study, which, it believes, will maximize the value of its current product pipeline. To date, the Company has enrolled 31 of an expected 70 patients in the study, and LB1148 continues to demonstrate safety and tolerability. Management and the Company’s board of directors (the “Board”) remain confident in its potential to support advancement to a Phase 3 study. As discussed below, the Company has decided to pause its U.S. Phase 3 study evaluating return of bowel function in adult patients undergoing gastrointestinal surgery. In pausing this U.S. Phase 3 study, the Company will narrow its focus to the continued advancement of its U.S. Phase 2 adhesions study, and it now believes it has sufficient capital to fund operations into the second half of 2023, by which time the Company expects it will have topline data for this U.S. Phase 2 adhesions study.

Postoperative Return of Bowel Function: GI Surgery

In May 2022, the Company’s co-development partner in China received clearance from the Center for Drug Evaluation of the National Medical Products Administration of the People’s Republic of China to proceed with their Phase 3 clinical trial to evaluate LB1148 for accelerated return of bowel function in adult patients undergoing gastrointestinal surgery. In June 2022, based on data generated by this co-development partner in its earlier Phase 2 study, the Company initiated a Phase 3 clinical trial in the U.S. evaluating LB1148 to accelerate the return of bowel function in adult patients undergoing gastrointestinal surgery.

Status of the U.S. Phase 3 Return of Bowel Function Study

In late September of 2022, the Board, in connection with a special clinical subcommittee it appointed, initiated a review of the Company’s operations, including its ongoing clinical programs. As part of the review, the Company engaged the services of independent third-party clinical development experts to assist in the review. In October of 2022, the review identified that in 2020, a former member of the Company’s management received unblinded clinical data related to bowel function from a subset of patients in the Company’s ongoing U.S. Phase 2 study.

Upon discovery of this information, the special clinical subcommittee of the Board commenced a thorough review of the Company’s ongoing clinical programs. As a result of the review, the Company believes that the current U.S. Phase 3 study protocol requires additional standardization across sites and further clarification in the definition of endpoints to permit an adequate assessment of the efficacy of LB1148 to recover GI function. The Company does not believe that the favorable safety and tolerability profiles of LB1148 were impacted by these findings.

Given the foregoing, as well as the financial resources available to the Company at this time, the Company believes it is in its stakeholders’ best interests to pause enrollment in the U.S. Phase 3 study in order to determine next steps for the study.

Notwithstanding the pausing of the trial, the Company remains optimistic as to the efficacy of LB1148 for the return of bowel function based on its co-development partner’s Phase 2 data and their plan to continue its Phase 3 study in China.

The Company’s ongoing U.S. Phase 2 study of LB1148 for prevention of post-surgical abdominal adhesions will proceed as planned.

Recent Financings

In May 2022, the Company completed a registered direct equity offering for net proceeds of $1.4 million consisting of aggregate consideration of $2.0 million less equity issuance costs of approximately $0.6 million. In August 2022, the Company completed an underwritten public equity offering for net proceeds of $11.5 million consisting of aggregate consideration of $13.8 million, including the full exercise of the underwriter's overallotment offering, less equity issuance costs of approximately $2.3 million.

The Company intends to use the net proceeds from both equity financings for working capital and general corporate purposes, including the development of the Company’s lead product candidate LB1148. With the Company's decision to pause its U.S. Phase 3 study for the return of bowel function, the Company is focusing all of its resources on the

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continued advancement of its U.S. Phase 2 adhesions study. The Company now believes it has sufficient capital to fund its U.S. Phase 2 adhesions study through its topline data readout expected in the second half of 2023.

Contingent Value Right

Immediately prior to the closing of the Merger, Seneca issued each share of its common stock held by Seneca stockholders of record, one contingent value right (“CVR”). Each CVR entitles the holder of such right (the “CVR Holder”) to receive that holder’s pro rata share of 80% of the net proceeds, subject to certain conditions (“CVR Payment Amount”), if any, derived from the sale or licensing of all or any part of the intellectual property owned, licensed or controlled by Seneca immediately prior to the closing of the Merger (the “Legacy Technology”) provided however that CVR Holders will only be entitled to receive such CVR Payment Amount if the sale or licensing of such Legacy Technology occurs on or before the 18-month anniversary of such closing (“Legacy Monetization”). Additionally, pursuant to the terms of the CVR agreement (“CVR Agreement”), CVR Holders are only entitled to participate in their pro-rata share of net proceeds which the Company receives during the 48-month period following the closing of the Merger. As discussed below, the Company entered into an Asset Transfer Agreement to potentially monetize one Legacy Technology whereby the licensee purchased the assets underlying the 189 License (as defined below). The Company is unable to determine if it will be successful in the sale or licensing of any of the remaining Legacy Technology. In the event the Company is not able to sell or license the remaining Legacy Technology, or the CVR Payment Amount is not greater than the minimum amount requiring distribution pursuant to the terms of the CVR Agreement, CVR Holders may not receive any proceeds from their CVRs and the CVRs may expire valueless. The CVR expired on October 27, 2022.

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

As previously disclosed, on December 16, 2020, 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 agreed to terms of an early exercise of the Purchase Option under the 189 License and entered into an Asset Transfer Agreement (“ATA”). Alto Neuroscience is a U.S. based private biopharmaceutical company focused on precision-medicine for central nervous system disorders, including depression, using artificial intelligence-based brain biomarkers.

In connection with the ATA, the Company received gross proceeds of $0.4 million. Pursuant to the terms of the CVR Agreement, no distribution is required to be made to the holders of the CVR if the CVR Payment Amount would be less than $0.5 million. In accordance with the terms of the CVR Agreement, the net proceeds from the sale of the NSI-189 assets, less any applicable transaction costs and expenses, were deposited into the CVR escrow to be used to pay costs and expenses associated with the monetization of our other Legacy Technologies, which may include but are not limited to: financial advisory and consulting fees, legal fees, and any other fees associated with the monetization. There can be no assurance that CVR holders will receive CVR Payment Amounts from the sale of the NSI-189 assets.

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 pre-clinical 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. There can be no assurance that NSI-532.IGF-1 will ever be successfully monetized or that CVR holders will receive CVR Payment Amounts from the sale of the NSI-532.IGF-1 assets.

NSI-566

The Company engaged a financial advisor to assist in monetizing NSI-566, the Company's stem cell therapeutic. Commencing in September of 2021, the advisor actively marketed NSI-566. The advisor used both subscription databases and public databases to identify potential acquirers and or licensees. The criteria used to identify potential acquirers included potential acquirers’ degree of focus on cellular therapies and/or companies pursuing indications in ALS, spinal cord injury, stroke or similar therapeutic targets. 256 companies were identified as potential acquirers and were contacted as part of the outreach process. The outreach process included communication through multiple mediums included emailing multiple targeted people within a company, calls to such people within a company,

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introductions through referral sources to targeted people in a company, and online submissions. Outreach targets were contacted contact multiple times. Generally, targets received an executive summary followed by non-confidential slides if there as interest. Of the 256 companies contacted, 45 companies requested non-confidential slide decks. In total, 116 companies declined or were eliminated after multiple rounds of follow-up after sharing materials. The Company's advisor along with members of our management team presented interested companies with further details regarding NSI-566 and presented the non-confidential information. Target companies that expressed continued interest received and signed a non-disclosure agreement and were granted access to virtual data room. Of the 256 companies contacted, five entered into non-disclosure agreements and were granted access to the virtual data room. The Company's advisors and representatives had follow-up calls to discuss the confidential information with 4 of the 5 companies. None of the target companies submitted any offers. The CVR Representative did received one unsolicited offer consisting of an upfront payment of $125,000 and a possible milestone payment of: (i) up to $6 million upon market approval in the U.S. or Europe or (ii) 30% of the consideration received by the purchaser upon the sale or licensing of NSI-566. In reviewing the proposal, the CVR Representative and its advisors considered the costs and expenses associated with such transfer, including legal and advisory fees as well as costs and expenses associated with the transfer of the Company’s wholly owned Chinese subsidiary that owns certain data which the CVR Representative concluded would be needed to be transferred. After taking into account these costs and expenses, the CRV Representative provided a counter-offer requiring a $1.0 million up front payment. The prospective acquirer did not respond.

Critical Accounting Policies and Estimates

The Company's consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). 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 Company’s estimates are based on historical experience, known trends, events and various other factors that it believes 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.

The Company's significant accounting policies used in the preparation of the consolidated financial statements are described in more detail in Note 2 to the notes to the condensed consolidated financial statements for the quarter ended September 30, 2022, included elsewhere in this Quarterly Report on Form 10-Q. The Company's critical accounting estimates, identified in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of the Company's most recently filed Form 10-K, include the discussion of estimates used for accrued research and development expenses, the valuation of share-based compensation and derivative financial instruments, and the fair value of LBS common stock prior to the Merger. Such accounting policies and estimates require significant judgments and assumptions to be used in the preparation of the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, and actual results could differ materially from the amounts reported.

Recently Issued Accounting Pronouncements Not Yet Adopted

See Note 2 to the notes to the condensed consolidated financial statements for the quarter ended September 30, 2022, included elsewhere in this Quarterly Report on Form 10-Q.

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RESULTS OF OPERATIONS

Revenue

The Company generated no revenues from the sale of its proposed therapies for any of the periods presented.

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for the clinical development of the Company's lead product candidate LB1148, which 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, investigative clinical trial sites that conduct research and development activities on the Company’s behalf, and consultants;

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

•regulatory expenses.

The Company’s 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, Contract Research Organizations ("CROs"), clinical site, contract manufacturing organizations (“CMOs”) and research laboratories in connection with its preclinical development, process development, manufacturing, clinical development, and regulatory activities. The Company does not allocate employee costs and costs associated with its 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. The Company primarily uses internal resources to conduct its research as well as for managing its preclinical development, process development, and clinical development activities.

The Company's research and development expenses were $1.9 million in the third quarter of 2022 and $4.2 million in the first nine-months of 2022, which, excluding the in-process research and development charge incurred in the second quarter of 2021 related to the Reverse Merger, represents as significant increase over the comparative prior year periods both in amount and as a percentage of the Company's overall operating expenses in such periods.

General and Administrative Expenses

General and administrative expenses of $2.1 million in the third quarter of 2022 and $7.3 million in the first nine-months of 2022 consist primarily of salary and employee-related costs and benefits, professional fees for legal, intellectual property, consulting, investor and public relations, accounting and audit services, insurance costs, director's fees and stipends, and general corporate expenses. The Company's general and administrative expenses for the nine-months ended September 30, 2022, primarily the first half of 2022, included higher-than-normal costs associated with professional fees, investor and public relations fees, and recruiting fees.

Restructuring Expenses

In order to better utilize the Company’s resources on the implementation of its refocused clinical programs and corporate strategy, on September 9, 2022 the Company committed to a cost-reduction plan. This cost-reduction plan consisted of an approximately 20% reduction in workforce force to better align the Company’s resources on its clinical studies, including its lead asset, LB1148.

Associated with the reduction in workforce, the Company has recognized restructuring costs of $0.4 million at the condensed consolidated statements of operations for the three and nine months ended September 30, 2022, consisting of severance and benefits payments pursuant to employment agreements and the execution of severance and release agreements.

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Although the Company will continue to identify other cost-saving opportunities in its normal course of business, it does not expect to incur any other significant costs associated with the cost reduction-plan announced on September 9, 2022.

Going Concern

The Company’s management has disclosed in Note 1 to the financial statements included herein that there is substantial doubt about the Company’s ability to continue as a going concern for a period of one year following the filing date of this Quarterly Report on Form 10-Q. This determination was based on the following factors: (i) the Company’s available cash as of the date of this filing will not be sufficient to fund its anticipated level of operations for the next 12 months; (ii) the Company will require additional financing during the second half of 2023 to continue at its expected level of operations; and (iii) if the Company fails to obtain the needed capital, it will be forced to delay, scale back, or eliminate some or all of its development activities or perhaps cease operations. In the opinion of management, these factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern as of the filing date of this Quarterly Report on Form 10-Q and for one year from the issuance of the condensed consolidated financial statements.

COVID-19

The COVID-19 pandemic resulted in quarantines, restrictions on travel and other business and economic disruptions, and had a negative impact on the Company's ability to conduct clinical trials of its lead drug candidate, LB1148. The Company's phase 2 clinical study for the prevention of post-surgical abdominal adhesions re-started in February 2022, and in June 2022 the Company initiated its phase 3 clinical study for the return of bowel function. Notwithstanding, the Company paused enrollment in this phase 3 clinical study pending the determination of next steps for the study. The Company will continue to actively evaluate the impact of the pandemic on its business operations and plans, including but not limited to the impact on access to capital, planned and ongoing clinical trials, cash management and its investment policies regarding cash as well as the long-term effects in the medical and drug development fields.

Results of Operations

Comparison of the three months ended September 30, 2022 and 2021

The following table summarizes the Company's results of operations for the three months ended September 30, 2022 and 2021 (in thousands):

	Three Months Ended September 30,						Change
	2022			2021			$			%
Operating expenses
Research and development	$	1,928		$	624		$	1,304			209	%
General and administrative		2,075			2,392			(317	)		(13	)%
Restructuring costs		410			—			410		n/a
Total operating expenses		4,413			3,016			1,397			46	%
Loss from operations		(4,413	)		(3,016	)		(1,397	)		46	%
Other income (expense):
Gain on change in fair value of warrant liability		385			12,764			(12,379	)		(97	)%
Gain on change in fair value of share liability		—			18			(18	)	n/a
Interest expense		(4	)		(26	)		22			(85	)%
Other income		41			20			21			105	%
Loss on issuance of warrants		—			(1,673	)		1,673		n/a
Total other income, net		422			11,103			(10,681	)		(96	)%
Net (loss) income	$	(3,991	)	$	8,087		$	(12,078	)		(149	)%

Research and Development Expenses

The increase in research and development expenses of approximately $1.3 million, or 209%, from $0.6 million for the three months ended September 30, 2021 to $1.9 million for the three months ended September 30, 2022 is a result of

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the restart of the Company's LB1148 phase 2 clinical study of the prevention of post-surgical abdominal adhesions and the initiation of its phase 3 clinical study of the accelerated return of bowel function following gastrointestinal ("GI") surgery. The majority of the $0.4 million increase in clinical operations expenses in the third quarter of 2022 compared to the third quarter of 2021 is the result of increased investigator site activations, clinical vendor charges, and consultant and contract labor charges. Manufacturing-related costs associated with the production and packaging of LB1148 increased $0.4 million in the three months ended September 30, 2022 compared to the same period last year, primarily due to scale up, and process and analytical method optimization beginning in the second quarter of 2022 and continuing into the third quarter of 2022. Also, to support the ramp up of clinical trial activity, employee headcount and consultant and contract labor within research and development increased compared to last year, which contributed to a $0.5 million increase in payroll and employee-related research and development expenses in the three months ended September 30, 2022 compared to the three months ended September 30, 2021.

General and Administrative Expenses

General and administrative expenses decreased from $2.4 million for the three months ended September 30, 2021 to $2.1 million for the three months ended September 30, 2022. The decrease of $0.3 million for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 was primarily attributable to a $0.6 decrease in professional and recruiting fees and a $0.1 decrease in consultants and contract labor, partially offset by (i) a $0.2 increase in net payroll and employee-related costs, (ii) a $0.1 million increase in insurance costs, and (iii) a $0.1 million increase in stock-based compensation expense.

Restructuring Expenses

Company has recognized restructuring costs of $0.4 million for the three months ended September 30, 2022, consisting of severance and benefits payments pursuant to employment agreements and the execution of severance and release agreements with employees terminated under a September 2022 cost-reduction plan.

Other income (expense)

Other income, net, decreased by $10.7 million, or 96%, to $0.4 million for the three months ended September 30, 2022 from $11.1 million for the three months ended September 30, 2021. Other income, net, for the three months ended September 30, 2022 consists primarily of a $0.4 million non-cash gain associated with the revaluation of liability-classified warrants in the period. Other income, net, for the three months ended September 30, 2021 consists of a $12.8 million non-cash gain associated with the revaluation of liability-classified warrants in the period, a portion of which was due to a due to an agreement entered into in July 2021 between the Company and an investor whereby the investor agreed to waive certain provisions of the previous Security Purchase Agreement entered into between the parties (the "Waiver Agreement"), which resulted in a $3.9 million favorable change in the fair value of the underlying warrants. The gain from the reduction in the fair value of warrant liabilities was partially offset by a $1.7 million loss associated with the issuance of warrants for three months ended September 30, 2021.

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Comparison of the nine months ended September 30, 2022 and 2021

The following table summarizes the Company's results of operations for the nine months ended September 30, 2022 and 2021 (in thousands):

	Nine Months Ended September 30,						Change
	2022			2021			$			%
Operating expenses
Research and development	$	4,204		$	1,630		$	2,574			158	%
In-process research and development		—			30,117			(30,117	)	n/a
General and administrative		7,259			6,080			1,179			19	%
Restructuring costs		410			—			410		n/a
Total operating expenses		11,873			37,827			(25,954	)		(69	)%
Loss from operations		(11,873	)		(37,827	)		25,954			(69	)%
Other income (expense):
Gain on forgiveness of PPP loan		—			279			(279	)	n/a
Loss on issuance of secured debt		—			(686	)		686		n/a
Gain on change in fair value of warrant liability		2,403			17,939			(15,536	)		(87	)%
Gain on change in fair value of share liability		—			91			(91	)	n/a
Interest expense		(10	)		(2,393	)		2,383			(99	)%
Other income		50			36			14			39	%
Loss on issuance of LBS Series 1 Preferred Stock		—			(1,881	)		1,881		n/a
Loss on issuance of warrants		(1,110	)		(3,247	)		2,137			(66	)%
Total other income, net		1,333			10,138			(8,805	)		87	%
Net loss	$	(10,540	)	$	(27,689	)	$	17,149			(62	)%

Research and Development Expenses

The increase in research and development expenses of approximately $2.6 million, or 158%, from $1.6 million for the nine months ended September 30, 2021, to $4.2 million for the nine months ended September 30, 2022 was primarily attributable to the Company's increased clinical trial activities in the first nine-months of 2022, compared to the same period of last year. In the first nine-months of 2022, the Company's clinical trial activities, which had been virtually halted going into the first half of 2021 due to the COVD-19 pandemic, continued to increase as the Company proceeded with its phase 2 study of the prevention of post-surgical abdominal adhesions and initiated its phase 3 postoperative return of bowel function study for which a first patient in was achieved in July 2022. Clinical research costs were $0.7 million higher for the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, and regulatory costs were higher by $0.3 million concurrent with the Company receiving phase 3 clearance for its postoperative return of bowel function study. Also contributing to the increase was higher drug manufacturing-related costs of $0.6 million. The increase drug manufacturing-related costs in the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021 was primarily due to the scale up, and process and analytical method optimization associated with the production and packaging of LB1148. Net research and development employee-related costs, and consulting and contract labor costs increased by $1.2 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. In the current period, increased payroll and benefits and contract labor costs, which increased in line with increased headcount and clinical activities, were offset by a $0.2 decrease in stock-based compensation expense in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.

In-process research and development

In connection with the Merger, the Company recognized an in-process research and development expense of $30.1 million for the nine months ended September 30, 2021.

General and Administrative Expenses

General and administrative expenses increased by approximately $1.2 million, or 19%, from $6.1 million for the nine months ended September 30, 2021 to $7.3 million for the nine months ended September 30, 2022. The increase was partially related to higher general and administrative expenses associated with operating as a public company for the full nine-month period, as compared to the five-month post-Merger period that the Company's accounting predecessor,

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LBS, was public in the nine months ended September 30, 2021. Related to this, investor relations and shareholder services costs were higher by $0.4 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, and insurance costs associated with being a public company were $0.4 million higher. Also contributing to the increase in general and administrative expenses for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 was a $0.5 million net increase in payroll and employee-related costs coinciding with the increased staffing needs after becoming a public company and expected staffing needs in line with the execution of the Company's strategy and operating plan, and a $0.2 million increase in consultants and contract labor. Partially offsetting these increases for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 was i) a decrease in share-based compensation expense of $0.1 million, and ii) lower expenses associated with the winddown of Seneca operations that were incurred in the second and third quarters of 2021.

Restructuring Expenses

Company has recognized restructuring costs of $0.4 million for the nine months ended September 30, 2022, consisting of severance and benefits payments pursuant to employment agreements and the execution of severance and release agreements with employees terminated under a September 2022 cost-reduction plan.

Other income (expense)

Other income, net decreased by $8.8 million, or 87%, to $1.3 million for the nine months ended September 30, 2022 from $10.1 million for the nine months ended September 30, 2021. The nine months ended September 30, 2021 included net other expenses of $2.2 million for which there were no comparable expenses in the first half of 2022, including: (i) a $1.9 million loss recognized on the issuance of LBS Series 1 Preferred Stock, (ii) a $0.7 million non-cash loss recorded on the issuance of secured debt in connection with the discount given for the pre-Merger senior secured debt, (iii) a $0.3 million gain on the forgiveness of the Company's Paycheck Protection Program ("PPP") loan, and (iv) a $0.1 million gain on the change in the fair value of a share liability owed to a former Seneca shareholder.

The nine months ended September 30, 2022 includes a $2.4 million non-cash gain associated with the revaluation of liability-classified warrants in the period, which was partially offset by a $1.1 million non-cash loss on the issuance of warrants. On January 31, 2022 (the "Effective Date"), the Company entered into an agreement to irrevocably waive any adjustment to the exercise price of the certain warrants held by an investor from and after the Effective Date for the Company's issuances of equity or equity-linked securities at a price below the exercise price of the related warrants (the "January 2022 Waiver Agreement") (see Note 7 in the notes the financial statements). As consideration for this waiver, pursuant to the January 2022 Waiver Agreement, the Company issued the investor 2,250,000 warrants (the "January 2022 Warrants"). The January 2022 Warrants are exercisable beginning six months following the Effective Date and expire five and a half years after the Effective Date. The exercise price for the January 2022 Warrants is $1.10 (the closing price of the Company’s common stock on January 28, 2022). The $1.1 million non-cash loss on the issuance of the January 2022 Warrants represents the fair value of the warrants on the date of issuance, January 31, 2022. The nine months ended September 30, 2021 includes a $17.9 million non-cash gain associated with the revaluation of liability-classified warrants in the period, $3.9 million of which is attributable to a gain resulting from the modification of certain liability-classified warrants, that was partially offset by $3.2 million of costs associated with on the issuance of warrants in the period, including a $1.7 million loss associated with the issuance of warrants in the three months ended September 30, 2021.

The remainder of the net increase in other income (expense), net, is due to lower interest expense for the nine months ended September 30, 2022 as the prior year period included a $1.6 million non-cash interest charge associated with a debt discount on pre-Merger debt, and increased interest expense of $0.8 million due to a higher debt balance outstanding during the period.

Liquidity and Capital Resources

Financial Condition

Since the Company's inception, it has financed its operations through the sales of its securities, issuance of long-term debt, the exercise of investor warrants, and to a lesser degree grants and research contracts as well as the licensing of its intellectual property to third parties. Refer to the paragraph under the heading "Going Concern" in the Results of Operations section above for management's assessment of the Company’s ability to continue as a going concern.

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Sources of Liquidity

Management expects the Company to incur substantial operating losses for the foreseeable future in order to complete clinical trials and launch and commercialize any product candidates for which it may receive regulatory approval. The Company will need to raise additional capital through a combination of equity offerings, debt financings, collaborations, and other similar arrangements. The Company’s ability to raise additional capital may be adversely impacted by general political, economic conditions, inflation, rising interest rates, ongoing supply chain disruptions, the ongoing conflict in the Ukraine, or a resurgence of COVID-19, COVID-19 variants, or another pandemic. In the event the Company is unable to access additional capital, it may need to curtail or greatly reduce its operations, which could have an adverse impact on its business, financial condition, and results of operations.

On May 6, 2022, the Company entered into definitive agreements with several institutional and accredited investors for the purchase and sale in a registered direct offering of 3,646,690 shares of common stock, at a purchase price of $0.55 per share (the "May 2022 Registered Direct Offering"). The Company also agreed to issue to the investors in a concurrent private placement, unregistered warrants to purchase up to an aggregate of 3,646,690 shares of its common stock. The warrants have an exercise price of $0.7105 per share of common stock, are be exercisable six months after the date of issuance, and expire five and a half years following the initial issuance date. The aggregate net proceeds from the May 2022 Registered Direct Offering were $1.4 million consisting of aggregate consideration of $2.0 million less equity issuance costs of approximately $0.6 million.

On August 12, 2022, Company, entered into an Underwriting Agreement (the “Underwriting Agreement”) with Ladenburg Thalmann & Co. Inc. (the “Underwriter”), pursuant to which the Company agreed to issue and sell, in a registered public offering by the Company (the "August 2022 Public Offering"), (a) 42,160,000 Class A Units, with each Class A Unit consisting of one share of the Company’s common stock, par value $0.01 per share, a Series 1 warrant with a term of one year from the date of issuance (a “Series 1 Warrant”) to purchase one share of the Company's common stock at an exercise price per share of $0.25, and a Series 2 warrant with a term of five years from the date of issuance (a “Series 2 Warrant”) to purchase one share of the Company's common stock at an exercise price per share of $0.25, with each Class A Unit to be offered to the public at an offering price of $0.25 per Class A Unit and (b) 1,460 Class B Units (the “Class B Units”, and collectively with the Class A Units, the “Units”), with each Class B Unit consisting of one share of Series B Convertible Preferred Stock, convertible into 4,000 shares of the Company's common stock, a Series 1 Warrant to purchase 4,000 shares of the Company's common stock, and a Series 2 Warrant to purchase 4,000 shares of common stock, with each Class B Unit offered to the public at an offering price of $1,000 per Class B Unit. Each Series 1 Warrant and Series 2 Warrant included in the Class B Units entitles its holder to purchase 4,000 shares of Common Stock at an exercise price per share of $0.25. All of the Series B Convertible Preferred Stock shares have been converted into shares of the Company's common stock as of September 30, 2022.

In addition, pursuant to the Underwriting Agreement, the Company granted the Underwriter a 45-day option (the “Overallotment Option”) to purchase up to (i) 7,200,000 additional shares of the Company's common stock, (ii) 7,200,000 additional Series 1 Warrants and/or (iii) 7,200,000 additional Series 2 Warrants, solely to cover over-allotments. The Underwriter fully exercised the Overallotment Option on August 12, 2022.

On August 16, 2022, the Company closed on the August 2022 Public Offering, pursuant to which the Company agreed to issue and sell (i) 49,360,000 shares of common stock (which includes 7,200,000 shares of Common Stock sold pursuant to the exercise of the Overallotment Option), (ii) 1,460 shares of Series B convertible preferred stock, (iii) 55,200,000 Series 1 Warrants (which includes 7,200,000 Series 1 Warrants sold pursuant to the exercise of the Overallotment Option), and (iv) 55,200,000 Series 2 Warrants (which includes 7,200,000 Series 2 Warrants sold pursuant to the exercise of the Overallotment Option). The warrants became exercisable beginning on the date of stockholder approval of the exercisability of the warrants, which was received on October 6, 2022. Gross proceeds from the August 2022 Public Offering, including the Overallotment Option, were $13.8 million and net proceeds were approximately $11.5 million after deducting after equity issuance costs of $2.3 million, including the Underwriter discount, professional fees and the fair value of the Underwriter Warrants.

The Company intends to use the net proceeds from the May 2022 Registered Direct Offering and the August 2022 Public Offering for working capital and general corporate purposes, including the development of the Company’s lead product candidate LB1148. With the Company's decision to pause its U.S. Phase 3 study for the return of bowel function, the Company is focusing all of its resources on the continued advancement of its U.S. Phase 2 adhesions study. The Company now believes it has sufficient capital to fund its U.S. Phase 2 adhesions study through its topline data readout expected in the second half of 2023.

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Contractual Obligations

Office Lease

On May 12, 2022, the Company entered into a new, non-cancelable facility operating lease (the "Corporate Office Lease") of office space for its corporate headquarters, replacing its existing corporate headquarters lease that expired on July 31, 2022. The Corporate Office Lease is for 2,747 square feet of an office building in Carlsbad, California. The initial contractual term is for 39-months commencing on June 1, 2022 and expiring on August 31, 2025. The Company has the option to renew the Corporate Office Lease for an additional 36-month period at the prevailing market rent upon completion of the initial lease term. The Company has determined it is not reasonably certain that it will exercise this renewal option.

Commencing on June 1, 2022, the Company is subject to contractual monthly lease payments of $10,850, plus certain utilities, for the first 12 months with 3 percent escalations at the first, second and third lease commencement anniversaries. As of September 30, 2022, the total remaining future minimum lease payments associated with the Corporate Office Lease of approximately $395,000, less imputed interest of $55,000, will be paid over the remaining lease term of approximately 2.9 years.

Insurance Financing Arrangements

Consistent with past practice, on May 9, 2022 and May 24, 2022, the Company entered into agreements to finance certain insurance policies which renewed in April 2022 and May 2022. The financing arrangements entered into on May 9, 2022 and May 24, 2022 have stated interest rate of 3.82% and 6.92%, respectively, and are payable over a 9-month period and 10-month period, respectively, with the first payment commencing May 27, 2022. The insurance financing arrangements are secured by the associated insurance policies. As of September 30, 2022, the aggregate remaining balance under the Company's insurance financing arrangements was $0.4 million.

Cash Flows

As of September 30, 2022, the Company had $14.0 million in cash, cash equivalents and restricted cash. The following table shows a summary of the Company's cash flows for the nine months ended September 30, 2022 and 2021 (in thousands):

	Nine Months Ended September 30,
	2022			2021
Net cash used in operating activities	$	(10,054	)	$	(11,718	)
Net cash used in investing activities	$	—		$	(54	)
Net cash provided by financing activities	$	13,544		$	25,163

Net Cash Used in Operating Activities

Cash used in operating activities of $10.1 million for the nine months ended September 30, 2022, reflects a $10.5 million net loss adjusted for $0.9 million of net cash inflows related to changes in operating assets and liabilities, and certain non-cash items including: (i) a $1.1 million loss recognized from the issuance of the January 2022 Warrants, (ii) a $2.4 million gain recognized for the change in the fair market value of the warrant liabilities in the period, and (iii) a $0.9 million non-cash expense recognized for stock-based compensation.

Cash used in operating activities of $11.7 million for the nine months ended September 30, 2021 includes a $27.7 million net loss adjusted for $5.0 million of net cash outflows related to changes in operating assets and liabilities, and certain non-cash items including: (i) $0.3 million gain on forgiveness of the PPP loan, (ii) $3.2 million in costs allocated to the warrant issuances, (iii) $1.2 million non-cash expense for stock-based compensation, (iv) $17.9 million gain recorded for the change in the fair market value of the warrant liabilities in the period, of which $3.9 million resulted from the modification of certain liability-classified warrants, (v) $0.1 million gain recorded for the change in the fair market value of the share liability, and (vi) $0.7 million loss on the issuance of the senior secured debt. Additionally, the nine months ended September 30, 2021 includes net non-cash expenses of $34.2 million, which were incurred directly in connection with the Merger.

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Net Cash Provided by Financing Activities

For the nine months ended September 30, 2022, cash provided by financing activities of $13.5 million was attributable to cash proceeds of $1.8 million from the May 2022 Registered Direct Offering and $12.6 million from the August 2022 Public Offering, partially offset by payments of equity issuance cost of $0.3 million in the period and payments made on the Company's insurance financing arrangements of $0.5 million in the period.

For the nine months ended September 30, 2021, cash provided by financing activities of $25.2 million consisted of $19.9 million in net proceeds from the issuance of LBS Series 1 Preferred Stock, $5.2 million in net proceeds from the issuance of common stock and warrants, and $1.3 million in proceeds from the issuance of senior secured debt. These increases were offset by payments on debt of $1.0 million, redemption of warrants of $0.1 million, and payment of debt issuance costs of $0.1 million.

Future Liquidity Needs

The Company has incurred significant operating losses and negative cash flows from operations since inception. To date, the Company has not been able to generate significant revenues nor achieve operating profitability. The Company plans to fund its current operating needs using cash on hand. The Company’s available cash as of the date of this filing will not be sufficient to fund its anticipated level of operations for the next 12 months and the Company will require additional financing during the second half of 2023 to continue at its expected level of operations. If the Company fails to obtain the needed capital, it will be forced to delay, scale back, or eliminate some or all of its development activities or perhaps cease operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are not required to provide the information required by this item as we are considered a smaller reporting company, as defined by Rule 229.10(f)(1).

ITEM 4. 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.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2022. Based upon the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2022, our disclosure controls and procedures were not effective at a reasonable assurance level as a result of the material weakness that existed in our internal control over financial reporting, as described below.

However, our management, including our Chief Executive Officer and our Chief Financial Officer, have concluded that, notwithstanding the identified material weakness in our internal control over financial reporting, the condensed financial statements in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP.

Material Weakness in Internal Control over Financial Reporting and Fair Value Calculations

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that a reasonable possibility exists that a material misstatement of our annual or interim consolidated financial statements would not be prevented or detected on a timely basis.

As of and for the quarter ended June 30, 2021, our management assessed the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013 Framework). Based on this assessment, our management

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concluded that, as of June 30, 2021, a material weakness existed in our internal control over financial reporting due to a lack of controls in the financial closing and reporting process, including a lack of segregation of duties and the documentation and design of formalized processes and procedures surrounding the creation and posting of journal entries and account reconciliations. This material weakness contributed to a material weakness in our control activities based on the criteria set forth in the 2013 Framework. If not remediated, or if the Company identifies further material weaknesses in its internal controls, the Company’s failure to establish and maintain effective disclosure controls and procedures and internal control over financial reporting could result in material misstatements in its consolidated financial statements and a failure to meet its reporting and financial obligations.

Also as of and for the quarter ended June 30, 2021, the Company’s management had identified an additional material weakness in its internal control over the fair value calculation of options granted during that period. This material weakness resulted in a material audit adjustment being made to our consolidated financial statements as of and for the period ended June 30, 2021.

As described below, management has begun designing the plan and executing the remediation actions to address the material weakness and further actions are ongoing as of September 30, 2022. We have not had sufficient time to test the effectiveness of the remediation actions taken to date. As a result, the material weaknesses continue to be present as of September 30, 2022.

Remediation Efforts related to the Material Weakness

Management, with oversight from the Audit Committee of the Board of Directors of the Company, is actively engaged in remediation efforts to address the material weaknesses identified in the management’s evaluation of internal controls and procedures. The remediation efforts summarized below, which have been or are in the process of being implemented, are intended to address the identified material weaknesses.

(i)The Company will continue to hire additional finance, accounting and information technology employees with appropriate experience, certification, education and training.

(ii)The Company has already implemented, or is in the process of implementing, compensating controls to remediate the inherent segregation of duties control risks associated with its current accounting software. In addition, the Company has implemented new accounting and finance management software effective July 1, 2022, which is intended to eliminate some of the existing deficiencies in our internal control environment. Both the compensating controls implemented and those information technology general controls implemented with the new accounting and finance management software will be documented and tested for operating effectiveness.

(iii)The Company is in the process of updating our formal accounting policies, procedures and controls, including preparation and review of account reconciliations, review of journal entries, and controls over period end financial reporting.

(iv)The Company is developing a comprehensive plan to identify and remediate all segregation of duties deficiencies in its current control environment.

(v)The Company engaged a third-party service provider to complete an independent risk assessment of its internal control over financial reporting to evaluate sources of potential risks to its consolidated financial statements. As a result of this risk assessment, the Company plans to identify and design key controls across several processes supporting internal control over financial reporting and develop a workplan for remediation of the enhancements identified.

(vi)The Company is in the process of implementing additional key internal controls designed to address the potential risks identified in its key business processes.

(vii)The Company engaged a third-party service provider to assist with the development, implementation and testing of its internal control environment.

The Company believes that the implementation of the above steps will allow it to make progress on addressing a number of the deficient controls within its internal control environment, which will help facilitate the remediation of the material weakness identified above. As the Company continues to evaluate and work to improve its internal control over financial reporting, it will take additional measures to address control deficiencies, or it may modify certain of the remediation measures described above. However, the Company requires additional time to complete the design and implementation of its remediation plans and demonstrate the operating effectiveness of our remediation efforts. The material weaknesses cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

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Changes in Internal Control Over Financial Reporting

Other than the implementation of a new accounting and finance management software, effective July 1, 2022, and changes in connection with implementing a plan to remediate the material weakness described above, there were no changes in the Company's internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the quarter ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

SUMMARY

We face many risks and uncertainties, as more fully described in this Quarterly on Form 10-Q under the heading “Risk Factors.” Some of these risks and uncertainties are summarized below. The summary below does not contain all of the information that may be important to you, and you should read this summary together with the more detailed discussion of these risks and uncertainties contained in “Risk Factors.”

•The Company’s business depends on the successful clinical development, regulatory approval and commercialization of the Company's lead drug candidate, LB1148.

•Some of the initial indications in which the Company plans to pursue development of LB1148 are indications for which there are no U.S. Food and Drug Administration-approved therapies. This makes it difficult to predict the timing and costs of clinical development for LB1148 in these indications, as well as the regulatory approval path.

•The development and commercialization strategy for the Company’s product candidate LB1148 depends, in part, on published scientific literature and prior findings of the FDA regarding the safety and efficacy of tranexamic acid. If the Company is not able to pursue this strategy, it may be delayed in receiving regulatory approval.

•Clinical drug development is very expensive, time-consuming, and uncertain.

•The Company expects that is operations and clinical trials will require substantially more capital than it currently has, and the Company cannot guarantee when or if it will be able to secure additional funding.

•The results of previous clinical trials may not be predictive of future results, and the results of the Company’s current and planned clinical trials may not satisfy the requirements of the FDA or non-U.S. regulatory authorities.

•Even if the Company receives marketing approval for LB1148, or any future product candidate, it may not be able to successfully commercialize its product candidates due to unfavorable pricing regulations or third-party coverage and reimbursement policies, which could make it difficult for the Company to sell its product candidates profitably.

•The Company’s product candidates may cause undesirable side effects or have other unexpected properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in post-approval regulatory action.

•The Company may in the future conduct clinical trials for its product candidates outside the United States, and the FDA and applicable foreign regulatory authorities may not accept data from such trials or the data may be insufficient to achieve regulatory approvals.

•The Company expects to rely on third-party Contract Research Organizations ("CROs") and other third parties to conduct and oversee its clinical trials. If these third parties do not meet the Company’s requirements or otherwise conduct the trials as required, the Company may not be able to satisfy its contractual obligations or obtain regulatory approval for, or commercialize, its product candidates.

•The Company will need to raise additional financing in the future to fund its operations, which may not be available to it on favorable terms or at all.

•The Company currently has no products approved for sale, and it may never obtain regulatory approval to commercialize any of its product candidate.

•The Company’s or third party’s clinical trials may fail to demonstrate the safety and efficacy of its product candidates, or serious adverse or unacceptable side effects may be identified during their development,

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which could prevent or delay marketing approval and commercialization, increase the Company’s costs or necessitate the abandonment or limitation of the development of the product candidate.

•The Company has expressed substantial doubt about its ability to continue as a going concern.

•The Company’s product candidates, if approved, will face significant competition and their failure to compete effectively may prevent them from achieving significant market penetration.

•Any adverse developments that occur during any clinical trials conducted by Newsoara Biopharma Co., Ltd. (“Newsoara”) may affect the Company’s ability to obtain regulatory approval or commercialize LB1148.

•The Company has a very limited operating history and has never generated any revenues from product sales.

•The Company has received a delisting notification from the Nasdaq Stock Market based on the Company’s Bid Price being under $1.00 for thirty (30) consecutive trading days and additionally received a delisting notification for the Company’s Bid Price being under $0.10 for ten (10) consecutive trading days. If the Company is not able to regain compliance with the applicable continued listing requirements or standards of The Nasdaq Capital Market, Nasdaq could delist the Company's common stock.

•The Company may not be able to protect its intellectual property rights throughout the world.

•The Company's board of directors (the “Board”) has broad discretion to issue additional securities, which might dilute the net tangible book value per share of our common stock for existing stockholders.

•The Company currently has no marketing capabilities and no sales organization. If the Company is unable to establish sales and marketing capabilities on its own or through third parties, the Company will be unable to successfully commercialize its product candidates, if approved, or generate product revenue.

•Failure to remediate a material weakness in internal controls over financial reporting could result in material misstatements in the Company’s consolidated financial statements.

•The Company may not be able to obtain, maintain or enforce global patent rights or other intellectual property rights that cover its product candidates and technologies that are of sufficient breadth to prevent third parties from competing against the Company.

•Obtaining and maintaining the Company’s patent protection depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by governmental patent agencies, and its patent protection could be reduced or eliminated for non-compliance with these requirements.

•If the Company fails to comply with its obligations under its intellectual property license agreements, it could lose license rights that are important to its business. Additionally, these agreements may be subject to disagreement over contract interpretation, which could narrow the scope of its rights to the relevant intellectual property or technology or increase its financial or other obligations to its licensors.

•The Company’s business could be adversely affected by the effects of health pandemics or epidemics, including the recent COVID-19 pandemic, especially where overwhelming patient hospitalizations disrupt routine medical practices, clinical studies, and ability for appropriate follow-up of patients enrolled in clinical studies or supply chain constraints associated with such pandemics impact the availability of the components needed to manufacture LB1148.

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RISK FACTORS

Investing in our common stock involves a high degree of risk. We have described below a number of uncertainties and risks which, in addition to uncertainties and risks presented elsewhere in this Quarterly Report, may adversely affect our business, operating results and financial condition. The uncertainties and risks enumerated below as well as those presented elsewhere in this Quarterly Report should be considered carefully when evaluating our Company, business and the value of our securities.

Risks Related to the Company’s Development, Commercialization and Regulatory Approval of the Company’s Investigational Therapies

The Company’s business depends on the successful clinical development, regulatory approval and commercialization of LB1148.

The success of the Company’s current business, including its ability to generate revenue in the future, primarily depends on the successful development, regulatory approval and commercialization of LB1148, as well as its ability to secure sufficient capital to fund its business operations. The clinical and commercial success of LB1148 depends on a number of factors, including the following:

•timely and successful completion of required clinical trials not yet initiated, which may be significantly slower or costlier than the Company currently anticipates and/or produce results that do not achieve the endpoints of the trials;

•whether the Company is required by the FDA or similar foreign regulatory agencies to conduct additional studies beyond those planned to support the approval and commercialization of LB1148;

•submission and approval of regulatory filings by the FDA for LB1148;

•achieving and maintaining, and, where applicable, ensuring that the Company’s third-party contractors achieve and maintain compliance with their contractual obligations and with all regulatory requirements applicable to LB1148;

•ability of third parties with whom the Company contracts to manufacture adequate clinical trial and commercial supplies of LB1148, to remain in good standing with regulatory agencies and to develop, validate and maintain commercially viable manufacturing processes that are compliant with current good manufacturing practices (“cGMP”);

•a continued acceptable safety profile during clinical development and following approval of LB1148;

•ability to obtain favorable labeling for LB1148 through regulators that allows for successful commercialization, given that the drugs may be marketed only to the extent approved by these regulatory authorities;

•ability to successfully commercialize LB1148 in the U.S. and internationally, if approved for marketing, sale and distribution in such countries and territories, whether alone or in collaboration others;

•acceptance by physicians, insurers and payors, and patients of the quality, benefits, safety and efficacy of LB1148, if approved, including relative to alternative and competing treatments;

•existence of a regulatory environment conducive to the success of LB1148;

•ability to price LB1148 to recover the Company’s development costs and generate a satisfactory profit margin; and

•The Company’s ability and its partners’ ability to establish and enforce intellectual property rights in and to LB1148.

If the Company, either individually or through its co-development partner, does not achieve one or more of these factors, many of which are beyond its control, in a timely manner or at all, the Company could experience significant delays or an inability to obtain regulatory approvals or commercialize LB1148. For example, the Company recently paused enrollment in its Phase 3 study for return of bowel function. The Company is not certain what the next steps will be regarding this Phase 3 study, and such uncertainty may result in delays or increase costs, or the failure to complete such trial. Even if regulatory approvals are obtained, the Company may never be able to successfully commercialize LB1148. Accordingly, the Company cannot assure you that it will ever be able to generate sufficient revenue through the sale of LB1148, if approved, to internally fund its business.

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Some of the initial indications in which the Company plans to pursue development of LB1148 are indications for which there are no FDA-approved therapies. This makes it difficult to predict the timing and costs of clinical development for LB1148 in these indications, as well as the regulatory approval path.

There are no FDA-approved therapies for decreasing the time to normal feedings and bowel movement (or preventing necrotizing enterocolitis) in infants after heart surgery. While ENTEREG® is approved to accelerate the time to upper and lower gastrointestinal recovery following surgeries that include partial bowel resection with primary anastomosis, there is no guarantee that regulatory precedence regarding ENTEREG® will apply to the approval of other therapies that may accelerate the time to gastrointestinal recovery following surgery. While there are multiple medical devices approved for the reduction or elimination of postoperative intra-abdominal adhesions, there are no drugs approved to reduce postoperative intra-abdominal adhesions. The regulatory approval process for novel product candidates such as LB1148 can be more uncertain, expensive and take longer than for other, better known or extensively studied therapeutic approaches.

The development and commercialization strategy for the Company’s lead product candidate LB1148 depends, in part, on published scientific literature and the FDA’s prior findings regarding the safety and efficacy of tranexamic acid. If the Company is not able to pursue this strategy, it may be delayed in receiving regulatory approval.

The Hatch-Waxman Act added Section 505(b)(2) to the U.S. Federal Food, Drug, and Cosmetic Act (“FDCA”). Section 505(b)(2) permits the submission of a New Drug Application ("NDA") where at least some of the information required for approval comes from investigations that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted. The FDA interprets Section 505(b)(2) of the FDCA, for purposes of approving an NDA, to permit the applicant to rely, in part, upon published literature and/or the FDA’s previous findings of safety and efficacy for an approved product. The FDA also requires companies to perform additional clinical trials or measurements to support any deviation from the previously approved product and to justify that it is scientifically appropriate to rely on the applicable published literature or referenced product, referred to as bridging. The FDA may then approve the new product candidate for all or some of the indications for which the referenced product has been approved, as well as for any new indication sought by the Section 505(b)(2) applicant, if such approval is supported by study data. The labeling, however, may be required to include all or some of the limitations, contraindications, warnings or precautions or restrictions on use included in the reference product’s labeling, including a boxed warning, or may require additional limitations, contraindications, warnings or precautions or restrictions on use.

The Company currently plans to pursue marketing approval for LB1148, in the U.S. through a 505(b)(2) NDA and will be completing bridging analyses prior to NDA submissions. If the FDA disagrees with the Company’s conclusions regarding the appropriateness of its reliance on the FDA’s prior findings of safety and efficacy for TXA or on published literature, or if the Company is not otherwise able to bridge to the listed drug or published literature to demonstrate that its reliance is scientifically appropriate, the Company could be required to conduct additional clinical trials or other studies to support its NDA, which could lead to unanticipated costs and delays or to the termination of the development program for LB1148. If the Company is unable to obtain approval for LB1148 through the 505(b)(2) NDA process, it may be required to pursue the more expensive and time consuming 505(b)(1) approval process, which consists of full reports of investigations of safety and effectiveness conducted by or on the behalf of the Company.

Notwithstanding the approval of a number of products by the FDA under Section 505(b)(2), pharmaceutical companies and others have objected to the FDA’s interpretation of Section 505(b)(2). If the FDA’s interpretation of Section 505(b)(2) is successfully challenged, the FDA may be required to change its policies and practices with respect to Section 505(b)(2) regulatory approvals, which could delay or even prevent the FDA from approving any NDA that the Company submits pursuant to the 505(b)(2) process. Even if the Company is allowed to pursue the 505(b)(2) regulatory pathway to FDA approval, there is no assurance that the Company's product candidates will receive the requisite approvals for commercialization.

The Company may find it difficult to enroll patients in its clinical trials, which could delay or prevent it from proceeding with clinical trials of its product candidates.

Identifying and qualifying subjects to participate in the Company’s clinical trials is critical to its success. The Company’s inability to enroll patients in its clinical trials on a timely basis could result in the completion of the trials being delayed.

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Patient enrollment and trial completion are affected by numerous additional factors, including the:

•process for identifying patients;

•design of the trial protocol;

•eligibility and exclusion criteria;

•perceived risks and benefits of the product candidate under study;

•availability of competing therapies and clinical trials;

•severity of the disease under investigation;

•proximity and availability of clinical trial sites for prospective patients;

•ability to obtain and maintain patient consent;

•risk that enrolled patients will drop out before completion of the trial;

•patient referral practices of physicians; and

•ability to monitor patients adequately during and after treatment.

If the Company has difficulty enrolling a sufficient number of patients to conduct its clinical trials as planned, it may need to delay, limit or terminate ongoing or planned clinical trials, any of which would have an adverse effect on its business, financial condition, results of operations and prospects. For example, the Company has recently paused enrollment in its Phase 3 study for return of bowel function, pending a determination of the Company of next steps for the study. As a result, there can be no assurances that the Company will be able to complete that clinical trial on a timely basis, or at all.

Clinical drug development is very expensive, time-consuming and uncertain.

Clinical development for the Company’s product candidates is very expensive, time-consuming, difficult to design and implement, and the outcomes are inherently uncertain. Most product candidates that commence clinical trials are never approved by regulatory authorities for commercialization and of those that are approved many do not cover their costs of development. In addition, the Company, any partner with which it may in the future collaborate, the FDA, or other regulatory authorities, including state and local agencies and counterpart agencies in foreign countries, or institutional review boards (“IRB”) at the Company’s trial sites, may suspend, delay, require modifications to or terminate the Company’s clinical trials at any time.

The Company expects that its operations and clinical trials will require substantially more capital than it currently has, and the Company cannot guarantee when or if it will be able to secure such additional funding.

The Company has historically funded its operations, including its past and present clinical trials, through the sale of its securities. Based on the Company's existing cash resources and its current plan of operations, the Company may not have adequate capital to complete its current clinical trials. Moreover, the Company cannot guarantee that its cash resources, even after giving effect to recent offerings, will be sufficient for it to complete enrolling patients in both clinical trials. As a result, the Company may need to secure additional financing in order to complete enrollment and undertake such trials. If the Company is not able to obtain financing in the future or on acceptable terms, it may have to terminate or suspend one or both clinical trials early.

The results of previous clinical trials may not be predictive of future results, and the results of the Company’s current and planned clinical trials may not satisfy the requirements of the FDA or non-U.S. regulatory authorities.

The results from the prior preclinical studies and clinical trials of LB1148 may not necessarily be predictive of the results of future preclinical studies or clinical trials. Even if the Company is able to complete its planned clinical trials of its product candidates according to its current development timelines, the results from its prior clinical trials of its product candidates may not be replicated in these future trials. Many companies in the pharmaceutical and biotechnology industries (including those with greater resources and experience than the Company) have suffered significant setbacks in late-stage clinical trials after achieving positive results in early stage development, and the

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Company cannot be certain that it will not face similar setbacks. These setbacks have been caused by, among other things, preclinical findings made while clinical trials were underway or safety or efficacy observations made in clinical trials, including previously unreported adverse events. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials nonetheless have failed to obtain FDA approval. If the Company fails to produce positive results in its clinical trials of any of its product candidates, the development timelines, regulatory approvals, and commercialization prospects for its product candidates, as well as the Company’s business and financial prospects, would be adversely affected. Further, the Company’s product candidates may not be approved even if they achieve their respective primary endpoints in Phase 3 registration trials. The FDA or non-U.S. regulatory authorities may disagree with the Company’s trial designs or its interpretation of data from preclinical studies and clinical trials. The Company has taken the position that LB1148 has a single active ingredient, TXA. LB1148 also contains polyethylene glycol 3350 (“PEG”). Across different countries and different circumstances, PEG may be regulated as an inactive ingredient, a medical device, or an active ingredient. There is uncertainty about (1) whether regulatory agencies will classify LB1148 as a fixed-combination drug product and (2) consequential implications of, for example, FDA’s fixed-combination drug product regulation concerning the evaluation of each active drug component’s individual contribution to the overall treatment effect. The treatment of PEG and any regulatory requirements, if it is considered an active ingredient, may differ across regulatory authorities. If LB1148 is considered a fixed-combination drug product, then this may impact the design and overall number of required clinical trials as well as additional requirements for nonclinical studies. Even though we are proceeding with a clinical trial for LB1148 as a single active ingredient drug product, we may be required to conduct additional trials, which could include the use of a factorial design, and nonclinical studies if, for example, FDA (1) concludes that PEG is an active ingredient in LB1148 and (2) is unwilling to provide a waiver from meeting their fixed-combination drug product regulation/requirements. In addition, any of these regulatory authorities may change requirements for the approval of a product candidate even after reviewing and providing comments or advice on a protocol for a pivotal clinical trial that has the potential to result in approval by the FDA or another regulatory authority. Furthermore, any of these regulatory authorities may also approve the Company’s product candidate for fewer or more limited indications than it requests or may grant approval contingent on the performance of costly post-marketing clinical trials.

If the clinical development of LB1148 is successful, the Company intends to eventually seek regulatory approvals of LB1148 initially in the U.S. and may seek approvals in other geographies. Before obtaining regulatory approvals for the commercial sale of any product candidate for any target indication, the Company must demonstrate to the FDA that the product candidate is safe and effective for use for the target indication. The Company cannot assure you that the FDA or non-U.S. regulatory authorities would consider its planned clinical trials to be sufficient to serve as the basis for approval of its product candidates for any indication. The FDA and non-U.S. regulatory authorities retain broad discretion in evaluating the results of the Company’s clinical trials and in determining whether the results demonstrate that its product candidates are safe and effective. If the Company is required to conduct clinical trials of its product candidates in addition to those it has planned prior to approval, there can be no assurance that the results of such clinical trials will be sufficient to gain regulatory approval.

The Company’s product candidates may cause undesirable side effects or have other unexpected properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in post-approval regulatory action.

Unforeseen side effects from LB1148 could arise either during clinical development or, if approved, after it has been marketed. Undesirable side effects could cause the Company, any partners with which the Company may collaborate, or regulatory authorities to interrupt, extend, modify, delay or halt clinical trials and could result in a more restrictive or narrower label or the delay or denial of regulatory approval by the FDA or comparable foreign authorities.

Results of clinical trials could reveal a high and unacceptable severity and prevalence of side effects. In such an event, trials could be suspended or terminated, and the FDA or comparable foreign regulatory authorities could order us to cease further development of or deny approval of a product candidate for any or all targeted indications. The drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial or result in product liability claims. Any of these occurrences may have an adverse material effect on the Company’s business, financial condition, operating results and prospects.

Additionally, if the Company or others identify undesirable side effects, or other previously unknown problems, caused by a product after obtaining U.S. or foreign regulatory approval, a number of potentially negative consequences could result, which could prevent the Company or its potential partners from achieving or maintaining market acceptance of the product and could substantially increase the costs of commercializing such product.

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The Company may in the future conduct clinical trials for its product candidates outside the United States, and the FDA and applicable foreign regulatory authorities may not accept data from such trials.

The Company, as well as investigator sponsors, have conducted clinical trials, is conducting clinical trials, and may in the future choose to conduct one or more clinical trials outside of the U.S. Although the FDA or applicable foreign regulatory authority may accept data from clinical trials conducted outside the U.S. or the applicable jurisdiction, acceptance of such study data by the FDA or applicable foreign regulatory authority may be subject to certain conditions or exclusion. Where data from foreign clinical trials are intended to serve as the basis for marketing approval in the United States, the FDA will not approve the application on the basis of foreign data alone unless such data are applicable to the U.S. population and U.S. medical practice; the studies were performed by clinical investigators of recognized competence; and the data are considered valid without the need for an on-site inspection by the FDA or, if the FDA considers such an inspection to be necessary, the FDA is able to validate the data through an on-site inspection or other appropriate means. Many foreign regulatory bodies have similar requirements. In addition, such foreign studies would be subject to the applicable local laws of the foreign jurisdictions where the studies are conducted. There can be no assurance the FDA or applicable foreign regulatory authority will accept data from trials conducted outside of the United States or the applicable home country. If the FDA or applicable foreign regulatory authority does not accept such data, it would likely result in the need for additional trials, which would be costly and time-consuming and delay aspects of the Company’s business plan.

The Company relies on and expects to continue to rely on third-party CROs and other third parties to conduct and oversee its clinical trials. If these third parties do not meet the Company’s requirements or otherwise conduct the trials as required, the Company may not be able to satisfy its contractual obligations or obtain regulatory approval for, or commercialize, its product candidates.

The Company relies on, and expects to continue to rely on, third-party CROs to conduct and oversee its LB1148 clinical trials and other aspects of product development. The Company also expects to rely on various medical institutions, clinical investigators and contract laboratories to conduct its trials in accordance with the Company’s clinical protocols and all applicable regulatory requirements, including the FDA’s regulations and good clinical practice (“GCP”) requirements, which are an international standard meant to protect the rights and health of patients and to define the roles of clinical trial sponsors, administrators and monitors, and state regulations governing the handling, storage, security and recordkeeping for drug and biologic products. These CROs and other third parties are expected to play a significant role in the conduct of these trials and the subsequent collection and analysis of data from the clinical trials. The Company expects to rely heavily on these parties for the execution of its clinical trials and preclinical studies and will control only certain aspects of their activities. The Company and its CROs and other third-party contractors will be required to comply with GCP and good laboratory practice (“GLP”) requirements, which are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities. Regulatory authorities enforce these GCP and GLP requirements through periodic inspections of trial sponsors, principal investigators and trial sites. If the Company or any of these third parties fail to comply with applicable GCP and GLP requirements, or reveal noncompliance from an audit or inspection, the clinical data generated in the Company’s clinical trials may be deemed unreliable and the FDA or other regulatory authorities may require the Company to perform additional clinical trials before approving the Company’s or the Company’s partners’ marketing applications. The Company cannot assure that upon inspection by a given regulatory authority, such regulatory authority will determine whether or not any of the Company’s clinical or preclinical trials comply with applicable GCP and GLP requirements. In addition, the Company’s clinical trials generally must be conducted with product produced under cGMP regulations. The Company’s failure to comply with these regulations and policies may require it to repeat clinical trials, which would delay the regulatory approval process.

If any of the Company’s CROs or clinical trial sites terminate their involvement in one of the Company's clinical trials for any reason, the Company may not be able to enter into arrangements with alternative CROs or clinical trial sites or do so on commercially reasonable terms. In addition, if the Company’s relationship with clinical trial sites is terminated, it may experience the loss of patient follow-up information unless the Company is able to transfer the care of those patients to another qualified clinical trial site. In addition, principal investigators for the Company’s clinical trials may serve as scientific advisors or consultants to it from time to time and could receive cash or equity compensation in connection with such services. If these relationships and any related compensation result in perceived or actual conflicts of interest, the integrity of the data generated at the applicable clinical trial site may be questioned by the FDA.

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Even if the Company receives marketing approval for LB1148, or any future product candidate, it may not be able to successfully commercialize its product candidates due to unfavorable pricing regulations or third-party coverage and reimbursement policies, which could make it difficult for the Company to sell its product candidates profitably.

Obtaining coverage and reimbursement approval for a product from a government or other third-party payor is a time consuming and costly process that could require the Company to provide supporting scientific, clinical and cost effectiveness data to the payor. There may be significant delays in obtaining such coverage and reimbursement for newly approved products, and coverage may be more limited than the purposes for which the product is approved by the FDA or comparable foreign regulatory authorities. Moreover, eligibility for coverage and reimbursement does not imply that a product will be paid for in all cases or at a rate that covers costs, including research, development, intellectual property, manufacture, sale and distribution expenses. Interim reimbursement levels for new products, if applicable, may also not be sufficient to cover costs and may not be made permanent. Reimbursement rates may vary according to the use of the product and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost products and may be incorporated into existing payments for other services. Net prices for products may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors, by any future laws limiting drug prices and by any future relaxation of laws that presently restrict imports of product from countries where they may be sold at lower prices than in the United States.

There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting reimbursement policies, but also have their own methods and approval process apart from Medicare coverage and reimbursement determinations.

Coverage and reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor’s determination that use of a product is:

•a covered benefit under its health plan;

•safe, effective and medically necessary;

•appropriate for the specific patient;

•cost-effective; and

•neither experimental nor investigational.

The Company cannot be sure that coverage and reimbursement will be available for any product that it commercializes and, if coverage and reimbursement are available, what the level of reimbursement will be. The Company’s inability to promptly obtain coverage and adequate reimbursement rates from both government-funded and private payors for any approved products that the Company develops could have a material adverse effect on its operating results, its ability to raise capital needed to commercialize products and its overall financial condition.

Reimbursement may impact the demand for, and the price of, any product for which the Company obtains marketing approval. Assuming the Company obtains coverage for a given product by a third-party payor, the resulting reimbursement payment rates may not be adequate or may require co-payments that patients find unacceptably high. Patients who are prescribed medications for the treatment of their conditions, and their prescribing physicians, generally rely on third-party payors to reimburse all or part of the costs associated with those medications. Patients are unlikely to use the Company’s products unless coverage is provided and reimbursement is adequate to cover all or a significant portion of the cost of the Company’s products. Therefore, coverage and adequate reimbursement is critical to new product acceptance. Coverage decisions may depend upon clinical and economic standards that disfavor new products when more established or lower cost therapeutic alternatives are already available or subsequently become available. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which the Company receives regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

The Company’s expects to experience pricing pressures in connection with the sale of any of its product candidates due to the trend toward managed healthcare, the increasing influence of health maintenance organizations, and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription medicines, medical devices and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the successful commercialization of new products. Further, the adoption

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and implementation of any future governmental cost containment or other health reform initiative may result in additional downward pressure on the price that the Company may receive for any approved product.

Outside of the U.S., many countries require approval of the sale price of a product before it can be marketed and the pricing review period only begins after marketing or product licensing approval is granted. To obtain reimbursement or pricing approval in some of these countries, the Company may be required to conduct a clinical trial that compares the cost-effectiveness of its product candidate to other available therapies. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, the Company might obtain marketing approval for a product candidate in a particular country, but then be subject to price regulations that delay its commercial launch of the product, possibly for lengthy time periods, and negatively impact the revenues, if any, the Company is able to generate from the sale of the product in that country. Adverse pricing limitations may hinder the Company’s ability to recoup its investment in one or more product candidates, even if such product candidates obtain marketing approval.

Even if a product candidate obtains regulatory approval, it may fail to achieve the broad degree of physician and patient adoption and use necessary for commercial success.

The commercial success of LB1148, if approved, will depend significantly on attaining broad adoption and use of the drug by physicians and patients for approved indications, and it may not be commercially successful even though it is shown to be effective. The degree and rate of physician and patient adoption of a product, if approved, will depend on a number of factors, including but not limited to:

•patient demand for approved products that treat the indication for which they are approved;

•the effectiveness of a product compared to other available therapies or treatment regimens;

•the availability of coverage and adequate reimbursement from managed care plans and other healthcare payors;

•the cost of treatment in relation to alternative treatments and willingness to pay on the part of patients;

•insurers’ willingness to see the applicable indication as a disease worth treating;

•proper administration by physicians or patients;

•patient satisfaction with the results, administration and overall treatment experience;

•limitations or contraindications, warnings, precautions or approved indications for use different than those sought by the Company that are contained in the final FDA-approved labeling for the applicable product;

•any FDA requirement to undertake a risk evaluation and mitigation strategy;

•the effectiveness of the Company’s sales, marketing, pricing, reimbursement and access, government affairs, and distribution efforts;

•adverse publicity about a product or favorable publicity about competitive products;

•new government regulations and programs, including price controls and/or limits or prohibitions on ways to commercialize drugs, such as increased scrutiny on direct-to-consumer advertising of pharmaceuticals; and

•potential product liability claims or other product-related litigation.

If LB1148 is approved for use but fails to achieve the broad degree of physician and patient adoption necessary for commercial success, the Company’s operating results and financial condition will be adversely affected, which may delay, prevent or limit its ability to generate revenue and continue its business.

The Company’s product candidates, if approved, will face significant competition and their failure to compete effectively may prevent them from achieving significant market penetration.

The pharmaceutical industry is characterized by rapidly advancing technologies, intense competition, less effective patent terms, and a strong emphasis on developing newer, fast-to-market proprietary therapeutics. Numerous companies are engaged in the development, patenting, manufacturing and marketing of healthcare products

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competitive with those that the Company is developing, including LB1148. The Company will face competition from a number of sources, such as pharmaceutical companies, generic drug companies, biotechnology companies, medical device companies and academic and research institutions, many of which have greater financial resources, marketing capabilities, sales forces, manufacturing capabilities, research and development capabilities, regulatory expertise, clinical trial expertise, intellectual property portfolios, more international reach, experience in obtaining patents and regulatory approvals for product candidates and other resources than the Company. Some of the companies that offer competing products also have a broad range of other product offerings, large direct sales forces and long-term customer relationships with the Company’s target physicians, which could inhibit the Company’s market penetration efforts.

With respect to the Company’s lead product candidate, LB1148, for the indication of postoperative improvement of bowel function, the Company expects to face competition in the pharmacological therapy space from alvimopan, marketed as a branded product, ENTEREG®, by Merck, as well as in generic form. There are no pharmacotherapies for decreasing the time to normal feedings and bowel movement (or preventing necrotizing enterocolitis) in infants after heart surgery or for the reduction or elimination of postoperative intra-abdominal adhesions. However, the Company will face general competition from other medical interventions, namely surgical procedures and adhesion barrier products. Adhesion barrier products approved for abdominal or pelvic surgery in the United States consist of SEPRAFILM, INTERCEED and ADEPT. In addition, several products are used off-label for adhesion prevention in the United States, including EVICEL, SURGIWRAP, COSEAL and PRECLUDE. Adhesion barrier products available outside the United States include HYALOBARRIER, SPRAYSHIELD, PREVADH, and INTERCOAT. Such products are used as adjunctive interventions, have variable efficacy, and are not easily used with laparoscopic procedures, which are becoming increasingly common.

Notwithstanding, as described in the “Executive Overview” in Item 2 of this Quarterly Report, the Company has currently paused enrollment in its Phase 3 study for return of bowel function, pending a determination of the Company of next steps for the future of the study.

Any adverse developments that occur during any clinical trials conducted by Newsoara may affect the Company’s ability to obtain regulatory approval or commercialize LB1148.

Newsoara has the rights to develop and commercialize LB1148 in China for return of bowel function, reduction of adhesions, and sepsis. If serious adverse events occur during any clinical trials for which Newsoara conducts with respect to LB1148, the FDA and other regulatory authorities may delay, limit or deny approval of LB1148 or require the Company to conduct additional clinical trials as a condition to marketing approval, which would increase our costs. If the Company receives FDA approval for LB1148 and a new and serious safety issue is identified in connection with clinical trials conducted by Newsoara, the FDA and other regulatory authorities may withdraw their approval of the product or otherwise restrict the Company’s ability to market and sell the Company’s product. In addition, treating physicians may be less willing to administer the Company’s product due to concerns over such adverse events, which would limit the Company’s ability to commercialize LB1148.

Risks Related to the Company’s Business

The Company has a very limited operating history and has never generated any revenues from product sales.

The Company is a clinical-stage biopharmaceutical company with a very limited operating history that may make it difficult to evaluate the success of its business to date and to assess its future viability. The Company was initially formed in 2001 and its operations, to date, have been limited to business planning, raising capital, developing the Company’s pipeline assets and other research and development. The Company has not yet demonstrated an ability to successfully complete any clinical trials and has never completed the development of any product candidate, nor has it ever generated any revenue from product sales or otherwise. Consequently, the Company has no meaningful operations upon which to evaluate its business, and predictions about its future success or viability may not be as accurate as they could be if it had a longer operating history or a history of successfully developing and commercializing biopharmaceutical products.

If the Company is unable to successfully retain and integrate a new management team, the Company's business could be adversely impacted.

Effective October 11, 2022, the Company appointed its Chief Financial Officer, J.D. Finley, as its Interim Chief Executive Officer. Also effective October 11, 2022, Dr. Hallam and Dr. Dawson, the Company’s former CEO and CMO respectively, ceased providing services to the Company. The Company's success depends largely on the

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development and execution of its business strategy by its senior management team. The Company currently has a limited executive team which may adversely affect its business. Additionally, the loss of any members or key personnel would likely harm the Company's ability to implement our business strategy and respond to the rapidly changing market conditions in which it operates. There can be no assurance that the Company will be able to retain the current members of its management team. Moreover, there may be a limited number of persons with the requisite skills to serve in these positions, and the Company cannot assure you that it will be able to identify, employ or retain such qualified personnel on acceptable terms, if at all. The Company cannot assure you that management will succeed in working together as a team. In the event the Company is unsuccessful, its business and prospects could be adversely impacted.

The Company currently has no products approved for sale, and it may never obtain regulatory approval to commercialize any of its product candidates.

The research, testing, manufacturing, safety surveillance, efficacy, quality control, recordkeeping, labeling, packaging, storage, approval, sale, marketing, distribution, import, export and reporting of safety and other post-market information related to its biopharmaceutical products are subject to extensive regulation by the FDA and other regulatory authorities in the U.S. and in foreign countries, and such regulations differ from country to country and frequently are revised.

Even after the Company achieves U.S. regulatory approval for a product candidate, if any, the Company will be subject to continued regulatory review and compliance obligations. For example, with respect to the Company’s product candidates, the FDA may impose significant restrictions on the approved indicated uses for which the product may be marketed or on the conditions of approval. A product candidate’s approval may contain requirements for potentially costly post-approval studies and surveillance, including Phase 4 clinical trials, to monitor the safety and efficacy of the product. The Company also will be subject to ongoing FDA obligations and continued regulatory review with respect to, among other things, the manufacturing, processing, labeling, packaging, distribution, pharmacovigilance and adverse event reporting, storage, advertising, promotion and recordkeeping for the Company’s product candidates. These requirements include submissions of safety and other post-marketing information and reports, registration, continued compliance with cGMP requirements and with the FDA’s GCP requirements and GLP requirements, which are regulations and guidelines enforced by the FDA for all of the Company’s product candidates in clinical and preclinical development, and for any clinical trials that it conducts post-approval, as well as continued compliance with the FDA’s laws governing commercialization of the approved product, including but not limited to the FDA’s Office of Prescription Drug Promotion (“OPDP”) regulation of promotional activities, fraud and abuse, product sampling, scientific speaker engagements and activities, formulary interactions as well as interactions with healthcare practitioners. To the extent that a product candidate is approved for sale in other countries, the Company may be subject to similar or more onerous (i.e., prohibition on direct-to-consumer advertising that does not exist in the U.S.) restrictions and requirements imposed by laws and government regulators in those countries.

In addition, manufacturers of drug and biologic products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP regulations. If the Company or a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the manufacturing, processing, distribution or storage facility where, or processes by which, the product is made, a regulatory agency may impose restrictions on that product or the Company, including requesting that the Company initiate a product recall, or requiring notice to physicians or the public, withdrawal of the product from the market, or suspension of manufacturing.

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If the Company, its product candidates or the manufacturing facilities for its product candidates fail to comply with applicable regulatory requirements, a regulatory agency may:

•impose restrictions on the sale, marketing or manufacturing of the products, amend, suspend or withdraw product approvals or revoke necessary licenses;

•mandate modifications to promotional and other product-specific materials or require the Company to provide corrective information to healthcare practitioners or in its advertising;

•require the Company or its partners to enter into a consent decree, which can include imposition of various fines, reimbursements for inspection costs, required due dates for specific actions, penalties for noncompliance and, in extreme cases, require an independent compliance monitor to oversee the Company’s activities;

•issue warning letters, bring enforcement actions, initiate surprise inspections, issue show cause notices or untitled letters describing alleged violations, which may be publicly available;

•commence criminal investigations and prosecutions;

•impose injunctions, suspensions or revocations of necessary approvals or other licenses;

•impose other civil or criminal penalties;

•suspend any ongoing clinical trials;

•place restrictions on the kind of promotional activities that can be done;

•delay or refuse to approve pending applications or supplements to approved applications filed by the Company or its potential partners;

•refuse to permit drugs or precursor chemicals to be imported or exported to or from the United States;

•suspend or impose restrictions on operations, including costly new manufacturing requirements; or

•seize or detain products or require the Company or its partners to initiate a product recall.

The regulations, policies or guidance of the FDA and other applicable government agencies may change, and new or additional statutes or government regulations may be enacted, including at the state and local levels, which can differ by geography and could prevent or delay regulatory approval of the Company’s product candidates or further restrict or regulate post-approval activities. The Company cannot predict the likelihood, nature or extent of adverse government regulations that may arise from future legislation or administrative action, either in the United States or abroad. If the Company is not able to achieve and maintain regulatory compliance, it may not be permitted to commercialize its product candidates, which would adversely affect its ability to generate revenue and achieve or maintain profitability.

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The Company has received a delisting notification from the Nasdaq Stock Market based on the Company’s Bid Price being under $1.00 for thirty (30) consecutive trading days and has additionally received a delisting notice based on the Company’s Bid Price being under $0.10 for ten (10) consecutive trading days. If the Company is not able to regain compliance with the applicable continued listing requirements or standards of The Nasdaq Capital Market, Nasdaq could delist its common stock.

The Company’s ability to publicly or privately sell equity securities and the liquidity of its common stock could be adversely affected if is delisted from the Nasdaq Capital Market or if it is unable to transfer its listing to another stock market. In order to maintain this listing, it must satisfy minimum financial and other continued listing requirements and standards, including a requirement to maintain a minimum bid price of the Company's common stock of $1.00 per share (“Minimum Bid Price Requirement”). On May 20, 2022, the Company received notice (the “Notice”) from the Nasdaq Stock Market LLC (“Nasdaq”) advising the Company that for 30 consecutive trading days preceding the date of the Notice, the bid price of the Company’s common stock had closed below $1.00 per share minimum required for continued listing on the Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2). Under Nasdaq Listing Rule 5810(c)(3)(A), the Company has until November 16, 2022 to regain compliance with the Minimum Bid Price Requirement. If at any time during this period the closing bid price of the Company’s common stock is at least $1.00 for a minimum of 10 consecutive business days, the Company will regain compliance with the Minimum Bid Price Requirement and its common stock will continue to be eligible for listing on The Nasdaq Capital Market absent noncompliance with any other requirement for continued listing.

Further, on November 7, 2022, the Company received an additional notice from Nasdaq indicating that based upon the Company’s common stock having a closing bid price of less than $0.10 per share for the preceding ten (10) consecutive trading days, the Company was in violation of Nasdaq Listing Rule 5810(3)(A)(iii). Accordingly, the notice stated that the Nasdaq staff had determined to delist the Company's common stock on November 16, 2022, unless the Company requests a hearing before the Nasdaq Hearings Panel (the “Panel”) by 4:00 p.m. Eastern Time on November 14, 2022.

The Company intends to timely request a hearing before the Panel as well as a further stay of any additional action by Nasdaq pending the issuance of a decision by the Panel and the expiration of any extension the Panel may grant to the Company following the hearing. There are no assurances that a stay will be granted or that a favorable decision will be obtained.

On October 4, 2022, the Company’s shareholders authorized a reverse stock split at a ratio of not less than 1-for-10 and not greater than 1-for-50 at any time prior to the Company’s 2023 annual meeting of shareholders, with the exact ratio to be set within that range at the discretion of the Board and to be effected before the day prior to the 2023 annual meeting of shareholders, without further approval or authorization of the Company's shareholders. The Company's Board has not yet effected this reverse stock split.

Notwithstanding, the Company cannot assure you that, in the future, its securities will meet the continued listing requirements to be listed on Nasdaq. If the Company’s common stock is delisted by Nasdaq, it could lead to a number of negative implications, including an adverse effect on the price of its common stock, increased volatility in its common stock, reduced liquidity in its common stock, a limited availability of market quotations for the Company’s common stock, the loss of federal preemption of state securities laws and greater difficulty in obtaining financing. In addition, delisting of the Company’s common stock could deter broker-dealers from making a market in or otherwise seeking or generating interest in its common stock, could result in a loss of current or future coverage by certain sell-side analysts and might deter certain institutions and persons from investing in the Company’s securities at all. Delisting could also cause a loss of confidence of the Company’s collaborators, vendors, suppliers and employees, which could harm its business and future prospects.

If the Company’s common stock is delisted by Nasdaq, its common stock may be eligible to trade on the OTC Bulletin Board, OTCQB or another over-the-counter market. Any such alternative would likely result in it being more difficult for us to raise additional capital through the public or private sale of equity securities and for investors to dispose of or obtain accurate quotations as to the market value of, its common stock. In addition, there can be no assurance that the Company’s common stock would be eligible for trading on any such alternative exchange or markets. Moreover, if the Company’s common stock is delisted, it may come within the definition of “penny stock” under the Exchange Act, which imposes additional sales practice requirements on broker-dealers who sell securities to persons other than established customers and accredited investors. For example, the Company and/or broker-dealers are required to make a special suitability determination for purchases of such securities and must receive a purchaser’s written consent to

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the transaction prior to any purchase. Additionally, unless exempt, prior to a transaction involving a penny stock, the penny stock rules require the delivery of a disclosure schedule prescribed by the SEC relating to the penny stock market. The broker-dealer must also disclose the commissions payable to the broker-dealer, current quotations for the securities and, if the broker-dealer is the sole market-maker for the security, the fact that they are the sole market-maker and their presumed control over the market. Finally, monthly statements disclosing recent price information on the limited market in penny stocks must be sent to holders of such penny stocks. These requirements may reduce trading activity in the secondary market for the Company’s common stock and may impact the ability or willingness of broker-dealers to sell its securities which could limit the ability of stockholders to sell their securities in the public market and limit the Company’s ability to attract and retain qualified employees or raise additional capital in the future.

The liquidity of the Company's common stock and shareholder’s ability to sell the Company's shares may be affected by its recently approved reverse stock split.

On October 4, 2022, the Company’s shareholders approved a reverse stock split at a ratio of not less than 1-to-10 and not greater than 1-to-50. In the event the reverse stock split is effective, the liquidity of the Company's common stock may decrease as a result of the corresponding reduction in the number of shares that are outstanding following such split. In addition, the reverse stock split may increase the number of stockholders who own odd lots (less than 100 shares) of the Company's common stock, creating the potential for such stockholders to experience an increase in the cost of selling their shares and greater difficulty effecting such sales.

A reverse stock split could cause the Company’s stock price to decline relative to its value before the split.

The Company anticipates effecting a reverse split of its outstanding common stock in order to regain compliance with the Nasdaq Capital Markets continued listing requirements. There is no assurance that the reverse stock split will be successful in raising our stock price sufficiently to enable us to meet the Minimum Bid Price Requirement of the Nasdaq Capital Market. Additionally, there can be no assurances that if the reverse stock split is effected, that the reverse split will not cause an actual decline in the value of the Company's outstanding common stock. Historically, after a reverse stock split, the market price of a company’s shares decline.

The Company currently has no marketing capabilities and no sales organization. If the Company is unable to establish sales and marketing capabilities on its own or through third parties, the Company will be unable to successfully commercialize its product candidates, if approved, or generate product revenue.

The Company currently has no marketing capabilities and no sales organization. To commercialize the Company’s product candidates, if approved, in the U.S. and other jurisdictions, the Company must build its marketing, sales, distribution, managerial and other non-technical capabilities or make arrangements with third parties to perform these services, and the Company may not be successful in doing so. Although the Company’s employees, consultants, contractors, and partners have experience in the marketing, sale and distribution of pharmaceutical products, and business development activities involving external alliances, from prior employment at other companies, the Company as a company has no prior experience in the marketing, sale and distribution of pharmaceutical products, and there are significant risks involved in building and managing a sales organization, including its ability to hire, retain and incentivize qualified individuals, generate sufficient sales leads, provide adequate training to sales and marketing personnel, and effectively manage a geographically dispersed sales and marketing team. Any failure or delay in the development of the Company’s internal sales, marketing, distribution and pricing/reimbursement/access capabilities would impact adversely the commercialization of these products.

The Company may face product liability exposure, and if successful claims are brought against it, the Company may incur substantial liability if its insurance coverage for those claims is inadequate.

The Company faces an inherent risk of product liability or similar causes of action as a result of the clinical testing of its product candidates and will face an even greater risk if the Company commercializes any products. This risk exists even if a product is approved for commercial sale by the FDA and manufactured in facilities licensed and regulated by the FDA or an applicable foreign regulatory authority and notwithstanding the Company complying with applicable laws on promotional activity. The Company’s products and product candidates are designed to affect important bodily functions and processes. Any side effects, manufacturing defects, misuse or abuse associated with the Company’s product candidates could result in injury to a patient or potentially even death. The Company cannot offer any assurance that it will not face product liability suits in the future, nor can it assure that its insurance coverage will be sufficient to cover its liability under any such cases.

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In addition, a liability claim may be brought against the Company even if its product candidates merely appear to have caused an injury. Product liability claims may be brought against the Company by consumers, healthcare providers, pharmaceutical companies or others selling or otherwise coming into contact with its product candidates, among others, and under some circumstances even government agencies. If the Company cannot successfully defend itself against product liability or similar claims, it will incur substantial liabilities, reputational harm and possibly injunctions and punitive actions. In addition, regardless of merit or eventual outcome, product liability claims may result in:

•withdrawal or delay of recruitment or decreased enrollment rates of clinical trial participants;

•termination or increased government regulation of clinical trial sites or entire trial programs;

•the inability to commercialize the Company’s product candidates;

•decreased demand for the Company’s product candidates;

•impairment of the Company’s business reputation;

•product recall or withdrawal from the market or labeling, marketing or promotional restrictions;

•substantial costs of any related litigation or similar disputes;

•distraction of management’s attention and other resources from the Company’s primary business;

•significant delay in product launch;

•substantial monetary awards to patients or other claimants against the Company that may not be covered by insurance;

•withdrawal of reimbursement or formulary inclusion; or

•loss of revenue.

The Company intends to obtain product liability insurance coverage for its clinical trials. Large judgments have been awarded in class action or individual lawsuits based on drugs that had unanticipated side effects. The Company’s insurance coverage may not be sufficient to cover all of its product liability-related expenses or losses and may not cover it for any expenses or losses it may suffer. Moreover, insurance coverage is becoming increasingly expensive, restrictive and narrow, and, in the future, the Company may not be able to maintain adequate insurance coverage at a reasonable cost, in sufficient amounts or upon adequate terms to protect it against losses due to product liability or other similar legal actions. The Company will need to increase its product liability coverage if any of its product candidates receive regulatory approval, which will be costly, and it may be unable to obtain this increased product liability insurance on commercially reasonable terms or at all and for all geographies in which the Company wishes to launch. A successful product liability claim or series of claims brought against the Company, if judgments exceed its insurance coverage, could decrease its cash and harm its business, financial condition, operating results and future prospects.

The Company’s employees, independent contractors, principal investigators, other clinical trial staff, consultants, vendors, CROs and any partners with whom the Company may collaborate may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.

The Company is exposed to the risk that its employees, independent contractors, principal investigators, other clinical trial staff, consultants, vendors, CROs and any partners with which the Company may collaborate may engage in fraudulent or other illegal activity. Misconduct by these persons could include intentional, reckless, gross or negligent misconduct or unauthorized activity that violates: laws or regulations, including those laws requiring the reporting of true, complete and accurate information to the FDA or foreign regulatory authorities; manufacturing standards; federal, state and foreign healthcare fraud and abuse laws and data privacy; anticorruption laws, antikickback and Medicare/Medicaid rules, or laws that require the true, complete and accurate reporting of financial information or data, books and records. If any such or similar actions are instituted against the Company and the Company is not successful in defending itself or asserting the Company’s rights, those actions could have a significant impact on the Company’s business, including the imposition of civil, criminal and administrative and punitive penalties, damages, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, debarments, contractual damages, reputational harm, diminished profits and future earnings, injunctions, and

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curtailment or cessation of the Company’s operations, any of which could adversely affect the Company’s ability to operate the Company’s business and the Company’s operating results.

The Company may be subject to risks related to off-label use of its product candidates.

The FDA strictly regulates the advertising and promotion of drug products, and drug products may only be marketed or promoted for their FDA approved uses, consistent with the product’s approved labeling. Although physicians may prescribe legally available drugs for off-label uses, manufacturers may not market or promote such uses. Advertising and promotion of any product candidate that obtains approval in the United States will be heavily scrutinized by the FDA, the Department of Justice, the Office of Inspector General of the Department of Health and Human Services, state attorneys general, members of Congress and the public. Violations, including promotion of the Company’s products for unapproved or off-label uses, are subject to enforcement letters, inquiries and investigations, and civil, criminal and/or administrative sanctions by the FDA. Additionally, advertising and promotion of any product candidate that obtains approval outside of the United States will be heavily scrutinized by relevant foreign regulatory authorities.

Even if the Company obtains regulatory approval for its product candidates, the FDA or comparable foreign regulatory authorities may require labeling changes or impose significant restrictions on a product’s indicated uses or marketing or impose ongoing requirements for potentially costly post-approval studies or post-market surveillance.

In the U.S., engaging in impermissible promotion of the Company’s product candidates for off-label uses can also subject it to false claims litigation under federal and state statutes, which can lead to civil, criminal and/or administrative penalties and fines and agreements, such as a corporate integrity agreement, that materially restrict the manner in which the Company promotes or distributes its product candidates. If the Company does not lawfully promote its products, the Company may become subject to such litigation and, if it is not successful in defending against such actions, those actions could have a material adverse effect on its business, financial condition and operating results and even result in having an independent compliance monitor assigned to audit the Company’s ongoing operations for a lengthy period of time.

The Company’s or third party’s clinical trials may fail to demonstrate the safety and efficacy of its product candidates, or serious adverse or unacceptable side effects may be identified during their development, which could prevent or delay marketing approval and commercialization, increase the Company’s costs or necessitate the abandonment or limitation of the development of the product candidate.

Before obtaining marketing approvals for the commercial sale of any product candidate, the Company must demonstrate through lengthy, complex and expensive preclinical testing and clinical trials that such product candidate is both safe and effective for use in the applicable indication. Failures can occur at any stage of testing. Clinical trials often fail to demonstrate safety and are associated with side effects or have characteristics that are unexpected. Based on the safety profile seen in clinical testing, the Company may need to abandon development or limit development to more narrow uses in which the side effects or other characteristics are less prevalent, less severe or more tolerable from a risk-benefit perspective. The FDA or an IRB may also require that the Company suspend, discontinue, or limit clinical trials based on safety information. Such findings could further result in regulatory authorities failing to provide marketing authorization for the product candidate. Many pharmaceutical candidates that initially showed promise in early stage testing and which were efficacious have later been found to cause side effects that prevented further development of the drug candidate and, in extreme cases, the side effects were not seen until after the drug was marketed, causing regulators to remove the drug from the market post-approval.

The Company may expend its limited resources to pursue a particular indication and fail to capitalize on indications that may be more profitable or for which there is a greater likelihood of success.

Because the Company has limited financial and managerial resources, it is currently focusing only on development programs that it identifies for specific indications for its product candidates. As a result, the Company may forego or delay pursuit of opportunities for other indications, or with other potential product candidates that later prove to have greater commercial potential. The Company’s resource allocation decisions may cause it to fail to capitalize on viable commercial products or profitable market opportunities. The Company’s spending on current and future research and development programs for specific indications or future product candidates may not yield any commercially viable products. If the Company does not accurately evaluate the commercial potential or target market for a product candidate, it may not gain approval or achieve market acceptance of that candidate, and its business and financial results will be harmed.

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The Company may choose to discontinue developing or commercializing any of its product candidates, or may choose to not commercialize product candidates in approved indications, at any time during development or after approval, which would reduce or eliminate its potential return on investment for those product candidates.

At any time, the Company may decide to discontinue the development of any of its product candidates for a variety of reasons, including the appearance of new technologies that make its product candidates obsolete, competition from a competing product or changes in or failure to comply with applicable regulatory requirements. If the Company terminates a program in which it has invested significant resources, the Company will not receive any return on its investment and it will have missed the opportunity to have allocated those resources to potentially more productive uses.

Healthcare reform measures could hinder or prevent the commercial success of the Company’s product candidates.

There have been executive, judicial, and Congressional challenges to certain aspects of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively, “Affordable Care Act”). For example, the so-called “individual mandate” was repealed as part of tax reform legislation adopted in December 2017, such that the shared responsibility payment for individuals who fail to maintain minimum essential coverage under section 5000A of the Code was eliminated beginning in 2019. On June 17, 2021 the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the Affordable Care Act is unconstitutional in its entirety because the “individual mandate” was repealed by Congress. Thus, the Affordable Care Act will remain in effect in its current form. Prior to the U.S. Supreme Court ruling, on January 28, 2021, President Biden issued an executive order that initiated a special enrollment period for purposes of obtaining health insurance coverage through the Affordable Care Act marketplace. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the Affordable Care Act. It is possible that the Affordable Care Act will be subject to judicial or Congressional challenges in the future. It is unclear how such challenges and the healthcare reform measures of the Biden administration will impact the Affordable Care Act and the Company's business.

Other legislative changes have been proposed and adopted in the United States since the Affordable Care Act was enacted. These changes included aggregate reductions to Medicare payments to providers of 2% per fiscal year, which, due to subsequent legislative amendments, including the Infrastructure Investment and Jobs Act, will stay in effect until 2031 unless additional Congressional action is taken. However, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") and other SARS-CoV-2 relief legislation have suspended the 2% Medicare sequester from May 1, 2020 through March 31, 2022. Under current legislation the actual reduction in Medicare payments will vary from 1% in 2022 to up to 4% in the final fiscal year of this sequester. These laws may result in additional reductions in Medicare and other healthcare funding, which could have a material adverse effect on customers for the Company's drugs, if approved, and accordingly, the Company's financial operations. The Company expects that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for its product candidates if approved or additional pricing pressures.

Further, in the United States there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries, Presidential executive orders, and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug and biological product pricing, reduce the cost of prescription drugs and biological products under government payor programs and review the relationship between pricing and manufacturer patient programs. For example, in July 2021, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs. In response to Biden’s executive order, on September 9, 2021, the U.S. Department of Health and Human Services, or HHS, released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue as well as potential administrative actions HHS can take to advance these principles. No legislation or administrative actions have been finalized to implement these principles. It is unclear whether these or similar policy initiatives will be implemented in the future. Congress is considering drug pricing as part of other reform initiatives.

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The Company may also be subject to stricter healthcare laws, regulation and enforcement, and its failure to comply with those laws could adversely affect its business, operations and financial condition.

Certain federal and state healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are and will be applicable to the Company’s business. The Company is subject to regulation by both the federal government and the states in which it or its partners conduct business. The healthcare laws and regulations that may affect the Company’s ability to operate include, but are not limited to: the federal Anti-Kickback Statute; federal civil and criminal false claims laws and civil monetary penalty laws; the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act; the federal physician sunshine requirements under the Affordable Care Act; the Foreign Corrupt Practices Act as it applies to activities outside of the United States; and state law equivalents of many of the above federal laws.

Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of the Company’s business activities could be subject to challenge under one or more of such laws. In addition, healthcare reform legislation has strengthened these laws. For example, the Affordable Care Act, among other things, amended the intent requirement of the federal Anti-Kickback Statute and certain criminal healthcare fraud statutes. A person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it. In addition, the Affordable Care Act provided that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act.

Achieving and sustaining compliance with these laws may prove costly. In addition, any action against the Company for violation of these laws, even if the Company successfully defends against it, could cause the Company to incur significant legal expenses and divert its management’s attention from the operation of its business and result in reputational damage. If the Company’s operations are found to be in violation of any of the laws described above or any other governmental laws or regulations that apply to the Company, it may be subject to significant penalties, including administrative, civil and criminal penalties, damages, including punitive damages, fines, disgorgement, the exclusion from participation in federal and state healthcare programs, individual imprisonment or the curtailment or restructuring of its operations, and injunctions, any of which could adversely affect the Company’s ability to operate its business and its financial results.

The Company’s inability to successfully in-license, acquire, develop and market additional product candidates or approved products would impair its ability to grow its business.

The Company intends to in-license, acquire, develop and market additional products and product candidates. Because the Company’s internal research and development capabilities are limited, it may be dependent on pharmaceutical companies, academic or government scientists and other researchers to sell or license products or technology to it. The success of this strategy depends partly on the Company’s ability to identify and select promising pharmaceutical product candidates and products, negotiate licensing or acquisition agreements with their current owners, and finance these arrangements.

The process of proposing, negotiating and implementing a license or acquisition of a product candidate or approved product is lengthy and complex. Other companies, including some with substantially greater financial, marketing, sales and other resources, may compete with the Company for the license or acquisition of product candidates and approved products. The Company has limited resources to identify and execute the acquisition or in-licensing of third-party products, businesses and technologies and integrate them into its current infrastructure. Moreover, the Company may devote resources to potential acquisitions or licensing opportunities that are never completed, or the Company may fail to realize the anticipated benefits of such efforts. The Company may not be able to acquire the rights to additional product candidates on terms that it finds acceptable or at all.

Further, any product candidate that the Company acquires may require additional development efforts prior to commercial sale, including preclinical or clinical testing and approval by the FDA and applicable foreign regulatory authorities. All product candidates are prone to risks of failure typical of pharmaceutical product development, including the possibility that a product candidate will not be shown to be sufficiently safe and effective for approval by regulatory authorities. In addition, the Company cannot provide assurance that any approved products that it acquires will be manufactured or sold profitably or achieve market acceptance.

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The Company may seek to avail itself of mechanisms to expedite the development or approval for product candidates it may pursue in the future, such as Fast Track or breakthrough designation, but such mechanisms may not actually lead to a faster development or regulatory review or approval process.

LB1148 has received Fast Track designation from the FDA for the treatment of postoperative GI dysfunction (which may present as feeding intolerance, ileus, necrotizing enterocolitis, etc.) associated with gut hypoperfusion injury in pediatric patients who underwent congenital heart disease repair surgery. In addition, the Company may seek Fast Track designation, breakthrough designation, or priority review for product candidates it may pursue in the future. For example, if a drug is intended for the treatment of a serious or life-threatening condition and the drug demonstrates the potential to address unmet medical needs for this condition, the drug sponsor may apply for FDA Fast Track designation. However, the FDA has broad discretion with regard to these mechanisms, and even if the Company believes a particular product candidate is eligible for any such mechanism, it cannot guarantee that the FDA would decide to grant it. Even if it does obtain Fast Track or priority review designation or pursue an accelerated approval pathway, the Company may not experience a faster development process, review, or approval compared to conventional FDA procedures. The FDA may withdraw a particular designation if it believes that the designation is no longer supported by data from the Company’s clinical development program.

The Company intends to seek breakthrough designation for LB1148 for the treatment of postoperative GI dysfunction associated with gut hypoperfusion injury in pediatric patients who undergo congenital heart disease repair surgery and for the treatment of postoperative GI dysfunction associated with major surgeries that risk disrupting the intestinal mucosal barrier. A breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints. Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if the Company believes a product candidate meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. The Company cannot be sure that its evaluation of a product candidate as qualifying for breakthrough therapy designation will meet the FDA’s requirements. In any event, the receipt of a breakthrough therapy designation for a product candidate may not result in a faster development process, review, or approval compared to conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even if one or more product candidates qualifies as a breakthrough therapy, the FDA may later determine that the product candidate no longer meets the conditions for qualification or may determine that the time period for FDA review or approval will not be shortened.

Risks Related to the Company’s Dependence on Third Parties

The Company expects to rely on collaborations with third parties for the successful development and commercialization of its product candidates.

The Company expects to rely upon the efforts of third parties for the successful development and commercialization of the Company’s current and future product candidates. The clinical and commercial success of the Company’s product candidates may depend upon maintaining successful relationships with third-party partners which are subject to a number of significant risks, including the following:

•the Company’s partners’ ability to execute their responsibilities in a timely, cost-efficient and compliant manner;

•reduced control over delivery and manufacturing schedules;

•price increases and product reliability;

•manufacturing deviations from internal or regulatory specifications;

•quality incidents;

•the failure of partners to perform their obligations for technical, market or other reasons;

•misappropriation of the Company’s current or future product candidates; and

•other risks in potentially meeting the Company’s current and future product commercialization schedule or satisfying the requirements of its end-users.

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The Company cannot assure you that it will be able to establish or maintain third-party relationships in order to successfully develop and commercialize its product candidates.

The Company relies completely on third-party contractors to supply, manufacture and distribute clinical drug supplies for its product candidates, which may include sole-source suppliers and manufacturers; the Company intends to rely on third parties for commercial supply, manufacturing and distribution if any of its product candidates receives regulatory approval; and the Company expects to rely on third parties for supply, manufacturing and distribution of preclinical, clinical and commercial supplies of any future product candidates.

The Company does not currently have, nor does it plan to acquire, the infrastructure or capability to supply, store, manufacture or distribute preclinical, clinical or commercial quantities of drug substances or products. Additionally, the Company has not entered into a long-term commercial supply agreement to provide it with such drug substances or products. As a result, the Company’s ability to develop its product candidates is dependent, and the Company’s ability to supply its products commercially will depend, in part, on the Company’s ability to obtain the active pharmaceutical ingredients (“APIs”) and other substances and materials used in its product candidates successfully from third parties and to have finished products manufactured by third parties in accordance with regulatory requirements and in sufficient quantities for preclinical and clinical testing and commercialization. If the Company fails to develop and maintain supply and other technical relationships with these third parties, it may be unable to continue to develop or commercialize its products and product candidates.

The Company does not have direct control over whether or not its contract suppliers and manufacturers will maintain current pricing terms, be willing to continue supplying the Company with APIs and finished products or maintain adequate capacity and capabilities to serve its needs, including quality control, quality assurance and qualified personnel. The Company is dependent on its contract suppliers and manufacturers for day-to-day compliance with applicable laws and cGMPs for production of both APIs and finished products. If the safety or quality of any product or product candidate or component is compromised due to a failure to adhere to applicable laws or for other reasons, the Company may not be able to commercialize or obtain regulatory approval for the affected product or product candidate successfully, and the Company may be held liable for injuries sustained as a result.

In order to conduct larger or late-stage clinical trials for a product candidate and supply sufficient commercial quantities of the resulting drug product and its components, if that product candidate is approved for sale, the Company’s contract manufacturers and suppliers will need to produce its drug substances and product candidates in larger quantities more cost-effectively and, in certain cases, at higher yields than they currently achieve. If the Company’s third-party contractors are unable to scale up the manufacture of any of the Company's product candidates successfully in sufficient quality and quantity and at commercially reasonable prices, or are shut down or put on clinical hold by government regulators, and the Company is unable to find one or more replacement suppliers or manufacturers capable of production at a substantially equivalent cost in substantially equivalent volumes and quality, and the Company is unable to transfer the processes successfully on a timely basis, the development of that product candidate and regulatory approval or commercial launch for any resulting products may be delayed, or there may be a shortage in supply, either of which could significantly harm its business, financial condition, operating results and prospects.

The Company expects to continue to depend on third-party contract suppliers and manufacturers for the foreseeable future. The Company’s supply and manufacturing agreements do not guarantee that a contract supplier or manufacturer will provide services adequate for its needs. Additionally, any damage to or destruction of the Company’s third-party manufacturer’s or suppliers’ facilities or equipment, even by force majeure, may significantly impair the Company's ability to have its products and product candidates manufactured on a timely basis. The Company’s reliance on contract manufacturers and suppliers further exposes it to the possibility that they, or third parties with access to their facilities, will have access to and may misappropriate the Company’s trade secrets or other proprietary information. In addition, the manufacturing facilities of certain of the Company’s suppliers may be located outside of the United States. This may give rise to difficulties in importing the Company’s products or product candidates or their components into the United States or other countries.

Risks Related to the Company’s Financial Operations

The Company has expressed substantial doubt about its ability to continue as a going concern.

Management has determined that there is substantial doubt about the Company’s ability to continue as a going concern due to uncertainties that the Company’s cash flows generated from its operations will be sufficient to meet its current

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operating costs and the Company’s future consolidated financial statements may include a similar qualification about its ability to continue as a going concern. The Company’s year-end and interim financial statements were prepared assuming that it will continue as a going concern and do not include any adjustments that may result from the outcome of this uncertainty.

If the Company is unable to meet its current operating costs, the Company would need to seek additional financing or modify its operational plans. If the Company seeks additional financing to fund its business activities in the future and there remains substantial doubt about its ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to the Company on commercially reasonable terms or at all.

The Company’s prior auditors expressed substantial doubt about the Company's ability to continue as a going concern.

The Company's prior auditors’ report on our December 31, 2021 consolidated financial statements expresses an opinion that as a result of the Company’s recurring losses from operations and net capital deficiency, there is substantial doubt about the Company’s ability to continue as a going concern.

Failure to remediate a material weakness in internal controls over financial reporting could result in material misstatements in the Company’s consolidated financial statements.

The Company’s management has identified a material weakness in its internal control over financial reporting. The material weakness was due to a lack of controls in the financial closing and reporting process, including a lack of segregation of duties and the documentation and design of formalized processes and procedures surrounding the creation and posting of journal entries and account reconciliations. Additionally, the Company’s management identified a material weakness in its internal control over the fair value calculation of options granted during the quarter ended June 30, 2021. If not remediated, or if the Company identifies further material weaknesses in its internal controls, the Company’s failure to establish and maintain effective disclosure controls and procedures and internal control over financial reporting could result in material misstatements in its consolidated financial statements and a failure to meet its reporting and financial obligations.

The Company may be adversely affected by natural disasters and other catastrophic events and by man-made problems such as terrorism that could disrupt its business operations, and its business continuity and disaster recovery plans may not adequately protect it from a serious disaster.

The Company’s headquarters and main research facility are located in the greater San Diego area, which in the past has experienced severe earthquakes and fires. If these earthquakes, fires, other natural disasters, health pandemics or epidemics, terrorism and similar unforeseen events beyond its control, including for example the ongoing COVID-19 pandemic, prevented it from using all or a significant portion of its headquarters or research facility, it may be difficult or, in certain cases, impossible for the Company to continue its business for a substantial period of time. The Company does not have a disaster recovery or business continuity plan in place and may incur substantial expenses as a result of the absence or limited nature of the Company’s internal or third-party service provider disaster recovery and business continuity plans, which, particularly when taken together with its lack of earthquake insurance, could have a material adverse effect on its business. Furthermore, integral parties in the Company’s supply chain are operating from single sites, increasing their vulnerability to natural disasters or other sudden, unforeseen and severe adverse events. If such an event were to affect its supply chain, it could have a material adverse effect on the Company’s ability to conduct clinical trials, its development plans and its business.

If our information systems or data, or those of third parties upon which we rely, are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse consequences.

In the ordinary course of our business, we may process, as defined above, proprietary, confidential, and sensitive data, including personal data (such as health-related patient data), intellectual property, and trade secrets (collectively, sensitive information). We may rely upon third-party service providers and technologies to operate critical business systems to process sensitive information in a variety of contexts, including, without limitation, third-party providers of cloud-based infrastructure, employee email, CROs, and other functions. Our ability to monitor these third parties’

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information security practices is limited, and these third parties may not have adequate information security measures in place. We may share or receive sensitive information with or from third parties.

The risk of a security breach or disruption, particularly through cyber-attacks, cyber-intrusion, malicious internet-based activity, and online and offline fraud, are prevalent and have generally increased as the number, intensity, and sophistication of attempted attacks and intrusions from around the world have increased. These threats are becoming increasingly difficult to detect and come from a variety of sources, including traditional computer hackers, threat actors, personnel (such as through theft or misuse), sophisticated nation states, and nation-state-supported actors. Some actors now engage and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities. During times of war and other major conflicts, we and the third parties upon which we rely may be vulnerable to a heightened risk of these attacks, including cyber-attacks that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our products.

We and the third parties upon which we rely may be subject to a variety of evolving threats, including but not limited to social engineering attacks (including through phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, natural disasters, terrorism, war, and telecommunication and electrical failures. Ransomware attacks, including by organized criminal threat actors, nation-states, and nation-state-supported actors, are becoming increasingly prevalent and can lead to significant interruptions in our operations, loss of data and income, reputational harm, and diversion of funds. Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments. Similarly, supply-chain attacks have increased in frequency and severity.

Furthermore, the COVID-19 pandemic and our remote workforce poses increased risks to our information technology systems and data, as more of our employees work from home, utilizing network connections outside our premises.

Any of the previously identified or similar threats could cause a security breach or disruption. While the Company has not experienced any such security breach or other disruption to date, if such an event were to occur, it could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive information and cause interruptions in the Company’s operations, including material disruptions of its development programs and business operations.

We may expend significant resources or modify our business activities (including our clinical trial activities) to try to protect against security breaches and disruptions. Certain data privacy and security obligations may require us to implement and maintain specific security measures, industry-standard or reasonable security measures to protect our information technology systems and sensitive information. While we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective. We may be unable in the future to detect vulnerabilities in our information technology systems because such threats and techniques change frequently, are often sophisticated in nature, and may not be detected until after a security breach or disruption has occurred. Despite our efforts to identify and remediate vulnerabilities, if any, in our information technology systems, our efforts may not be successful. Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities.

Applicable data privacy and security obligations may require us to notify relevant stakeholders of certain security breaches and disruptions. Such disclosures are costly, and the disclosure or the failure to comply with such requirements could lead to adverse consequences. If we (or a third party upon whom we rely) experience a security breach or other disruption, or are perceived to have experienced such events, we may experience adverse consequences, including: government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive information (including personal data); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; interruptions in our operations (including availability of data); financial loss; and other similar harms. In particular, since the Company sponsors clinical trials, any breach or disruption that compromises patient data and identities could generate significant reputational damage, which may affect trust in the Company and our ability to recruit for future clinical trials. Additionally, the loss of clinical trial data from completed or future clinical trials could result in delays in the Company’s regulatory approval efforts and significantly increase its costs to recover or reproduce the data.

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Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations. Furthermore, we cannot be sure that our insurance coverage will be adequate or sufficient to protect us from or to mitigate liabilities arising out of our privacy and security practices, that such coverage will continue to be available on commercially reasonable terms or at all, or that such coverage will pay future claims.

The Company’s business and operations would suffer in the event of system failures, cyber-attacks or a deficiency in its cyber-security.

Despite the implementation of security measures, the Company’s internal computer systems and those of its current and future CROs and other contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. Although the Company has not suffered any material incidents to date, the risk of a security breach or disruption, particularly through cyber-attacks or cyber-intrusion, including by computer hackers, foreign governments, and cyber-terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. While the Company has not experienced any such material system failure, accident or security breach to date, if such an event were to occur and cause interruptions in the Company’s operations, it could result in a material disruption of its development programs and its business operations. In addition, since the Company sponsors clinical trials, any breach that compromises patient data and identities causing a breach of privacy could generate significant reputational damage and legal liabilities and costs to recover and repair, including affecting trust in the Company to recruit for future clinical trials. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in the Company’s regulatory approval efforts and significantly increase its costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of, or damage to, the Company’s data or applications or inappropriate disclosure of confidential or proprietary information, the Company could incur liability and the further development and commercialization of its products and product candidates could be delayed.

Risks Related to the Company’s Intellectual Property

The Company may not be able to obtain, maintain or enforce global patent rights or other intellectual property rights that cover its product candidates and technologies that are of sufficient breadth to prevent third parties from competing against the Company.

The Company’s success with respect to its product candidates will depend, in part, on its ability to obtain and maintain patent protection in both the U.S. and other countries, to preserve its trade secrets and to prevent third parties from infringing on its proprietary rights. The Company’s ability to protect its product candidates from unauthorized or infringing use by third parties depends in substantial part on its ability to obtain and maintain valid and enforceable patents around the world.

The patent application process, also known as patent prosecution, is expensive and time-consuming, and the Company and its current or future licensors and licensees may not be able to prepare, file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner in all the countries that are desirable. It is also possible that the Company or its current licensors, or any future licensors or licensees, will fail to identify patentable aspects of inventions made in the course of development and commercialization activities before it is too late to obtain patent protection on them. Therefore, these and any of the Company’s patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of its business. Moreover, the Company’s competitors independently may develop equivalent knowledge, methods and know-how or discover workarounds to the Company patents that would not constitute infringement. Any of these outcomes could impair the Company’s ability to enforce the exclusivity of its patents effectively, which may have an adverse impact on its business, financial condition and operating results.

Due to legal standards relating to patentability, validity, enforceability and claim scope of patents covering pharmaceutical inventions, the Company’s ability to obtain, maintain and enforce patents is uncertain and involves complex legal and factual questions especially across countries. Accordingly, rights under any existing patents or any patents the Company might obtain or license may not cover its product candidates or may not provide the Company with sufficient protection for its product candidates to afford a sustainable commercial advantage against competitive products or processes, including those from branded, generic and over-the-counter pharmaceutical companies. In addition, the Company cannot guarantee that any patents or other intellectual property rights will issue from any pending or future patent or other similar applications owned by or licensed to the Company. Even if patents or other

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intellectual property rights have issued or will issue, the Company cannot guarantee that the claims of these patents and other rights are or will be held valid or enforceable by the courts, through injunction or otherwise, or will provide the Company with any significant protection against competitive products or otherwise be commercially valuable to the Company in every country of commercial significance that the Company may target.

The Company’s ability to obtain and maintain valid and enforceable patents depends on whether the differences between its technology and the prior art allow its technology to be patentable over the prior art. The Company does not have outstanding issued patents covering all of the recent developments in its technology and is unsure of the patent protection that it will be successful in obtaining, if any. Even if the patents do successfully issue, third parties may design around or challenge the validity, enforceability or scope of such issued patents or any other issued patents the Company owns or licenses, which may result in such patents being narrowed, invalidated or held unenforceable. If the breadth or strength of protection provided by the patents the Company holds or pursues with respect to its product candidates is challenged, it could dissuade companies from collaborating with the Company to develop or threaten its ability to commercialize or finance its product candidates.

The laws of some foreign jurisdictions do not provide intellectual property rights to the same extent or duration as in the U.S., and many companies have encountered significant difficulties in acquiring, maintaining, protecting, defending and especially enforcing such rights in foreign jurisdictions. If the Company encounters such difficulties in protecting or are otherwise precluded from effectively protecting its intellectual property in foreign jurisdictions, its business prospects could be substantially harmed, especially internationally.

Proprietary trade secrets and unpatented know-how are also very important to the Company’s business. Although the Company has taken steps to protect its trade secrets and unpatented know-how by entering into confidentiality agreements with third parties, and intellectual property protection agreements with officers, directors, employees, and certain consultants and advisors, there can be no assurance that binding agreements will not be breached or enforced by courts, that the Company would have adequate remedies for any breach, including injunctive and other equitable relief, or that its trade secrets and unpatented know-how will not otherwise become known, inadvertently disclosed by the Company or its agents and representatives, or be independently discovered by its competitors. If trade secrets are independently discovered, the Company would not be able to prevent their use and if the Company and its agents or representatives inadvertently disclose trade secrets and/or unpatented know-how, the Company may not be allowed to retrieve these trade secrets and/or unpatented know-how and maintain the exclusivity it previously held.

The Company may not be able to protect its intellectual property rights throughout the world.

Filing, prosecuting and defending patents on the Company’s product candidates does not guarantee exclusivity. The requirements for patentability differ in certain countries, particularly developing countries. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as laws in the United States, especially when it comes to granting use and other kinds of patents and what kind of enforcement rights will be allowed, especially injunctive relief in a civil infringement proceeding. Consequently, the Company may not be able to prevent third parties from practicing its inventions in all countries outside the United States and even in launching an identical version of the Company’s product notwithstanding the Company has a valid patent in that country. Competitors may use the Company’s technologies in jurisdictions where it has not obtained patent protection to develop their own products, or produce copy products, and, further, may export otherwise infringing products to territories where the Company has patent protection but enforcement on infringing activities is inadequate or where the Company has no patents. These products may compete with the Company’s products, and the Company’s patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to pharmaceuticals, and the judicial and government systems are often corrupt, which could make it difficult for the Company to stop the infringement of its patents or marketing of competing products in violation of its proprietary rights generally. Proceedings to enforce its patent rights in foreign jurisdictions could result in substantial costs and divert its efforts and attention from other aspects of its business, could put its global patents at risk of being invalidated or interpreted narrowly and its global patent applications at risk of not issuing, and could provoke third parties to assert claims against it. The Company may not prevail in any lawsuits that the Company initiates or infringement actions brought against the Company, and the damages or other remedies awarded, if any, may not be commercially meaningful when the Company is the plaintiff. If the Company is the defendant it may be required to post large bonds to stay in the market while it defends itself from an infringement action.

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In addition, certain countries in Europe and certain developing countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties, especially if the patent owner does not enforce or use its patents over a protracted period of time. In some cases, the courts will force compulsory licenses on the patent holder even when finding the patent holder’s patents are valid if the court believes it is in the best interests of the country to have widespread access to an essential product covered by the patent. In these situations, the royalty the court requires to be paid by the license holder receiving the compulsory license is not calculated at fair market value and can be inconsequential, thereby disaffecting the patentholder’s business. In these countries, the Company may have limited remedies if its patents are infringed or if the Company is compelled to grant a license to its patents to a third party, which could also materially diminish the value of those patents. This would limit its potential revenue opportunities. Accordingly, the Company’s efforts to enforce its intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that the Company owns or licenses, especially in comparison to what it enjoys from enforcing its intellectual property rights in the United States. Finally, the Company’s ability to protect and enforce its intellectual property rights may be adversely affected by unforeseen changes in both U.S. and foreign intellectual property laws, or changes to the policies in various government agencies in these countries, including but not limited to the patent office issuing patents and the health agency issuing pharmaceutical product approvals. Finally, many countries have large backlogs in patent prosecution, and in some countries in Latin America it can take years, even decades, just to get a pharmaceutical patent application reviewed notwithstanding the merits of the application.

Obtaining and maintaining the Company’s patent protection depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by governmental patent agencies, and its patent protection could be reduced or eliminated for non-compliance with these requirements.

Periodic maintenance and annuity fees on any issued patent are due to be paid to the U.S. Patent and Trade Office ("USPTO") and foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can, in many cases, be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction just for failure to know about and/or timely pay a prosecution fee. Non-compliance events that could result in abandonment or lapse of a patent or patent application include failure to respond to official actions within prescribed time limits, non-payment of fees in prescribed time periods, and failure to properly legalize and submit formal documents in the format and style the country requires. If the Company or its licensors fail to maintain the patents and patent applications covering its product candidates for any reason, the Company’s competitors might be able to enter the market, which would have an adverse effect on the Company’s business.

If the Company fails to comply with its obligations under its intellectual property license agreements, it could lose license rights that are important to its business. Additionally, these agreements may be subject to disagreement over contract interpretation, which could narrow the scope of its rights to the relevant intellectual property or technology or increase its financial or other obligations to its licensors.

The Company has entered into in-license agreements with respect to certain of its product candidates. These license agreements impose various diligence, milestone, royalty, insurance and other obligations on the Company. From time to time, the Company may be delayed in various diligence or other obligations upon it. For example, the Company has experienced delays in meeting certain regulatory milestones related to clinical studies under its license agreements with the Regents of the University of California ("Regents"). If the Company fails to comply with these obligations, Regents or the respective licensors may terminate the license. The loss of such rights could materially adversely affect its business, financial condition, operating results and prospects.

If the Company is sued for infringing intellectual property rights of third parties, such litigation could be costly and time consuming and could prevent or delay it from developing or commercializing its product candidates.

The Company’s commercial success depends on its ability to develop, manufacture, market and sell its product candidates and use its proprietary technologies without infringing the proprietary rights of third parties. The Company cannot assure that marketing and selling such candidates and using such technologies will not infringe existing or future patents. Numerous U.S.- and foreign-issued patents and pending patent applications owned by third parties exist in the fields relating to its product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that others may assert that its product candidates, technologies or methods of delivery or use infringe their patent rights. Moreover, it is not always clear to industry participants, including us, which

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patents and other intellectual property rights cover various drugs, biologics, drug delivery systems or their methods of use, and which of these patents may be valid and enforceable. Thus, because of the large number of patents issued and patent applications filed in the Company’s fields across many countries, there may be a risk that third parties may allege they have patent rights encompassing the Company’s product candidates, technologies or methods.

In addition, there may be issued patents of third parties that are infringed or are alleged to be infringed by the Company’s product candidates or proprietary technologies notwithstanding patents the Company may possess. Because some patent applications in the United States may be maintained in secrecy until the patents are issued, because patent applications in the United States and many foreign jurisdictions are typically not published until 18 months after filing and because publications in the scientific literature often lag behind actual discoveries, the Company cannot be certain that others have not filed patent applications for technology covered by its own and in-licensed issued patents or its pending applications. the Company’s competitors may have filed, and may in the future file, patent applications covering the Company’s own product candidates or technology similar to the Company’s technology. Any such patent application may have priority over the Company’s own and in-licensed patent applications or patents, which could further require the Company to obtain rights to issued patents covering such technologies, which may mean paying significant licensing fees or the like. If another party has filed a U.S. patent application on inventions similar to those owned or in-licensed to us, the Company or, in the case of in-licensed technology, the licensor may have to participate, in the United States, in an interference proceeding to determine priority of invention.

The Company may be exposed to, or threatened with, future litigation by third parties having patent or other intellectual property rights alleging that its product candidates or proprietary technologies infringe such third parties’ intellectual property rights, including litigation resulting from filing under Paragraph IV of the Hatch-Waxman Act or other countries’ laws similar to the Hatch-Waxman Act. These lawsuits could claim that there are existing patent rights for such drug, and this type of litigation can be costly and could adversely affect its operating results and divert the attention of managerial and technical personnel, even if the Company does not infringe such patents or the patents asserted against the Company is ultimately established as invalid. There is a risk that a court would decide that the Company is infringing the third party’s patents and would order the Company to stop the activities covered by the patents. In addition, there is a risk that a court will order the Company to pay the other party significant damages for having violated the other party’s patents.

Because the Company relies on certain third-party licensors and partners and will continue to do so in the future, if one of its licensors or partners is sued for infringing a third party’s intellectual property rights, the Company’s business, financial condition, operating results and prospects could suffer in the same manner as if the Company were sued directly. In addition to facing litigation risks, the Company has agreed to indemnify certain third-party licensors and partners against claims of infringement caused by the Company’s proprietary technologies, and the Company has entered or may enter into cost-sharing agreements with some its licensors and partners that could require the Company to pay some of the costs of patent litigation brought against those third parties whether or not the alleged infringement is caused by its proprietary technologies. In certain instances, these cost-sharing agreements could also require the Company to assume greater responsibility for infringement damages than would be assumed just on the basis of its technology.

The occurrence of any of the foregoing could adversely affect the Company’s business, financial condition or operating results.

The Company may be subject to claims that its officers, directors, employees, consultants or independent contractors have wrongfully used or disclosed to us alleged trade secrets of their former employers or their former or current customers.

As is common in the biotechnology and pharmaceutical industries, certain of the Company’s employees were formerly employed by other biotechnology or pharmaceutical companies, including its competitors or potential competitors. Moreover, the Company engages the services of consultants to assist us in the development of the Company's product candidates, many of whom were previously employed at, or may have previously been or are currently providing consulting services to, other biotechnology or pharmaceutical companies, including the Company's competitors or potential competitors. The Company may be subject to claims that these employees and consultants or the Company has inadvertently or otherwise wrongfully used or disclosed trade secrets or other proprietary information of their former employers or their former or current customers. Although the Company has no knowledge of any such claims being alleged to date, if such claims were to arise, litigation may be necessary to defend against any such claims. Even if the Company is successful in defending against any such claims, any such litigation could be protracted, expensive,

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a distraction to its management team, not viewed favorably by investors and other third parties, and may potentially result in an unfavorable outcome.

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Other Risks Related to the Company

The Company will need to raise additional financing in the future to fund its operations, which may not be available to it on favorable terms or at all.

The Company will require substantial additional funds to fund its operations and to conduct the costly and time-consuming clinical efficacy trials necessary to pursue regulatory approval of LB1148 and any other product candidates. The Company’s future capital requirements will depend upon a number of factors, including: the number and timing of future product candidates in the pipeline; progress with and results from preclinical testing and clinical trials; the ability to manufacture sufficient drug supplies to complete preclinical and clinical trials; the costs involved in preparing, filing, acquiring, prosecuting, maintaining and enforcing patent and other intellectual property claims; and the time and costs involved in obtaining regulatory approvals and favorable reimbursement or formulary acceptance. For example, the Company recently paused enrollment in its Phase 3 study for return of bowel function, and as a result, the necessary costs and timing of the study are currently uncertain. Raising additional capital may be costly or difficult to obtain and could significantly dilute stockholders’ ownership interests or inhibit the Company’s ability to achieve its business objectives. If the Company raises additional funds through public or private equity offerings, the terms of these securities may include liquidation or other preferences that adversely impact the rights of its common stockholders. Further, to the extent that the combined Company raises additional capital through the sale of common stock or securities convertible or exchangeable into common stock, stockholders' ownership interest in the Company will be diluted. In addition, any debt financing may subject the Company to fixed payment obligations and covenants limiting or restricting its ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If the Company raises additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, the Company may have to relinquish certain valuable intellectual property or other rights to its product candidates, technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable to it. Even if the Company were to obtain sufficient funding, there can be no assurance that it will be available on terms acceptable to the Company or its stockholders.

The Company’s business could be adversely affected by the effects of health pandemics or epidemics, including the recent COVID-19 pandemic, in regions where it or third parties on which it relies have significant manufacturing facilities, concentrations of clinical trial sites or other business operations. The COVID-19 pandemic could materially affect the Company’s operations, including at its headquarters in California, which has been in the past, and could be in the future, subject to a county-wide stay-at-home order, and at clinical trial sites, as well as the business or operations of manufacturers, CROs or other third parties with whom the Company conducts business.

The Company’s business could be adversely affected by the effects of health pandemics or epidemics in regions where it has concentrations of clinical trial sites or other business operations, and could cause significant disruption in the operations of third-party manufacturers and CROs upon whom it relies. For example, in December 2019, a novel strain of coronavirus, SARS-CoV-2, causing a disease referred to as COVID-19, was reported to have surfaced in Wuhan, China. Since then, COVID-19 and its variants have spread to most countries, including the United States and many other countries. The Company’s headquarters is located in San Diego County, California, and many of the Company’s raw materials for manufacture of LB1148 are produced in foreign countries. In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic and the U.S. government-imposed travel restrictions on travel between the United States and numerous other countries. Further, the President of the United States declared the COVID-19 pandemic a national emergency, invoking powers under the Stafford Act, the legislation that directs federal emergency disaster response. Similarly, the State of California declared a state of emergency related to the spread of COVID-19. Further, on March 19, 2020 the State of California declared a statewide stay at home order for an indefinite period of time (subject to certain exceptions to facilitate authorized necessary activities) to mitigate the impact of the COVID-19 pandemic. Due to the stay-at-home order, the Company implemented work from home policies for all of its employees. The stay-at-home order has since expired and currently not in effect. The effects of future stay-at-home orders and work from home policies may negatively impact productivity, disrupt business and delay clinical programs and timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on its ability to conduct business in the ordinary course. These and similar, and perhaps more severe, disruptions in operations could negatively impact the Company’s business, operating results and financial condition.

Quarantines, stay at home and similar government orders, or the perception that such orders, shutdowns or other restrictions on the conduct of business operations could occur, related to COVID-19 or other infectious diseases, may impact personnel at third-party manufacturing facilities in the United States and other countries, or the availability or

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cost of materials, which could disrupt the Company’s supply chain. In particular, some of the Company’s suppliers of certain materials used in the production of the Company’s drug products are located in countries outside the United States, where there have been government-imposed quarantines. While many of these materials may be obtained by more than one supplier, restrictions resulting from the COVID-19 pandemic may disrupt the Company’s supply chain or limit its ability to obtain sufficient materials for its product candidates.

Supply chain constraints associated with the COVID-19 pandemic have impacted the availability of the components needed in the manufacture of LB1148 and, depending on the duration and extent of the pandemic or new strains, could impact the components and production capacity required for a commercial scale-up of LB1148. The Company's suppliers could be adversely impacted, which may result in delays or disruptions in the Company's current or future supply chain.

In addition, the Company’s clinical trials may be affected by the COVID-19 pandemic. Clinical site initiation and patient enrollment may be delayed due to prioritization of hospital resources toward the COVID-19 pandemic. Some patients may not be able or willing to comply with clinical trial protocols if quarantines interrupt healthcare services, particularly surgical services. Similarly, the Company’s ability to recruit and retain patients, principal investigators and site staff (who as healthcare providers may have heightened exposure to COVID-19) may be hindered, which would adversely affect clinical trial operations. In addition, the COVID-19 pandemic may cause interruption or delays in the operation of the FDA or other regulatory authorities which could negatively affect the Company’s planned clinical trials.

The spread of COVID-19, which has caused a broad impact globally, may materially affect the Company economically. While the potential economic impact brought by, and the duration of, the COVID-19 pandemic may be difficult to assess or predict, it is currently resulting in significant disruption of global financial markets. This disruption, if sustained or recurrent, could make it more difficult for the Company to access capital, which could in the future negatively affect its liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect the Company’s business and the value of its common stock.

The global pandemic of COVID-19 continues to rapidly evolve. The ultimate impact of the COVID-19 pandemic or a similar health pandemic or epidemic is highly uncertain and subject to change. The Company does not yet know the full extent of potential delays or impacts on its business, its clinical trials, healthcare systems or the global economy as a whole. These effects could have a material impact on the Company’s operations, and it will continue to monitor the COVID-19 situation closely. To the extent the COVID-19 pandemic adversely affects the Company’s operations, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.

Global, market and economic conditions may negatively impact the Company’s business, financial condition and share price.

Concerns over inflation, geopolitical issues, the U.S. financial markets, foreign exchange rates, capital and exchange controls, unstable global credit markets and financial conditions and the COVID-19 pandemic, have led to periods of significant economic instability, declines in consumer confidence and discretionary spending, diminished expectations for the global economy and expectations of slower global economic growth going forward, and increased unemployment rates. The Company’s general business strategy may be adversely affected by any such economic downturns, volatile business environments and continued unstable or unpredictable economic and market conditions. If these conditions continue to deteriorate or do not improve, it may make any necessary debt or equity financing more difficult to complete, more costly and more dilutive. In addition, there is a risk that one or more of our current or future service providers, manufacturers, suppliers and other partners could be negatively affected by difficult economic times, which could adversely affect the Company’s ability to attain our operating goals on schedule and on budget or meet our business and financial objectives.

In addition, the Company faces several risks associated with international business and are subject to global events beyond its control, including war, public health crises, such as pandemics and epidemics, trade disputes, economic sanctions, trade wars and their collateral impacts and other international events. Any of these changes could have a material adverse effect on the Company’s reputation, business, financial condition or results of operations. There may be changes to the Company’s business if there is instability, disruption or destruction in a significant geographic region, regardless of cause, including war, terrorism, riot, civil insurrection or social unrest; and natural or man-made disasters, including famine, flood, fire, earthquake, storm or disease. In February 2022, armed conflict escalated between Russia and Ukraine. The sanctions announced by the U.S. and other countries, following Russia’s invasion

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of Ukraine against Russia to date include restrictions on selling or importing goods, services or technology in or from affected regions and travel bans and asset freezes impacting connected individuals and political, military, business and financial organizations in Russia. The U.S. and other countries could impose wider sanctions and take other actions should the conflict further escalate. It is not possible to predict the broader consequences of this conflict, which could include further sanctions, embargoes, regional instability, geopolitical shifts and adverse effects on macroeconomic conditions, currency exchange rates and financial markets, all of which could impact the Company’s business, financial condition and results of operations.

The stock price of the Company may be highly volatile.

The market price of shares of the Company could be subject to significant fluctuations. Since the completion of the Merger on April 27, 2021, the Company’s stock price has already been subject to significant fluctuation. Market prices for securities of biotechnology and other life sciences companies historically have been particularly volatile subject even to large daily price swings. Some of the factors that may cause the market price of shares of the Company to fluctuate include, but are not limited to:

•the ability of the Company to obtain timely regulatory approvals for LB1148 or future product candidates, and delays or failures to obtain such approvals;

•failure of LB1148, if approved, to achieve commercial success;

•issues in manufacturing LB1148 or future product candidates;

•the results of current and any future clinical trials of LB1148;

•failure of other Company product candidates, if approved, to achieve commercial success;

•the entry into, or termination of, or breach by partners of key agreements, including key commercial partner agreements;

•the initiation of, material developments in, or conclusion of any litigation to enforce or defend any intellectual property rights or defend against the intellectual property rights of others;

•announcements of any dilutive equity financings;

•announcements by commercial partners or competitors of new commercial products, clinical progress or the lack thereof, significant contracts, commercial relationships or capital commitments;

•failure to elicit meaningful stock analyst coverage and downgrades of the Company’s stock by analysts; and

•the loss of key employees.

Moreover, the stock markets in general have experienced substantial volatility in the biotech industry that has often been unrelated to the operating performance of individual companies or a certain industry segment. These broad market fluctuations may also adversely affect the trading price of the Company’s shares.

In the past, following periods of volatility in the market price of a company’s securities, shareholders have often instituted class action securities litigation against those companies. Such litigation, if instituted, could result in substantial costs and diversion of management attention and resources, which could significantly harm the Company’s profitability and reputation. In addition, such securities litigation often has ensued after a reverse merger or other merger and acquisition activity of the type that the Company recently completed with LBS. Such litigation if brought could negatively impact the Company’s business.

The Company is expected to take advantage of reduced disclosure and governance requirements applicable to smaller reporting companies, which could result in its common stock being less attractive to investors.

As of June 30, 2022, the last business day of the Company’s most recently completed second fiscal quarter, the public float of the Company is less than $250 million and therefore qualifies as a smaller reporting company under the rules of the SEC. As a smaller reporting company, the Company will be able to take advantage of reduced disclosure requirements, such as simplified executive compensation disclosures and reduced financial statement disclosure requirements in its SEC filings. Decreased disclosures in the Company’s SEC filings due to its status as a smaller

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reporting company may make it harder for investors to analyze its results of operations and financial prospects. The Company cannot predict if investors will find the Company’s common stock less attractive if it relies on these exemptions. If some investors find its common stock less attractive as a result, there may be a less active trading market for its common stock and its stock price may be more volatile. The Company may take advantage of the reporting exemptions applicable to a smaller reporting company until it is no longer a smaller reporting company, which status would end once it has a public float greater than $250 million. In that event, the Company could still be a smaller reporting company if its annual revenues were below $100 million and it has a public float of less than $700 million.

The Company does not anticipate paying any dividends in the foreseeable future.

The current expectation is that the Company will retain its future earnings to fund the development and growth of its business. As a result, capital appreciation, if any, of the shares of the Company will be your sole source of gain, if any, for the foreseeable future.

If the Company fails to attract and retain management and other key personnel, it may be unable to successfully develop or commercialize its product candidates or otherwise implement its business plan.

The biotechnology industry has experienced a high rate of turnover in recent years. The Company’s ability to compete in the highly competitive biopharmaceuticals industry depends upon the ability to attract, retain and motivate highly skilled and experienced personnel with scientific, medical, regulatory, manufacturing and management skills and experience. The Company will conduct its operations in the greater San Diego area, a region that is home to many other biopharmaceutical companies as well as many academic and research institutions, resulting in fierce competition for qualified personnel. The Company may not be able to attract or retain qualified personnel in the future due to the intense competition for a limited number of qualified personnel among biopharmaceutical companies. Many of the other biopharmaceutical companies against which the Company will compete have greater financial and other resources, different risk profiles and a longer history in the industry. The Company’s competitors may provide higher compensation, more diverse opportunities and/or better opportunities for career advancement. Any or all of these competing factors may limit the Company’s ability to continue to attract and retain high quality personnel, which could negatively affect its ability to successfully develop and commercialize its product candidates and to grow the business and operations as currently contemplated.

The Company’s ability to use NOL carryforwards and certain other tax attributes may be limited.

The Company has incurred substantial losses during its history and does not expect to become profitable in the near future, and it may never achieve profitability. Unused U.S. federal and state net operating loss (“NOL”) carryforwards generated in taxable years beginning before January 1, 2018, may be carried forward to offset future taxable income, if any, until such unused NOLs expire. Under current U.S. federal income tax law, U.S. federal NOLs generated in taxable years beginning after December 31, 2017, can be carried forward indefinitely, but the deductibility of such U.S. federal NOLs in taxable years beginning after December 31, 2020, is limited to 80% of taxable income. It is uncertain if and to what extent various states will conform to current U.S. federal tax law.

In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, (the "Code"), and corresponding provisions of state law, if the Company undergoes (or has undergone) an “ownership change,” which is generally defined as a greater than 50-percentage-point cumulative change, by value, in its equity ownership over a three-year period, the Company's ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income or taxes may be limited. Including the recently completed Merger, the Company has completed several equity offerings since its inception which may have resulted in an ownership change as defined by Sections 382 and 383 of the Code, or could result in an ownership change in the future. The Company has not completed a Code Section 382 and 383 analysis regarding the limitation of NOL and research and development credit carryforwards for all relevant tax years.

Accordingly, the Company's pre-2018 NOL carryforwards may expire prior to being used, its NOL carryforwards generated in 2018 and thereafter will be subject to a percentage limitation and, the Company's ability to use pre-change NOL carryforwards and other pre-change tax attributes (such as research tax credits) to offset post-change income or taxes may be limited. Similar provisions of state tax law may also apply to limit the Company's use of accumulated state tax attributes. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed. As a result, even if the Company attains profitability, it may be unable to use all or a material portion of its NOLs and other tax attributes, which could adversely affect future cash flows.

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Changes in tax law could adversely affect the Company’s business.

The rules dealing with U.S. federal, state and local income taxation are constantly under review by the Internal Revenue Service, the U.S. Treasury Department and other governmental bodies. Changes to tax laws (which changes may have retroactive application) could adversely affect the Company or holders of its common stock. In recent years, many such changes have been made and changes are likely to continue to occur in the future. Future changes in tax laws could have a material adverse effect on the Company’s business, cash flow, financial condition or results of operations.

The Company will incur costs and demands upon management as a result of complying with the laws and regulations affecting public companies.

The Company will incur significant legal, accounting and other expenses that the Company did not incur as a private company prior to the Merger, including costs associated with public company reporting requirements. The Company also incurs costs associated with corporate governance requirements, including requirements under the Sarbanes-Oxley Act, as well as new implemented requirements by the SEC and Nasdaq. These rules and regulations are expected to increase the Company’s legal and financial compliance costs and to make some activities more time consuming and costly. For example, the Company’s management team consists of the executive officers of the Company prior to the Merger, some of whom have not previously managed and operated a public company. These executive officers and other personnel need to devote substantial time to gaining expertise regarding operations as a public company and compliance with applicable laws and regulations. These rules and regulations also may make it difficult and expensive for the Company to obtain directors’ and officers’ liability insurance. As a result, it may be more difficult for the Company to attract and retain qualified individuals to serve on the Company’s board of directors or as executive officers of the Company, which may adversely affect investor confidence in the Company and could cause its business or stock price to suffer.

Anti-takeover provisions in the Company’s charter documents and under Delaware law could make an acquisition of the Company more difficult and may prevent attempts by the Company stockholders to replace or remove the Company management.

Provisions in the Company’s certificate of incorporation and bylaws may delay or prevent an acquisition or a change in management. In addition, because the Company is incorporated in Delaware, it is governed by the provisions of Section 203 of the DGCL, which prohibits stockholders owning in excess of 15% of the outstanding Company voting stock from merging or combining with the Company. Although the Company believes these provisions collectively will provide for an opportunity to receive higher bids by requiring potential acquirors to negotiate with the Company’s board of directors, they would apply even if the offer may be considered beneficial by some stockholders. In addition, these provisions may frustrate or prevent any attempts by the Company’s stockholders to replace or remove then current management by making it more difficult for stockholders to replace members of the board of directors, which is responsible for appointing the members of management.

If the Company fails to maintain proper and effective internal controls, its ability to produce accurate financial statements on a timely basis could be impaired.

The Company is subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of Nasdaq. The Sarbanes-Oxley Act requires, among other things, that the Company maintain effective disclosure controls and procedures and internal control over financial reporting. The Company must perform system and process evaluation and testing of its internal control over financial reporting to allow management to report on the effectiveness of its internal controls over financial reporting in its Annual Report on Form 10-K filing for that year, as required by Section 404 of the Sarbanes-Oxley Act. This has required that the Company incur substantial professional fees and internal costs to expand its accounting and finance functions and that it expend significant management efforts. The Company may experience difficulty in meeting these reporting requirements in a timely manner.

The Company may discover weaknesses in its system of internal financial and accounting controls and procedures that could result in a material misstatement of its consolidated financial statements. Prior to the Merger, LBS’s management identified a material weakness in its internal control over financial reporting. The material weakness was due to a lack of controls in the financial closing and reporting process for LBS, including a lack of segregation of duties and the documentation and design of formalized processes and procedures surrounding the creation and posting of journal entries and account reconciliations. If the Company does not remediate this material weakness, or if the

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Company identifies further material weaknesses in its internal controls, the Company’s failure to establish and maintain effective internal financial and accounting controls and procedures could result in material misstatements in its consolidated financial statements and a failure to meet its reporting and financial obligations.

The Company’s internal control over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.

If the Company is not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act, or if it is unable to maintain proper and effective internal controls, the Company may not be able to produce timely and accurate consolidated financial statements. If that were to happen, the market price of its common stock could decline and it could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities.

Our board of directors has broad discretion to issue additional securities, which might dilute the net tangible book value per share of our common stock for existing stockholders.

The Company is entitled under its certificate of incorporation to issue up to 300,000,000 shares of common stock and 7,000,000 “blank check” shares of preferred stock. Additionally, in the event the Company consummates the reverse stock split previously approved by its shareholders on October 4, 2022 (at a ratio to be between 1-for-10 and 1-for-50 at the discretion of the Board, the number of issued and outstanding shares will increase, but the Company’s authorized shares of common stock will not be proportionately reduced. Shares of the Company’s blank check preferred stock provide its board of directors with broad authority to determine voting, dividend, conversion, and other rights. The Company expects that significant additional capital may be needed in the future to continue its planned operations. To the extent the Company raises additional capital by issuing equity securities, its existing shareholders may experience substantial dilution. The Company may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner the Company determines from time to time. If the Company sells common stock, convertible securities or other equity securities in more than one transaction, investors may be materially diluted by subsequent sales. These sales may also result in material dilution to the Company’s existing shareholders, and new investors could gain rights superior to existing shareholders. Pursuant to the Company’s equity incentive plans and employee stock purchase plan, management is authorized to grant stock options, restricted stock units and other equity-based awards to employees, directors and consultants, and to sell common stock to employees, respectively. Any increase in the number of shares outstanding as a result of the exercise of outstanding options, the vesting or settlement of outstanding stock awards, or the purchase of shares pursuant to the employee stock purchase plan will cause shareholders to experience additional dilution, which could cause the stock price to fall.

General Risk Factors

If equity research analysts do not publish research or reports, or publish unfavorable research or reports, about the Company, its business or its market, its stock price and trading volume could decline.

The trading market for the Company’s common stock is and will be influenced by the research and reports that equity research analysts publish about it and its business. Equity research analysts may elect not to provide research coverage of the Company’s common stock, and such lack of research coverage may adversely affect the market price of its common stock. In the event it does have equity research analyst coverage, the Company will not have any control over the analysts, or the content and opinions included in their reports. The price of the Company’s common stock could decline if one or more equity research analysts downgrade its stock or issue other unfavorable commentary or research. If one or more equity research analysts ceases coverage of the Company or fails to publish reports on it regularly, demand for its common stock could decrease, which in turn could cause its stock price or trading volume to decline.

Future sales of substantial amounts of our common stock, or the possibility that such sales could occur, could adversely affect the market price of our common stock.

Future sales in the public market of shares of our common stock, including shares issued upon exercise of our outstanding stock options, or the perception by the market that these sales could occur, could lower the market price of our common stock or make it difficult for us to raise additional capital.

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Our business could be negatively affected as a result of actions of activist stockholders, and such activism could impact the trading value of our securities.

Stockholders may, from time to time, engage in proxy solicitations or advance stockholder proposals, or otherwise attempt to effect changes and assert influence on our board of directors and management. Activist campaigns that contest or conflict with our strategic direction or seek changes in the composition of our board of directors could have an adverse effect on our operating results and financial condition. A proxy contest would require us to incur significant legal and advisory fees, proxy solicitation expenses and administrative and associated costs and require significant time and attention by our board of directors and management, diverting their attention from the pursuit of our business strategy. Any perceived uncertainties as to our future direction and control, our ability to execute on our strategy, or changes to the composition of our board of directors or senior management team arising from a proxy contest could lead to the perception of a change in the direction of our business or instability which may result in the loss of potential business opportunities, make it more difficult to pursue our strategic initiatives, or limit our ability to attract and retain qualified personnel and business partners, any of which could adversely affect our business and operating results. If individuals are ultimately elected to our board of directors with a specific agenda, it may adversely affect our ability to effectively implement our business strategy and create additional value for our stockholders. We may choose to initiate, or may become subject to, litigation as a result of the proxy contest or matters arising from the proxy contest, which would serve as a further distraction to our board of directors and management and would require us to incur significant additional costs. In addition, actions such as those described above could cause significant fluctuations in our stock price based upon temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.

Securities class action litigation could divert our management’s attention and harm our business and could subject us to significant liabilities.

The stock markets have from time to time experienced significant price and volume fluctuations that have affected the market prices for the equity securities of life sciences and biotechnology companies. These broad market fluctuations may cause the market price of our ordinary shares to decline. In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because biotechnology and biopharma companies have experienced significant stock price volatility in recent years. Even if we are successful in defending claims that may be brought in the future, such litigation could result in substantial costs and may be a distraction to our management and may lead to an unfavorable outcome that could adversely impact our financial condition and prospects.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULT UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURE

Not Applicable.

ITEM 5. OTHER INFORMATION

On November 7, 2022, the Company received notice (the “Notice”) from the Nasdaq Stock Market LLC (“Nasdaq”) indicating that based upon the Company’s common stock having a closing bid price of less than $0.10 per share for the preceding ten (10) consecutive trading days, the Company was in violation of Nasdaq Listing Rule 5810(3)(A)(iii). Accordingly, the Notice stated that the Nasdaq staff had determined to delist the Company's common stock on November 16, 2022, unless the Company requests a hearing before the Nasdaq Hearings Panel (the “Panel”) by 4:00 p.m. Eastern Time on November 14, 2022. Additionally, the Company continues to not be in compliance with Nasdaq Listing Rule 5550(a)(2) (the minimum bid price of $1.00), as previously disclosed in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on May 20, 2022.

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The Company intends to timely request a hearing before the Panel as well as a further stay of any additional action by Nasdaq pending the issuance of a decision by the Panel and the expiration of any extension the Panel may grant to the Company following the hearing. There are no assurances that a stay will be granted or that a favorable decision will be obtained.

As previously disclosed, the Company’s shareholders authorized a reverse stock split of the Company’s common stock at a ratio of not less than 1-for-10 and not greater than 1-for-50, with the exact ratio to be set by the Board of Directors of the Company and effected prior to the Company’s 2023 annual meeting of shareholders. The Company intends to effect such a reverse stock split as part of its plan to comply with the Nasdaq Listing Rules described above.

ITEM 6. EXHIBITS

Exhibit Number	Description of document
2.1†	Agreement and Plan of Merger, dated as of December 16, 2020, by and among Seneca Biopharma, Inc., Leading BioSciences, Inc. and Townsgate Acquisition Sub 1, Inc. (Incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on December 21, 2020).
3.1	Amended and Restated Certificate of Incorporation of the Registrant (Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on April 27, 2021).
3.2	Certificate of Designation of Series A 4.5% Convertible Preferred Stock (Incorporated by reference to Exhibit 3.01 to the Registrant’s Current Report on Form 8-K, filed with the SEC on December 12, 2016).
3.3	Amended and Restated Bylaws of the Registrant (Incorporated by reference to Exhibit 3.3 to the Registrant’s Registration Statement on Form S-1 Amendment 5, filed with the SEC on August 11, 2022).
3.4	Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock (Incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K, filed with the SEC on August 16, 2022).
4.1	Reference is made to Exhibits 3.1, 3.2 and 3.3.
4.2	Specimen Common Stock Certificate. (Incorporated by reference to Exhibit 4.3 to the Registrant’s Annual Report on Form 10-K, filed with the SEC on March 17, 2022).
4.3	Form of Series A Preferred Stock Certificate (Incorporated by reference to Exhibit 4.01 to the Registrant’s Current Report on Form 8-K, filed with the SEC on September 12, 2016).
4.4	Form of Consulting Warrant issued January 2011 and March 2012 (Incorporated by reference to Exhibit 4.01 to the Registrant’s Registration Statement on Form S-3 (File No. 333-188859) original filed with the SEC on May 24, 2013
4.5	Form of Common Stock Purchase Warrant from August 2017 Public Offering Dated August 1, 2017 (Incorporated by reference to Exhibit 4.01 to the Registrant’s Current Report on Form 8-K, filed with the SEC on July 28, 2017).
4.6	Form of Common Stock Purchase Warrant from October 2018 Offering (Incorporated by reference to Exhibit 4.01 to the Registrant's Current Report on Form 8-K, originally filed with the SEC on October 29, 2018)
4.7	Form of Placement Agent Common Stock Purchase Warrant from October 2018 Offering (Incorporated by reference to Exhibit 4.02 to the Registrant's Current Report on Form 8-K, originally filed with the SEC on October 29, 2018)
4.8	Consultant Warrant for Hibiscus BioVentures, LLC issued January 2019 (Incorporated by reference to Exhibit 4.40 to the Registrant's Form 10-Q, originally filed with the SEC on May 14, 2019)
4.9	Form of Series M and Series N warrant from July 2019 Offering (Incorporated by reference to Exhibit 4.45 to the Registrant's Registration Statement on Form S-1/A (File No. 333-232273), filed with the SEC on July 24, 2019)
4.10	Letter Agreement from January 2020 Offering (Incorporated by reference to Exhibit 10.01 to the Registrant's Current Report on Form 8-K, originally filed with the SEC on January 22, 2020)

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4.11	Form of Series O Pre-Funded Warrant from July 2019 Offering (Incorporated by reference to Exhibit 4.45 to the Registrant's Registration Statement on Form S-1/A (File No. 333-232273), filed with the SEC on July 24, 2019)
4.12	Form of Series Q Replacement Warrant issued in January 2020 Offering (Incorporated by reference to Exhibit 4.02 to the Registrant's Current Report on Form 8-K, originally filed with the SEC on January 22, 2020)
4.13	Form of Placement Agent Agreement from January 2020 Offering (Incorporated by reference to Exhibit 10.02 to the Registrant's Current Report on Form 8-K, originally filed with the SEC on January 22, 2020)
4.14	Form of Placement Agent Warrant issued in January 2020 Offering (Incorporated by reference to Exhibit 4.03 to the Registrant's Current Report on Form 8-K, originally filed with the SEC on January 22, 2020)
4.15	Form of Placement Agent Warrant issued in May 2020 Offering (Incorporated by reference to Exhibit 4.01 to the Registrant's Current Report on Form 8-K, originally filed with the SEC on May 27, 2020)
4.16	Form of Securities Purchase Agreement with Investors from May 2020 Offering (Incorporated by reference to Exhibit 10.01 to the Registrant's Current Report on Form 8-K, originally filed with the SEC on May 27, 2020)
4.17	Form of Warrant to Purchase Shares of Common Stock of Leading BioSciences, Inc. (Incorporated by reference to Exhibit 4.30 to the Registrant’s Registration Statement on Form S-4 (File No. 333-251659), originally filed with the SEC on December 23, 2020, as amended).
4.18	Form of Bridge Warrant of Leading BioSciences, Inc. (Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on December 21, 2020).
4.19	Form of Equity Warrant of Leading BioSciences, Inc. (Incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K, filed with the SEC on December 21, 2020).
4.20†	Registration Rights Agreement, by and between Seneca Biopharma, Inc. and the investor party thereto, dated December 16, 2020 (Incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K, filed with the SEC on December 21, 2020).
4.21	Waiver Agreement, dated as of July 21, 2021, by and between Palisade Bio, Inc. and Altium Growth Fund, LP (Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on July 22, 2021).
4.22	Warrant, dated as of July 21, 2021, issued to Altium Growth Fund, LP (Incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K, filed with the SEC on July 22, 2021).
4.23	Waiver Agreement, dated as of January 31, 2022, by and between Palisade Bio, Inc. and Altium Growth Fund, LP (Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on February 21, 2022).
4.24	Warrant, dated as of January 31, 2022, issued to Altium Growth Fund, LP (Incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K, filed with the SEC on February 21, 2022).
4.25	Securities Purchase Agreement, dated as of August 19, 2021, by and between Palisade Bio, Inc. and Yuma Regional Medical Center (Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on August 24, 2021).
4.26	Warrant, dated as of August 19, 2021, issued to Yuma Regional Medical Center (Incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K, filed with the SEC on August 24, 2021).
4.27	Form of Common Stock Purchase Warrant (Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on May 6, 2022).
4.28	Form of Placement Agent Warrant (Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on May 6, 2022).
4.29	Form of Series 1 Common Stock Warrant (Incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K, filed with the SEC on August 16, 2022).
4.30	Form of Series 2 Common Stock Warrant (Incorporated by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K, filed with the SEC on August 16, 2022).

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4.31	Warrant Agency Agreement dated August 16, 2022, by and between Palisade Bio, Inc. and American Stock Transfer and Trust Company, LLC. (Incorporated by reference to Exhibit 4.3 to the Registrant's Current Report on Form 8-K, filed with the SEC on August 16, 2022).
4.32	Form of Series B Preferred Stock Certificate of Registrant (Incorporated by reference to Exhibit 4.33 to the Registrant's Registration Statement on Form S-1/A, filed with the SEC on August 9, 2022)
4.33*	Form of Underwriter Warrant issued August 16, 2022.
10.1	Office Lease Between AP Beacon Carlsbad, LP, and Palisade Bio, Inc., dated May 12, 2022 (Incorporate by reference to Exhibit 10.1 to the Registrant's Form 10-Q filed with the SEC on May 13, 2022).
10.2	First Amendment dated July 14, 2022 to the Office Lease Between AP Beacon Carlsbad, LP, and Palisade Bio, Inc., dated May 12, 2022 (Incorporated by reference to Exhibit 10.2 to the Registrants Form 10-Q filed with the SEC on August 15, 2022).
10.3†	Form of Securities Purchase Agreement, dated May 6, 2022, by and among the Company and the purchasers named therein (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on May 6, 2022).
10.5+	Separation Agreement and Release with former Chief Executive Officer (Incorporated by reference to Exhibit 10.01 to the Registrant's Current Report on Form 8-K filed with the SEC on October 14, 2022).
31.1*	Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Exchange Act.
31.2*	Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Exchange Act.
32.1*	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rules 13a-14(b) or 15d-14(b) of the Exchange Act, and 18 U.S.C. Section 1350.
101.INS*	Inline XBRL Instance Document-the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document.
101.SCH*	Inline XBRL Taxonomy Extension Schema.
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase.
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase.
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase.
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase.
104*	Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101).

* Filed herewith

** Furnished herewith.

+ Indicates management contract or compensatory plan.

† Certain schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the Securities and Exchange Commission upon request.

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SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed by the undersigned hereunto duly authorized.

	PALISADE BIO, INC.
Date: November 14, 2022		/s/ J.D. Finley
		J.D. Finley, Interim Chief Executive Officer and Chief Financial Officer
		(Principal Executive Officer and Principal Financial Officer)

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EX-4.33

COMMON STOCK PURCHASE WARRANT

PALISADE BIO, INC.

Warrant Shares: _______ Initial Exercise Date: _______ __, 2022

CUSIP:

ISIN:

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, CEDE & CO. or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise Date”) and on or prior to 5:00 p.m. (New York City time) on _____ __, 2027 (the “Termination Date”) but not thereafter, to subscribe for and purchase from Palisade Bio, Inc., a Delaware corporation (the “Company”), up to ______ shares (as subject to adjustment hereunder, the “Warrant Shares”) of Common Stock. The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b). This Warrant shall initially be issued and maintained in the form of a security held in book-entry form and the Depository Trust Company or its nominee (“DTC”) shall initially be the sole registered holder of this Warrant, subject to a Holder’s right to elect to receive a Warrant in certificated form pursuant to the terms of the Warrant Agency Agreement, in which case this sentence shall not apply.

Section 1. Definitions. In addition to the terms defined elsewhere in this Warrant, the following terms have the meanings indicated in this Section 1:

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.

“Bid Price” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the bid price of the Common Stock for the time in question (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on the Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

1

“Board of Directors” means the board of directors of the Company.

“Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed; provided, however, for clarification, commercial banks shall not be deemed to be authorized or required by law to remain closed due to “stay at home”, “shelter-in-place”, “non-essential employee” or any other similar orders or restrictions or the closure of any physical branch locations at the direction of any governmental authority so long as the electronic funds transfer systems (including for wire transfers) of commercial banks in The City of New York generally are open for use by customers on such day.

“Commission” means the United States Securities and Exchange Commission.

“Common Stock” means the common stock of the Company, par value $0.01 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.

“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

“Registration Statement” means the Company’s registration statement on Form S-1 (File No. 333-265769).

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Subsidiary” means any subsidiary of the Company and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.

“Trading Day” means a day on which the Common Stock is traded on a Trading Market.

“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock Exchange (or any successors to any of the foregoing).

2

“Transfer Agent” means American Stock Transfer & Trust Company, LLC, the current transfer agent of the Company, with a mailing address of 6201 15th Avenue, Brooklyn, New York 11219 and an email address of _______________, and any successor transfer agent of the Company.

“Underwriting Agreement” means the underwriting agreement, dated as of ____ __2022, among the Company and Ladenburg Thalmann & Co. Inc. as representative of the underwriters named therein, as amended, modified or supplemented from time to time in accordance with its terms.

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on the Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

“Warrant Agency Agreement” means that certain warrant agency agreement, dated on or about the Initial Exercise Date, between the Company and the Warrant Agent.

“Warrant Agent” means the Transfer Agent and any successor warrant agent of the Company.

“Warrants” means this Warrant and other Common Stock purchase warrants issued by the Company pursuant to the Registration Statement.

Section 2. Exercise.

a)Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed PDF copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise in the form annexed hereto (the “Notice of Exercise”). Within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined in Section 2(d)(i) herein) following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price to the Company for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is

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specified in the applicable Notice of Exercise.No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation as soon as reasonably practicable of the date on which the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Business Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

Notwithstanding the foregoing in this Section 2(a), a holder whose interest in this Warrant is a beneficial interest in certificate(s) representing this Warrant held in book-entry form through DTC (or another established clearing corporation performing similar functions), shall effect exercises made pursuant to this Section 2(a) by delivering to DTC (or such other clearing corporation, as applicable) the appropriate instruction form for exercise, complying with the procedures to effect exercise that are required by DTC (or such other clearing corporation, as applicable), subject to a Holder’s right to elect to receive a Warrant in certificated form pursuant to the terms of the Warrant Agency Agreement, in which case this sentence shall not apply.

b)Exercise Price. The exercise price per share of Common Stock under this Warrant shall be $_____, subject to adjustment hereunder (the “Exercise Price”).

c)Cashless Exercise. If at the time of exercise hereof there is no effective registration statement registering, or the prospectus contained therein is not available for the issuance of the Warrant Shares to the Holder, then this Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

(A) = as applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 2(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) at the option of the Holder, either (y) the VWAP on the Trading Day immediately preceding the date of the

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applicable Notice of Exercise or (z) the Bid Price of the Common Stock on the principal Trading Market as reported by Bloomberg L.P. (“Bloomberg”) as of the time of the Holder’s execution of the applicable Notice of Exercise if such Notice of Exercise is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter (including until two (2) hours after the close of “regular trading hours” on a Trading Day) pursuant to Section 2(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 2(a) hereof after the close of “regular trading hours” on such Trading Day;

(B) = the Exercise Price of this Warrant, as adjusted hereunder; and

(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.

If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the registered characteristics of the Warrants being exercised. The Company agrees not to take any position contrary to this Section 2(c).

Notwithstanding anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 2(c).

d)Mechanics of Exercise.

i.Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by Holder or (B) this Warrant is being exercised via cashless exercise, and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is the earliest of (i) two (2) Trading Days after the delivery to the Company of the Notice of Exercise, (ii) one (1) Trading Day after delivery of the aggregate Exercise Price to the Company and (iii) the number of Trading Days comprising the Standard Settlement Period after the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”). Upon delivery of the Notice of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with

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respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period following delivery of the Notice of Exercise. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the third Trading Day after the Warrant Share Delivery Date) for each Trading Day after such Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise. The Company agrees to maintain a transfer agent that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Exercise. Notwithstanding the foregoing, with respect to any Notice(s) of Exercise delivered on or prior to 12:00 p.m. (New York City time) on the Initial Exercise Date, which may be delivered at any time after the time of execution of the Underwriting Agreement, the Company agrees to deliver the Warrant Shares subject to such notice(s) by 10:00 a.m. (New York City time) on the Initial Exercise Date and the Initial Exercise Date shall be the Warrant Share Delivery Date for purposes hereunder, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received by such Warrant Share Delivery Date.

ii.Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

iii.Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.

iv.Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section

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2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date and the Holder has paid any required Exercise Price for the portion of this Warrant being exercised on or prior to such Warrant Share Delivery Date (or utilized cashless exercise, if available), and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including customary brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.]

v.No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.

vi.Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant

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Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that, in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.

vii.Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

e)Holder’s Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the

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accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within one Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% (or, upon election by a Holder prior to the issuance of any Warrants, 9.99%) of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

f)Call Provision. Subject to the provisions of Section 2(e) and this Section 2(f), if, after the Initial Exercise Date, (i) the VWAP for any 30 consecutive Trading Days (the “Measurement Period,” which 30 consecutive Trading Day period shall not have commenced until after the Initial Exercise Date) exceeds $____ (subject to adjustment for forward and reverse stock splits, recapitalizations, stock dividends and the like after the Initial Exercise Date), (ii) the average daily volume for such Measurement Period exceeds $500,000 per Trading Day and (iii) the Holder is not in possession of any information that constitutes, or might constitute, material non-public information which was provided by the Company, any of its Subsidiaries, or any of their officers, directors, employees, agents or Affiliates, then the Company may, within one (1) Trading Day of the end of such Measurement Period, call for cancellation of all or any portion of this Warrant for which a Notice of Exercise has not yet been delivered (such right, a “Call”) for consideration equal to $0.01 per Warrant Share. To exercise this right, the Company must deliver to the Holder an irrevocable written notice (a “Call Notice”), indicating therein the portion of unexercised portion of this Warrant to which such notice applies. If the conditions set forth below for such Call are satisfied from the period from the date of the Call Notice through

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and including the Call Date (as defined below), then any portion of this Warrant subject to such Call Notice for which a Notice of Exercise shall not have been received by the Call Date will be cancelled at 6:30 p.m. (New York City time) on the tenth Trading Day after the date the Call Notice is received by the Holder (such date and time, the “Call Date”). Any unexercised portion of this Warrant to which the Call Notice does not pertain will be unaffected by such Call Notice. In furtherance thereof, the Company covenants and agrees that it will honor all Notices of Exercise with respect to Warrant Shares subject to a Call Notice that are tendered through 6:30 p.m. (New York City time) on the Call Date. The parties agree that any Notice of Exercise delivered following a Call Notice which calls less than all of the Warrants shall first reduce to zero the number of Warrant Shares subject to such Call Notice prior to reducing the remaining Warrant Shares available for purchase under this Warrant. For example, if (A) this Warrant then permits the Holder to acquire 100 Warrant Shares, (B) a Call Notice pertains to 75 Warrant Shares, and (C) prior to 6:30 p.m. (New York City time) on the Call Date the Holder tenders a Notice of Exercise in respect of 50 Warrant Shares, then (x) on the Call Date the right under this Warrant to acquire 25 Warrant Shares will be automatically cancelled, (y) the Company, in the time and manner required under this Warrant, will have issued and delivered to the Holder 50 Warrant Shares in respect of the exercises following receipt of the Call Notice, and (z) the Holder may, until the Termination Date, exercise this Warrant for 25 Warrant Shares (subject to adjustment as herein provided and subject to subsequent Call Notices). Subject again to the provisions of this Section 2(f), the Company may deliver subsequent Call Notices for any portion of this Warrant for which the Holder shall not have delivered a Notice of Exercise. Notwithstanding anything to the contrary set forth in this Warrant, the Company may not deliver a Call Notice or require the cancellation of this Warrant (and any such Call Notice shall be void), unless, from the beginning of the Measurement Period through the Call Date, (1) the Company shall have honored in accordance with the terms of this Warrant all Notices of Exercise delivered by 6:30 p.m. (New York City time) on the Call Date, and (2) a registration statement shall be effective as to all Warrant Shares and the prospectus thereunder available for use by the Company for the sale of all such Warrant Shares to the Holder, and (3) the Common Stock shall be listed or quoted for trading on the Trading Market, and (4) there is a sufficient number of authorized shares of Common Stock for issuance of all Warrant Shares, and (5) the issuance of all Warrant Shares subject to a Call Notice shall not cause a breach of any provision of Section 2(e) herein. The Company’s right to call the Warrants under this Section 2(f) shall be exercised ratably among the Holders based on each Holder’s initial purchase of Warrants.

Section 3. Certain Adjustments.

a)Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be

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multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re‑classification.

b)Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, that, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

c)Pro Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that, to the extent that the Holder's right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of

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any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

d)Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of more than 50% of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Common Stock or more than 50% of the voting power of the common equity of the Company (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. Notwithstanding anything to the contrary, in the event of a Fundamental Transaction, the Company or any Successor Entity (as defined below) shall, at the Holder’s

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option, exercisable at any time concurrently with, or within 30 days after, the consummation of the Fundamental Transaction (or, if later, the date of the public announcement of the applicable Fundamental Transaction), purchase this Warrant from the Holder by paying to the Holder an amount of cash equal to the Black Scholes Value (as defined below) of the remaining unexercised portion of this Warrant on the date of the consummation of such Fundamental Transaction; provided,however, that, if the Fundamental Transaction is not within the Company’s control, including not approved by the Company’s Board of Directors, the Holder shall only be entitled to receive from the Company or any Successor Entity the same type or form of consideration (and in the same proportion), at the Black Scholes Value of the unexercised portion of this Warrant, that is being offered and paid to the holders of Common Stock of the Company in connection with the Fundamental Transaction, whether that consideration be in the form of cash, stock or any combination thereof, or whether the holders of Common Stock are given the choice to receive from among alternative forms of consideration in connection with the Fundamental Transaction; provided, further, that if holders of Common Stock of the Company are not offered or paid any consideration in such Fundamental Transaction, such holders of Common Stock will be deemed to have received common stock of the Successor Entity (which Entity may be the Company following such Fundamental Transaction) in such Fundamental Transaction. “Black Scholes Value” means the value of this Warrant calculated using the Black-Scholes Option Pricing Model obtained from the “OV” function on Bloomberg determined as of the day immediately following the public announcement of the applicable contemplated Fundamental Transaction, or, if such contemplated Fundamental Transaction is not publicly announced, the date such Fundamental Transaction has occurred or is consummated, for pricing purposes and reflecting (i) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining term of this Warrant as of such date of request, (ii) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg as of the Trading Day immediately following the public announcement of the applicable contemplated Fundamental Transaction, or, if such contemplated Fundamental Transaction is not publicly announced, the date such Fundamental Transaction has occurred or is consummated, (iii) the underlying price per share used in such calculation shall be the greater of (x) the highest VWAP of the Common Stock during the period beginning on the Trading Day prior to the execution of definitive documentation relating to the applicable Fundamental Transaction and ending on (A) the Trading Day immediately following the public announcement of such contemplated Fundamental Transaction, if the applicable contemplated Fundamental Transaction is publicly announced or (B) the Trading Day immediately following the consummation of the applicable Fundamental Transaction if the applicable contemplated Fundamental Transaction is not publicly announced and (y) the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction, (iv) a remaining option time equal to the time between the date of the public announcement of the applicable contemplated Fundamental Transaction or, if such applicable contemplated Fundamental Transaction is not publicly announced, the date such Fundamental Transaction has occurred or is consummated, (v) a zero cost of borrow, and (vi) a 365 day annualization factor. The payment of the Black Scholes Value will be made by wire transfer of immediately available funds (or such other consideration) within the later of (i) five

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Business Days of the Holder’s election and (ii) the date of consummation of the Fundamental Transaction.The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant in accordance with the provisions of this Section 3(d) pursuant to written agreements in form and substance reasonably satisfactory to the holders of Warrants representing at least a majority of the shares of Common Stock underlying the Warrants issued and sold pursuant to the Purchase Agreement (the “Required Holders”) and approved by the Required Holders (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to or concurrent with such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall be added to the term “Company” under this Warrant (so that from and after the occurrence or consummation of such Fundamental Transaction, each and every provision of this Warrant referring to the “Company” shall refer instead to each of the Company and the Successor Entity or Successor Entities, jointly and severally), and the Successor Entity or Successor Entities, jointly and severally with the Company, may exercise every right and power of the Company prior thereto and the Successor Entity or Successor Entities shall assume all of the obligations of the Company prior thereto under this Warrant with the same effect as if the Company and such Successor Entity or Successor Entities, jointly and severally, had been named as the Company herein.

e)Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

f)Notice to Holder.

i.Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly deliver to the Holder by email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.

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ii.Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company (or any of its Subsidiaries) is a party, any sale or transfer of all or substantially all of its assets, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by email to the Holder at its last email address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided in this Warrant constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

g)Voluntary Adjustment By Company. Subject to the rules and regulations of the Trading Market, the Company may at any time during the term of this Warrant reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the board of directors of the Company. The Company may extend the duration of this Warrants by delaying the Termination Date; provided, however, that the Company will provide notice of not less than ten (10) days to the Holder.

Section 4. Transfer of Warrant.

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a)Transferability. This Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date on which the Holder delivers an assignment form to the Company assigning this Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

b)New Warrants. If this Warrant is not held in global form through DTC (or any successor depositary), this Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.

c)Warrant Register. The Warrant Agent shall register this Warrant, upon records to be maintained by the Warrant Agent for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company and the Warrant Agent may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

Section 5. Miscellaneous.

a)No Rights as Stockholder Until Exercise; No Settlement in Cash. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3. Without limiting any rights of a Holder to receive Warrant Shares on a “cashless exercise” pursuant to Section 2(c) or to receive cash payments pursuant to Section 2(d)(i) and Section 2(d)(iv) herein, in no event shall the Company be required to net cash settle an exercise of this Warrant.

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b)Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

c)Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

d)Authorized Shares.

The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and

17

(iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.

Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

e)Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Warrant (whether brought against a party hereto or their respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Warrant and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If either party shall commence an action, suit or proceeding to enforce any provisions of this Warrant, the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for their reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.

f)Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.

g)Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of this Warrant, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and

18

expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

h)Notices. Any and all notices or other communications or deliveries to be provided by the Holders hereunder including, without limitation, any Notice of Exercise, shall be in writing and delivered personally, by e-mail, or sent by a nationally recognized overnight courier service, addressed to the Company, at Palisade Bio, Inc., 5800 Armada Drive, Suite 210, Carlsbad, CA 92008, Attention: Chief Financial Officer, email address: ___________, or such other email address or address as the Company may specify for such purposes by notice to the Holders. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile or e-mail, or sent by a nationally recognized overnight courier service addressed to each Holder at the e-mail address or address of such Holder appearing on the books of the Company. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via e-mail at the e-mail address set forth in this Section prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number or via e-mail at the e-mail address set forth in this Section on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. Notwithstanding any other provision of this Warrant, as to any Warrant not held in certificated form, where this Warrant provides for notice of any event to a Holder, such notice shall be sufficiently given if given to DTC (or any successor depository) pursuant to the procedures of DTC (or such successor depository).

i)Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

j)Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.

k)Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.

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l)Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company, on the one hand, and the Holder or the beneficial owner of this Warrant, on the other hand.

m)Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

n)Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

o)Warrant Agency Agreement. If this Warrant is held in global form through DTC (or any successor depositary), this Warrant is issued subject to the Warrant Agency Agreement. To the extent any provision of this Warrant conflicts with the express provisions of the Warrant Agency Agreement, the provisions of this Warrant shall govern and be controlling.

********************

(Signature Page Follows)

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.

PALISADE BIO, INC.

By:__________________________________________

     Name:

     Title:

21

Exhibit 4.33

NOTICE OF EXERCISE

To: PALISADE BIO, INC.

(1)The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

(2)Payment shall take the form of (check applicable box):

[ ] in lawful money of the United States; or

[ ] if permitted the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).

(3)Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:

_______________________________

The Warrant Shares shall be delivered to the following DWAC Account Number:

_______________________________

_______________________________

_______________________________

[SIGNATURE OF HOLDER]

Name of Investing Entity: ________________________________________________________________________

Signature of Authorized Signatory of Investing Entity: _________________________________________________

Name of Authorized Signatory: ___________________________________________________________________

Title of Authorized Signatory: ____________________________________________________________________

Date: ________________________________________________________________________________________

Exhibit 4.33

ASSIGNMENT FORM

(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to

Name:
	(Please Print)
Address:
Phone Number: Email Address:	(Please Print) ______________________________________ ______________________________________
Dated: _______________ __, ______
Holder’s Signature:
Holder’s Address:

EX-31.1

Exhibit 31.1

SECTION 302

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER

I, J.D. Finley, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Palisade Bio, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in exchange act rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2022

By:	/s/ J.D. Finley
	J.D. Finley
	Interim Chief Executive Officer
	Principal Executive Officer

EX-31.2

Exhibit 31.2

SECTION 302

CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER

I, J.D. Finley, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Palisade Bio, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in exchange act rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2022

By:	/s/ J.D. Finley
	J.D. Finley
	Chief Financial Officer
	Principal Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), J.D. Finley, Chief Financial Officer and Interim Chief Executive Officer of the Company, each hereby certifies that, to the best of his knowledge:

1.The Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2022, to which this Certification is attached as Exhibit 32.1 (the “Periodic Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and

2.The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 14, 2022

IN WITNESS WHEREOF, the undersigned has set their hand hereto as of the date indicated above.

/s/ J.D. Finley

J.D. Finley

Chief Financial Officer and Interim Chief Executive Officer

(Principal Executive Officer and Principal Financial Officer)

This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.”

XML

Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2022	Nov. 10, 2022
Cover [Abstract]
Entity Central Index Key	0001357459
Entity Registrant Name	PALISADE BIO, INC.
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2022
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2022
Document Transition Report	false
Entity File Number	001-33672
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	52-2007292
Entity Address, Address Line One	7750 El Camino Real, Suite 5200
Entity Address, City or Town	Carlsbad
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92009
City Area Code	858
Local Phone Number	704-4900
Title of 12(b) Security	Common Stock, $0.01 par value
Trading Symbol	PALI
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		77,080,169

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($)	Sep. 30, 2022	Dec. 31, 2021
Current assets:
Cash and cash equivalents	$ 13,985,000	$ 10,495,000
Prepaid expenses and other current assets	1,173,000	1,011,000
Total current assets	15,158,000	11,506,000
Restricted cash	26,000	26,000
Right-of-use asset	324,000	109,000
Other noncurrent assets	746,000	868,000
Property and equipment, net	12,000	3,000
Total assets	16,266,000	12,512,000
Current liabilities:
Accounts payable	1,725,000	1,323,000
Accrued liabilities	1,242,000	463,000
Accrued compensation and benefits	93,000	511,000
Current portion of lease liability	101,000	112,000
Debt	352,000	87,000
Total current liabilities	3,513,000	2,496,000
Warrant liability	84,000	2,651,000
Lease liability, net of current portion	239,000	0
Total liabilities	3,836,000	5,147,000
Commitments and contingencies (Note10)
Stockholders' equity:
Common stock, $0.01 par value; 300,000,000 shares authorized as of September 30, 2022 and December 31, 2021, 77,080,169 and 14,239,177 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively	771,000	143,000
Additional paid-in capital	116,839,000	101,862,000
Accumulated deficit	(105,182,000)	(94,642,000)
Total stockholders' equity	12,430,000	7,365,000
Total liabilities and stockholders' equity	16,266,000	12,512,000
Series A Preferred Stock [Member]
Stockholders' equity:
Series A convertible Preferred Stock, 7,000,000 shares authorized, $0.01 par value; 200,000 issued and outstanding at September 30, 2022 and December 31, 2021	$ 2,000	$ 2,000

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Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Sep. 30, 2022	Dec. 31, 2021
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	300,000,000	300,000,000
Common stock, shares issued (in shares)	77,080,169	14,239,177
Common stock, shares outstanding (in shares)	77,080,169	14,239,177
Series A Preferred Stock [Member]
Preferred stock, shares authorized (in shares)	7,000,000	7,000,000
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares issued (in shares)	200,000	200,000
Preferred stock, shares outstanding (in shares)	200,000	200,000
Common stock, shares issued (in shares)	200,000	200,000
Common stock, shares outstanding (in shares)	200,000	200,000

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Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Operating expenses:
Research and development	$ 1,928	$ 624	$ 4,204	$ 1,630
In-process research and development	0	0	0	30,117
General and administrative	2,075	2,392	7,259	6,080
Restructuring costs (Note 10)	410	0	410	0
Total operating expenses	4,413	3,016	11,873	37,827
Loss from operations	(4,413)	(3,016)	(11,873)	(37,827)
Other income (expense):
Gain on forgiveness of PPP loan	0	0	0	279
Loss on issuance of secured debt	0	0	0	(686)
Gain on change in fair value of warrant liability	385	12,764	2,403	17,939
Gain on change in fair value of share liability	0	18	0	91
Interest expense	(4)	(26)	(10)	(2,393)
Other income	41	20	50	36
Loss on issuance of LBS Series 1 Preferred Stock	0	0	0	(1,881)
Loss on issuance of warrants	0	(1,673)	(1,110)	(3,247)
Total other income (expense)	422	11,103	1,333	10,138
Net (loss) income	$ (3,991)	$ 8,087	$ (10,540)	$ (27,689)
(Loss) income per common share:
Basic net (loss) income per common share	$ (0.08)	$ 0.42	$ (0.37)	$ (3.50)
Diluted net (loss) income per common share	$ (0.08)	$ 0.42	$ (0.37)	$ (4.13)
Weighted average shares used in computing (loss) income per common share:
Weighted average shares used in calculating basic (loss) income per share	48,709,846	12,100,292	28,634,209	7,902,104
Weighted average shares used in calculating diluted (loss) income per share	48,709,846	12,106,771	28,634,209	7,952,998
Net (loss) income attributable to common shares - basic	$ (3,991)	$ 5,118	$ (10,540)	$ (27,689)
Net (loss) income attributable to common shares - diluted	$ (3,991)	$ 5,119	$ (10,540)	$ (32,808)

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Condensed Consolidated Statements Convertible Preferred Stock and Stockholders' Equity (Deficit) (Unaudited) - USD ($) $ in Thousands	Total	Direct registered offering	Private Placement [Member]	August 2022 Public Offering Class A Units and Class B Units [Member]	Series C Convertible Preferred Stock [Member]	Series B Convertible Preferred Stock [Member]	Series B Convertible Preferred Stock [Member] August 2022 Public Offering Class A Units and Class B Units [Member]	Preferred Stock Member	Common Stock [Member]	Common Stock [Member] Direct registered offering	Common Stock [Member] Private Placement [Member]	Common Stock [Member] August 2022 Public Offering Class A Units and Class B Units [Member]	Additional Paid-in Capital [Member]	Additional Paid-in Capital [Member] Direct registered offering	Additional Paid-in Capital [Member] Private Placement [Member]	Additional Paid-in Capital [Member] August 2022 Public Offering Class A Units and Class B Units [Member]	Accumulated Deficit [Member]	Conversion Of Senior Secured Debt To Lbs Series1 Preferred Shares Member	Conversion Of Senior Secured Debt To Lbs Series1 Preferred Shares Member Preferred Stock Member	Conversion Of Senior Secured Debt To Lbs Series1 Preferred Shares Member Additional Paid-in Capital [Member]	Conversion Of L B S Series1 Preferred Stock To Common Shares Upon Merger Member Preferred Stock Member	Conversion Of L B S Series1 Preferred Stock To Common Shares Upon Merger Member Common Stock [Member]	Conversion Of L B S Series1 Preferred Stock To Common Shares Upon Merger Member Additional Paid-in Capital [Member]	Conversion Of L B S Series C Preferred Shares To Common Shares Upon Merger Member	Conversion Of L B S Series C Preferred Shares To Common Shares Upon Merger Member Series C Convertible Preferred Stock [Member]	Conversion Of L B S Series C Preferred Shares To Common Shares Upon Merger Member Common Stock [Member]	Conversion Of L B S Series C Preferred Shares To Common Shares Upon Merger Member Additional Paid-in Capital [Member]
Balance (in shares) at Dec. 31, 2020					11,674,131				2,774,502
Balance at Dec. 31, 2020	$ (16,602)				$ 9,503				$ 28				$ 51,396				$ (68,026)
Net income (loss)	(27,689)																(27,689)
Stock-based compensation expense	1,208												1,208
Issuance of common stock to vendor (in shares)									118,833
Issuance of common stock to vendor	1,184								$ 1				1,183
Conversion of share liability to common stock	33								$ 1				32
Conversion of share liability to common stock, shares									12,500
Issuance of common stock warrants related to promissory note (in shares)											1,509,896
Issuance of common stock warrants related to promissory note	16		$ 5,141								$ 15		16		$ 5,126
Conversion of restricted stock units to common stock, shares									8,817
Conversion of convertible securities (in shares)																			786,957
Conversion of convertible securities																		$ 2,421		$ 2,421
Issuance of stock during period, Shares								4,516,611
Conversion of LBS Series Preferred stock to common shares upon Merger, shares issued (in shares)																					(5,303,568)	5,303,568				317,420
Conversion of LBS Series Preferred stock to common shares upon Merger, shares issued	9,503																					$ 53	$ (53)	$ 9,503		$ 3	$ 9,500
Conversion of stock (in shares)																									(11,674,131)
Conversion of stock	0																								$ (9,503)
Issuance of common shares to former shareholders of Seneca upon Merger (in shares)									2,884,375
Issuance of common shares to former shareholders of Seneca upon Merger	28,728								$ 29				28,699
Acquisition of Seneca Series A Preferred Stock upon Merger (in shares)								200,000
Acquisition of Seneca Series A Preferred Stock upon Merger	2							$ 2
Equity warrant put rights activated upon Merger	(51)												(51)
Expiration of put rights on equity classified warrants	26												26
Balance (in shares) at Sep. 30, 2021					0			200,000	12,929,911
Balance at Sep. 30, 2021	3,920				$ 0			$ 2	$ 130				99,503				(95,715)
Balance (in shares) at Jun. 30, 2021								200,000	11,398,698
Balance at Jun. 30, 2021	(9,444)							$ 2	$ 114				94,242				(103,802)
Net income (loss)	8,087																8,087
Stock-based compensation expense	103												103
Conversion of share liability to common stock	33								$ 1				32
Conversion of share liability to common stock, shares									12,500
Issuance of common stock warrants related to promissory note (in shares)											1,509,896
Issuance of common stock warrants related to promissory note			$ 5,141								$ 15				$ 5,126
Conversion of restricted stock units to common stock, shares									8,817
Balance (in shares) at Sep. 30, 2021					0			200,000	12,929,911
Balance at Sep. 30, 2021	3,920				$ 0			$ 2	$ 130				99,503				(95,715)
Balance (in shares) at Dec. 31, 2021								200,000	14,239,177
Balance at Dec. 31, 2021	7,365							$ 2	$ 143				101,862				(94,642)
Net income (loss)	(10,540)																(10,540)
Stock-based compensation expense	946												946
Issuance of common stock upon warrant exercises (in shares)									3,994,302
Issuance of common stock upon warrant exercises	1,274								$ 40				1,234
Issuance of common stock warrants related to promissory note (in shares)										3,646,690
Issuance of common stock warrants related to promissory note		$ 1,427								$ 37				$ 1,390
Conversion of convertible securities (in shares)						(1,460)			5,840,000
Conversion of convertible securities									$ 58				(58)
Issuance of stock during period, Shares							1,460					49,360,000
Issuance of stock during period, value				$ 11,958								$ 493				$ 11,465
Conversion of LBS Series Preferred stock to common shares upon Merger, shares issued	0
Conversion of stock	58
Balance (in shares) at Sep. 30, 2022						0		200,000	77,080,169
Balance at Sep. 30, 2022	12,430					$ 0		$ 2	$ 771				116,839				(105,182)
Balance (in shares) at Jun. 30, 2022								200,000	21,880,169
Balance at Jun. 30, 2022	4,211							$ 2	$ 220				105,180				(101,191)
Net income (loss)	(3,991)																(3,991)
Stock-based compensation expense	252												252
Conversion of convertible securities (in shares)						(1,460)			5,840,000
Conversion of convertible securities									$ 58				(58)
Issuance of stock during period, Shares							1,460					49,360,000
Issuance of stock during period, value				$ 11,958								$ 493				$ 11,465
Balance (in shares) at Sep. 30, 2022						0		200,000	77,080,169
Balance at Sep. 30, 2022	$ 12,430					$ 0		$ 2	$ 771				$ 116,839				$ (105,182)

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Condensed Consolidated Statements Convertible Preferred Stock and Stockholders' Equity (Deficit) (Unaudited) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Payment of equity issuance costs			$ 333	$ 0
Class A Units and Class B Units [Member]
Stock issuance costs	$ 2,293		2,293
Common Stock
Payment of equity issuance costs		$ 67	$ 634	$ 67

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Net loss	$ (10,540)	$ (27,689)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization	1	2
In-process research and development	0	30,117
Noncash transaction costs shared with Seneca	0	(135)
Noncash lease expense	140	122
Gain on forgiveness of PPP loan	0	(279)
Accretion of debt discount and non-cash interest expense	0	2,334
Loss on issuance of LBS Series 1 Preferred Stock	0	1,881
Loss on issuance of secured debt	0	686
Loss on issuance of warrants	1,110	3,247
Change in fair value of warrant liabilities	(2,403)	(17,939)
Change in fair value of share liability	0	(91)
Stock-based compensation	946	1,208
Other	(213)	191
Changes in operating assets and liabilities
Other receivables	0	84
Prepaid and other assets and other noncurrent assets	744	(1,264)
Accounts payable and accrued liabilities	706	(2,145)
Accrued compensation	(418)	(1,544)
Operating lease liabilities	(127)	(122)
Net cash used in operating activities	(10,054)	(11,718)
Cash flows from investing activities:
Cash acquired in connection with the Merger	0	3,279
Acquisition related costs paid	0	(3,333)
Net cash used in investing activities	0	(54)
Cash flows from financing activities
Payments on debt	(524)	(949)
Proceeds from issuance of debt	0	1,250
Proceeds from issuance of LBS Series 1 Preferred Stock	0	19,900
Proceeds from issuance of common stock and warrants	14,401	5,209
Redemption of warrants	0	(99)
Payment of equity issuance costs	(333)	0
Payment of debt issuance costs	0	(148)
Net cash provided by financing activities	13,544	25,163
Net (decrease) increase in cash, cash equivalents and restricted cash	3,490	13,391
Cash, cash equivalents and restricted cash, beginning of period	10,521	739
Cash, cash equivalents and restricted cash, end of period	14,011	14,130
Reconciliation of cash, cash equivalents and restricted cash to the balance sheets
Cash and cash equivalents	13,985	14,104
Restricted cash	26	26
Total cash, cash equivalents and restricted cash	14,011	14,130
Supplemental disclosure of cash flows
Interest Paid	10	61
Right-of-use assets obtained in exchange for lease liabilities	355	0
Supplemental disclosures of non-cash investing and financing activities
Equity issuance costs included in accounts payable and accrued liabilities	683	67
Issuance of common stock for the cashless exercise of warrants	1,274	0
Fair value of warrants issued to placement agent	55	0
Fair value of warrants issued to underwriter agent	459	0
Issuance of common stock upon conversion of Series B Convertible Preferred Stock	58	0
Insurance financing arrangements included in prepaid and other assets	784	772
Purchase of property and equipment included in accounts payable and accrued liabilities	10	0
Transaction costs shared with Seneca	0	135
Acquisition costs related to stock issuance	0	1,184
Issuance of common stock to former Seneca stockholders	0	28,728
Conversion of LBS Series C Preferred stock into common stock	0	9,503
Net assets acquired in the Merger	0	2
Acquisition related vesting of RSU’s assumed in the Merger	0	41
Acquisition related fair value change in warrant liability assumed in the Merger	$ 0	$ 51

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Note 1 - Organization, Business and Financial Condition

9 Months Ended

Sep. 30, 2022

Disclosure Text Block [Abstract]

Organization, Business and Financial Condition

1. Organization, Business and Financial Condition

The Merger

On April 27, 2021, Leading Biosciences, Inc. (“LBS”) became a wholly owned subsidiary of Seneca Biopharma Inc. (“Seneca”) in accordance with the terms of the agreement and plan of merger and reorganization, dated as of December 16, 2020, (the “Merger Agreement”) by and among Seneca, Townsgate Acquisition Sub 1, Inc., a wholly owned subsidiary of Seneca (“Merger Sub”), and LBS, pursuant to which Merger Sub merged with and into LBS, with LBS surviving as a wholly owned subsidiary of Seneca (the “Merger”). Concurrent with the closing of the Merger, LBS outstanding common stock, common stock warrants and options for the purchase of LBS common stock were exchanged for Seneca common stock, Seneca common stock warrants, and options for the purchase of Seneca common stock, at a ratio of 0.02719 shares of LBS common stock equivalents to one share of Seneca common stock equivalents (the “Exchange Ratio”). On April 27, 2021, in connection with the Merger, Seneca filed a certificate of amendment to its amended and restated certificate of incorporation to affect a 1-for-6 reverse stock split of its common stock (the "Reverse Stock Split"). The par value and the authorized shares of the common stock were not adjusted as a result of the Reverse Stock Split. The final Exchange Ratio incorporated the effect of this Reverse Stock Split, and all issued and outstanding common stock have been retroactively adjusted to reflect this Reverse Stock Split for all periods presented. All issued and outstanding shares of LBS common stock and shares of common stock underlying convertible preferred stock, options and warrants prior to the effective date of the Merger have been retroactively adjusted to reflect the Exchange Ratio for all periods presented herein these condensed consolidated financial statements.

Unless the context otherwise requires, references to the “Company,” “Palisade,” “Palisade Bio,” the “combined organization,” “we,” “our” or “us” in this report refer to Palisade Bio, Inc. and its subsidiaries after completion of the Merger. In addition, references to “Seneca” or “LBS” refer to these entities prior to the completion of the Merger.

Description of Business

The Company is a clinical stage biopharmaceutical company advancing therapies that aim to aid patients suffering with acute and chronic gastrointestinal complications stemming from post-operative digestive enzyme damage. The Company's lead asset LB1148, is a protease inhibitor with the potential to both reduce abdominal adhesions and help restore bowel function following surgery. The Company believes that its investigational therapies have the potential to address the many health conditions and complications associated with the chronic disruption to the gastrointestinal epithelial barrier.

Liquidity and Going Concern

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 losses and negative cash flows from operations since its inception. At September 30, 2022, the Company had an accumulated deficit of $105.2 million and cash and cash equivalents of $14.0 million. The Company expects to continue to incur losses into the foreseeable future. The successful transition to attaining profitable operations is dependent upon achieving a level of revenues adequate to support the Company’s cost structure.

Historically, the Company has funded its operations primarily through a combination of debt and equity financings. Management anticipates continuing to raise capital from the sale of its securities or through agreements, such as entering into potential partnering events for Company’s existing technology. However, no assurance can be given as to whether the Company will achieve these objectives. Based on the Company’s current business plan, management believes that existing cash and cash equivalents will not be sufficient to fund the Company’s obligations for at least 12 months from the date of issuance of these financial statements. The Company’s ability to execute its operating plan depends on its ability to obtain additional funding through equity offerings, debt financings or potential licensing and collaboration arrangements. The condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and settlement of liabilities in the normal course of business. However, the Company’s current working capital, anticipated operating expenses

and net operating losses raise substantial doubt about its ability to continue as a going concern for a period of one year following the date that these condensed consolidated financial statements are issued. The condensed consolidated financial statements do not include any adjustments for the recovery and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The Company plans to continue to fund its operations through cash and cash equivalents on hand, as well as through future equity offerings, debt financings, other third-party funding, and potential licensing or collaboration arrangements. Refer to Note 6, Stockholders' Equity, for discussion of the recent financings undertaken by the Company. There can be no assurance that additional funds will be available when needed from any source or, if available, will be available on terms that are acceptable to the Company. Even if the Company raises additional capital, it may also be required to modify, delay or abandon some of its plans which could have a material adverse effect on the Company’s business, operating results and financial condition and the Company’s ability to achieve its intended business objectives. Any of these actions could materially harm the Company’s business, results of operations and future prospects.

COVID-19

In April 2020, as a result of impacts and risks associated with the COVID-19 pandemic (COVID-19), the Company paused enrollment and program activities surrounding the Company’s clinical trials of its lead therapeutic candidate, LB1148, due primarily to slower enrollment. The Company's phase 2 clinical study for the prevention of post-surgical abdominal adhesions re-started in February 2022, and in June 2022 the Company initiated its phase 3 clinical study for the return of bowel function. Notwithstanding, the Company paused enrollment in this phase 3 clinical study pending the determination of next steps for the study. The Company cannot predict how legal and regulatory responses to ongoing concerns about COVID-19 or other major public health issues will impact the Company’s business, nor can it predict potential adverse impacts related to the availability of capital to fund the Company’s operations. Any of these factors, alone or in combination with others, could harm the Company’s business, results of operations, financial condition or liquidity. However, the magnitude, timing, and duration of any such potential financial impacts cannot be reasonably estimated at this time.

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Note 2 - Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

In management’s opinion, the accompanying interim condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, which are necessary to present fairly the Company's financial position, results of operations and cash flows. The interim results of operations are not necessarily indicative of the results that may occur for the full year. Certain information and note disclosures normally included in the consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to instructions, rules and regulations prescribed by the U.S. Securities and Exchange Commission (“SEC”). The Company believes that the disclosures provided herein are adequate to make the information presented not misleading when these condensed consolidated financial statements are read in conjunction with the condensed consolidated financial statements and notes included in the Company’s financial statements filed on the Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on March 17, 2022.

The accompanying condensed consolidated financial statements prior to the closing of the Merger are representative of LBS’s operations as LBS was determined to be the accounting acquirer for financial reporting purposes. The condensed consolidated financial statements subsequent to the closing of the Merger include the accounts of the Company and its wholly owned subsidiaries, Leading Biosciences, Inc. and Suzhou Neuralstem Biopharmaceutical Co., Ltd. All the entities are consolidated in the Company's condensed consolidated financial statements and all intercompany activity and transactions, if any, have been eliminated.

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 condensed consolidated financial statements relate to clinical trial accruals, and the valuation of derivative liabilities and stock-based compensation instruments. 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.

Segment Information

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, the Chief Executive Officer, in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business as one operating segment which consists of research and development activities.

Cash and Cash Equivalents

Cash and cash equivalents represent cash available 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 September 30, 2022 and December 31, 2021, the Company held restricted cash of $26,000, 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 condensed 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. As of September 30, 2022, deferred equity issuance costs of $81,000 were included in prepaid and other assets in the condensed consolidated balance sheet. There were no deferred equity issuance costs as of December 31, 2021. These costs will be netted against additional paid-in capital as a cost of the future equity issuances to which they relate.

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 nor has the Company experienced any losses in these accounts.

Convertible Preferred Stock

The Company’s Series C Convertible Preferred Stock has been classified as temporary equity, in accordance with authoritative guidance of ASC 480-10-S99 for the classification and measurement of potentially redeemable securities, as the Series C Convertible Preferred Stock are redeemable for cash or other assets upon the occurrence of an event that is not solely within the Company’s control, including the liquidation, sale or transfer of control of the Company.

In connection with the Merger, the Series C Convertible Preferred Stock converted to common stock.

Fair Value of Financial Instruments

The Company’s financial instruments consist principally of cash and cash equivalents, restricted cash, accounts payable, accrued liabilities, and derivative liabilities. The carrying amounts of financial instruments such as cash equivalents, restricted cash, accounts payable, and accrued liabilities approximate their related fair values due to the short-term nature of these instruments. The carrying value of the Company’s debt approximates its fair value due to the market rate of interest, which is based on level 2 inputs. The Company’s derivative financial instruments are carried at fair value based on level 3 inputs as defined below.

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:

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

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

(3)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 financial instruments can be found at Note 5, 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, including warrants, to determine if such instruments are derivatives, or contain features that qualify as embedded derivatives, or otherwise require liability classification under U.S. GAAP. The Company values its derivatives using the Black-Scholes option-pricing model or other acceptable valuation models, including the Monte-Carlo simulation model. Derivative instruments 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 re-assessed 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 warrants, including options or warrants to non-employees in exchange for consulting or other services performed.

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 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 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 condensed 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.

Research and Development Costs

Research and development expenses consist primarily of salaries and other personnel related expenses including stock-based compensation costs, preclinical costs, clinical trial costs, costs related to acquiring and manufacturing clinical trial materials, and contract services. All research and development costs are expensed as incurred.

Clinical Trial Expenses

Expenses related to clinical studies are based on estimates of the services received and efforts expended pursuant to the Company’s contract arrangements. The financial terms of these agreements are subject to negotiation, vary from contract to contract, and may result in uneven payment flows. 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

clinical expense. 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. In accruing service fees, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. 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. As of September 30, 2022 and December 31, 2021, the Company has accrued for $257,000 and $158,000, respectively, in clinical trial expenses for which services have been provided but the Company has not yet been invoiced as of the balance sheet date. Clinical trial expenses are included in research and development expenses in the condensed consolidated statements of operations.

Patent Costs

Costs related to filing and pursuing patent applications (including direct application fees, and the legal and consulting expenses related to making such applications) are expensed as incurred, as recoverability of such expenditures is uncertain. These costs are included in general and administrative expenses in the condensed consolidated statements of operations.

Debt Issuance Costs

Debt issuance costs incurred to obtain debt financing are deferred and are amortized over the term of the debt using the effective interest method. Debt issuance costs are recorded as a reduction to the carrying value of the debt and are amortized to interest expense in the condensed consolidated statements of operations.

Income Taxes

The Company follows ASC 740, Income Taxes, or ASC Topic 740 (“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 condensed 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

Stock-based compensation expense represents the cost of the estimated grant date fair value of employee and non-employee stock option grants recognized over the requisite service period of the awards, which is usually the vesting period, on a straight-line basis. The Company recognizes forfeitures as they occur as a reduction of expense. The Company estimates the fair value of employee and non-employee stock option grants using the Black-Scholes option pricing model.

Net (Loss) Earnings Per Common Share

Basic (loss) earnings per common share is computed by dividing net (loss) income available to common stockholders by the weighted average number of shares of common stock outstanding during the period. The Company's Series B Convertible Preferred Stock and certain of the Company's outstanding warrants (See Note 7) contain non-forfeitable rights to dividends with the common stockholders, and therefore are considered to be participating securities. These Series B Convertible Preferred Stock and the 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 when the Company is in a net income position, such as the three months ended September 31, 2021. When in a net income position, diluted earnings per share is computed using the more dilutive of the two-class method or the if-converted and treasury stock methods.

Basic and diluted loss per common share for the three and nine months ended September 30, 2022 and the nine months ended September 30, 2021 were calculated under the if-converted and treasury stock methods. For the three and nine months ended September 30, 2022 and the nine months ended September 30, 2021, basic and diluted loss per common share were the same as all common stock equivalents were anti-dilutive for both periods. Basic and diluted earnings per share during the three months ended September 30, 2021 were calculated under the two-class method. Certain of the Company's liability classified warrants were dilutive in the second quarter of 2021 resulting in a dilutive impact for the nine months ended September 30, 2021.

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Basic net (loss) income per common share:
Net (loss) income	$	(3,991	)	$	8,087		$	(10,540	)	$	(27,689	)
Undistributed earnings allocated to participating securities		—			(2,969	)		—			—
Net (loss) income attributable to common shares - basic	$	(3,991	)	$	5,118		$	(10,540	)	$	(27,689	)
Weighted average shares used in calculating basic (loss) income per share		48,709,846			12,100,292			28,634,209			7,902,104
Basic net (loss) income per common share	$	(0.08	)	$	0.42		$	(0.37	)	$	(3.50	)
Diluted net (loss) income per common share:
Net (loss) income	$	(3,991	)	$	8,087		$	(10,540	)	$	(27,689	)
Change in fair value of warrants		—			—			—			(5,119	)
Undistributed earnings allocated to participating securities		—			(2,968	)		—			—
Net (loss) income attributable to common shares - diluted	$	(3,991	)	$	5,119		$	(10,540	)	$	(32,808	)
Weighted-average shares outstanding		48,709,846			12,100,292			28,634,209			7,902,104
Effect of potentially dilutive securities		—			6,479			—			50,894
Weighted average shares used in calculating diluted (loss) income per share		48,709,846			12,106,771			28,634,209			7,952,998
Diluted net (loss) income per common share	$	(0.08	)	$	0.42		$	(0.37	)	$	(4.13	)

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

	September 30,
	2022		2021
Stock options		2,586,976		799,562
Warrants for common stock		122,924,912		8,491,006
Series A Convertible Preferred Stock		6,479		—
Total		125,518,367		9,290,568

Comprehensive Income (Loss)

Comprehensive income (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 income (loss) was the same as its reported net income (loss) for all periods presented.

Recently Adopted Accounting Pronouncements

In August 2020, FASB issued Accounting Standards Update ("ASU") 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) — Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity ("ASU- 2020-06"), which, among other things, provides guidance on how to account for contracts on an entity’s own equity. This ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. Specifically, the ASU eliminated the need for the Company to assess whether a contract on the entity’s own equity (1) permits settlement in unregistered shares, (2) whether counterparty rights rank higher stockholder’s rights, and (3) whether collateral is required. In addition, the ASU requires incremental disclosure related to contracts on the entity’s own equity and clarifies the treatment of certain financial instruments accounted for under this ASU on earnings per share. This ASU may be applied on a full retrospective of modified retrospective basis. For smaller reporting companies, this ASU is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption of the ASU is permitted for fiscal years beginning after December 15, 2020, including interim periods within

those fiscal years. The Company early adopted this standard on January 1, 2022 and determined that it had no impact on the accounting for its liability-classified warrants as of the date of adoption.

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The ASU introduced a new credit loss methodology, the Current Expected Credit Losses (“CECL”) methodology, which requires earlier recognition of credit losses, while also providing additional transparency about credit risk. The CECL methodology utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for loans, held-to maturity debt securities, trade receivables and other receivables measured at amortized cost at the time the financial asset is originated or acquired. After the issuance of ASU 2016-13, the FASB issued several additional ASUs to clarify implementation guidance, provide narrow-scope improvements and provide additional disclosure guidance. In November 2019, the FASB issued an amendment making this ASU effective for fiscal years beginning after December 15, 2022 for smaller reporting companies. The Company plans to adopt this standard as of January 1, 2023 and does not expect the adoption will have a significant impact on its consolidated financial statements and related disclosures.

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Note 3 - Revision of Previously Issued Financial Statements for Correction of Immaterial Errors

9 Months Ended

Sep. 30, 2022

Accounting Changes and Error Corrections [Abstract]

Revision of Previously Issued Financial Statements for Correction of Immaterial Errors

3. Revision of Previously Issued Financial Statements for Correction of Immaterial Errors

In connection with the preparation of the Company's condensed consolidated financial statements required to be included in this Quarterly Report on Form 10-Q as of and for the nine months ended September 30, 2022, management identified a classification error, between current assets (prepaid expenses and other current assets) and noncurrent assets (other noncurrent assets), in the Company's historical financial statements, resulting in a conclusion that for comparability purposes a correction should be made to the Company's consolidated financial statements as of December 31, 2021. The Company has revised its balance sheet as of the year ended December 31, 2021 accordingly and included such revisions herein. Based on an analysis of quantitative and qualitative factors, the Company concluded this error was not material to its consolidated financial position as of December 31, 2021 and had no impact on the Company’s results of operations, including net (loss) earnings per share or cash flows as presented in the Company’s previously issued financial statements. As a result, amendment of such reports is not required.

The adjustment to “prepaid expenses and other current assets” and “other noncurrent assets” within the Company’s consolidated balance sheet as of the year ended December 31, 2021 are as follows:

	December 31, 2021
	As Reported		Adjustment			As Adjusted
ASSETS
Current assets:
Cash and cash equivalents	$	10,495	$	—		$	10,495
Prepaid expenses and other current assets		1,879		(868	)		1,011
Total current assets		12,374		(868	)		11,506
Restricted cash		26		—			26
Right-of-use asset		109		—			109
Other noncurrent assets		—		868			868
Property and equipment, net		3		—			3
Total assets	$	12,512	$	—		$	12,512

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Note 4 - Balance Sheet Details

9 Months Ended

Sep. 30, 2022

Disclosure Text Block [Abstract]

Balance Sheet Details

4. Balance Sheet Details

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

	September 30,		December 31,
	2022		2021
Prepaid insurance	$	807	$	540
Other receivables		20		150
Prepaid subscriptions and fees		205		215
Prepaid software licenses		54		78
Deferred equity issuance costs		81		—
Prepaid other		6		28
	$	1,173	$	1,011

Accrued liabilities consisted of the following (in thousands):

	September 30,		December 31,
	2022		2021
Accrued accounts payable	$	482	$	195
Accrued clinical trial costs		257		158
Accrued director stipends		111		110
Accrued severance and benefits (Note 10)		392		—
	$	1,242	$	463

Other noncurrent assets consisted of the following (in thousands):

	September 30,		December 31,
	2022		2021
Prepaid insurance, less current portion	$	734	$	868
Other noncurrent assets		12		—
	$	746	$	868

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Note 5 - Fair Value Measurements

9 Months Ended

Sep. 30, 2022

Disclosure Text Block [Abstract]

Fair Value Measurements

. Fair Value Measurements

The Company has issued warrants that are accounted for as liabilities in accordance with ASC 815. Estimating fair values of liability-classified financial instruments requires the development of estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques are highly volatile and sensitive to changes in the trading market price of the Company’s common stock. Because liability-classified financial instruments are initially and subsequently carried at fair value, the Company’s financial results will reflect the volatility in these estimate and assumption changes. Changes in fair value are recognized as a component of other income (expense) in the condensed consolidated statement of operations.

In connection with the transactions contemplated by the Merger, on December 16, 2020, the Company entered into a securities purchase agreement (the "Securities Purchase Agreement") with an investor (the "Investor") pursuant to which, among other things, warrants to purchase 858,892 shares of the Company’s common stock (“Senior Secured Promissory Note Warrants”) were issued.

On May 20, 2021, pursuant to the terms of the Securities Purchase Agreement, the Company issued to the Investor warrants to purchase 4,995,893 shares of common stock at an exercise price of $4.70 per share (the “May 2021 Warrants”). In June 2021, pursuant to the reset provisions of the Securities Purchase Agreement, the number of shares of common stock underlying the May 2021 Warrants increased to 5,303,568 shares and the exercise price was reduced to $3.88 per share. All of the outstanding May 2021 Warrants were exercised in the fourth quarter of 2021 and the first quarter of 2022 in exchange for 5,303,568 shares of the Company's common stock in a series of exercises by the Investor. As of September 30, 2022, there are no May 2021 Warrants outstanding.

On July 21, 2021, the Company and the Investor entered into an agreement to waive certain provisions of the previous Security Purchase Agreement (the "July 2021 Waiver Agreement"). As part of the July 2021 Waiver Agreement, the Investor agreed to waive the reset provisions of the Senior Secured Promissory Note Warrants and the May 2021 Warrants such that the number of shares and exercise price in effect immediately prior to the effective date of the

Waiver Agreement shall no longer be subject to price-based resets. The waiver of the reset provision of the Senior Secured Promissory Note Warrants and the May 2021 Warrants is considered a modification to those warrants and as a result, the underlying warrants were re-valued using a Black-Scholes based valuation model, which resulted in a favorable change in the fair value of the underlying warrants of $3.9 million. As consideration for the July 2021 Waiver Agreement, the Company issued the Investor additional warrants to purchase 1,100,000 shares of the Company's common stock at an exercise price of $3.63 per share (the "July 2021 Warrants"). The initial fair value of the July 2021 Warrants was determined to be $1.7 million and is included in loss on issuance of warrants at the condensed consolidated statements of operations for the three and nine months ended September 30, 2021.

On January 31, 2022, the Company and the Investor entered into an agreement to irrevocably waive any adjustment to the exercise price of the Senior Secured Promissory Note Warrants and the May 2021 Warrants held by the Investor from and after January 31, 2022 ("the Effective Date") for the Company's issuances of equity or equity-linked securities at a price below the exercise price of the warrants (the "January 2022 Waiver Agreement"). The waiver of any adjustments to the exercise price of the Senior Secured Promissory Note Warrants and the May 2021 Warrants is considered a modification to those warrants. The modification was determined to have no impact on the valuation of the warrants.

As consideration for the foregoing, pursuant to the January 2022 Waiver Agreement, the Company issued the Investor an additional warrant to purchase up to 2,250,000 shares of the Company’s common stock (the “January 2022 Warrants”). The initial fair value of the January 2022 Warrants was determined to be $1.1 million and is included in loss on issuance of warrants in the condensed consolidated statements of operations for the nine months ended September 30, 2022. The initial fair value was determined using a Monte Carlo simulation model that considered: (i) the starting stock price of $1.17, (ii) certain key event dates such as expected capital financings, if any, (iii) an expected re-levered volatility of 93.0 percent, (iv) an estimated risk-free interest rate of 1.65 percent, (v) an estimated contractual term of approximately 5.5 years, and (vi) a zero percent dividend rate.

As of September 30, 2022, the fair value of the Senior Secured Promissory Note Warrants of $2,000 was determined using a Black-Scholes valuation model that used the following assumptions: (i) a stock price of $0.10, (ii) an exercise price per share of $3.88, (iii) an estimated risk-free interest rate of approximately 4.17 percent, (iv) an estimated contractual term of 3.86 years, (v) volatility of 75.5%, and (vi) a zero percent dividend rate.

As of September 30, 2022, the fair value of the July 2021 Warrants in the amount of $16,000 was determined using a Monte Carlo simulation model that considered: (i) a starting stock price of $0.10, (ii) an expected re-levered volatility of 104.9 percent; (iv) an estimated risk-free rate of 4.13 percent, (v) estimated contractual terms of approximately 4.31 years, and (vi) a zero percent dividend rate.

As of September 30, 2022, the fair value of the January 2022 Warrants in the amount of $63,000 was determined using a Monte Carlo simulation model that used the following assumptions: (i) a starting stock price of $0.10, (ii) an expected re-levered volatility of 104.2 percent; (iii) an estimated risk-free rate of 4.08 percent, (iv) estimated contractual terms of approximately 4.83 years, and (v) a zero percent dividend rate.

The following table summarizes the activity of the Company’s Level 3 warrant liabilities during the three and nine months ended September 30, 2022 and 2021 (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
Warrant Liabilities	2022			2021			2022			2021
Fair value at beginning of period	$	469		$	20,526		$	2,651		$	1,830
Initial fair value at the original issuance date		—			1,672			1,110			25,417
Equity classified warrant put feature activated		—			—			—			51
Change in fair value during the period		(385	)		(12,764	)		(2,403	)		(17,939	)
Fair value of warrants exercised		—			—			(1,274	)		—
Seneca liability classified warrants assumed		—			—			—			200
Expiration of equity classified warrant put feature		—			—			—			(26	)
Settlement of liability-classified warrants		—			—			—			(99	)
Fair value at end of period	$	84		$	9,434		$	84		$	9,434

Seneca had certain common stock purchase warrants that were originally issued in connection with May 2016 and August 2017 offerings that are accounted for as liabilities whose fair value was determined using Level 3 inputs. The May 2016 warrants expired in the second quarter of 2021. As a result of the Merger, the put right was activated on the August 2017 offering warrants and these warrants were valued at their put right value using a Black-Scholes option

pricing model. The Company settled the put feature for 7,813 of these warrants during the quarter ended June 30, 2021. The put right became inactive in July 2021 and the remaining warrants were valued using a Black-Scholes option pricing model. The gains resulting from the changes in the fair value of the liability classified warrants are classified as a gain on change in fair value of warrant liability in the accompanying condensed consolidated statements of operations.

In connection with the May 2022 Registered Direct Offering (see Note 6, Stockholders' Equity), the Company issued to certain investors warrants to purchase up to 3,646,690 shares of its common stock and warrants to purchase up to 218,801 shares of the Company's common stock that were issued to the placement agent. All of these warrants were classified as equity as of the date of issuance of May 10, 2022.

In connection with the August 2022 Public Offering (see Note 6, Stockholders' Equity), the Company issued to certain investors warrants to purchase up to 110,400,000 shares of its common stock and warrants to purchase up to 3,312,000 shares of the Company's common stock that were issued to the underwriter of the offering. All of these warrants were classified as equity as of the date of issuance of August 16, 2022.

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Note 6 - Stockholders' Equity

9 Months Ended

Sep. 30, 2022

Disclosure Text Block [Abstract]

Stockholders' Equity

. Stockholders’ Equity

Classes of Stock

Prior to the completion of the Merger, LBS was authorized to issue 6,797,500 shares of $0.01 par value common stock and 33,594,625 shares of $0.001 par value Series C Convertible Preferred Stock. In connection with the Merger, the issued and outstanding Series C Convertible Preferred Stock shares in the amount of 11,674,131 were converted to 317,420 shares of the Company's common stock.

Common Stock

As of September 30, 2022 and December 31, 2021, the Company was authorized to issue 300,000,000 shares of $0.01 par value common stock. Each share of common stock shall entitle the holder thereof to one (1) vote on each matter submitted to a vote at a meeting of stockholders.

On October 6, 2022, the shareholders of the Company approved an amendment to the Company’s Amended and Restated Certificate of Incorporation to decrease the number of authorized shares of common stock of the Company from 300,000,000 to 280,000,000, which will take effect upon the filing of an amendment to the Company's Certificate of Incorporation, which has not yet occurred.

Preferred Stock

As of September 30, 2022 and December 31, 2021, the Company was authorized to issue 7,000,000 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") and 200,000 of which are issued and outstanding.

In connection with the August 2022 Public Offering (see below), the Company's Board of Directors designated 1,460 shares of the Company's preferred stock as $0.01 par value Series B Convertible Preferred Stock. Each share of Series B Convertible Preferred Stock will be convertible at any time at the holder’s option into one share of the Company's common stock, which conversion ratio will be subject to adjustment for stock splits, stock dividends, distributions, subdivisions and combinations. Subject to certain limitations, if the volume weighted average price of the Company's stock during any 30 consecutive trading day period exceeds 300% of the conversion price, the average daily dollar trading volume for such 30 consecutive trading period $500,000 per trading day and the holder is not in possession of any material non-public information, the Company may force each holder of Series B Convertible Preferred Stock to convert all of their shares of Series B Convertible Preferred Stock. The Series B Convertible Preferred Stock carries no voting rights and is not eligible for any dividends paid by the Company on shares of the Company's common stock, other than dividends in the form of the Company's common stock. The Series B Convertible Preferred Stock was classified as permanent equity as of the date of issuance, in accordance with authoritative guidance of ASC 480-10-S99 for the classification and measurement of potentially redeemable securities. As of September 30, 2022, all of the shares of the Series B Convertible Preferred stock issued in connection with the August 2022 Public Offering (see below) has been converted into shares of the Company's common stock and there were no shares issued or outstanding.

As of September 30, 2022, the Company's Series A Convertible Preferred Stock issued in the amount of 200,000 is convertible into 6,479 shares of common stock.

Reverse Stock Split

On October 4, 2022, the shareholders of the Company approved an amendment to the Company’s Amended and Restated Certificate of Incorporation to effect, at the discretion of the Company’s Board of Directors, a reverse split

of the Company’s common stock, at a ratio not less than 1-for-10 and not greater than 1-for-50, with the exact ratio to be set within that range at the discretion of the Board of Directors and to be effected before the day prior to the 2023 annual meeting of shareholders, without further approval or authorization of the Company's shareholders. The Company's Board of Directors has not yet effected this reverse stock split.

May 2022 Registered Direct Offering

On May 6, 2022, the Company entered into securities purchase agreements with certain investors pursuant to which it agreed to sell and issue, in a registered direct offering (the “May 2022 Registered Direct Offering”), an aggregate of 3,646,690 shares of its common stock, par value $0.01 per share, at a purchase price per share of $0.55 and, in a concurrent private placement, also agreed to sell and issue to such purchasers warrants (the “May 2022 Purchase Warrants”) to purchase up to 3,646,690 shares of common stock at an exercise price of $0.7105 per share.

In connection with the May 2022 Registered Direct Offering and concurrent private placement transaction, the Company engaged a placement agent. The Company issued placement agent warrants (“May 2022 Placement Agent Warrants”) to purchase an aggregate of 218,801 shares of its common stock. The May 2022 Placement Agent Warrants have an exercise price of $0.7105 per share. The May 2022 Placement Agent Warrants and the May 2022 Purchase Warrants are referred to collectively as the May 2022 Warrants.

The aggregate net proceeds from the May 2022 Registered Direct Offering of $1.4 million consisted of aggregate consideration of $2.0 million less equity issuance costs of approximately $0.6 million. The fair value of the May 2022 Placement Agent Warrants was recognized as an equity issuance cost.

The shares of common stock (but not the warrants or the shares of common stock underlying such warrants) offered in the Registered Offering were offered and sold by the Company pursuant to a "shelf" registration statement on Form S-3, including a base prospectus, previously filed with and declared effective by the SEC on April 26, 2022. The May 2022 Warrants and shares of common stock underlying such warrants were later registered for resale on a separate registration statement on Form S-1.

August 2022 Public Offering

On August 12, 2022, Company, entered into an Underwriting Agreement (the “Underwriting Agreement”) with Ladenburg Thalmann & Co. Inc. (the “Underwriter”), pursuant to which the Company agreed to issue and sell, in a registered public offering by the Company (the "August 2022 Public Offering"), (a) 42,160,000 Class A Units, with each Class A Unit consisting of one share of the Company’s common stock, par value $0.01 per share, a Series 1 warrant with a term of one year from the date of issuance (a “Series 1 Warrant”) to purchase one share of the Company's common stock at an exercise price per share of $0.25, and a Series 2 warrant with a term of five years from the date of issuance (a “Series 2 Warrant”) to purchase one share of the Company's common stock at an exercise price per share of $0.25, with each Class A Unit to be offered to the public at an offering price of $0.25 per Class A Unit and (b) 1,460 Class B Units (the “Class B Units”, and collectively with the Class A Units, the “Units”), with each Class B Unit consisting of one share of Series B Convertible Preferred Stock, convertible into 4,000 shares of the Company's common stock, a Series 1 Warrant to purchase 4,000 shares of the Company's common stock, and a Series 2 Warrant to purchase 4,000 shares of common stock, with each Class B Unit offered to the public at an offering price of $1,000 per Class B Unit. Each Series 1 Warrant and Series 2 Warrant included in the Class B Units entitles its holder to purchase 4,000 shares of Common Stock at an exercise price per share of $0.25. All shares of the Series B Convertible Preferred Stock have been converted into shares of the Company's common stock as of September 30, 2022.

In addition, pursuant to the Underwriting Agreement, the Company granted the Underwriter a 45-day option (the “Overallotment Option”) to purchase up to (i) 7,200,000 additional shares of the Company's common stock, (ii) 7,200,000 additional Series 1 Warrants and/or (iii) 7,200,000 additional Series 2 Warrants, solely to cover over-allotments. The Underwriter fully exercised the Overallotment Option on August 12, 2022.

On August 16, 2022, the Company closed on the August 2022 Public Offering, pursuant to which the Company agreed to issue and sell (i) 49,360,000 shares of common stock (which includes 7,200,000 shares of Common Stock sold pursuant to the exercise of the Overallotment Option), (ii) 1,460 shares of Series B convertible preferred stock, (iii) 55,200,000 Series 1 Warrants (which includes 7,200,000 Series 1 Warrants sold pursuant to the exercise of the Overallotment Option), and (iv) 55,200,000 Series 2 Warrants (which includes 7,200,000 Series 2 Warrants sold pursuant to the exercise of the Overallotment Option). The warrants became exercisable beginning on the date of stockholder approval of the exercisability of the warrants, which was received on October 6, 2022. Gross proceeds from the August 2022 Public Offering, including the Overallotment Option, were $13.8 million and net proceeds were

approximately $11.5 million after deducting equity issuance costs of $2.3 million, which includes the underwriter discount, professional fees, and the fair value of the Underwriter Warrants (see Note 7).

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Note 7 - Common Stock Warrants

9 Months Ended

Sep. 30, 2022

Disclosure Text Block [Abstract]

Common Stock Warrants

7. Common Stock Warrants

From time to time, the Company issues warrants to its investors, creditors and various other individuals. The Company’s outstanding common stock warrants that are classified as equity warrants are included as a component of stockholder’s equity at the date of grant at the relative fair value at that grant date. Common stock warrants accounted for as liabilities are included in non-current liabilities. The warrants have an exercise price ranging from $0.25 to $694.80 per share and generally expire between one and ten years after the date of issuance. The Company had common stock warrants outstanding of 122,924,912 and 7,181,741, at September 30, 2022 and December 31, 2021, respectively.

January 2022 Waiver Agreement

On January 31, 2022, the Company and the Investor entered into the January 2022 Waiver Agreement (See Note 5, Fair Value Measurements). In addition to irrevocably waiving any adjustment to the exercise price of the Senior Secured Promissory Note Warrants and the May 2021 Warrants held by the Investor from and after the Effective Date for the Company's issuances of equity or equity-linked securities at a price below the exercise price of the warrants, the January 2022 Waiver Agreement also includes agreement by the parties to, among other things, (i) restrict the Investor's ability to sell the Company's securities through a "leak out" provision whereby sales are restricted by applying a volume limitation, (ii) shorten the notice period for the Investor’s participation rights related to certain future securities offerings, (iii) restrict the Company’s ability to conduct a primary offering of its securities for a specified period of time, and (iv) provide registration rights for the shares underlying the January 2022 Warrant.

As consideration for the foregoing, pursuant to the January 2022 Waiver Agreement, the Company issued the Investor the January 2022 Warrants. The January 2022 Warrants are exercisable beginning six months following the Effective Date and expire five and a half years from the Effective Date. The exercise price for the January 2022 Warrant is $1.10 (the closing price of the Company’s common stock on January 28, 2022), subject to customary adjustments for stock splits, stock dividends, stock combinations, reclassifications and similar transactions.

May 2021 Warrant Exercises

In the three months ended March 31, 2022, the Investor exchanged the remaining 3,994,302 May 2021 Warrants into shares of the Company’s common stock in cashless exercises. Following these exercises, the May 2021 Warrants were fully exercised. As of September 30, 2022, there are no May 2021 Warrants outstanding.

May 2022 Registered Direct Offering Warrants

In connection with the May 2022 Registered Direct Offering (see Note 6, Stockholders' Equity), on May 10, 2022 the Company issued the May 2022 Purchase Warrants. The May 2022 Purchase Warrants are not exercisable until six months following the date of issuance and expire five and a half years from the date of issuance. The May 2022 Purchase Warrants were classified as equity. Concurrently, the Company issued the May 2022 Placement Agent Warrants. The May 2022 Placement Agent Warrants are not exercisable until six months following the date of issuance and expire five years from the date of issuance.

August 2022 Public Offering Warrants

In connection with the August 2022 Public Offering (see Note 6, Stockholders' Equity), on August 16, 2022 the Company issued the Series 1 Warrants and the Series 2 Warrants. Both the Series 1 Warrants and the Series 2 Warrants became exercisable beginning on the date of stockholder approval of the exercisability of the warrants, which was received on October 6, 2022. The Series 1 Warrants expire one year from the date of issuance and the Series 2 Warrants expire five years from the date of issuance. The Series 1 Warrants and the Series 2 Warrants were classified as equity. Concurrent with the August 2022 Public Offering, the Company issued the Underwriter Warrants. The Underwriter Warrants are immediately exercisable and expire five years from the date of issuance.

The following table summarizes warrant activity for the nine months ended September 30, 2022:

	Number of Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Warrants outstanding, December 31, 2021		7,181,741		$	5.96		4.45
Granted		119,827,491			0.28		3.04
Exercised		(3,994,302	)		3.88		4.11
Forfeited, expired or cancelled		(90,018	)		81.37		—
Warrants outstanding, September 30, 2022		122,924,912			0.44		3.04

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Note 8 - Equity Incentive Plans

9 Months Ended

Sep. 30, 2022

Disclosure Text Block [Abstract]

Equity Incentive Plans

. Equity Incentive Plans

In 2013, LBS adopted the 2013 Employee, Director, and Consultant Equity Incentive Plan, (as amended and restated, the “2013 Plan”). Upon the closing of the Merger, each outstanding, unexercised and unexpired LBS option under the 2013 Plan, whether vested or unvested, was assumed by the Company and converted into an option to purchase common stock of the Company and became exercisable by the holder of such option in accordance with its terms, with (i) the number of shares of common stock subject to each option multiplied by the Exchange Ratio and (ii) the per share exercise price upon the exercise of each option divided by the Exchange Ratio. In connection with the closing of the Merger, no further awards will be made under the 2013 Plan.

In April 2021, in connection with the closing of the Merger, the Company’s stockholders approved the Palisade Bio, Inc. 2021 Equity Incentive Plan (the “2021 EIP Plan”). The maximum number of shares of the Company’s common stock available for issuance under the 2021 EIP Plan will not exceed 1,502,583 shares. In addition, such aggregate number of shares of the Company's common stock available for issuance will automatically increase on January 1 of each year for a period of ten years commencing on January 1, 2022 and ending on (and including) January 1, 2031, in an amount equal to 4% of the total number of shares of the Company's common stock outstanding on December 31st of the preceding year; provided, however, that the board of directors of the Company may act prior to January 1st of a given year to provide that the increase for such year will be a lesser number of shares of common stock. As of September 30, 2022, there were 717,010 shares of the Company's common stock available for issuance under the 2021 EIP Plan.

Also in April 2021, the Company stockholders approved the Palisade Bio, Inc. 2021 Employee Stock Purchase Plan (the "2021 ESPP"). The 2021 ESPP was adopted in order to provide eligible employees of the Company an opportunity to purchase shares of the Company's common stock. The maximum number of shares of the Company’s common stock available for issuance under the 2021 ESPP will not exceed 693,500 shares. In addition, such aggregate number of shares of the Company's common stock available for issuance will automatically increase on January 1 of each year for a period of ten years commencing on January 1, 2022 and ending on (and including) January 1, 2031, in an amount equal to 1% of the total number of shares of the Company's common stock outstanding on December 31st of the preceding year; provided, however, that the board of directors of the Company may act prior to January 1st of a given year to provide that the increase for such year will be a lesser number of shares of common stock. As of September 30, 2022, there have been no shares issued under the ESPP.

In November 2021, the Company's compensation committee of the board of directors of the Company adopted the Palisade Bio, Inc. 2021 Inducement Award Plan (the "2021 Inducement Plan"). The 2021 Inducement Plan was adopted in order to grant share-based awards to individuals not previously employed by the Company, as an inducement to join the Company. Subject to certain changes in the capitalization of the Company, as provided in the 2021 Inducement Plan document, the aggregate number of shares of the Company's common stock that may be issued under the 2021 Inducement Plan will not exceed 750,000 shares of common stock. As of September 30, 2022, there are 308,250 shares of the Company's common stock available for issuance under the 2021 Inducement Plan.

Stock Options

The Company believes that stock options align the interests of its employees, consultants and directors with the interests of its stockholders. 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, a term as determined by the Company's board of directors but generally not to exceed ten-years, and generally vest in equal proportions each quarter over three years. Vesting would 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 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 plans allow for the issuance of both incentive stock options and non-statutory stock options.

The fair value of options granted in the nine months ended September 30, 2022 and September 30, 2021 is estimated as of the grant date using the Black-Scholes option pricing model using the assumptions in the following table:

	Nine Months Ended September 30,
	2022			2021
Weighted-average exercise price per share	$	0.81		$	17.72
Weighted-average expected term (years)		5.81			5.00
Weighted-average risk-free interest rate		2.30	%		0.88	%
Weighted-average expected dividend yield		—			—
Weighted-average volatility		73.66	%		76.05	%

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 biotechnology 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 Plan and the 2021 Inducement Plan for the nine months ended September 30, 2022:

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2021		1,956,855	$	7.32		8.12	$	—
Granted		792,600		0.81		9.50		—
Exercised		—		—		—		—
Forfeited, expired or cancelled		162,479		—		—		—
Outstanding at September 30, 2022		2,586,976		5.65		7.83		—
Vested and expected to vest at September 30, 2022		2,586,976		5.65		7.83		—
Exercisable at September 30, 2022		1,392,169		9.20		5.64		—

The weighted-average grant-date fair value of options granted during the nine months ended September 30, 2022 was $0.52 per share. The fair value of the options vested during nine months ended September 30, 2022 was approximately $0.95 million.

Share-Based Compensation Expense

The allocation of stock-based compensation for all stock awards is as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Research and development expense	$	63	$	26	$	174	$	349
General and administrative		189		77		772		859
Total	$	252	$	103	$	946	$	1,208

As of September 30, 2022, the unrecognized compensation cost related to outstanding options was $1.1 million, which was expected to be recognized over a weighted-average period of approximately 2.02 years.

Officer Settlement Agreements

The Company’s former Chief Development Officer was terminated in February 2021. As part of the separation and settlement agreement, the Company’s board of directors agreed to (i) accelerate vesting by four months for the former employee’s outstanding options and (ii) allow up to seven years from the termination date for the former employee to exercise all vested options. The Company concluded the actions taken by the Company resulted in modification accounting for the stock options. The Company determined the incremental fair value of the modified stock options was $225,000, which was expensed to research and development expenses in the condensed consolidated statements of operations during the three months ended March 31, 2021.

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Note 9 - Collaborations and License Agreements

9 Months Ended

Sep. 30, 2022

Disclosure Text Block [Abstract]

Collaborations and License Agreements

9. Collaborations and License Agreements

Co-Development and Distribution Agreement with Newsoara

LBS has entered into a co-development and distribution agreement with Newsoara Biopharma Co., Ltd. (“Newsoara”), a joint venture established with Biolead Medical Technology Limited, as amended, (the “Co-Development Agreement”). Pursuant to the 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 “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 Licensed Products only include the Company's lead drug candidate, LB1148. 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 Co-Development Agreement obligates Newsoara to initially use LBS as the exclusive supplier for all of Newsoara’s requirements for Licensed Products in the Territory. During the term of the Co-Development Agreement, Newsoara may request to manufacture the Licensed Product 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.

In consideration of the rights granted to Newsoara under the Co-Development Agreement, Newsoara paid LBS a one-time upfront fee of $1.0 million. In addition, Newsoara is obligated to make (i) payments 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 Co-Development Agreement. For the three and nine months ended September 30, 2022 and September 30, 2021, there were no milestone payments earned from Newsoara under the Co-Development Agreement.

The Co-Development Agreement will expire upon the later of the expiration date of the last valid claim of any licensed patent covering the Licensed Products in the Territory. In addition, the 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

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. The licensed assets are related to the Company’s products and assays under development. Along with the one-time license issue fees paid, the Regents are entitled to annual license maintenance fees in the mid-four digit dollar range per license until such time that the Company is commercially selling a licensed product. In addition, the Company is obligated to make payments under each of the respective licenses upon the achievement of certain development, regulatory, and commercial milestones, as well as tiered and minimum annual sales royalties.

In conjunction with the Co-Development Agreement with Newsoara, the Company is obligated to pay the Regents a portion of the sublicense income equal to 30 percent of one-third of the upfront payment and milestone payments received. As of September 30, 2022 and December 31, 2021 sublicensing payables of approximately $40,000 and $81,000, respectively, were included in accounts payable.

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Note 10 - Commitments and Contingencies

9 Months Ended

Sep. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

10. Commitments and Contingencies

Corporate Office Lease

On May 12, 2022, the Company entered into a new, non-cancelable facility operating lease (the "Corporate Office Lease") of office space for its corporate headquarters, replacing its existing corporate headquarters lease that expired on July 31, 2022. The Corporate Office Lease is for 2,747 square feet of an office building in Carlsbad, California. The initial contractual term is for 39-months commencing on June 1, 2022 and expiring on August 31, 2025. The Company has the option to renew the Corporate Office Lease for an additional 36-month period at the prevailing market rent upon completion of the initial lease term. The Company has determined it is not reasonably certain that it will exercise this renewal option.

Commencing on June 1, 2022, the Company is subject to contractual monthly lease payments of $10,850, plus certain utilities, for the first 12 months with 3 percent escalations at the first, second and third lease commencement anniversaries. The Corporate Office Lease is subject to conditional abatement of fifty percent (50%) of such base rent during the second, third and fourth full calendar months of the initial lease term, as set forth in the lease agreement, as well as a $28,000 tenant improvement allowance.

The Corporate Office Lease is also subject to additional variable charges for common area maintenance, insurance, taxes and other operating costs. This additional variable rent expense is not estimable at lease inception. Therefore, it is excluded from the Company’s straight-line expense calculation at lease inception and is expensed as incurred.

As of September 30, 2022, the Company recognized an operating right-of-use asset related to the Corporate Office Lease in the amount of $324,000 and a current and noncurrent operating lease liability related to the Corporate Office Lease of $101,000 and $239,000, respectively, calculated using a discount rate of 10.75%. As of September 30, 2022, the total remaining future minimum lease payments associated with the Corporate Office Lease of approximately $395,000, less imputed interest of $55,000, will be paid over the remaining lease term of approximately 2.9 years.

The Company recognized operating lease expense associated with its Corporate Office Lease and its predecessor corporate headquarters lease of approximately $49,000 and $157,000 in the three and nine months ended September 30, 2022, respectively.

Maturities of the Company's operating lease liabilities as of September 30, 2022 are as follows:

Year ending December 31,
2022 (remaining)	$	43
2023		133
2024		137
2025		82
Total operating lease payments		395
Less: imputed interest		(55	)
Total operating lease obligations	$	340

Insurance Financing Arrangements

Consistent with past practice, on May 9, 2022 and May 24, 2022, the Company entered into agreements to finance certain insurance policies which renewed in April 2022 and May 2022. The financing arrangements entered into on May 9, 2022 and May 24, 2022 have stated interest rate of 3.82% and 6.92%, respectively, and are payable over a 9-month period and 10-month period, respectively, with the first payment commencing May 27, 2022. The insurance financing arrangements are secured by the associated insurance policies. As of September 30, 2022 and December 31, 2021, the aggregate remaining balance under the Company's insurance financing arrangements was $0.4 million and $0.1 million, respectively.

Restructuring Costs

In order to better utilize the Company’s resources on the implementation of its refocused clinical programs and corporate strategy, on September 9, 2022 the Company committed to a cost-reduction plan. This cost-reduction plan consisted of an approximately 20% reduction in workforce force to better align the Company’s resources on its clinical studies, including its lead asset, LB1148.

Associated with the reduction in workforce, the Company has recognized restructuring costs of $410,000 at the condensed consolidated statements of operations for the three and nine months ended September 30, 2022, consisting of severance and benefits payments pursuant to employment agreements and the execution of severance and release agreements. As of September 30, 2022, the Company has recognized a liability in the amount of approximately $392,000 associated with the restructuring in accrued liabilities at the condensed consolidated balance sheets. The Company expects to substantially complete the remaining cash payments of the employee severance and benefits incurred by the end of the first quarter of 2023.

Although the Company will continue to identify other cost-saving opportunities in its normal course of business, it does not expect to incur any other significant costs associated with the cost reduction-plan announced on September 9, 2022.

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 September 30, 2022, which will have, individually or in the aggregate, a material adverse effect on its business, liquidity, financial position, or results of operations. Litigation, however, is subject to inherent uncertainties, and an adverse result in such matters may arise from time to time that may harm the Company’s business.

Indemnification

In accordance with the Company’s amended and restated memorandum and articles of association, the Company has indemnification obligations to its officers and directors for certain events or occurrences, subject to certain limits, while they are serving in such capacity. There have been no claims to date, and the Company has a directors and officers liability insurance policy that may enable it to recover a portion of any amounts paid for future claims.

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Note 11 - Related Party Transactions

9 Months Ended

Sep. 30, 2022

Related Party Transactions [Abstract]

Related Party Transactions

11. Related Party Transactions

Yuma Regional Medical Center

On August 19, 2021, the Company issued to Yuma Regional Medical Center ("Yuma"), a related party, a warrant to purchase up to 377,474 shares of Common Stock at a price of $3.45 per share, subject to certain adjustments (the "August 2021 Warrants"). The August 2021 Warrants, which have been registered for resale, are immediately exercisable and have an expiration date of August 26, 2026.

Director stipends

Unpaid cash stipends owed to the Company's directors for their annual board service are recorded on the Company’s condensed consolidated balance sheets within accrued liabilities. These liabilities were $111,250 and $110,000 as of September 30, 2022, and December 31, 2021, respectively.

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Note 2 - Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

Basis of Presentation and Consolidation

Basis of Presentation and Consolidation

In management’s opinion, the accompanying interim condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, which are necessary to present fairly the Company's financial position, results of operations and cash flows. The interim results of operations are not necessarily indicative of the results that may occur for the full year. Certain information and note disclosures normally included in the consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to instructions, rules and regulations prescribed by the U.S. Securities and Exchange Commission (“SEC”). The Company believes that the disclosures provided herein are adequate to make the information presented not misleading when these condensed consolidated financial statements are read in conjunction with the condensed consolidated financial statements and notes included in the Company’s financial statements filed on the Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on March 17, 2022.

The accompanying condensed consolidated financial statements prior to the closing of the Merger are representative of LBS’s operations as LBS was determined to be the accounting acquirer for financial reporting purposes. The condensed consolidated financial statements subsequent to the closing of the Merger include the accounts of the Company and its wholly owned subsidiaries, Leading Biosciences, Inc. and Suzhou Neuralstem Biopharmaceutical Co., Ltd. All the entities are consolidated in the Company's condensed consolidated financial statements and all intercompany activity and transactions, if any, have been eliminated.

Use of Estimates

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 condensed consolidated financial statements relate to clinical trial accruals, and the valuation of derivative liabilities and stock-based compensation instruments. 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.

Segment Information

Segment Information

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, the Chief Executive Officer, in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business as one operating segment which consists of research and development activities.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents represent cash available 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

Restricted Cash

As of September 30, 2022 and December 31, 2021, the Company held restricted cash of $26,000, 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 condensed consolidated balance sheets.

Deferred Equity Issuance Costs

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. As of September 30, 2022, deferred equity issuance costs of $81,000 were included in prepaid and other assets in the condensed consolidated balance sheet. There were no deferred equity issuance costs as of December 31, 2021. These costs will be netted against additional paid-in capital as a cost of the future equity issuances to which they relate.

Concentration of Credit Risk

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 nor has the Company experienced any losses in these accounts.

Convertible Preferred Stock

Convertible Preferred Stock

The Company’s Series C Convertible Preferred Stock has been classified as temporary equity, in accordance with authoritative guidance of ASC 480-10-S99 for the classification and measurement of potentially redeemable securities, as the Series C Convertible Preferred Stock are redeemable for cash or other assets upon the occurrence of an event that is not solely within the Company’s control, including the liquidation, sale or transfer of control of the Company.

In connection with the Merger, the Series C Convertible Preferred Stock converted to common stock.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company’s financial instruments consist principally of cash and cash equivalents, restricted cash, accounts payable, accrued liabilities, and derivative liabilities. The carrying amounts of financial instruments such as cash equivalents, restricted cash, accounts payable, and accrued liabilities approximate their related fair values due to the short-term nature of these instruments. The carrying value of the Company’s debt approximates its fair value due to the market rate of interest, which is based on level 2 inputs. The Company’s derivative financial instruments are carried at fair value based on level 3 inputs as defined below.

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:

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

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

(3)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 financial instruments can be found at Note 5, Fair Value Measurements.

Derivative Financial Instruments

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, including warrants, to determine if such instruments are derivatives, or contain features that qualify as embedded derivatives, or otherwise require liability classification under U.S. GAAP. The Company values its derivatives using the Black-Scholes option-pricing model or other acceptable valuation models, including the Monte-Carlo simulation model. Derivative instruments 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 re-assessed 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 warrants, including options or warrants to non-employees in exchange for consulting or other services performed.

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 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 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 condensed 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.

Research and Development Costs

Research and Development Costs

Research and development expenses consist primarily of salaries and other personnel related expenses including stock-based compensation costs, preclinical costs, clinical trial costs, costs related to acquiring and manufacturing clinical trial materials, and contract services. All research and development costs are expensed as incurred.

Clinical Trial Expenses

Clinical Trial Expenses

Expenses related to clinical studies are based on estimates of the services received and efforts expended pursuant to the Company’s contract arrangements. The financial terms of these agreements are subject to negotiation, vary from contract to contract, and may result in uneven payment flows. 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

clinical expense. 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. In accruing service fees, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. 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. As of September 30, 2022 and December 31, 2021, the Company has accrued for $257,000 and $158,000, respectively, in clinical trial expenses for which services have been provided but the Company has not yet been invoiced as of the balance sheet date. Clinical trial expenses are included in research and development expenses in the condensed consolidated statements of operations.

Patent Costs

Patent Costs

Costs related to filing and pursuing patent applications (including direct application fees, and the legal and consulting expenses related to making such applications) are expensed as incurred, as recoverability of such expenditures is uncertain. These costs are included in general and administrative expenses in the condensed consolidated statements of operations.

Debt Issuance Costs

Debt Issuance Costs

Debt issuance costs incurred to obtain debt financing are deferred and are amortized over the term of the debt using the effective interest method. Debt issuance costs are recorded as a reduction to the carrying value of the debt and are amortized to interest expense in the condensed consolidated statements of operations.

Income Taxes

Income Taxes

The Company follows ASC 740, Income Taxes, or ASC Topic 740 (“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 condensed 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

Stock-Based Compensation

Stock-based compensation expense represents the cost of the estimated grant date fair value of employee and non-employee stock option grants recognized over the requisite service period of the awards, which is usually the vesting period, on a straight-line basis. The Company recognizes forfeitures as they occur as a reduction of expense. The Company estimates the fair value of employee and non-employee stock option grants using the Black-Scholes option pricing model.

Net (Loss) Earnings Per Common Share

Net (Loss) Earnings Per Common Share

Basic (loss) earnings per common share is computed by dividing net (loss) income available to common stockholders by the weighted average number of shares of common stock outstanding during the period. The Company's Series B Convertible Preferred Stock and certain of the Company's outstanding warrants (See Note 7) contain non-forfeitable rights to dividends with the common stockholders, and therefore are considered to be participating securities. These Series B Convertible Preferred Stock and the 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 when the Company is in a net income position, such as the three months ended September 31, 2021. When in a net income position, diluted earnings per share is computed using the more dilutive of the two-class method or the if-converted and treasury stock methods.

Basic and diluted loss per common share for the three and nine months ended September 30, 2022 and the nine months ended September 30, 2021 were calculated under the if-converted and treasury stock methods. For the three and nine months ended September 30, 2022 and the nine months ended September 30, 2021, basic and diluted loss per common share were the same as all common stock equivalents were anti-dilutive for both periods. Basic and diluted earnings per share during the three months ended September 30, 2021 were calculated under the two-class method. Certain of the Company's liability classified warrants were dilutive in the second quarter of 2021 resulting in a dilutive impact for the nine months ended September 30, 2021.

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Basic net (loss) income per common share:
Net (loss) income	$	(3,991	)	$	8,087		$	(10,540	)	$	(27,689	)
Undistributed earnings allocated to participating securities		—			(2,969	)		—			—
Net (loss) income attributable to common shares - basic	$	(3,991	)	$	5,118		$	(10,540	)	$	(27,689	)
Weighted average shares used in calculating basic (loss) income per share		48,709,846			12,100,292			28,634,209			7,902,104
Basic net (loss) income per common share	$	(0.08	)	$	0.42		$	(0.37	)	$	(3.50	)
Diluted net (loss) income per common share:
Net (loss) income	$	(3,991	)	$	8,087		$	(10,540	)	$	(27,689	)
Change in fair value of warrants		—			—			—			(5,119	)
Undistributed earnings allocated to participating securities		—			(2,968	)		—			—
Net (loss) income attributable to common shares - diluted	$	(3,991	)	$	5,119		$	(10,540	)	$	(32,808	)
Weighted-average shares outstanding		48,709,846			12,100,292			28,634,209			7,902,104
Effect of potentially dilutive securities		—			6,479			—			50,894
Weighted average shares used in calculating diluted (loss) income per share		48,709,846			12,106,771			28,634,209			7,952,998
Diluted net (loss) income per common share	$	(0.08	)	$	0.42		$	(0.37	)	$	(4.13	)

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

	September 30,
	2022		2021
Stock options		2,586,976		799,562
Warrants for common stock		122,924,912		8,491,006
Series A Convertible Preferred Stock		6,479		—
Total		125,518,367		9,290,568

Comprehensive Income (Loss)

Comprehensive Income (Loss)

Comprehensive income (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 income (loss) was the same as its reported net income (loss) for all periods presented.

Recently Adopted Issued Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In August 2020, FASB issued Accounting Standards Update ("ASU") 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) — Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity ("ASU- 2020-06"), which, among other things, provides guidance on how to account for contracts on an entity’s own equity. This ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. Specifically, the ASU eliminated the need for the Company to assess whether a contract on the entity’s own equity (1) permits settlement in unregistered shares, (2) whether counterparty rights rank higher stockholder’s rights, and (3) whether collateral is required. In addition, the ASU requires incremental disclosure related to contracts on the entity’s own equity and clarifies the treatment of certain financial instruments accounted for under this ASU on earnings per share. This ASU may be applied on a full retrospective of modified retrospective basis. For smaller reporting companies, this ASU is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption of the ASU is permitted for fiscal years beginning after December 15, 2020, including interim periods within

those fiscal years. The Company early adopted this standard on January 1, 2022 and determined that it had no impact on the accounting for its liability-classified warrants as of the date of adoption.

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The ASU introduced a new credit loss methodology, the Current Expected Credit Losses (“CECL”) methodology, which requires earlier recognition of credit losses, while also providing additional transparency about credit risk. The CECL methodology utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for loans, held-to maturity debt securities, trade receivables and other receivables measured at amortized cost at the time the financial asset is originated or acquired. After the issuance of ASU 2016-13, the FASB issued several additional ASUs to clarify implementation guidance, provide narrow-scope improvements and provide additional disclosure guidance. In November 2019, the FASB issued an amendment making this ASU effective for fiscal years beginning after December 15, 2022 for smaller reporting companies. The Company plans to adopt this standard as of January 1, 2023 and does not expect the adoption will have a significant impact on its consolidated financial statements and related disclosures.

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Note 2 - Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

Schedule of Weighted Average Number of Shares

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Basic net (loss) income per common share:
Net (loss) income	$	(3,991	)	$	8,087		$	(10,540	)	$	(27,689	)
Undistributed earnings allocated to participating securities		—			(2,969	)		—			—
Net (loss) income attributable to common shares - basic	$	(3,991	)	$	5,118		$	(10,540	)	$	(27,689	)
Weighted average shares used in calculating basic (loss) income per share		48,709,846			12,100,292			28,634,209			7,902,104
Basic net (loss) income per common share	$	(0.08	)	$	0.42		$	(0.37	)	$	(3.50	)
Diluted net (loss) income per common share:
Net (loss) income	$	(3,991	)	$	8,087		$	(10,540	)	$	(27,689	)
Change in fair value of warrants		—			—			—			(5,119	)
Undistributed earnings allocated to participating securities		—			(2,968	)		—			—
Net (loss) income attributable to common shares - diluted	$	(3,991	)	$	5,119		$	(10,540	)	$	(32,808	)
Weighted-average shares outstanding		48,709,846			12,100,292			28,634,209			7,902,104
Effect of potentially dilutive securities		—			6,479			—			50,894
Weighted average shares used in calculating diluted (loss) income per share		48,709,846			12,106,771			28,634,209			7,952,998
Diluted net (loss) income per common share	$	(0.08	)	$	0.42		$	(0.37	)	$	(4.13	)

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

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

	September 30,
	2022		2021
Stock options		2,586,976		799,562
Warrants for common stock		122,924,912		8,491,006
Series A Convertible Preferred Stock		6,479		—
Total		125,518,367		9,290,568

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Note 3 - Revision of Previously Issued Financial Statements for Correction of Immaterial Errors (Tables)

9 Months Ended

Sep. 30, 2022

Accounting Changes and Error Corrections [Abstract]

Schedule of Adjustment to Prepaid Expenses and Other Current Assets and Other Noncurrent Assets

The adjustment to “prepaid expenses and other current assets” and “other noncurrent assets” within the Company’s consolidated balance sheet as of the year ended December 31, 2021 are as follows:

	December 31, 2021
	As Reported		Adjustment			As Adjusted
ASSETS
Current assets:
Cash and cash equivalents	$	10,495	$	—		$	10,495
Prepaid expenses and other current assets		1,879		(868	)		1,011
Total current assets		12,374		(868	)		11,506
Restricted cash		26		—			26
Right-of-use asset		109		—			109
Other noncurrent assets		—		868			868
Property and equipment, net		3		—			3
Total assets	$	12,512	$	—		$	12,512

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Note 3 - Balance Sheet Details (Tables)

9 Months Ended

Sep. 30, 2022

Table Text Block [Abstract]

Summary of Prepaid Expenses and Other Current Assets

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

	September 30,		December 31,
	2022		2021
Prepaid insurance	$	807	$	540
Other receivables		20		150
Prepaid subscriptions and fees		205		215
Prepaid software licenses		54		78
Deferred equity issuance costs		81		—
Prepaid other		6		28
	$	1,173	$	1,011

Schedule Of Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

	September 30,		December 31,
	2022		2021
Accrued accounts payable	$	482	$	195
Accrued clinical trial costs		257		158
Accrued director stipends		111		110
Accrued severance and benefits (Note 10)		392		—
	$	1,242	$	463

Schedule of Other Noncurrent Assets

Other noncurrent assets consisted of the following (in thousands):

	September 30,		December 31,
	2022		2021
Prepaid insurance, less current portion	$	734	$	868
Other noncurrent assets		12		—
	$	746	$	868

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Note 4 - Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2022

Disclosure Text Block [Abstract]

Schedule of fair value of options granted

	Three Months Ended September 30,						Nine Months Ended September 30,
Warrant Liabilities	2022			2021			2022			2021
Fair value at beginning of period	$	469		$	20,526		$	2,651		$	1,830
Initial fair value at the original issuance date		—			1,672			1,110			25,417
Equity classified warrant put feature activated		—			—			—			51
Change in fair value during the period		(385	)		(12,764	)		(2,403	)		(17,939	)
Fair value of warrants exercised		—			—			(1,274	)		—
Seneca liability classified warrants assumed		—			—			—			200
Expiration of equity classified warrant put feature		—			—			—			(26	)
Settlement of liability-classified warrants		—			—			—			(99	)
Fair value at end of period	$	84		$	9,434		$	84		$	9,434

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Note 6 - Common Stock Warrants (Tables)

9 Months Ended

Sep. 30, 2022

Table Text Block [Abstract]

Schedule of Stockholders' Equity Note, Warrants or Rights

The following table summarizes warrant activity for the nine months ended September 30, 2022:

	Number of Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Warrants outstanding, December 31, 2021		7,181,741		$	5.96		4.45
Granted		119,827,491			0.28		3.04
Exercised		(3,994,302	)		3.88		4.11
Forfeited, expired or cancelled		(90,018	)		81.37		—
Warrants outstanding, September 30, 2022		122,924,912			0.44		3.04

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Note 8 - Equity Incentive Plans (Tables)

9 Months Ended

Sep. 30, 2022

Table Text Block [Abstract]

Schedule of Fair Value of Options Granted

The fair value of options granted in the nine months ended September 30, 2022 and September 30, 2021 is estimated as of the grant date using the Black-Scholes option pricing model using the assumptions in the following table:

	Nine Months Ended September 30,
	2022			2021
Weighted-average exercise price per share	$	0.81		$	17.72
Weighted-average expected term (years)		5.81			5.00
Weighted-average risk-free interest rate		2.30	%		0.88	%
Weighted-average expected dividend yield		—			—
Weighted-average volatility		73.66	%		76.05	%

Schedule of Summarized Stock Option Activity

The following table summarizes stock option activity and related information under the 2013 Plan, the 2021 EIP Plan and the 2021 Inducement Plan for the nine months ended September 30, 2022:

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2021		1,956,855	$	7.32		8.12	$	—
Granted		792,600		0.81		9.50		—
Exercised		—		—		—		—
Forfeited, expired or cancelled		162,479		—		—		—
Outstanding at September 30, 2022		2,586,976		5.65		7.83		—
Vested and expected to vest at September 30, 2022		2,586,976		5.65		7.83		—
Exercisable at September 30, 2022		1,392,169		9.20		5.64		—

Schedule of Stock-based Compensation for all Stock Awards

The allocation of stock-based compensation for all stock awards is as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Research and development expense	$	63	$	26	$	174	$	349
General and administrative		189		77		772		859
Total	$	252	$	103	$	946	$	1,208

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Note 9 - Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Schedule of Maturities of the Company's operating lease liabilities

Maturities of the Company's operating lease liabilities as of September 30, 2022 are as follows:

Year ending December 31,
2022 (remaining)	$	43
2023		133
2024		137
2025		82
Total operating lease payments		395
Less: imputed interest		(55	)
Total operating lease obligations	$	340

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Note 1 - Organization, Business and Financial Condition (Details) $ in Thousands	Apr. 27, 2021	Sep. 30, 2022 USD ($)	Dec. 31, 2021 USD ($)	Sep. 30, 2021 USD ($)
Retained earnings (Accumulated deficit), ending balance		$ 105,200
Cash and cash equivalents		$ 13,985	$ 10,495	$ 14,104
Reverse Stock Split [Member]
Reverse stock split ratio	6
Merger Agreement with Leading Biosciences, Inc. [Member]
Merger agreement, exchange ratio	0.02719

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Note 2 - Summary of Significant Accounting Policies (Details Textual)	9 Months Ended
	Sep. 30, 2022 USD ($) Segment	Dec. 31, 2021 USD ($)
Accounting Policies [Abstract]
Number of operating segments | Segment	1
Restricted cash	$ 26,000	$ 26,000
Deferred equity issuance costs	81,000	0
Accrued clinical trial costs	$ 257,000	$ 158,000

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Note 2 - Summary of Significant Accounting Policies - Calculation of Weighted Average Shares Used to Calculate Basic and Diluted (Loss) Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Basic net loss per common share:
Net income (loss)	$ (3,991)	$ 8,087	$ (10,540)	$ (27,689)
Undistributed earnings allocated to participating securities - basic	0	2,969	0	0
Net Income (Loss) Available to Common Stockholders, Basic, Total	$ (3,991)	$ 5,118	$ (10,540)	$ (27,689)
Weighted average shares used in calculating basic (loss) income per share	48,709,846	12,100,292	28,634,209	7,902,104
Basic net (loss) income per common share	$ (0.08)	$ 0.42	$ (0.37)	$ (3.50)
Diluted net (loss) per common share:
Net loss	$ (3,991)	$ 8,087	$ (10,540)	$ (27,689)
Change in fair value of warrants	0	0	0	(5,119)
Undistributed earnings allocated to participating securities - diluted	0	(2,968)	0	0
Net loss attributable to common shares - diluted	$ (3,991)	$ 5,119	$ (10,540)	$ (32,808)
Weighted-average shares outstanding	48,709,846	12,100,292	28,634,209	7,902,104
Effect of potentially dilutive securities	0	6,479	0	50,894
Weighted average shares used in calculating diluted loss per share	48,709,846	12,106,771	28,634,209	7,952,998
Diluted net (loss) income per common share	$ (0.08)	$ 0.42	$ (0.37)	$ (4.13)

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Note 2 - Summary of Significant Accounting Policies - Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share (Details) - shares	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Anti-dilutive securities (in shares)	125,518,367	9,290,568
Stock option [Member]
Anti-dilutive securities (in shares)	2,586,976	799,562
Warrant [Member]
Anti-dilutive securities (in shares)	122,924,912	8,491,006
Series A Convertible Preferred Stock [Member]
Anti-dilutive securities (in shares)	6,479	0

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Note 3 - Revision of Previously Issued Financial Statements for Correction of Immaterial Errors - Schedule of Adjustment to Prepaid Expenses and Other Current Assets and Other Noncurrent Assets (Details) - USD ($)	Sep. 30, 2022	Dec. 31, 2021	Sep. 30, 2021
Current assets:
Cash and cash equivalents	$ 13,985,000	$ 10,495,000	$ 14,104,000
Prepaid expenses and other current assets	1,173,000	1,011,000
Total current assets	15,158,000	11,506,000
Restricted cash	26,000	26,000
Right-of-use asset	324,000	109,000
Other noncurrent assets	746,000	868,000
Property and equipment, net	12,000	3,000
Total assets	$ 16,266,000	12,512,000
Previously Reported [Member]
Current assets:
Cash and cash equivalents		10,495,000
Prepaid expenses and other current assets		1,879,000
Total current assets		12,374,000
Restricted cash		26,000
Right-of-use asset		109,000
Other noncurrent assets		0
Property and equipment, net		3,000
Total assets		12,512,000
Revision of Prior Period, Adjustment [Member]
Current assets:
Cash and cash equivalents		0
Prepaid expenses and other current assets		(868,000)
Total current assets		(868,000)
Restricted cash		0
Right-of-use asset		0
Other noncurrent assets		868,000
Property and equipment, net		0
Total assets		$ 0

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Note 4 - Balance Sheet Details - Summary of Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Disclosure Text Block [Abstract]
Prepaid insurance	$ 807	$ 540
Other receivables	20	150
Prepaid subscriptions and fees	205	215
Prepaid software licenses	54	78
Deferred equity issuance costs	81	0
Prepaid other	6	28
Prepaid expenses and other current assets	$ 1,173	$ 1,011

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Note 4 - Balance Sheet Details - Summary of Accrued Liabilities (Details) - USD ($)	Sep. 30, 2022	Dec. 31, 2021
Disclosure Text Block [Abstract]
Accrued accounts payable	$ 482,000	$ 195,000
Accrued clinical trial costs	257,000	158,000
Accrued director stipends	111,000	110,000
Accrued severance and benefits	392,000	0
Accrued Liabilities, Current, Total	$ 1,242,000	$ 463,000

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Note 4 - Balance Sheet Details - Summary of Other Noncurrent Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Disclosure Text Block [Abstract]
Prepaid Expense, Noncurrent	$ 734	$ 868
Other noncurrent assets	12
Other noncurrent assets, total	$ 746	$ 868

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Note 5 - Fair Value Measurements (Details)	1 Months Ended	3 Months Ended	9 Months Ended
	May 31, 2021 shares	Jun. 30, 2021 $ / shares shares	Sep. 30, 2022 USD ($) $ / shares shares	Mar. 31, 2022 shares	Jan. 31, 2022 USD ($) shares	Dec. 31, 2021 USD ($) shares	Aug. 19, 2021 $ / shares shares	Jul. 21, 2021 USD ($) $ / shares shares	May 20, 2021 $ / shares shares	Dec. 16, 2020 shares
Warrant liability | $			$ 84,000			$ 2,651,000
Warrants and Rights Outstanding, Measurement Input | $								3,900,000
Warrants exercise price | $ / shares							$ 3.45
Warrants to purchase common stock							377,474
Warrants exercised			0
Warrants outstanding			122,924,912			7,181,741
May 2022 Registered Direct Offering
Warrants to purchase shares of common stock			3,646,690
May 2022 Registered Direct Offering to Placement Agent
Warrants to purchase shares of common stock			218,801
August 2022 Public Offering
Warrants to purchase shares of common stock			110,400,000
August 2022 Public Offering | Underwriter [Member]
Warrants to purchase shares of common stock			3,312,000
Measurement Input, Price Volatility [Member] | Investor Warrants [Member]
Warrants and Rights Outstanding, Measurement Input | $			75.5
Measurement Input, Expected Term [Member] | Investor Warrants [Member]
Warrants and Rights Outstanding, Measurement Input			3.86
Measurement Input, Expected Dividend Rate [Member] | Investor Warrants [Member]
Warrants and Rights Outstanding, Measurement Input			0
Maximum [Member]
Warrants exercise price | $ / shares			$ 694.80
Senior Secured Promissory Note Warrants [Member] | Investor Warrants [Member]
Warrant liability | $			$ 2,000
Senior Secured Promissory Note Warrants [Member] | Measurement Input, Share Price [Member] | Investor Warrants [Member]
Warrants and Rights Outstanding, Measurement Input | $			0.10
Senior Secured Promissory Note Warrants [Member] | Measurement Input, Risk Free Interest Rate [Member] | Investor Warrants [Member]
Warrants and Rights Outstanding, Measurement Input			4.17
Senior Secured Promissory Note Warrants [Member] | Measurement Input, Exercise Price [Member] | Investor Warrants [Member]
Warrants and Rights Outstanding, Measurement Input | $			3.88
Senior Secured Promissory Note Warrants [Member] | Altium Growth Fund, LP [Member]
Warrants to purchase shares of common stock										858,892
The Equity Warrant [Member]
Warrant liability | $					$ 1,100,000			$ 1,700,000
The Equity Warrant [Member] | Measurement Input, Share Price [Member]
Warrants and Rights Outstanding, Measurement Input | $					1.17
The Equity Warrant [Member] | Measurement Input, Price Volatility [Member]
Warrants and Rights Outstanding, Measurement Input					93.0
The Equity Warrant [Member] | Measurement Input, Risk Free Interest Rate [Member]
Warrants and Rights Outstanding, Measurement Input					1.65
The Equity Warrant [Member] | Measurement Input, Expected Term [Member]
Warrants and Rights Outstanding, Measurement Input					5.5
The Equity Warrant [Member] | Altium Growth Fund, LP [Member]
Warrants exercise price | $ / shares									$ 4.70
Warrants to purchase shares of common stock				3,994,302					4,995,893
May 2021 Warrants [Member]
Warrants exercised	5,303,568
Warrants outstanding			0
May 2021 Warrants [Member] | Altium Growth Fund, LP [Member]
Warrants exercise price | $ / shares		$ 3.88
Class of warrant or right, unissued		5,303,568
July 2021 Warrants [Member]
Warrant liability | $			$ 16,000
Warrants and Rights Outstanding, Measurement Input | $			0.10
Warrants exercise price | $ / shares								$ 3.63
July 2021 Warrants [Member] | Measurement Input, Price Volatility [Member]
Warrants and Rights Outstanding, Measurement Input			104.9
July 2021 Warrants [Member] | Measurement Input, Risk Free Interest Rate [Member]
Warrants and Rights Outstanding, Measurement Input			4.13
July 2021 Warrants [Member] | Measurement Input, Expected Term [Member]
Warrants and Rights Outstanding, Measurement Input			4.31
July 2021 Warrants [Member] | Measurement Input, Expected Dividend Rate [Member]
Warrants and Rights Outstanding, Measurement Input			0
July 2021 Warrants [Member] | Maximum [Member]
Warrants to purchase common stock								1,100,000
January 2022 [Member]
Warrant liability | $			$ 63,000
January 2022 [Member] | Measurement Input, Share Price [Member]
Warrants and Rights Outstanding, Measurement Input | $			0.10
January 2022 [Member] | Measurement Input, Price Volatility [Member]
Warrants and Rights Outstanding, Measurement Input			104.2
January 2022 [Member] | Measurement Input, Risk Free Interest Rate [Member]
Warrants and Rights Outstanding, Measurement Input			4.08
January 2022 [Member] | Measurement Input, Expected Term [Member]
Warrants and Rights Outstanding, Measurement Input			4.83
January 2022 [Member] | Measurement Input, Expected Dividend Rate [Member]
Warrants and Rights Outstanding, Measurement Input			0
January 2022 [Member] | Maximum [Member]
Warrants to purchase common stock					2,250,000
Warrants Issued in Connection with May 2016 and August 2017 Offerings [Member]
Class of Warrant or Right, Put Feature Settled (in shares)		7,813

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Note 5 - Fair Value Measurements - Activity for Items Measured at Fair Value on a Recurring Basis (Details) - Stock Purchase Warrants [Member] - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Balance	$ 469	$ 20,526	$ 2,651	$ 1,830
Initial fair value at the original issuance date	0	1,672	1,110	25,417
Equity classified warrant put feature activated	0	0	0	51
Change in fair value during the period	(385)	(12,764)	(2,403)	(17,939)
Fair value of warrants exercised	0	0	(1,274)	0
Seneca liability classified warrants assumed	0	0	0	200
Expiration of equity classified warrant put feature	0	0	0	(26)
Settlement of liability - classified warrants	0	0	0	(99)
Balance	$ 84	$ 9,434	$ 84	$ 9,434

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Note 6 - Stockholders' Equity (Details Textual)					9 Months Ended
	Oct. 04, 2022	Aug. 16, 2022 USD ($) shares	Aug. 12, 2022 USD ($) Days $ / shares shares	May 06, 2022 USD ($) $ / shares shares	Sep. 30, 2022 USD ($) $ / shares shares	Sep. 30, 2021 USD ($)	Oct. 06, 2022 shares	Dec. 31, 2021 $ / shares shares	Aug. 19, 2021 $ / shares
Common Stock, Shares Authorized (in shares)					300,000,000			300,000,000
Common Stock, Par or Stated Value Per Share (in dollars per share) | $ / shares					$ 0.01			$ 0.01
Warrants exercise price | $ / shares									$ 3.45
Proceeds from issuance of common stock and warrants | $					$ 14,401,000	$ 5,209,000
Payment of equity issuance costs | $					$ 333,000	$ 0
Common stock, shares outstanding (in shares)					77,080,169			14,239,177
Common stock, shares issued (in shares)					77,080,169			14,239,177
Maximum [Member]
Warrants exercise price | $ / shares					$ 694.80
Date of issuance of warrant					10 years
Minimum [Member]
Warrants exercise price | $ / shares					$ 0.25
Date of issuance of warrant					1 year
Subsequent Event [Member]
Common Stock, Shares Authorized (in shares)							280,000,000
Subsequent Event [Member] | Maximum [Member]
Reverse stock split ratio	50
Subsequent Event [Member] | Minimum [Member]
Reverse stock split ratio	10
May 2022 Registered Direct Offering
Common Stock, Par or Stated Value Per Share (in dollars per share) | $ / shares				$ 0.01
Offering shares (Per share)				3,646,690
Shares Issued, Price Per Share | $ / shares				$ 0.55
Warrants to purchase shares of common stock					3,646,690
Proceeds from issuance of common stock and warrants | $				$ 1,400,000
Aggregate Consideration | $				2,000,000.0
Payment of equity issuance costs | $				$ 600,000
Stock Issued During Period, Shares, New Issues				3,646,690
May 2022 Purchase Warrants
Warrants to purchase shares of common stock				3,646,690
Warrants exercise price | $ / shares				$ 0.7105
May 2022 Placement Agent Warrants
Warrants to purchase shares of common stock				218,801
Warrants exercise price | $ / shares				$ 0.7105
August 2022 Public Offering
Offering shares (Per share)		49,360,000
Warrants to purchase shares of common stock					110,400,000
Proceeds from issuance of common stock and warrants | $		$ 13,800,000
Payment of equity issuance costs | $		2,300,000
Net Proceeds | $		$ 11,500,000
Stock Issued During Period, Shares, New Issues		49,360,000
Consecutive trading day period | Days			30
Trading day conversion price period			300.00%
August 2022 Public Offering | Warrant One [Member]
Warrants to purchase shares of common stock		55,200,000
Warrants exercise price | $ / shares			$ 0.25
Date of issuance of warrant			1 year
August 2022 Public Offering | Warrant Two [Member]
Warrants to purchase shares of common stock		55,200,000
Warrants exercise price | $ / shares			$ 0.25
Date of issuance of warrant			5 years
Over Allotment Option [Member]
Offering shares (Per share)		7,200,000	7,200,000
Stock Issued During Period, Shares, New Issues		7,200,000	7,200,000
Over Allotment Option [Member] | Warrant One [Member]
Warrants to purchase shares of common stock		7,200,000	7,200,000
Over Allotment Option [Member] | Warrant Two [Member]
Warrants to purchase shares of common stock		7,200,000	7,200,000
Common Class A [Member] | August 2022 Public Offering
Common Stock, Par or Stated Value Per Share (in dollars per share) | $ / shares			$ 0.01
Offering shares (Per share)			42,160,000
Sale of public offering | $ / shares			$ 0.25
Stock Issued During Period, Shares, New Issues			42,160,000
Common Class B [Member] | August 2022 Public Offering
Public offering price			1,000
Offering shares (Per share)			1,460
Stock Issued During Period, Shares, New Issues			1,460
Common Class B [Member] | August 2022 Public Offering | Warrant one and Warrant two [Member]
Convertible Preferred Stock, Issuable Upon Conversion of All Shares (in shares)			4,000
Warrants exercise price | $ / shares			$ 0.25
Series B Convertible Preferred Stock [Member] | August 2022 Public Offering
Preferred Stock, Par or Stated Value Per Share (in dollars per share) | $ / shares			$ 0.01
Preferred stock, shares issued (in shares)		1,460	1,460
Convertible Preferred Stock, Issuable Upon Conversion of All Shares (in shares)			4,000
Weighted average daily dollar trading volume | $			$ 500,000
Series B Convertible Preferred Stock [Member] | August 2022 Public Offering | Warrant One [Member]
Convertible Preferred Stock, Issuable Upon Conversion of All Shares (in shares)			4,000
Series B Convertible Preferred Stock [Member] | August 2022 Public Offering | Warrant Two [Member]
Convertible Preferred Stock, Issuable Upon Conversion of All Shares (in shares)			4,000
Series C Preferred Stock [Member]
Preferred stock, shares issued (in shares)					317,420
Series C convertible preferred stock, shares outstanding (in shares)					11,674,131
Series A 4.5% Convertible Preferred Stock [Member]
Preferred Stock, Shares Authorized (in shares)					1,000,000			1,000,000
Preferred Stock, Par or Stated Value Per Share (in dollars per share) | $ / shares					$ 0.01			$ 0.01
Convertible Preferred Stock, Issuable Upon Conversion of All Shares (in shares)					6,479
Series A Preferred Stock [Member]
Preferred Stock, Shares Authorized (in shares)					7,000,000			7,000,000
Preferred Stock, Par or Stated Value Per Share (in dollars per share) | $ / shares					$ 0.01			$ 0.01
Preferred stock, shares issued (in shares)					200,000
Common stock, shares outstanding (in shares)					200,000			200,000
Common stock, shares issued (in shares)					200,000			200,000
LBS [Member]
Common Stock, Shares Authorized (in shares)					6,797,500
Common Stock, Par or Stated Value Per Share (in dollars per share) | $ / shares					$ 0.01
Preferred Stock, Shares Authorized (in shares)					33,594,625
Preferred Stock, Par or Stated Value Per Share (in dollars per share) | $ / shares					$ 0.001

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Note 7 - Common Stock Warrants (Details) - USD ($)	Sep. 30, 2022	Mar. 31, 2022	Jan. 31, 2022	Dec. 31, 2021	Aug. 19, 2021	May 20, 2021
Warrants exercise price					$ 3.45
Warrants and Rights Outstanding	$ 122,924,912,000			$ 7,181,741
Warrant Waiver Agreement Member
Warrants exercise price			$ 1.10
The Equity Warrant [Member] | Altium Growth Fund, LP [Member]
Warrants exercise price						$ 4.70
Conversion of warrant into common stock		3,994,302				4,995,893
Minimum [Member]
Warrants exercise price	$ 0.25
Date of issuance of warrant	1 year
Maximum [Member]
Warrants exercise price	$ 694.80
Date of issuance of warrant	10 years

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Note 7 - Common Stock Warrants - Summary of Warrant Activity (Details) - $ / shares	9 Months Ended	12 Months Ended
	Sep. 30, 2022	Dec. 31, 2021
Warrants and Rights Note Disclosure [Abstract]
Warrants outstanding, balance (in shares)	7,181,741
Warrants outstanding, weighted average exercise price (in dollars per share)	$ 0.44	$ 5.96
Warrants outstanding, December 31, 2021	3 years 14 days	4 years 5 months 12 days
Class of warrant or right, issued during period (in shares)	119,827,491
Granted, weighted average exercise price (in dollars per share)	$ 0.28
Granted, weighted average remaining contractual life	3 years 14 days
Exercised (in shares)	(3,994,302)
Exercised, weighted average exercise price	$ 3.88
Exercised, weighted average remaining contractual life	4 years 1 month 9 days
Forfeited, expired or cancelled (in shares)	(90,018)
Forfeited, expired, or cancelled, weighted average exercise price	$ 81.37
Warrants outstanding, balance (in shares)	122,924,912	7,181,741

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Note 8 - Equity Incentive Plans (Details Textual) - USD ($)		1 Months Ended	3 Months Ended	9 Months Ended
	Apr. 27, 2021	Feb. 28, 2021	Mar. 31, 2021	Sep. 30, 2022	Nov. 30, 2021	Dec. 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in shares)				792,600
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value (in dollars per share)				$ 0.52
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value, Vested				$ 950,000
Share-based Payment Arrangement, Nonvested Award, Option, Cost Not yet Recognized, Amount				$ 1,100,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition (Year)				2 years 7 days
Stock option [Member] | Former Chief Development Officer [Member]
Share-based Payment Arrangement, Period by Which Vesting is Accelerated (Year)		4 months
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)		7 years
Stock option [Member] | Former Chief Development Officer [Member] | Research and Development Expense [Member]
Share-based Payment Arrangement, Accelerated Cost			$ 225,000
The 2021 Plan [Member]
Common Stock, Capital Shares Reserved for Future Issuance (in shares)	1,502,583
Common Stock, Capital Shares Reserved for Future Issuance, Period of Yearly Increase (Year)	10 years
Common Stock, Capital Shares Reserved for Future Issuance, Yearly Increase, Percentage	4.00%
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in shares)				717,010
2013 Plan [Member]
Common Stock, Capital Shares Reserved for Future Issuance (in shares)						0
The 2021 ESPP [Member]
Common Stock, Capital Shares Reserved for Future Issuance (in shares)	693,500
Common Stock, Capital Shares Reserved for Future Issuance, Period of Yearly Increase (Year)	10 years
Common Stock, Capital Shares Reserved for Future Issuance, Yearly Increase, Percentage	1.00%
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in shares)				0
2021 Inducement Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in shares)				308,250
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized					750,000

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Note 8 - Equity Incentive Plans - Fair Value Assumptions for Stock Options (Details) - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Disclosure Text Block [Abstract]
Weighted-average exercise price per share	$ 0.81	$ 17.72
Weighted-average expected term (years)	5 years 9 months 21 days	5 years
Weighted-average risk-free interest rate	2.30%	0.88%
Weighted-average expected dividend yield	$ 0	$ 0
Weighted-average volatility	73.66%	76.05%

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Note 8 - Equity Incentive Plans - Summary of Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2022	Dec. 31, 2021
Disclosure Text Block [Abstract]
Options Outstanding (in shares)	1,956,855
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in shares)	792,600
Options Exercised (in shares)	0
Options Forfeited, expired or cancelled (in shares)	162,479
Options Outstanding (in shares)	2,586,976	1,956,855
Options Vested and expected to vest (in shares)	2,586,976
Options Exercisable (in shares)	1,392,169
Options Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 7.32
Options Granted, Weighted Average Exercise Price (in dollars per share)	0.81
Options Forfeited, expired or cancelled, Weighted Average Exercise Price (in dollars per share)	0
Options Outstanding, Weighted Average Exercise Price (in dollars per share)	5.65	$ 7.32
Options Vested and expected to vest, Weighted Average Exercise Price (in dollars per share)	5.65
Options Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 9.20
Options Outstanding, Weighted Average Remaining Contractual Life (Year)	7 years 9 months 29 days	8 years 1 month 13 days
Granted, Weighted Average Remaining Contractual Life (Year)	9 years 6 months
Options Vested and expected to vest, Weighted Average Remaining Contractual Life (Year)	7 years 9 months 29 days
Options Exercisable, Weighted Average Remaining Contractual Life (Year)	5 years 7 months 20 days
Options Outstanding, Aggregate Intrinsic Value	$ 0	$ 0
Options Vested and expected to vest, Aggregate Intrinsic Value	0
Options Exercisable, Aggregate Intrinsic Value	$ 0

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Note 8 - Equity Incentive Plans - Share-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Share-based compensation expense	$ 252	$ 103	$ 946	$ 1,208
Research and Development Expense [Member]
Share-based compensation expense	63	26	174	349
General and Administrative Expense [Member]
Share-based compensation expense	$ 189	$ 77	$ 772	$ 859

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Note 9 - Collaborations and License Agreements (Details Textual)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2022 USD ($) Agreement	Sep. 30, 2021 USD ($)	Sep. 30, 2022 USD ($) Agreement	Sep. 30, 2021 USD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2021 USD ($)
Collaborations and License Agreements Upfront Fee					$ 1,000,000.0
Royalty Expense					$ 6,750,000
Milestone Payments	$ 0	$ 0	$ 0	$ 0
License Agreements with the Regents of the University of California [Member]
Number of License Agreements | Agreement	3		3
Royalty Rate, Portion of Sublicense Income to Be Paid, Percentage of One-third of Upfront Payment and Milestone Payment Received	30.00%		30.00%
Accrued Royalties, Current	$ 40,000,000		$ 40,000,000			$ 81,000,000

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Note 10 - Commitments and Contingencies (Details Textual)				3 Months Ended		9 Months Ended
	Jun. 01, 2022 USD ($)	May 24, 2022	May 09, 2022	Sep. 30, 2022 USD ($)	Sep. 30, 2021 USD ($)	Sep. 30, 2022 USD ($)	Sep. 30, 2021 USD ($)	Sep. 09, 2022	May 12, 2022 ft²	Dec. 31, 2021 USD ($)
Loss Contingencies [Line Items]
Operating Lease, Right-of-Use Asset				$ 324,000		$ 324,000				$ 109,000
Operating Lease, Liability, Current				101,000		101,000				112,000
Operating Lease, Liability, Noncurrent				239,000		239,000				0
Restructuring Costs				410,000	$ 0	410,000	$ 0
Accrued severance and benefits				392,000		392,000				0
Imputed interest				55,000		55,000
Accrued Liabilities [Member]
Loss Contingencies [Line Items]
Accrued severance and benefits				392,000		392,000
Restructuring Costs [Member]
Loss Contingencies [Line Items]
Restructuring Costs				410,000		410,000
Cost Reduction Plan [Member]
Loss Contingencies [Line Items]
Reduction In Work Force								20.00%
Insurance Financing Arrangement [Member]
Loss Contingencies [Line Items]
Line of Credit Facility, Interest Rate During Period		6.92%	3.82%
Line of Credit Facility, Expiration Period		10 months	9 months
Remaining balance under insurance financing arrangements				400,000		400,000				$ 100,000
Base Rate [Member]
Loss Contingencies [Line Items]
Base Rent Rate Percentage	50.00%
Corporate Office [Member]
Loss Contingencies [Line Items]
Area of real estate property (Square Foot) | ft²									2,747
Lessee, operating lease, term of contract (Month)									39 months
Lessee, operating lease, renewal term (Month)									36 months
Lease monthly payment	$ 10,850
Operating lease, contractual monthly lease payments, yearly escalation rate	3.00%
Payments for (Proceeds from) Tenant Allowance	$ 28,000
Operating Lease, Right-of-Use Asset				324,000		324,000
Operating Lease, Liability, Current				101,000		101,000
Operating Lease, Liability, Noncurrent				$ 239,000		$ 239,000
Lessee, Operating Lease, Discount Rate				10.75%		10.75%
Lessee, Operating Lease, Remaining Lease Term				2 years 10 months 24 days		2 years 10 months 24 days
Operating Lease, Expense				$ 49,000		$ 157,000
Imputed interest				55,000		55,000
Total remaining future minimum lease payments				$ 395,000		$ 395,000

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Note 10 - Commitments and Contingencies - Schedule of Maturities of the Company's operating lease liabilities (Details) $ in Thousands	Sep. 30, 2022 USD ($)
Commitments and Contingencies Disclosure [Abstract]
2022 (remaining)	$ 43
2023	133
2024	137
2025	82
Total operating lease payments	395
Less: imputed interest	(55)
Total operating lease obligations	$ 340

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Note 11 - Related Party Transactions (Details Textual) - USD ($)	Sep. 30, 2022	Dec. 31, 2021	Aug. 19, 2021
Related Party Transactions [Abstract]
Warrants to purchase common stock			377,474
Warrants exercise price			$ 3.45
Warrants,expiration date	Aug. 26, 2026
Due to related parties, total	$ 111,250	$ 110,000