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 March 31, 2023

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 2A 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 May 8, 2023, there were 6,696,982 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 Stockholders’ Equity (Deficit)	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	30
Item 4.	Controls and Procedures	30
PART II -	OTHER INFORMATION	32
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 3.	Defaults Upon Senior Securities	59
Item 4.	Mine Safety Disclosure	59
Item 5.	Other Information	59
Item 6.	Exhibits	59
SIGNATURES		65

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PART I

FINANCIAL INFORMATION

ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Palisade Bio, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except share and per share amounts)

	March 31,			December 31,
	2023			2022
ASSETS
Current assets:
Cash and cash equivalents	$	13,297		$	12,383
Accounts receivable		250			—
Prepaid expenses and other current assets		762			2,350
Total current assets		14,309			14,733
Restricted cash		26			26
Property and equipment, net		9			10
Right-of-use asset		275			300
Other noncurrent assets		643			694
Total assets	$	15,262		$	15,763
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	706		$	1,759
Accrued liabilities		309			574
Accrued compensation and benefits		191			486
Current portion of lease liability		109			105
Debt		—			88
Total current liabilities		1,315			3,012
Warrant liability		18			61
Lease liability, net of current portion		182			211
Total liabilities		1,515			3,284
Commitments and contingencies (Note 9)
Stockholders' equity:
Series A Convertible Preferred Stock, $0.01 par value, 7,000,000 shares authorized; 200,000 issued and outstanding at March 31, 2023 and December 31, 2022		2			2
Common stock, $0.01 par value; 280,000,000 shares authorized; 4,563,977 and 2,944,306 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively		46			30
Additional paid-in capital		125,229			121,637
Accumulated deficit		(111,530	)		(109,190	)
Total stockholders' equity		13,747			12,479
Total liabilities and stockholders' equity	$	15,262		$	15,763

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

Palisade Bio, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except share and per share amounts)

	Three Months Ended March 31,
	2023			2022
License revenue	$	250		$	—
Operating expenses:
Research and development		1,241			959
General and administrative		1,538			2,929
Total operating expenses		2,779			3,888
Loss from operations		(2,529	)		(3,888	)
Other income (expense):
Interest expense		—			(1	)
Other income		189			794
Loss on issuance of warrants		—			(1,110	)
Total other income (expense), net		189			(317	)
Net loss	$	(2,340	)	$	(4,205	)
Basic and diluted loss per common share*	$	(0.54	)	$	(12.96	)
Basic and diluted weighted average shares used in computing loss per common share*		4,315,526			324,473

(*) Basic and diluted loss per common share and basic and diluted weighted average share used in computing basic and diluted loss per common share for the three months ended March 31, 2022 have been adjusted to reflect the 1-for-50 reverse stock split effected on November 16, 2022.

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

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Palisade Bio, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(in thousands, except share amounts)

(Unaudited)

	Three Months Ended March 31, 2023
	Preferred Stock				Common Stock				Additional Paid-in Capital		Accumulated Deficit			Total Stockholders' Equity (Deficit)
	Shares		Amount		Shares		Amount
Balance, December 31, 2022		200,000	$	2		2,944,306	$	30	$	121,637	$	(109,190	)	$	12,479
Net loss		—		—		—		—		—		(2,340	)		(2,340	)
Stock-based compensation expense		—		—		—		—		93		—			93
Issuance of common stock upon warrant exercises		—		—		1,142,829		11		1,338		—			1,349
Issuance of common stock and warrants in January 2023 Offering, net of issuance costs of $507 (Note 6)		—		—		476,842		5		2,161		—			2,166
Balance, March 31, 2023		200,000	$	2		4,563,977	$	46	$	125,229	$	(111,530	)	$	13,747

	Three Months Ended March 31, 2022
	Preferred Stock				Common Stock				Additional Paid-in Capital*		Accumulated Deficit			Total Stockholders' Equity (Deficit)
	Shares		Amount		Shares*		Amount*
Balance, December 31, 2021		200,000	$	2		284,780	$	3	$	102,002	$	(94,642	)	$	7,365
Net loss		—		—		—		—		—		(4,205	)		(4,205	)
Stock-based compensation expense		—		—		—		—		358		—			358
Issuance of common stock upon warrant exercises		—		—		79,886		1		1,273		—			1,274
Balance, March 31, 2022		200,000	$	2		364,666	$	4	$	103,633	$	(98,847	)	$	4,792

(*) Adjusted to reflect the 1-for-50 reverse stock split effected on November 16, 2022.

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

Palisade Bio, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

	Three Months Ended March 31,
	2023			2022
Net loss	$	(2,340	)	$	(4,205	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1			1
Noncash lease expense		25			45
Loss on issuance of warrants		—			1,110
Change in fair value of warrant liabilities		(43	)		(793	)
Stock-based compensation		93			358
Changes in operating assets and liabilities:
Accounts receivable		(250	)		—
Prepaid and other assets and other noncurrent assets		278			265
Accounts payable and accrued liabilities		(970	)		(59	)
Accrued compensation		(295	)		(439	)
Operating lease liabilities		(25	)		(47	)
Net cash used in operating activities		(3,526	)		(3,764	)
Cash flows from financing activities:
Payments on debt		(88	)		(87	)
Proceeds from issuance of common stock and warrants		2,231			—
Proceeds from the exercise of warrants		2,710			—
Payment of equity issuance costs		(413	)		—
Net cash provided by (used in) financing activities		4,440			(87	)
Net increase (decrease) in cash, cash equivalents and restricted cash		914			(3,851	)
Cash, cash equivalents and restricted cash, beginning of year		12,409			10,521
Cash, cash equivalents and restricted cash, end of period	$	13,323		$	6,670
Reconciliation of cash, cash equivalents and restricted cash to the balance sheets:
Cash and cash equivalents	$	13,297		$	6,644
Restricted cash		26			26
Total cash, cash equivalents and restricted cash	$	13,323		$	6,670
Supplemental disclosures of non-cash investing and financing activities:
Equity issuance costs included in accounts payable and accrued liabilities	$	12		$	82
Issuance of common stock for the cashless exercise of warrants	$	—		$	1,274
Fair value of warrants issued to placement agent	$	173		$	—
Cash receivable for exercises of warrants included in prepaid and other current assets	$	48		$	—

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

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 stock 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”). Immediately following the Merger, Seneca changed its name to “Palisade Bio, Inc.”

Unless the context otherwise requires, references to the “Company,” “Palisade,” “Palisade Bio,” “we,” “our” or “us” in this report refer to Palisade Bio, Inc. and its subsidiaries. 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 biopharmaceutical company focused on developing therapeutics that protect the integrity of the intestinal barrier. The Company's lead therapeutic candidate, LB1148, is a novel oral liquid formulation of the well-characterized digestive enzyme inhibitor tranexamic acid (“TXA”) that 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 postoperative adhesions between intra-abdominal tissues and accelerate the time to the return of normal gastrointestinal ("GI") function.

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 March 31, 2023, the Company had an accumulated deficit of $111.5 million and cash and cash equivalents of $13.3 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.

Based on the Company’s current working capital, anticipated operating expenses, and anticipated net operating losses, there is substantial doubt about the Company's 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 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. 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.

Historically, the Company has funded its operations primarily through a combination of debt and equity financings. 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 (Deficit) and Note 11, Subsequent Events, 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.

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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, 2022, which was filed with the SEC on March 22, 2023. Certain prior period amounts in the condensed consolidated financial statements and accompanying notes have been reclassified to conform to the current period’s presentation.

The accompanying condensed consolidated financial statements 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.

Reverse Stock Split

On November 15, 2022, the Company effected a 1-for-50 reverse stock split of its issued and outstanding common stock (the "Reverse Stock Split"). As a result of the Reverse Stock Split, each of the Company’s shareholders received one new share of common stock for every 50 shares such shareholder held immediately prior to the effective time of the Reverse Stock Split. The Reverse Stock Split affected all the Company’s issued and outstanding shares of common stock equally. The par value and authorized shares of the Company's common stock was not adjusted as a result of the Reverse Stock Split. The Reverse Split also affected the Company’s outstanding stock options, common stock warrants and other exercisable or convertible securities and resulted in the shares underlying such instruments being reduced and the exercise price being increased proportionately. Unless otherwise noted, all common stock shares, common stock per share data and shares of common stock underlying convertible preferred stock, stock options and common stock warrants included in these condensed consolidated financial statements, including the exercise price of such equity instruments, as applicable, have been retrospectively adjusted to reflect the effect of the Reverse Stock Split for all periods presented.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates, judgments, and assumptions that impact the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the balance sheet, and the reported amounts of expenses during the reporting period. The most significant estimates in the Company’s condensed consolidated financial statements relate to clinical trial accruals and its derivative financial 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.

6

Restricted Cash

As of March 31, 2023 and December 31, 2022, 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 (See Note 11, Subsequent Events) or shelf registration statement. As of March 31, 2023 and December 31, 2022, deferred equity issuance costs of $93,000 and $114,000, respectively, were included in prepaid and other assets in the condensed consolidated balance sheet. 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 and accounts receivable. 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. The Company's entire accounts receivable balance as of March 31, 2023 is with the Company co-development partner, Newsoara Biopharma Co., Ltd. (“Newsoara”) (See Note 8, Collaborations and License Agreements). Management believes it is not exposed to significant credit risk on the accounts receivable based on its relationship with Newsoara and Newsoara's history of timely payment of balances owed. In early May 2023, prior to the issuance of these condensed consolidated financial statements, Newsoara has paid the entire balance of the accounts receivable outstanding as of March 31, 2023.

Fair Value of Financial Instruments

The Company’s financial instruments consist principally of cash and cash equivalents, restricted cash, accounts receivable, other current receivables, accounts payable, accrued liabilities, debt, and liability-classified warrants. The carrying amounts of financial instruments such as cash equivalents, restricted cash, accounts receivable, other current receivables, 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 as of December 31, 2022 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. None of the Company’s non-financial assets or liabilities are recorded at fair value on a nonrecurring basis.

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.

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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. 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 reassessed at the end of each reporting period.

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

The Company accounts for its common stock warrants in accordance with ASC 480, Distinguishing Liabilities from Equity ("ASC 480") and ASC 815, Derivatives and Hedging (“ASC 815”). Based upon the provisions of ASC 480 and ASC 815, the Company accounts for common stock warrants as liabilities if the warrant requires net cash settlement or gives the holder the option of net cash settlement, or 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.

Leases

In accordance with ASC 842, Leases, the Company assesses contracts for lease arrangements at inception. Operating right-of-use (“ROU”) assets and liabilities are recognized at the lease commencement date equal to the present value of future lease payments using the implicit, if readily available, or incremental borrowing rate based on the information readily available at the commencement date. ROU assets include any lease payments as of commencement and initial direct costs but exclude any lease incentives. Lease and non-lease components are generally accounted for separately and the Company recognizes operating lease expense straight-line over the term of the lease.

Milestone Revenue

The Company uses the revenue recognition guidance established by ASC 606, Revenue From Contracts With Customers (“ASC 606”). When an agreement falls under the scope of other standards, such as ASC 808, Collaborative Arrangements, the Company will apply the recognition, measurement, presentation, and disclosure guidance in ASC 606 to the performance obligations in the agreements if those performance obligations are with a customer. The Company currently does not have any collaborative arrangements with counterparties that are also considered customers. For arrangements that include amounts to be paid to the Company upon the achievement of certain development milestones of technology licensed by the Company, the Company recognizes such license revenue using the most likely method. At the end of each reporting period, the Company re-evaluates the probability or achievement

8

of any potential milestones and any related constraints, and if necessary, adjusts its estimates of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenue in the period of adjustment. For the three months ended March 31, 2023, $0.3 million of license revenue related to milestones achieved on licensed technology was recognized as revenue and was reported in accounts receivable as of March 31, 2023, to which the Company has not recorded an allowance for estimated credit losses based on its relationship with the counterparty and the counterparty's history of timely payment of balances owed to the Company (see Note 8, Collaborations and License Agreements).

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 condensed 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 March 31, 2023 and December 31, 2022, the Company has accrued $94,000 and $184,000, 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 recognized in research and development expenses in the condensed consolidated statements of operations in the period incurred.

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.

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

The Company’s stock-based compensation expense generally includes time-based restricted stock units (“RSUs”) stock options, as well as performance-based RSUs (“PSUs”). The Company accounts for forfeitures as they occur for each type of award as a reduction of expense. Stock-based compensation expense related to time-based RSUs is based

9

on the market value of the underlying stock on the date of grant and the related expense is recognized ratably over the requisite service period, which is usually the vesting period. The Company estimates the fair value of employee and non-employee stock option grants using the Black-Scholes option pricing model. The determination of the fair value of stock-based payment awards on the date of grant using the Black-Scholes option pricing model is affected by the Company's stock price as well as assumptions, which include the expected term of the award, the expected stock price volatility, risk-free interest rate, and expected dividends over the expected term of the award. Stock-based compensation expense represents the cost of the estimated grant date fair value of employee and non-employee stock option grants recognized ratably over the requisite service period of the awards, which is usually the vesting period. For PSUs with vesting subject to market conditions, the fair value of the award is determined at grant date using the Monte Carlo simulation model, and expense is recognized ratably over the requisite service period regardless of whether or not the market condition is satisfied. The Monte Carlo simulation model considers a variety of potential future scenarios under the market condition vesting criteria, including but not limited to share prices for the Company and its peer companies in a selected market index.

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

Net Loss Per Common Share

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

As the Company was in a loss position for both periods, basic and diluted loss per common share for the three months ended March 31, 2023 and March 31, 2022 were calculated under the if-converted and treasury stock methods. For the three months ended March 31, 2023 and March 31, 2022, basic and diluted loss per common share were the same as all common stock equivalents were anti-dilutive for both periods.

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

	Three Months Ended March 31,
	2023			2022
Basic net loss per common share:
Net loss	$	(2,340	)	$	(4,205	)
Weighted average shares used in calculating basic loss per common share		4,315,526			324,473
Basic net loss per common share	$	(0.54	)	$	(12.96	)
Diluted net loss per common share:
Net loss	$	(2,340	)	$	(4,205	)
Weighted average shares used in calculating diluted loss per common share		4,315,526			324,473
Diluted net loss per common share	$	(0.54	)	$	(12.96	)

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

	March 31,
	2023		2022
Stock options		63,789		30,965
Restricted stock units		42,153		—
Warrants for common stock		1,604,421		106,921
Series A Convertible Preferred Stock		129		129
Total		1,710,492		138,015

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

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board ("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 adopted this standard as of January 1, 2023 and determined it did not have a material impact on its condensed consolidated financial statements and related disclosures for the three months ended March 31, 2023.

3. Balance Sheet Details

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

	March 31,		December 31,
	2023		2022
Prepaid insurance	$	355	$	581
Other receivables		78		1,438
Prepaid subscriptions and fees		193		157
Prepaid software licenses		37		54
Deferred equity issuance costs		93		114
Prepaid other		6		6
	$	762	$	2,350

Other receivables as of March 31, 2023 and December 31, 2022 includes a $47,600 receivable and $1.4 million receivable, respectively, for the cash exercise price of common stock purchase warrants that had been exercised but the cash had not yet been received by the Company as of each respective balance sheet date. The entire amount of these other receivables as of March 31, 2023 and December 31, 2022 were received in April 2023 and January 2023, respectively.

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

	March 31,		December 31,
	2023		2022
Prepaid insurance, less current portion	$	631	$	682
Other noncurrent assets		12		12
	$	643	$	694

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Accrued liabilities consisted of the following (in thousands):

	March 31,		December 31,
	2023		2022
Accrued accounts payable	$	73	$	69
Accrued clinical trial costs		94		184
Accrued director stipends		108		141
Accrued severance and benefits (Note 9)		5		180
Accrued other		29		—
	$	309	$	574

4. Common Stock Warrants

The Company’s outstanding common stock warrants that are classified as equity warrants are included as a component of stockholder’s equity (deficit) at the date of grant at the relative fair value at that grant date. Common stock warrants accounted for as liabilities in accordance with the authoritative accounting guidance are included in non-current liabilities. The Company had common stock warrants outstanding of 1,604,421 and 1,055,672 at March 31, 2023 and December 31, 2022, respectively. Of the Company's common stock warrants exercisable at March 31, 2023, (i) 278,162 common stock warrants have an exercise price of $2.38, (ii) 1,012,631 common stock warrants have an exercise price of $2.375, (iii) 63,158 common stock warrants have an exercise price of $2.9668 and (iv) the remaining 250,470 common stock warrants have a weighted-average exercise price of $104.24. Only the 278,162 common stock warrants outstanding that have an exercise price of $2.38 are subject to down round price reset provisions.

Liability-Classified Warrants

The Company accounts for certain of its warrants as liability-classified in accordance with ASC 480 and ASC 815.

Senior Secured Promissory Note Warrants

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, the Company agreed to issued warrants to purchase shares of the Company’s common stock (“Senior Secured Promissory Note Warrants”). The Senior Secured Promissory Note Warrants expire five years from the date of registration of the warrants, or August 10, 2026. As of March 31, 2023, the Senior Secured Promissory Note Warrants outstanding were exercisable for 17,177 shares of the Company’s common stock at an exercise price of $194.00.

May 2021 Warrants

On May 20, 2021, pursuant to the terms of the Securities Purchase Agreement, the Company issued to the Investor warrants to purchase shares of common stock (the “May 2021 Warrants”). All of the outstanding May 2021 Warrants were exercised by the investor in the fourth quarter of 2021 and the first quarter of 2022 in exchange for 26,186 shares and 79,886 shares of the Company's common stock, respectively. As of March 31, 2023, there are no May 2021 Warrants outstanding.

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July 2021 Warrants

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 consideration for the July 2021 Waiver Agreement, the Company issued the Investor additional warrants to purchase shares of the Company's common stock (the "July 2021 Warrants"). The July 2021 Warrants expire five years from the date of registration of the warrants, or August 19, 2026. As of March 31, 2023, the July 2021 Warrants outstanding were exercisable for 22,000 shares of the Company’s common stock at an exercise price of $181.50.

January 2022 Warrants

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 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 was 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 additional warrants to purchase 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 consolidated statements of operations for the three months ended March 31, 2022.

The January 2022 Warrants expire five and a half years from the date of issuance, or July 31, 2027. As of March 31, 2023, the January 2022 Warrants outstanding were exercisable for 45,000 shares of the Company’s common stock at an exercise price of $55.00.

Equity-Classified Warrants

The Company accounts for the majority of its warrants as equity-classified in accordance with ASC 480 and ASC 815. Equity-classified warrants are recorded in equity based on their relative fair value on the date of issuance.

January 2023 Registered Direct Offering and Private Placement Warrants

In connection with the January 2023 Offering (see Note 6, Stockholders' Equity (Deficit)), on January 4, 2023 the Company issued the (i) 37,000 pre-funded warrants to purchase shares of the Company's common stock at a purchase price of $2.3749, with such warrants having an exercise price of $0.0001 per share and a perpetual term (ii) 538,789 pre-funded warrants to purchase shares of the Company's common stock at a purchase price of $2.3749, with such warrants having an exercise price of $0.0001 per share and a perpetual term; (iii) 1,052,631 warrants to purchase shares of the Company's common stock at an exercise price of $2.375 per share and a term of five years, and (iv) 63,158 warrants to purchase shares of the Company's common stock to the offering placement agent at an exercise price of $2.9688 per share and a term of five years. All of the warrants issued in the January 2023 Offering were determined to be equity-classified. As of March 31, 2023, all of the pre-funded warrants issued with the January 2023 Offering have been exercised for shares of the Company's common stock.

The following table summarizes warrant activity during the three months ended March 31, 2023:

	Number of Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Warrants outstanding, December 31, 2022		1,055,672		$	26.48		3.32
Granted		1,691,578			1.59		4.76
Exercised		(1,142,829	)		1.18		1.40
Forfeited, expired or cancelled		—			—		—
Warrants outstanding, March 31, 2023		1,604,421			18.26		4.41

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5. Fair Value Measurements

The Company has issued warrants that are accounted for as liabilities based upon the guidance of 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 in the condensed consolidated statement of operations.

As of March 31, 2023, the fair value of the Senior Secured Promissory Note Warrants outstanding was determined using a Black-Scholes option pricing model valuation model to be insignificant due to the low market price of the Company's stock at the date of valuation relative to the exercise price of the Senior Secured Promissory Note Warrants outstanding.

As of March 31, 2023, the fair value of the July 2021 Warrants outstanding was determined using a Monte Carlo simulation model to be insignificant due to the low market price of the Company's stock at the date of valuation relative to the exercise price of the Senior Secured Promissory Note Warrants outstanding.

As of March 31, 2023, the fair value of the January 2022 Warrants in the amount of $15,200 was determined using a Monte Carlo simulation model that used the following assumptions: (i) a starting stock price of $3.35, (ii) certain key event dates such as expected capital financings, (iii) an exercise price per share of $55.00, (iv) an expected re-levered volatility of 81.3 percent; (v) an estimated risk-free rate of 3.67 percent, (vi) estimated contractual terms of approximately 4.33 years, and (vii) a zero percent dividend rate.

The following table summarizes the activity of the Company’s Level 3 warrant liabilities during the three months ended March 31, 2023 and 2022 (in thousands):

	Three Months Ended March 31,
Warrant Liabilities	2023			2022
Fair value at beginning of period	$	61		$	2,651
Initial fair value at the original issuance date		—			1,110
Change in fair value during the period		(43	)		(793	)
Fair value of liability classified warrants exercised		—			(1,274	)
Fair value at end of period	$	18		$	1,694

The change in fair value of warrant liabilities during the three months ended March 31, 2023 and 2022 is included in Other income at the condensed consolidated statements of operations.

Seneca had certain common stock purchase warrants that were originally issued in connection with the 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, with only the August 2017 warrants recorded as a liability as of March 31, 2023. 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 these warrants during the quarter ended June 30, 2021. The put right became inactive in July 2021 and the remaining warrants had an insignificant value as of March 31, 2023, which was determined using a Black-Scholes option pricing model.

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6. Stockholders’ Equity (Deficit)

Classes of Stock

Common Stock

As of March 31, 2023, the Company was authorized to issue 280,000,000 shares of $0.01 par value common stock. Each share of common stock entitles the holder thereof to one vote on each matter submitted to a vote at a meeting of stockholders.

On November 15, 2022, the Company effected the Reverse Stock Split. Accordingly, each of the Company’s shareholders received one new share of the Company's common stock for every 50 shares of the Company's common stock such shareholder held immediately prior to the effective time of the Reverse Stock Split. The Reverse Stock Split affected all of the Company’s issued and outstanding shares of the Company's common stock equally. The Reverse Stock Split also affected the Company’s outstanding stock options, warrants and other exercisable or convertible securities and resulted in the shares underlying such instruments being reduced and the exercise price being increased proportionately to the Reverse Stock Split ratio. No fractional shares were issued as a result of the Reverse Stock Split with any fractional shares that would have otherwise resulted from the Reverse Stock Split paid in cash, at an amount equal to the resulting fractional interest in one share of the Company's common stock to which the shareholder would otherwise be entitled, multiplied by the closing trading price of the Company's common stock on November 15, 2022. The amount of cash paid for fractional shares was insignificant.

As a result of the Reverse Stock Split, the number of issued and outstanding shares of the Company's common stock was adjusted from 77,080,169 shares to approximately 1,541,508 shares. Each share of the Company's common stock entitles the holder thereof to one vote on each matter submitted to a vote at a meeting of stockholders.

Preferred Stock

As of March 31, 2023, 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. As of March 31, 2023, the Company's Series A Convertible Preferred Stock issued in the amount of 200,000 preferred stock shares is convertible into 129 shares of common stock.

January 2023 Registered Direct Offering and Private Placement

On January 4, 2023, the Company announced that it had closed on a previously announced agreement with certain institutional and accredited investors pursuant to which it agreed to sell and issue, in a registered direct offering (the “January 2023 Registered Offering”), an aggregate of (i) 476,842 shares of the Company's common stock, par value $0.01 per share, at a purchase price per share of $2.375, and (ii) 37,000 pre-funded warrants to purchase shares of the Company's common stock at a purchase price of $2.3749, with such warrants having an exercise price of $0.0001 per share and a perpetual term. Additionally, in a concurrent private placement, the Company also agreed to sell and issue to such purchasers, an aggregate of (i) 538,789 pre-funded warrants to purchase shares of the Company's common stock at a purchase price of $2.3749, with such warrants having an exercise price of $0.0001 per share and a perpetual term; and (ii) 1,052,631 warrants to purchase shares of the Company's common stock at an exercise price of $2.375 per share and a term of five years (collectively, the “January 2023 Offering”). All the warrants are immediately exercisable from their date of issuance.

Pursuant to a placement agency agreement dated as of December 30, 2022, the Company engaged Ladenburg Thalmann & Co. Inc. (the “January 2023 Placement Agent”), to act as the exclusive placement agent in connection with the January 2023 Registered Offering and concurrent private placement transaction. The Company issued warrants to the January 2023 Placement Agent to purchase an aggregate of 63,158 shares of the Company's common stock (the "January 2023 Placement Agent Warrants"). The January 2023 Placement Agent Warrants have an exercise price of $2.9688 per share and a term of five years. The January 2023 Placement Agent Warrants are immediately exercisable from issuance. The fair value of the January 2023 Placement Agent Warrants was recognized by the Company as an equity issuance cost which reduced the additional paid-in capital recognized from the January 2023 Offering.

Gross cash proceeds from the January 2023 Offering were $2.5 million and net cash proceeds were approximately $2.2 million after deducting equity issuance costs of approximately $0.3 million, which excludes the grant date fair value of the January 2023 Placement Agent Warrants of approximately $0.2 million.

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7. 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. 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”). As of March 31, 2023, there were 70,672 shares of the Company's common stock authorized and available for issuance as equity-based awards under the 2021 EIP Plan.

Also in April 2021, the Company's 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. As of March 31, 2023, there were 34,603 shares of the Company's common stock authorized and available under the ESPP and there have been no shares issued under the ESPP.

In November 2021, the Company's compensation committee of the Board adopted the Palisade Bio, Inc. 2021 Inducement Award Plan (the "2021 Inducement Plan"). The 2021 Inducement Plan was adopted in order to grant equity-based awards to individuals not previously employed by the Company, as an inducement to join the Company. As of March 31, 2023, there were 6,574 shares of the Company's common stock authorized and available for issuance as equity-based awards under the 2021 Inducement Plan.

Stock Options

The Company believes that stock options align the interests of its employees 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 but generally not to exceed ten-years, and generally vest in equal proportions each quarter over three years. The Company's equity incentive plans allow for the issuance of both incentive stock options and non-statutory stock options.

The fair value of options granted in the three months ended March 31, 2023 and March 31, 2022 is estimated as of the grant date using the Black-Scholes option pricing model using the assumptions in the following table:

	Three Months Ended March 31,
	2023			2022
Weighted-average exercise price per share	$	2.36		$	48.67
Weighted-average expected term (years)		5.81			5.81
Weighted-average risk-free interest rate		3.76	%		1.85	%
Weighted-average expected dividend yield		—			—
Weighted-average volatility		69.54	%		73.77	%

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.

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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 three months ended March 31, 2023:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2022		43,658		$	311.74		6.08	$	—
Granted		30,620			2.36		9.88		—
Exercised		—			—		—		—
Forfeited, expired or cancelled		(10,489	)		242.03		—		—
Outstanding at March 31, 2023		63,789			174.70		8.70		35,644
Vested and expected to vest at March 31, 2023		63,789			174.70		8.70		35,644
Exercisable at March 31, 2023		22,383			463.61		6.97		—

The weighted-average grant-date fair value of options granted during the three months ended March 31, 2023 was $1.51 per share. The fair value of the options vested during the three months ended March 31, 2023 was approximately $0.1 million.

On February 6, 2023, the Company conditionally granted to certain members of management a total of 81,500 stock options that are conditional subject to shareholder approval at the Company's annual shareholder meeting to be held on June 8, 2023. Accordingly, the Company has not recognized any share-based compensation expense related to the conditional stock options as of March 31, 2023. The Company will begin to recognize share-based compensation expense related to the conditional stock options if and when shareholder approval is received.

Restricted Stock Units

During the three months ended March 31, 2023, the Company granted under the 2021 EIP Plan time-based restricted stock units ("RSUs") to employees. The RSUs generally vest proportionally each quarter over a term of one or three years.

The following table summarizes RSU activity and related information under the 2021 EIP Plan for the three months ended March 31, 2023:

	Number of Restricted Stock Units			Weighted Average Grant Date Fair Value Per Share		Weighted Average Remaining Contractual Life (Years)
Non-vested at December 31, 2022		—		$	—		—
Granted		44,632			3.25		—
Vested		—			—		—
Forfeited		(2,479	)		3.15		—
Non-vested at March 31, 2023		42,153			3.26		1.47

None of the RSUs granted the during three months ended March 31, 2023 vested during the three months ended March 31, 2023.

On February 6, 2023, the Company conditionally granted to certain members of management a total of 59,500 restricted stock units that are conditional and subject to shareholder approval at the Company's annual shareholder meeting to be held on June 8, 2023. Accordingly, the Company has not recognized any share-based compensation expense related to the conditional restricted stock units as of March 31, 2023. The Company will begin to recognize share-based compensation expense related to the conditional RSUs if and when shareholder approval is received.

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Performance Based Stock Units

On February 6, 2023, the Company conditionally granted to certain members of management a total of 68,700 performance-based stock units ("PSUs") which vest (a) 50% when the volume weighted average price of the Company’s common stock over 20 consecutive trading days is $3.20 or greater, and (b) 50% when such volume weighted average price of the Company’s common stock over 20 consecutive trading days is $4.25 or greater. The PSUs are conditional subject to shareholder approval at the Company's annual shareholder meeting to be held on June 8, 2023. Accordingly, the Company has not recognized any share-based compensation expense related to the conditional PSUs as of March 31, 2023. The Company will begin to recognize share-based compensation expense related to the conditional PSUs if and when shareholder approval is received.

Share-Based Compensation Expense

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

	Three Months Ended March 31,
	2023		2022
Research and development expense	$	49	$	52
General and administrative expense		44		306
Total	$	93	$	358

As of March 31, 2023, the unrecognized compensation cost related to outstanding options was $0.5 million, which is expected to be recognized over a weighted-average period of approximately 1.84 years and the unrecognized compensation cost related to outstanding RSUs was $0.1 million which is expected to be recognized over a weighted average period of approximately 1.47 years.

8. Collaborations and License Agreements

Co-Development and Distribution Agreement with Newsoara

LBS has entered into a co-development and distribution agreement with 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 development 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.

During the three months ended March 31, 2023, the Company recognized license revenue of $0.3 million earned upon Newsoara's achievement of a development milestone under the Co-Development Agreement during the period. Related to this, the Company has recognized $0.3 million in accounts receivable as of March 31, 2023, to which the Company has not recorded an allowance for estimated credit losses based on its relationship with Newsoara and Newsoara's history of timely payment of balances owed. In early May 2023, prior to the issuance of these condensed

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consolidated financial statements, Newsoara has paid the entire balance of the accounts receivable outstanding as of March 31, 2023. During the three months ended March 31, 2022, 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. The Regents are entitled to certain development and sales milestones.

In conjunction with the Co-Development Agreement with Newsoara, the Company is obligated to pay the Regents a portion of the sublicense revenue ranging from 30 percent to 35 percent of one-third of the upfront payment and milestone payments received. As of March 31, 2023 and December 31, 2022 sublicensing payables of approximately $36,000 and $13,000 respectively, were included in accounts payable.

9. 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 March 31, 2023, the Company recognized an operating right-of-use asset related to the Corporate Office Lease in the amount of $275,000 and a current and noncurrent operating lease liability related to the Corporate Office Lease of $109,000 and $182,000, respectively. As of March 31, 2023, the total remaining future minimum lease payments associated with the Corporate Office Lease of approximately $291,000, less imputed interest of $38,000 calculated using a discount rate of 10.75%, will be paid over the remaining lease term of approximately 2.4 years.

Maturities of the Company's operating lease liabilities as of March 31, 2023 are as follows:

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Year ending December 31,
2023 (remaining)	$	100
2024		136
2025		93
Total operating lease payments		329
Less: imputed interest		(38	)
Total operating lease obligations	$	291

The Company recognized operating lease expense associated with its Corporate Office Lease and its predecessor corporate headquarters lease of approximately $32,000 and $49,000 in the three months ended March 31, 2023 and March 31, 2022, respectively.

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 March 31, 2023 and December 31, 2022, the aggregate remaining balance under the Company's insurance financing arrangements was zero 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 a reduction of approximately 20% in workforce to better align the Company’s resources on its clinical studies, including its lead asset, LB1148.

As of March 31, 2023 and December 31, 2022, the Company recognized accrued liabilities on its condensed consolidated balance sheets in the amount of approximately $5,000 and $180,000, respectively, related to severance and benefits owed pursuant to employment agreements and the execution of severance and release agreements associated with the restructuring. The Company made cash payments of approximately $175,000 in the three months ended March 31, 2023 related to the employee severance and benefits and expects to make remaining cash payments of $5,000 in the three months ending June 30, 2023. The Company recognized no restructuring expense related to the cost-reduction plan in the three months ended March 31, 2023 and 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 March 31, 2023, which will have, individually or in 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.

10. 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 7,549 shares of the Company's common stock at a price of $172.50 per share, subject to certain

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adjustments (the "August 2021 Warrants"), all of which are outstanding as of March 31, 2023. 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 $107,500 and $141,250 as of March 31, 2023, and December 31, 2022, respectively.

Separation agreement with former Chief Executive Officer

On October 11, 2022, the Company entered into a separation agreement with its former Chief Executive Officer whereby the parties agreed to a mutual release of claims. Subsequent to paying an aggregate of $22,000 pursuant to the terms of the separation agreement, the Company determined that it is not probable that any additional compensation would be due to the former Chief Executive Officer and therefore, the Company has not recognized any accrual related to compensation or benefits owed pursuant to the separation agreement as of March 31, 2023.

11. Subsequent Events

April 2023 Offering

On April 3, 2023, the Company entered into securities purchase agreements (the “Securities Purchase Agreement”) with certain institutional and accredited investors pursuant to which the Company agreed to sell and issue, in a registered direct offering (the “April 2023 Registered Offering”), an aggregate of 756,317 shares of the Company's common stock, at a purchase price per share of $2.64. Additionally, in a concurrent private placement, the Company also agreed to sell and issue to such purchasers, an aggregate of (i) 455,242 unregistered shares of the Company's common stock, at a purchase price per share of $2.64, (ii) 1,061,164 prefunded warrants to purchase shares of the Company's common stock at a purchase price of 2.6399, with such warrants having an exercise price of $0.0001 per share and a perpetual term; and (iii) 2,272,723 common stock warrants to purchase shares of the Company's common stock at an exercise price of $2.64 per share and a term of five years from the date of issuance (the “Private Offering”) (collectively, April 2023 Registered Offering and Private Offering are referred to as the “April 2023 Offering”). All of the warrants issued in the Private Offering are immediately exercisable from their date of issuance.

Pursuant to a placement agency agreement dated as of April 3, 2023, the Company engaged Ladenburg Thalmann & Co. Inc. (the “April 2023 Placement Agent”), to act as the exclusive placement agent in connection with the April 2023 Offering. The Company issued warrants to the April 2023 Placement Agent to purchase an aggregate of 136,363 shares of the Company's common stock (the "April 2023 Offering Placement Agent Warrants"). The April 2023 Offering Placement Agent Warrants have an exercise price of $3.30 per share and a term of five years and are immediately exercisable from issuance.

Gross cash proceeds from the April 2023 Offering were $6.0 million and net cash proceeds are approximately $5.4 million after deducting cash equity issuance costs of approximately $0.6 million.

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

Statements in this Quarterly Report on Form 10-Q that are not strictly historical are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements relate to future events or to our future operating or financial performance and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. You can identify these forward-looking statements because they involve 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") 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 on Form 10-Q, unless the context otherwise requires, “Palisade,” “Palisade Bio,” “the Company,” “we,” “us,” and “our” or similar designations in this report refer to Palisade Bio, Inc., a Delaware Corporation, and its subsidiaries. In addition, references to “Seneca” and “Seneca Biopharma, Inc.” are to the Registrant prior to the completion of the Merger. 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 “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 (March 31, 2023), unless another date is specified.

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 following the Merger, Seneca changed its name to “Palisade Bio, Inc.”

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 months ended March 31, 2023 and 2022.

•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 biopharmaceutical company focused on developing therapeutics that protect the integrity of the intestinal barrier. The Company utilizes over three decades of research and established science that links the role of intestinal barrier biology with human disease to advance novel therapeutics that target and improve the integrity of the intestinal barrier.

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 gastrointestinal (“GI”) tract into the peritoneal cavity that can damage tissues and promote inflammation, causing a broad array of acute and chronic conditions. The Company's goal is to be an industry leader in developing therapies to prevent or treat conditions resulting from intestinal barrier dysfunction and to improve the lives of patients suffering from such conditions.

The Company's lead therapeutic candidate, LB1148, is a novel oral liquid formulation of the well-characterized digestive enzyme inhibitor tranexamic acid (“TXA”) that 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 postoperative adhesions between intra-abdominal tissues and 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. The Company's strategy is to maintain a capital efficient organization focused on pursuing the approval of LB1148 for the reduction of postoperative adhesions following major surgeries. As part of this strategy, the Company is exploring possible indication expansion, partnering, and out-licensing opportunities and, if advantageous opportunities arise, in-licensing and partnering of other product candidates.

Clinical and Regulatory Update

Prevention of Postoperative Abdominal Adhesions: GI Surgery

Status of the U.S. Phase 2 Adhesions Study

In December 2022, the Company concluded enrollment of a randomized, double-blind, placebo-controlled, Phase 2 clinical trial of LB1148 in patients undergoing elective bowel resection surgery in the United States to evaluate if patients treated with LB1148 experience fewer postoperative intra-abdominal adhesions compared to placebo treated patients. The Company enrolled a total of 35 of the planned 70 patients in this study. Of the patients enrolled, as of May 10, 2023, 31 patients had completed a first surgery, and 22 patients had completed a second surgery, which is the primary endpoint for data under the current study protocol. The Company believes that the data collected to date is sufficient for its evaluation purposes, including an evaluation of its risk profile, and for such reason, the Company voluntarily ceased enrollment in the trial. In the second quarter of 2023, the Company expects to report topline data from the patients that completed the second surgery.

The Company has initiated a dose-optimization study for all indications to determine if a different dosing protocol in healthy volunteers would improve the risk profile of LB1148 while simultaneously providing efficacy. This study, which recently enrolled its first patient, is anticipated to generate pharmacokinetic and pharmacodynamic data across multiple doses in patients.

Postoperative Return of Bowel Function: GI Surgery

In March 2023, the Company’s development partner in China, Newsoara Biopharma Co. Ltd ("Newsoara"), enrolled its first patient in its Phase 3 clinical trial to evaluate LB1148 for accelerated return of bowel function in adult patients undergoing gastrointestinal surgery. The trial is being fully conducted and funded by Newsoara.

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

With regard to the Company's U.S Phase 3 return of bowel function study, as previously disclosed the Company continues to believe it is in its stakeholders’ best interests to pause enrollment in 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 Newsoara's Phase 2 data and their initiation of a Phase 3 study in China.

Recent Financings

In January 2023, the Company completed a registered direct offering and concurrent private placement for net cash proceeds of $2.2 million consisting of gross cash proceeds of $2.5 million less cash equity issuance costs of

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approximately $0.3 million. In April 2023, the Company completed a second registered direct offering and concurrent private placement for net cash proceeds of approximately $5.4 million consisting of gross cash proceeds of $6.0 million, less cash equity issuance costs of approximately $0.6 million.

The Company intends to use the net proceeds from these recent financings for working capital and general corporate purposes, including the development of the Company’s lead product candidate LB1148. With the additional net cash proceeds of approximately $5.4 million received subsequent to the end of the first quarter of 2023 as a result of the registered direct offering and concurrent private placement which closed on April 3, 2023, combined with the Company's cash and cash equivalents balance of $13.3 million as of March 31, 2023, the Company believes it has sufficient cash to fund its currently planned operations and clinical programs through the end of 2024.

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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. In the three months ended March 31, 2023, the Company recognized licensing revenue of $0.3 million from the co-development and distribution agreement with Newsoara, a joint venture established with Biolead Medical Technology Limited, as amended, (the “Co-Development Agreement”).

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.

General and Administrative Expenses

General and administrative expenses consist primarily of salary and employee-related costs and benefits, professional fees for legal, intellectual property, investor and public relations, accounting and audit services, insurance costs, director's fees and stipends, and general corporate expenses.

Going Concern

The Company believes it has sufficient cash to fund its currently planned operations and clinical programs through the end of 2024. Notwithstanding, the Company’s management has evaluated all conditions and events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern within one year after the date that the financial statements are issued, including: (i) the probability that significant changes to the Company’s anticipated level of operations, due to factors that are within or outside of the Company’s control, would cause the Company’s available cash as of the date of this filing to not be sufficient to fund its anticipated level of operations for the next 12 months; and (ii) uncertainties around the ultimate timing and cost of the Company’s ongoing clinical trials. 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.

Reverse Stock Split

On November 15, 2022, the Company effected a 1-for-50 reverse stock split of its issued and outstanding common stock (the "Reverse Stock Split"). As a result of the Reverse Stock Split, each of the Company’s shareholders received one new share of common stock for every 50 shares such shareholder held immediately prior to the effective time of the Reverse Stock Split. The Reverse Stock Split affected all the Company’s issued and outstanding shares of common stock equally. The par value and authorized shares of the Company's common stock was not adjusted as a result of the

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Reverse Stock Split. The Reverse Split also affected the Company’s outstanding stock options, common stock warrants and other exercisable or convertible securities and resulted in the shares underlying such instruments being reduced and the exercise price being increased proportionately. Unless otherwise noted, all common stock shares, common stock per share data and shares of common stock underlying convertible preferred stock, stock options and common stock warrants included in these condensed consolidated financial statements, including the exercise price of such equity instruments, as applicable, have been retrospectively adjusted to reflect the effect of the Reverse Stock Split for all periods presented.

Results of Operations

Comparison of the three months ended March 31, 2023 and 2022

The following table summarizes the Company's results of operations for the three months ended March 31, 2023 and 2022 (in thousands):

	Three Months Ended March 31,						Change
	2023			2022			$			%
License revenue	$	250		$	—		$	250		n/a
Operating expenses
Research and development		1,241			959			282			29	%
General and administrative		1,538			2,929			(1,391	)		(47	)%
Total operating expenses		2,779			3,888			(1,109	)		(29	)%
Loss from operations		(2,529	)		(3,888	)		1,359			(35	)%
Other income (expense):
Interest expense		—			(1	)		1		n/a
Other income		189			794			(605	)		(76	)%
Loss on issuance of warrants		—			(1,110	)		1,110		n/a
Total other income (expense), net		189			(317	)		506			(160	)%
Net loss	$	(2,340	)	$	(4,205	)	$	1,865			(44	)%

License revenue

During the three months ended March 31, 2023, the Company recognized license revenue of $0.3 million earned upon Newsoara's achievement of a development milestone under Co-Development Agreement. During the three months ended March 31, 2022, there were no milestone payments earned from Newsoara under the Co-Development Agreement.

Research and Development Expenses

The 29% increase in research and development expenses from $1.0 million for the three months ended March 31, 2022 to $1.2 million for the three months ended March 31, 2023 is attributable to the Company's increased clinical trial activity related to the development of its lead therapeutic candidate, LB1148, as compared to the first quarter of last year. In December 2022, the Company concluded enrollment in its Phase 2 clinical trial in patients undergoing elective bowel resection surgery in the United States to evaluate if patients treated with LB1148 experience fewer postoperative intra-abdominal adhesions compared to placebo treated patients. The Company expects topline data from this study in the second quarter of 2023. In addition, the Company has initiated a dose-optimization study for all indications to determine if a different dosing protocol in healthy volunteers would improve the risk profile of LB1148 while simultaneously providing efficacy, with the first patient in this study being recently enrolled. As a result of the Company's increase in clinical trial activity related to these studies, research and development employee compensation costs increased in the three months ended March 31, 2023 compared to the three months ended March 31, 2022 by approximately $0.4 million primarily due to increased year-over-year headcount, and a $0.1 million increase in clinical trial vendor costs, investigator site fees and translational research costs. Partially offsetting these increases in the three months ended March 31, 2023 compared to the three months ended March 31, 2022 was a decrease in regulatory activities of $0.1 million, a decrease in consultant and contract labor of $0.1 million, and a decrease in drug manufacturing-related costs of $0.1 million.

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General and Administrative Expenses

General and administrative expenses decreased by approximately $1.4 million, or 47%, from $2.9 million for the three months ended March 31, 2022 to $1.5 million for the three months ended March 31, 2023, primarily as a result of cost-saving opportunities implemented by the Company in the third and fourth quarters of 2022, including those associated with the cost-reduction plan announced on September 9, 2022. Compared to the three months ended March 31, 2022, general and administrative employee compensation costs in the three months ended March 31, 2023 decreased by approximately $0.6 million primarily due to a $0.4 million decrease in salaries and benefits and a $0.3 million decrease in stock-based compensation expense. Other decreases in general and administrative expenses during the three months ended March 31, 2023 compared to the same quarter of last year include (i) a $0.5 million decrease in professional fees, investor relations fees and shareholder services costs, (ii) a $0.1 million decrease in consultants and contract labor costs, (iii) a $0.1 million decrease in employee recruiting costs, and (iv) a $0.1 million decrease in general operating costs.

Other income (expense)

Other income, net, for three months ended March 31, 2023 includes dividend income of approximately $147,000 from the Company's short-term investments of excess cash in money market funds with maturities of three months or less and a non-cash gain of approximately $43,000 associated with the revaluation of liability-classified warrants in the period.

Other expense, net, for three months ended March 31, 2022 includes a $0.8 million non-cash gain associated with the revaluation of liability-classified warrants in the period, which was more than offset by a $1.1 million non-cash loss on the issuance of warrants. On January 31, 2022, the Company issued 45,000 warrants to certain investors as consideration for the waiver of certain rights pursuant to the underlying warrant agreements (the "January 2022 Warrants"). As a result of this issuance, the Company recognized a $1.1 million non-cash loss upon the issuance of the January 2022 Warrants, which represents the fair value of the warrants on the date of issuance.

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 common stock 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.

Sources of Liquidity

Management expects the Company to incur substantial operating losses for the foreseeable future. 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 (i) general political or economic conditions, (ii) inflation, (iii) rising interest rates, (iv) ongoing supply chain disruptions, (v) the ongoing conflict in the Ukraine, (vi) limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry, (vii) 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 a materially adverse impact on its business, financial condition, and results of operations.

January 2023 Offering

On January 4, 2023, the Company announced that it had closed on a previously announced agreement with certain institutional and accredited investors pursuant to which it agreed to sell and issue, in a registered direct offering (the “January 2023 Registered Offering”), an aggregate of (i) 476,842 shares of the Company's common stock, par value $0.01 per share, at a purchase price per share of $2.375, and (ii) 37,000 pre-funded warrants to purchase shares of the Company's common stock at a purchase price of $2.3749, with such warrants having an exercise price of $0.0001 per share and a perpetual term. Additionally, in a concurrent private placement, the Company also agreed to sell and issue to such purchasers, an aggregate of (i) 538,789 pre-funded warrants to purchase shares of the Company's common stock at an exercise price of $0.0001 per share, and a perpetual term; and (ii) 1,052,631 warrants to purchase shares

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of the Company's common stock at an exercise price of $2.375 per share and a term of five years (collectively, the “January 2023 Offering”). All of the warrants are immediately exercisable from their date of issuance.

Gross cash proceeds from the January 2023 Offering were $2.5 million and net cash proceeds were approximately $2.2 million after deducting cash equity issuance costs of approximately $0.3 million.

April 2023 Offering

On April 3, 2023, the Company entered into securities purchase agreements (the “Securities Purchase Agreement”) with certain institutional and accredited investors pursuant to which the Company agreed to sell and issue, in a registered direct offering (the “April 2023 Registered Offering”), an aggregate of 756,317 shares of the Company's common stock, at a purchase price per share of $2.64. Additionally, in a concurrent private placement, the Company also agreed to sell and issue to such purchasers, an aggregate of (i) 455,242 unregistered shares of the Company's common stock, (ii) 1,061,164 prefunded warrants to purchase shares of the Company's common stock at an exercise price of $0.0001 per share, with a perpetual term; and (iii) 2,272,723 common stock warrants to purchase shares of the Company's common stock at an exercise price of $2.64 per share and a term of five years (the “Private Offering”) (collectively, April 2023 Registered Offering and Private Offering are referred to as the “April 2023 Offering”). All of the warrants issued in the Private Offering are immediately exercisable from their date of issuance.

Gross cash proceeds from the April 2023 Offering were $6.0 million and net cash proceeds were $5.4 million after deducting cash equity issuance costs of approximately $0.6 million.

Warrant Exercises

During the three months ended March 31, 2023, the Company received gross cash proceeds of approximately $2.7 million from common stock warrant exercises, approximately $1.4 million of which related to common stock warrant exercises on December 30, 2022 for which the related cash was not received by the Company until January 2023.

Cash Flows

As of March 31, 2023, the Company had $13.3 million in cash, cash equivalents and restricted cash. The following table shows a summary of the Company's cash flows for the three months ended March 31, 2023 and 2022 (in thousands):

	Three Months Ended March 31,
	2023			2022
Net cash used in operating activities	$	(3,526	)	$	(3,764	)
Net cash provided by (used in) financing activities		4,440			(87	)

Net Cash Used in Operating Activities

Cash used in operating activities was $3.5 million for the three months ended March 31, 2023 which reflects a $2.3 million net loss adjusted for $1.3 million of net cash outflows related to changes in operating assets and liabilities and certain non-cash items impacting the net loss, consisting primarily of a $0.1 million non-cash expense recognized for stock-based compensation. The net cash outflow from operating assets and liabilities was primarily due the recording of a $0.3 million accounts receivable for license revenue recognized in the quarter and a $1.0 million cash outflow for accounts payable and accrued liabilities due to the timing of payments.

Cash used in operating activities of $3.8 million for the three months ended March 31, 2022 reflects a $4.3 million loss for the quarter adjusted for $0.3 million of net cash outflows 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 $0.8 million gain recognized for the change in the fair market value of the warrant liabilities in the period, and (iii) a $0.4 million expense recognized for stock-based compensation.

Net Cash Provided by Financing Activities

For the three months ended March 31, 2023, cash provided by financing activities of $4.4 million was attributable to cash proceeds of $2.2 million from the January 2023 Offering and $2.7 million from the exercise of common stock purchase warrants, which includes the receipt in early January 2023 of a $1.4 million other receivable from warrant exercises on December 30, 2022, partially offset by payments of equity issuance costs of $0.4 million and payments made on the Company's insurance financing arrangements of $0.1 million.

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For the three months ended March 31, 2022, cash used in financing activities of less than $0.1 million was attributable to payments made on the Company's insurance financing arrangements of $0.1 million.

Contractual Obligations

Office Lease

On May 12, 2022, the Company entered 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 March 31, 2023, the total remaining future minimum lease payments associated with the Corporate Office Lease of approximately $291,000, less imputed interest of $38,000 calculated using a discount rate of 10.75%, will be paid over the remaining lease term of approximately 2.4 years.

Insurance Financing Arrangements

As of March 31, 2023, the Company had no outstanding debt under any existing financing arrangements at that time.

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. With the additional net cash proceeds of approximately $5.4 million received subsequent to the end of the first quarter of 2023 from the April 2023 Offering, combined with the Company's cash and cash equivalents balance of $13.3 million as of March 31, 2023, the Company believes it has sufficient cash to fund its currently planned operations and clinical programs through the end of 2024. Notwithstanding, should the Company’s anticipated level of operations significantly change, or the timing and cost of ongoing clinical trials significantly change, the Company may require additional financing sooner than the end of 2024. Further, beyond 2024, the Company will require additional financing 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.

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 March 31, 2023, 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 and derivative financial instruments. The Company believes there have been no significant changes in its critical accounting policies and significant judgements and estimates since those disclosed in its most recently filed Form 10-K.

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Recently Adopted Accounting Pronouncements

See Note 2 to the notes to the condensed consolidated financial statements for the quarter ended March 31, 2023, included elsewhere in this Quarterly Report on Form 10-Q.

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 Interim Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2023. Based upon the evaluation, our Interim Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2023, 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 Interim Chief Executive Officer and Chief Financial Officer, have concluded that, notwithstanding the identified material weakness in our internal control over financial reporting, the condensed consolidated 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 previously disclosed, during the quarter ended June 30, 2021, the Company identified a material weakness in our internal controls 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.

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 March 31, 2023. The material weakness continues to be present as of March 31, 2023.

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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 weakness.

(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 implemented new accounting and finance management software effective July 1, 2022, which is intended to eliminate some of the existing deficiencies in the Company's internal control environment. The 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 its 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 is in the process of implementing additional key internal controls designed to address the potential risks identified in its key business processes.

(vi)The Company engaged a third-party service provider to assist with the development, implementation and testing of its information technology general computer controls.

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 weakness 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.

Changes in Internal Control Over Financial Reporting

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 March 31, 2023 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

RISK FACTOR SUMMARY

We face many risks and uncertainties, as more fully described in this Quarterly Report on Form 10-Q and as disclosed in the Company's most recently filed Annual Report on Form 10-K, 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 LB1148.

•There are no U.S. Food and Drug Administration (“FDA”) approved therapies for LB1148’s lead indication which makes it difficult to predict the timing, costs and regulatory approval path of LB1148.

•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 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.

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

•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 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.

•The Company’s product candidates may cause undesirable side effects 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.

•The Company may 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.

•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.

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

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

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

•The Company's common stock could be delisted from the Nasdaq Capital Market if the Company is unable to maintain compliance with Nasdaq's continued listing standards.

•If the Company is unable to successfully retain and integrate a new management team, the Company's business 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 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’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.

•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.

•The Company has expressed substantial doubt about its 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 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 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 the Company's common stock for existing stockholders.

•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 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 COVID-19 pandemic, or a similar pandemic, epidemic, or outbreak of an infectious disease, may materially and adversely affect the Company's business and its financial results and could cause disruptions to the development of the Company's product candidates.

•The Company's 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.

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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 depends on the successful development, regulatory approval and commercialization of LB1148, as well as the Company's 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:

•successful completion of required clinical trials, including those trials not yet initiated, which may be significantly slower or costlier than the Company currently anticipates;

•the Company's ability to develop trial designs and protocols;

•whether the FDA or similar foreign regulatory agencies will require the Company to conduct additional studies beyond those currently planned;

•approval by the FDA to commence the marketing of LB1148;

•the Company and third-party contractors, if applicable, achieving and maintaining compliance with their contractual obligations and with applicable regulatory requirements;

•the ability of the Company's contract manufacturers to manufacture sufficient supply of LB1148 to meet the required clinical trial and commercial supplies;

•the ability of the Company's contract manufacturers to remain in good standing with regulatory agencies and to develop, validate and maintain commercially viable manufacturing facilities and processes that are compliant with cGMP;

•the Company's ability to obtain favorable labeling for LB1148 through regulators that allows for successful commercialization;

•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;

•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 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. Such delays may result in increased costs and 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 make assurances that it will ever be able to generate sufficient revenue through the sale of LB1148, or any other future product candidates, if approved, to internally fund its business.

There are no FDA-approved therapies for LB1148’s lead indication which makes it difficult to predict the timing, costs and regulatory approval path of LB1148.

The Company's lead indication for LB1148 is the reduction or elimination of postoperative intra-abdominal adhesions. While there are multiple medical devices approved for the reduction or elimination of postoperative intra-abdominal adhesions, there are no approved drugs for such indication. The regulatory approval process for novel product

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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 an 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. Although it is not required to, the FDA may 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 it 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.

The Company’s inability to identify, qualify, and enroll patients in its clinical trials on a timely basis could result in the completion of the trials being delayed.

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;

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•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 subjects 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. As a result, there can be no assurances that the Company will be able to complete that clinical trial, if it chooses to resume the study, on either a timely basis, or at all.

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

Clinical development new drug 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 or future plan of operations, the Company may not have adequate capital to complete its current clinical trials or fund operations. 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 and provide for the Company's working capital needs. As a result, the Company may need to secure additional financing. 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 and/or curtail its operations.

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 prior preclinical and 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) have suffered significant setbacks in late-stage clinical trials after achieving positive results in early-stage development, and the 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 studies. 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

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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.

The Company’s product candidates may cause undesirable side effects 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. 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, including the FDA requiring the Company to recall the product, 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.

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.

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The Company may 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 may 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 be costly and 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.

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

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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. Reimbursement may impact the demand for, and the price of, any product for which the Company obtains marketing approval. 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.

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. 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.

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The Company’s product candidates, if approved, may 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 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. The inability of the Company’s products, if approved, to effectively compete with such products could adversely affect the Company’s results and operations.

Any adverse developments related to LB1148 that occur during the clinical trials being conducted by Newsoara could 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 with respect to Newsoara’s clinical trials related 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 and delay our ability to seek marketing approval. If the Company receives FDA approval for LB1148 and a new and serious safety issue is identified in connection with Newsoara’s clinical trials related to LB1148, the FDA and other regulatory authorities may withdraw their approval of the product or otherwise restrict the Company’s ability to market and sell LB1148. 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 and would adversely affect the Company’s prospects and business.

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 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 LB1148 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.

The Company's common stock could be delisted from the Nasdaq Capital Market if the Company is unable to maintain compliance with Nasdaq's continued listing standards.

The Company's common stock is listed on the Nasdaq Capital Market. There are a number of continued listing requirements that the Company must satisfy in order to maintain its listing on The Nasdaq Capital Market, including the requirement to maintain a minimum bid price of at least $1.00 (the “Bid Price Rule”). Although the Company is currently in compliance with the Bid Price Rule, the Company has been unable to comply with this rule in the past and for periods in 2022 the Company's continued listing on the Nasdaq Capital Market required the grant of a grace period from Nasdaq and the implementation of a 1-for-50 reverse stock split. If the Company fails to comply with the Bid Price Rule in the future, or any of the other continued listing requirements, there can be no assurance that the Company will be able to regain compliance. The delisting of the Company's common stock would likely adversely affect the market liquidity and market price of the Company's common stock and the Company's ability to obtain financing for the continuation of the Company operations and/or result in the loss of confidence by investors.

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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. On November 18, 2022 the Company announced the appointment of Herbert B. Slade, MD, FAAAAI as Chief Medical Officer of the Company. On February 8, 2023, the Company announced it had promoted Robert McRae to Chief Operating Officer. The Company's success depends largely on the development and execution of its business strategy by its senior management team. The Company currently has a limited executive team with limited experience of working together. Additionally, the loss of any members or key personnel would likely harm the Company's ability to implement its 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 that the Company is unable to retain or integrate its management team, its business, prospects, and operations 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 at all, the Company will be subject to continued regulatory review and compliance obligations. 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.

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.

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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. 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.

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.

Although the Company has product liability insurance coverage for its clinical trials, the 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 the Company 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

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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 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.

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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.

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 could adversely affect the Company and its operations.

At any time, the Company may decide to discontinue the development of, or temporarily pause 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 temporarily pauses or 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 which could have an adverse effect on the Company and its business.

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.

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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 may 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 identifying, 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. 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 or licenses 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.

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.

The Company may seek to avail itself of 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 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. 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.

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;

•manufacturing deviations from internal or regulatory specifications;

•quality incidents;

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•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.

The Company cannot provide assurance 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.

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 candidate, which could adversely affect the Company and its business.

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.

The Company expects to continue to depend on third-party contract suppliers and manufacturers. 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 for a period of one year following the issuance of this report. This determination was based on conditions and events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern within one year after the date that the financial statements are issued, including: (i) the probability that significant changes to the Company’s anticipated level of operations, due to factors that are within or outside of the Company’s control, would cause the Company’s available cash as of the date of this filing to not be sufficient to fund its anticipated level of operations for the next 12 months; and (ii) uncertainties around the ultimate timing and cost of the Company’s ongoing clinical trials. 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 consolidated 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.

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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.

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, although management concluded that this material weakness has been remediated in the year ended December 31, 2022.

If the Company's remaining material weakness, which management concluded is still present as of March 31, 2023, is 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.

Changing circumstances and market conditions, some of which may be beyond the Company's control, could impair our ability to access our existing cash and cash equivalents and investments and to timely pay key vendors and others.

Changing circumstances and market conditions, some of which may be beyond the Company's control, could impair its ability to access its existing cash and cash equivalents and investments and to timely pay key vendors and others. For example, on March 10, 2023, Silicon Valley Bank ("SVB") was placed into receivership with the Federal Deposit Insurance Corporation ("FDIC"), which resulted in all funds held at SVB being temporarily inaccessible by SVB’s customers. Although the Company does not have any funds at SVB, if other banks and financial institutions with whom the Company has banking relationships enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, the Company may be unable to access, and the Company may lose, some or all of its existing cash and cash equivalents to the extent those funds are not insured or otherwise protected by the FDIC. In addition, in such circumstances the Company might not be able to timely pay key vendors and others. The Company regularly maintain cash balances that are not insured or are in excess of the FDIC’s insurance limit. Any delay in the Company's ability to access its cash and cash equivalents (or the loss of some or all of such funds) or to timely pay key vendors and others could have a material adverse effect on the Company's operations and cause it to need to seek additional capital sooner than planned.

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

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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’ 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;

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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.

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.

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

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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 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.

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

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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 development 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 and licensed 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 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.

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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 and licenses 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.

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

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 capital to fund its operations and conduct the costly and time-consuming clinical 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

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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 Company raises additional capital through the sale of common stock or securities convertible or exchangeable into common stock, its stockholders' ownership percentage 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 COVID-19 pandemic, or a similar pandemic, epidemic, or outbreak of an infectious disease, may materially and adversely affect the Company's business and the Company's financial results and could cause a disruption to the development of the Company's product candidates.

Public health crises, such as pandemics or similar outbreaks, could adversely impact the Company's business. The impact of the COVID-19 pandemic and the efforts to mitigate it, resulted in and will likely continue to result in disruptions to the global economy, as well as businesses and capital markets around the world. The Company experienced delays in its development activities as a result of the COVID-19 pandemic, primarily due to temporary and partial shutdowns at certain of the Company's CROs and trial sites that have since resumed operations, and due to governmental responses to the pandemic. Additionally, the emergence of new variants, which could prove resistant to existing vaccines, could again result in major disruptions to businesses and markets worldwide. The extent to which the COVID-19 pandemic will continue to impact the Company's operations or those of its consultants and collaborators, will depend on future developments, including the global macroeconomic effects of the virus.

Global, market and economic conditions, including inflation, 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.

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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 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;

•issues in manufacturing LB1148 or future product candidates;

•the results of current and any future clinical trials of LB1148, including the Company's decision to pause or terminate any such trials;

•failure of the Company's current and future 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 personnel.

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.

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The Company takes 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, the Company qualifies as a smaller reporting company under SEC rules. As a smaller reporting company, the Company is 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 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. State NOL carryforward periods, expirations and limitations may differ from federal tax laws.

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.

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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.

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.

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, 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, 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 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.

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.

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Our 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 is entitled under its certificate of incorporation to issue up to 280,000,000 shares of common stock and 7,000,000 “blank check” shares of preferred stock. Shares of the Company’s blank check preferred stock provide its Board with broad authority to determine voting, dividend, conversion, and other rights. As of March 8, 2023, the Company has outstanding, common stock or securities convertible into common stock, totaling 4,503,977 shares. As a result, the Company is authorized to issue up to an additional 275,496,023 shares of common stock or common stock equivalents under its certificate of incorporation as amended. Additionally, pursuant to the initial issuance of (i) 1,000,000 shares of Series A 4.5% Convertible Preferred Stock, of which 200,000 shares are outstanding and (ii) 1,460 shares of Series B Convertible Preferred Stock, of which no shares are outstanding, the Company is authorized to issue up to an additional 6,800,000 shares of preferred stock. 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.

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 and management. Activist campaigns that contest or conflict with our strategic direction or seek changes in the composition of our Board 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 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 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

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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 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 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

Effective May 15, 2023, Robert McRae will transition from the Company’s Chief Operating Officer (“COO”) to an executive strategic consultant. Upon the transition, Mr. McRae will cease his duties and responsibilities as COO. In his capacity as a consultant, Mr. McRae will advise the Palisade team regarding clinical and business development, licensing, and investor relations. For his services, Mr. McRae will receive monthly compensation of $4,000. The initial term of his consultancy is until November 30, 2023, which can be extended by the mutual consent of the Company and Mr. McRae.

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).

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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).
3.5	Amendment to Amended and Restated Certificate of Incorporation of Palisade Bio, Inc., effective November 15, 2022 (Incorporated by reference to Exhibit 3.01(i) to the Registrant’s Current Report on Form 8-K, filed with the SEC on November 16, 2022).
4.1	Reference is made to Exhibits 3.1, 3.2 and 3.3.
4.2	Description of Securities (incorporated by reference to Exhibit 4.2 to the Registrant’s Form 10-K, filed with the SEC on March 17, 2022).
4.3	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).
4.4	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).
4.5	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
4.6	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).
4.7	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)
4.8	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)
4.9	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)
4.10	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)
4.11	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)
4.12	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)
4.13	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)
4.14	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)
4.15	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)
4.16	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)
4.17	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)

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4.18	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).
4.19	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).
4.20	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).
4.21†	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).
4.22	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).
4.23	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).
4.24	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).
4.25	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).
4.26	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).
4.27	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).
4.28	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).
4.29	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).
4.30	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).
4.31	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).
4.32	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).
4.33	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)
4.34	Form of Underwriter Warrant issued August 16, 2022 (Incorporated by reference to Exhibit 4.33 to the Registrant's Quarterly Report on Form 10-Q, filed with the SEC on November 14, 2022).
4.35	Form of Registered Prefunded Warrant issued in January 2023 Registered Offering (Incorporated by reference to Exhibit 4.01 to the Registrant’s Current Report on Form 8-K, filed with the SEC on January 4, 2023).
4.36	Form of Prefunded Warrant issued in January 2023 Private Placement (Incorporated by reference to Exhibit 4.02 to the Registrant’s Current Report on Form 8-K, filed with the SEC on January 4, 2023).
4.37	Form of Warrant issued in January 2023 Private Placement (Incorporated by reference to Exhibit 4.03 to the Registrant’s Current Report on Form 8-K, filed with the SEC on January 4, 2023).
4.38	Form of Placement Agent Warrant issued in January 2023 Private Placement (Incorporated by reference to Exhibit 4.04 to the Registrant’s Current Report on Form 8-K, filed with the SEC on January 4, 2023).
4.39	Form of Prefunded Warrant issued in April 2023 Private Placement (Incorporated by Reference to Exhibit 4.01 to the Registrant’s Current Report on Form 8-K, filed with the SEC on April 5, 2023).

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4.40	Form of Warrant issued in April 2023 Private Placement (Incorporated by Reference to Exhibit 4.02 to the Registrant’s Current Report on Form 8-K, filed with the SEC on April 5, 2023).
4.41	Form of Placement Agent Warrant issued in April 2023 Private Placement (Incorporated by reference to Exhibit 4.03 to the Registrant’s Current Report on Form 8-K filed with the SEC on April 5, 2023).
10.1#	Seneca Biopharma 2019 Equity Incentive Plan (Incorporated by reference to Appendix A to the Registrant’s Definitive Proxy Statement, originally filed with the SEC on April 29, 2019).
10.2#	Form of Restricted Option Grant from 2019 Equity Incentive Plan (Incorporated by reference to Exhibit 4.43 to the Registrant’s Registration Statement on Form S-1 (File No. 333-232273), originally filed with the SEC on June 21, 2019, originally filed with the SEC on June 21, 2019).
10.3#	License Agreement, by and between Leading BioSciences, Inc. and The Regents of the University of California, dated August 19, 2015, as amended on December 20, 2019 (Incorporated by reference to Exhibit 10.18 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).
10.4#	License Agreement, by and between Leading BioSciences, Inc. and The Regents of the University of California, dated April 1, 2020 (Incorporated by reference to Exhibit 10.19 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).
10.5#	License Agreement, by and between Palisade Bio, Inc. and The Regents of the University of California, dated July 6, 2021 (incorporated by reference to Exhibit 10.5 to the Registrant’s Form 10-K, filed with the SEC on March 17, 2022).
10.6#	Co-Development and Distribution Agreement, by and between Leading BioSciences, Inc. and Newsoara Biopharma Co., Ltd. (as successor-in-interest to Biolead Medical Technology Limited), dated February 17, 2018, as amended on November 27, 2018 (Incorporated by reference to Exhibit 10.20 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).
10.7	Form of Seneca Biopharma, Inc. Support Agreement, dated as of December 16, 2020, by and between Leading BioSciences, Inc. and each of the parties named in each agreement therein (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on December 21, 2020).
10.8	Form of Leading BioSciences, Inc. Support Agreement, dated as of December 16, 2020, by and between Seneca Biopharma, Inc. and each of the parties named in each agreement therein(Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, filed with the SEC on December 21, 2020).
10.9†	Securities Purchase Agreement, by and between Leading BioSciences, Inc. and the investor party thereto, dated December 16, 2020 (Incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K, filed with the SEC on December 21, 2020).
10.10†	Securities Purchase Agreement, by and among Seneca Biopharma, Inc., Leading BioSciences, Inc. and the investor party thereto, dated December 16, 2020 (Incorporated by reference to Exhibit 10.6 to the Registrant’s Current Report on Form 8-K, filed with the SEC on December 21, 2020).
10.11	Amendment Agreement to Securities Purchase Agreement by and among, the Company, Leading BioSciences, Inc. and Altium Growth Fund, LP, dated May 3, 2021 (Incorporated by reference to Exhibit 10.03 to the Registrant’s Quarterly Report on Form 10-Q, filed with the SEC on May 14, 2021).
10.12	Form of Separation Agreement with Seneca Biopharma, Inc. Executives (Incorporated by reference to Exhibit 10.01 to the Registrant’s Current Report on Form 8-K, filed with the SEC on March 18, 2021).
10.13†	Contingent Value Rights Agreement, dated as of April 27, 2021, by and among the Company, American Stock Transfer & Trust Company, LLC and Raul Silvestre (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on April 27, 2021).
10.14+	Form of Indemnification Agreement (incorporated by reference from Exhibit 10.03 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 18, 2018).
10.15+	Leading BioSciences, Inc. Amended and Restated 2013 Employee, Director and Consultant Equity Incentive Plan and Forms of Stock Option Grant Notice, Stock Option Agreement and Notice of Exercise of Stock Option thereunder (Incorporated by reference to Exhibit 10.24 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).

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10.16+	Palisade Bio, Inc. 2021 Equity Incentive Plan, as amended (Incorporated by reference to Exhibit 10.6 to the Registrant’s Current Report on Form 8-K, filed with the SEC on November 23, 2021).
10.17+	Form of Stock Option Grant Notice, Stock Option Agreement and Notice of Exercise under the Palisade Bio, Inc. 2021 Equity Incentive Plan (Incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K, filed with the SEC on November 23, 2021).
10.18+	Form of Non-Employee Director Stock Option Grant Notice, Stock Option Agreement and Notice of Exercise under the Palisade Bio, Inc. 2021 Equity Incentive Plan (Incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K, filed with the SEC on November 23, 2021).
10.19+	Palisade Bio, Inc. Employee Stock Purchase Plan (Incorporated by reference to Exhibit 4.30 to the Registrant’s Quarterly Report on Form 10-Q, filed with the SEC on August 23, 2021).
10.20+	Palisade Bio, Inc. 2021 Inducement Incentive Plan (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on November 23, 2021).
10.21+	Form of Restricted Stock Unit Grant Notice and Award Agreement under the Palisade Bio, Inc. 2021 Inducement Incentive Plan (Incorporated by reference to Exhibit 99.1 to the Registrant’s Registration Statement on Form S-8 (File No. 333-261196), filed with the SEC on November 19, 2021).
10.22+	Form of Stock Option Grant Notice and Award Agreement under the Palisade Bio, Inc. 2021 Inducement Incentive Plan (Incorporated by reference to Exhibit 99.2 to the Registrant’s Registration Statement on Form S-8 (File No. 333-261196), filed with the SEC on November 19, 2021).
10.23+	Non-Employee Director Compensation Policy (Incorporated by reference to Exhibit 10.35 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 22, 2023).
10.24+	Amended and Restated Executive Employment Agreement, by and between Leading BioSciences, Inc. and JD Finley, dated January 24, 2021(Incorporated by reference to Exhibit 10.23 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).
10.25+	Executive Employment Agreement, by and between Leading BioSciences, Inc. and Thomas Hallam, Ph.D., dated December 16, 2020 (Incorporated by reference to Exhibit 10.22 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).
10.26	Executive Employment Agreement, by and between Leading BioSciences, Inc. and Michael Dawson, M.D., dated December 16, 2020 (Incorporated by reference to Exhibit 10.21 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).
10.27†	Asset Transfer Agreement, by and between Alto Neuroscience, Inc. and Palisade Bio, Inc., dated October 18, 2021 (incorporated by reference to Exhibit 10.27 to the Registrant’s Form 10-K, filed with the SEC on March 17, 2022).
10.28	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).
10.29	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).
10.30	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).
10.31+	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).
10.32	Form of Securities Purchase Agreement dated December 30, 2022, by and among the Company and the purchasers named therein (Incorporated by Reference to Exhibit 10.01 to the Registrant’s Current report on Form 8-K, filed with the SEC on January 4, 2023).
10.33	Form of Registration Rights Agreement, dated December 30, 2022, by and among the Company and signatories named therein (Incorporated by reference to Exhibit 10.02 to the Registrant’s Current Report on Form 8-K, filed with the SEC on January 4, 2023).

63

10.34	Form of Placement Agency Agreement, dated December 30, 2022, by and between the Company and Ladenburg Thalmann & Co Inc. (Incorporated by reference to Exhibit 10.03 to the Registrant’s Current Report on Form 8-K, filed with the SEC on January 4, 2023).
10.35+	Form of First Amendment Consulting Agreement dated January 25, 2023 by and between Dr. Herbert Slade and the Company (Incorporated by reference to Exhibit 10.35 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 22, 2023).
10.36+	Form of Consulting Agreement dated April 7, 2023 by and between Dr. Herbert Slade and the Company. (Incorporated by reference to Exhibit 10.36 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 22, 2023).
10.37	Form of Securities Purchase Agreement dated April 3, 2023, by and among the Company and the purchasers named therein (Incorporated by Reference to Exhibit 10.01 to the Registrant’s Current Report on Form 8-K, filed with the SEC on April 5, 2023).
10.38	Form of Registration Rights Agreement dated April 3, 2023, by and among the Company and the signatories named therein (Incorporated by Reference to Exhibit 10.02 to the Registrant’s Current Report on Form 8-K, filed with the SEC on April 5, 2023).
10.39	Form of Placement Agency Agreement dated April 3, 2023, by and among the Company and Ladenburg Thalmann & Co Inc. (Incorporated by Reference to Exhibit 10.01 to the Registrant’s Current Report on Form 8-K, filed with the SEC on April 5, 2023).
19.1	Registrant’s Insider Trading Policy (Incorporated by reference to Exhibit 19.1 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 22, 2023).
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 portions of this exhibit (indicated by “[***]”) have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.

† 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.

64

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: May 11, 2023		/s/ J.D. Finley
		J.D. Finley, Interim Chief Executive Officer and Chief Financial Officer
		(Principal Executive Officer and Principal Financial Officer)

65

EX-31

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: May 11, 2023

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

EX-31

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: May 11, 2023

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

EX-32

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 March 31, 2023, 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: May 11, 2023

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

/s/ J.D. Finley

J.D. Finley

Interim Chief Executive Officer and

Chief Financial 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	3 Months Ended
	Mar. 31, 2023	May 08, 2023
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	Q1
Document Fiscal Year Focus	2023
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2023
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 2A
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		6,696,982

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 13,297,000	$ 12,383,000
Accounts Receivable	250,000	0
Prepaid expenses and other current assets	762,000	2,350,000
Total current assets	14,309,000	14,733,000
Restricted cash	26,000	26,000
Property and equipment, net	9,000	10,000
Right-of-use asset	275,000	300,000
Other noncurrent assets	643,000	694,000
Total assets	15,262,000	15,763,000
Current liabilities:
Accounts payable	706,000	1,759,000
Accrued liabilities	309,000	574,000
Accrued compensation and benefits	191,000	486,000
Current portion of lease liability	109,000	105,000
Debt	0	88,000
Total current liabilities	1,315,000	3,012,000
Warrant liability	18,000	61,000
Lease liability, net of current portion	182,000	211,000
Total liabilities	1,515,000	3,284,000
Commitments and contingencies (Note11)
Stockholders' equity:
Common stock, $0.01 par value; 280,000,000 shares authorized; 4,563,977 and 2,944,306 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively	46,000	30,000
Additional paid-in capital	125,229,000	121,637,000
Accumulated deficit	(111,530,000)	(109,190,000)
Total stockholders' equity	13,747,000	12,479,000
Total liabilities and stockholders' equity	15,262,000	15,763,000
Series A Preferred Stock [Member]
Stockholders' equity:
Series A convertible Preferred Stock, $0.01 par value, 7,000,000 shares authorized; 200,000 issued and outstanding at March 31, 2023 and December 31, 2022	$ 2,000	$ 2,000

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Mar. 31, 2023	Dec. 31, 2022
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	280,000,000	280,000,000
Common stock, shares issued (in shares)	4,563,977	2,944,306
Common stock, shares outstanding (in shares)	4,563,977	2,944,306
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
Common stock, shares outstanding (in shares)	200,000

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2023	Mar. 31, 2022
Operating expenses:
License revenue		$ 250	$ 0
Research and development		1,241	959
General and administrative		1,538	2,929
Total operating expenses		2,779	3,888
Loss from operations		(2,529)	(3,888)
Other income (expense):
Interest expense		0	(1)
Other income		189	794
Loss on issuance of warrants		0	(1,110)
Total other income (expense), net		189	(317)
Net loss		$ (2,340)	$ (4,205)
(Loss) income per common share:
Basic loss per common share	[1]	$ (0.54)	$ (12.96)
Diluted loss per common share	[1]	$ (0.54)	$ (12.96)
Weighted average shares used in computing (loss) income per common share:
Basic weighted average shares used in computing loss per common share	[1]	4,315,526	324,473
Diluted weighted average shares used in computing loss per common share	[1]	4,315,526	324,473

[1] (*) Basic and diluted loss per common share and basic and diluted weighted average share used in computing basic and diluted loss per common share for the three months ended March 31, 2022 have been adjusted to reflect the 1-for-50 reverse stock split effected on November 16, 2022.

XML

Condensed Consolidated Statements Convertible Preferred Stock and Stockholders' Equity (Deficit) (Unaudited) - USD ($) $ in Thousands	Total	Preferred Stock Member	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Deficit [Member]
Balance (in shares) at Dec. 31, 2021		200,000	284,780
Balance at Dec. 31, 2021	$ 7,365	$ 2	$ 3	$ 102,002	$ (94,642)
Net loss	(4,205)				(4,205)
Stock-based compensation expense	358			358
Issuance of common stock upon warrant exercises (in shares)			79,886
Issuance of common stock upon warrant exercises	1,274		$ 1	1,273
Balance (in shares) at Mar. 31, 2022		200,000	364,666
Balance at Mar. 31, 2022	4,792	$ 2	$ 4	103,633	(98,847)
Balance (in shares) at Dec. 31, 2022		200,000	2,944,306
Balance at Dec. 31, 2022	12,479	$ 2	$ 30	121,637	(109,190)
Net loss	(2,340)				(2,340)
Stock-based compensation expense	93			93
Issuance of common stock upon warrant exercises (in shares)			1,142,829
Issuance of common stock upon warrant exercises	1,349		$ 11	1,338
Issuance of common stock warrants related to promissory note (in shares)			476,842
Issuance of common stock warrants related to promissory note	2,166		$ 5	2,161
Balance (in shares) at Mar. 31, 2023		200,000	4,563,977
Balance at Mar. 31, 2023	$ 13,747	$ 2	$ 46	$ 125,229	$ (111,530)

XML

Condensed Consolidated Statements Convertible Preferred Stock and Stockholders' Equity (Deficit) (Unaudited) (Parenthetical) $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($)
Payment of equity issuance costs	$ 413
Common Stock
Payment of equity issuance costs	$ 507

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Net loss	$ (2,340,000)	$ (4,205,000)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization	1,000	1,000
Noncash lease expense	25,000	45,000
Loss on issuance of warrants	0	1,110,000
Change in fair value of warrant liabilities	(43,000)	(793,000)
Stock-based compensation	93,000	358,000
Changes in operating assets and liabilities
Accounts receivable	(250,000)	0
Prepaid and other assets and other noncurrent assets	278,000	265,000
Accounts payable and accrued liabilities	(970,000)	(59,000)
Accrued compensation	(295,000)	(439,000)
Operating lease liabilities	(25,000)	(47,000)
Net cash used in operating activities	(3,526,000)	(3,764,000)
Cash flows from financing activities
Payments on debt	(88,000)	(87,000)
Proceeds from issuance of common stock and warrants	2,231,000	0
Proceeds from the exercise of warrants	2,710,000	0
Payment of equity issuance costs	(413,000)	0
Net cash provided by (used in) financing activities	4,440,000	(87,000)
Net increase (decrease) in cash, cash equivalents and restricted cash	914,000	(3,851,000)
Cash, cash equivalents and restricted cash, beginning of year	12,409,000	10,521,000	$ 10,521,000
Cash, cash equivalents and restricted cash, end of period	13,323,000	6,670,000	12,409,000
Reconciliation of cash, cash equivalents and restricted cash to the balance sheets
Cash and cash equivalents	13,297,000	6,644,000	12,383,000
Restricted cash	26,000	26,000
Total cash, cash equivalents and restricted cash	13,323,000	6,670,000	12,409,000
Supplemental disclosures of non-cash investing and financing activities
Equity issuance costs included in accounts payable and accrued liabilities	12,000	82,000
Issuance of common stock for the cashless exercise of warrants	0	1,274,000
Fair value of warrants issued to placement agent	173,000	0
Cash receivable for exercises of warrants included in prepaid and other current assets	$ 47,600	$ 0	$ 1,400,000

XML

Note 1 - Organization, Business and Financial Condition

3 Months Ended

Mar. 31, 2023

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 stock 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”). Immediately following the Merger, Seneca changed its name to “Palisade Bio, Inc.”

Unless the context otherwise requires, references to the “Company,” “Palisade,” “Palisade Bio,” “we,” “our” or “us” in this report refer to Palisade Bio, Inc. and its subsidiaries. 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 biopharmaceutical company focused on developing therapeutics that protect the integrity of the intestinal barrier. The Company's lead therapeutic candidate, LB1148, is a novel oral liquid formulation of the well-characterized digestive enzyme inhibitor tranexamic acid (“TXA”) that 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 postoperative adhesions between intra-abdominal tissues and accelerate the time to the return of normal gastrointestinal ("GI") function.

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 March 31, 2023, the Company had an accumulated deficit of $111.5 million and cash and cash equivalents of $13.3 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.

Based on the Company’s current working capital, anticipated operating expenses, and anticipated net operating losses, there is substantial doubt about the Company's 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 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. 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.

Historically, the Company has funded its operations primarily through a combination of debt and equity financings. 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 (Deficit) and Note 11, Subsequent Events, 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.

XML

Note 2 - Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2023

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, 2022, which was filed with the SEC on March 22, 2023. Certain prior period amounts in the condensed consolidated financial statements and accompanying notes have been reclassified to conform to the current period’s presentation.

The accompanying condensed consolidated financial statements 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.

Reverse Stock Split

On November 15, 2022, the Company effected a 1-for-50 reverse stock split of its issued and outstanding common stock (the "Reverse Stock Split"). As a result of the Reverse Stock Split, each of the Company’s shareholders received one new share of common stock for every 50 shares such shareholder held immediately prior to the effective time of the Reverse Stock Split. The Reverse Stock Split affected all the Company’s issued and outstanding shares of common stock equally. The par value and authorized shares of the Company's common stock was not adjusted as a result of the Reverse Stock Split. The Reverse Split also affected the Company’s outstanding stock options, common stock warrants and other exercisable or convertible securities and resulted in the shares underlying such instruments being reduced and the exercise price being increased proportionately. Unless otherwise noted, all common stock shares, common stock per share data and shares of common stock underlying convertible preferred stock, stock options and common stock warrants included in these condensed consolidated financial statements, including the exercise price of such equity instruments, as applicable, have been retrospectively adjusted to reflect the effect of the Reverse Stock Split for all periods presented.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates, judgments, and assumptions that impact the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the balance sheet, and the reported amounts of expenses during the reporting period. The most significant estimates in the Company’s condensed consolidated financial statements relate to clinical trial accruals and its derivative financial 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 March 31, 2023 and December 31, 2022, 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 (See Note 11, Subsequent Events) or shelf registration statement. As of March 31, 2023 and December 31, 2022, deferred equity issuance costs of $93,000 and $114,000, respectively, were included in prepaid and other assets in the condensed consolidated balance sheet. 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 and accounts receivable. 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. The Company's entire accounts receivable balance as of March 31, 2023 is with the Company co-development partner, Newsoara Biopharma Co., Ltd. (“Newsoara”) (See Note 8, Collaborations and License Agreements). Management believes it is not exposed to significant credit risk on the accounts receivable based on its relationship with Newsoara and Newsoara's history of timely payment of balances owed. In early May 2023, prior to the issuance of these condensed consolidated financial statements, Newsoara has paid the entire balance of the accounts receivable outstanding as of March 31, 2023.

Fair Value of Financial Instruments

The Company’s financial instruments consist principally of cash and cash equivalents, restricted cash, accounts receivable, other current receivables, accounts payable, accrued liabilities, debt, and liability-classified warrants. The carrying amounts of financial instruments such as cash equivalents, restricted cash, accounts receivable, other current receivables, 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 as of December 31, 2022 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. None of the Company’s non-financial assets or liabilities are recorded at fair value on a nonrecurring basis.

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. 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 reassessed at the end of each reporting period.

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

The Company accounts for its common stock warrants in accordance with ASC 480, Distinguishing Liabilities from Equity ("ASC 480") and ASC 815, Derivatives and Hedging (“ASC 815”). Based upon the provisions of ASC 480 and ASC 815, the Company accounts for common stock warrants as liabilities if the warrant requires net cash settlement or gives the holder the option of net cash settlement, or 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.

Leases

In accordance with ASC 842, Leases, the Company assesses contracts for lease arrangements at inception. Operating right-of-use (“ROU”) assets and liabilities are recognized at the lease commencement date equal to the present value of future lease payments using the implicit, if readily available, or incremental borrowing rate based on the information readily available at the commencement date. ROU assets include any lease payments as of commencement and initial direct costs but exclude any lease incentives. Lease and non-lease components are generally accounted for separately and the Company recognizes operating lease expense straight-line over the term of the lease.

Milestone Revenue

The Company uses the revenue recognition guidance established by ASC 606, Revenue From Contracts With Customers (“ASC 606”). When an agreement falls under the scope of other standards, such as ASC 808, Collaborative Arrangements, the Company will apply the recognition, measurement, presentation, and disclosure guidance in ASC 606 to the performance obligations in the agreements if those performance obligations are with a customer. The Company currently does not have any collaborative arrangements with counterparties that are also considered customers. For arrangements that include amounts to be paid to the Company upon the achievement of certain development milestones of technology licensed by the Company, the Company recognizes such license revenue using the most likely method. At the end of each reporting period, the Company re-evaluates the probability or achievement

of any potential milestones and any related constraints, and if necessary, adjusts its estimates of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenue in the period of adjustment. For the three months ended March 31, 2023, $0.3 million of license revenue related to milestones achieved on licensed technology was recognized as revenue and was reported in accounts receivable as of March 31, 2023, to which the Company has not recorded an allowance for estimated credit losses based on its relationship with the counterparty and the counterparty's history of timely payment of balances owed to the Company (see Note 8, Collaborations and License Agreements).

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 condensed 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 March 31, 2023 and December 31, 2022, the Company has accrued $94,000 and $184,000, 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 recognized in research and development expenses in the condensed consolidated statements of operations in the period incurred.

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.

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

The Company’s stock-based compensation expense generally includes time-based restricted stock units (“RSUs”) stock options, as well as performance-based RSUs (“PSUs”). The Company accounts for forfeitures as they occur for each type of award as a reduction of expense. Stock-based compensation expense related to time-based RSUs is based

on the market value of the underlying stock on the date of grant and the related expense is recognized ratably over the requisite service period, which is usually the vesting period. The Company estimates the fair value of employee and non-employee stock option grants using the Black-Scholes option pricing model. The determination of the fair value of stock-based payment awards on the date of grant using the Black-Scholes option pricing model is affected by the Company's stock price as well as assumptions, which include the expected term of the award, the expected stock price volatility, risk-free interest rate, and expected dividends over the expected term of the award. Stock-based compensation expense represents the cost of the estimated grant date fair value of employee and non-employee stock option grants recognized ratably over the requisite service period of the awards, which is usually the vesting period. For PSUs with vesting subject to market conditions, the fair value of the award is determined at grant date using the Monte Carlo simulation model, and expense is recognized ratably over the requisite service period regardless of whether or not the market condition is satisfied. The Monte Carlo simulation model considers a variety of potential future scenarios under the market condition vesting criteria, including but not limited to share prices for the Company and its peer companies in a selected market index.

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

Net Loss Per Common Share

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

As the Company was in a loss position for both periods, basic and diluted loss per common share for the three months ended March 31, 2023 and March 31, 2022 were calculated under the if-converted and treasury stock methods. For the three months ended March 31, 2023 and March 31, 2022, basic and diluted loss per common share were the same as all common stock equivalents were anti-dilutive for both periods.

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

	Three Months Ended March 31,
	2023			2022
Basic net loss per common share:
Net loss	$	(2,340	)	$	(4,205	)
Weighted average shares used in calculating basic loss per common share		4,315,526			324,473
Basic net loss per common share	$	(0.54	)	$	(12.96	)
Diluted net loss per common share:
Net loss	$	(2,340	)	$	(4,205	)
Weighted average shares used in calculating diluted loss per common share		4,315,526			324,473
Diluted net loss per common share	$	(0.54	)	$	(12.96	)

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

	March 31,
	2023		2022
Stock options		63,789		30,965
Restricted stock units		42,153		—
Warrants for common stock		1,604,421		106,921
Series A Convertible Preferred Stock		129		129
Total		1,710,492		138,015

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

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board ("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 adopted this standard as of January 1, 2023 and determined it did not have a material impact on its condensed consolidated financial statements and related disclosures for the three months ended March 31, 2023.

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Note 3 - Balance Sheet Details

3 Months Ended

Mar. 31, 2023

Disclosure Text Block [Abstract]

Balance Sheet Details

3. Balance Sheet Details

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

	March 31,		December 31,
	2023		2022
Prepaid insurance	$	355	$	581
Other receivables		78		1,438
Prepaid subscriptions and fees		193		157
Prepaid software licenses		37		54
Deferred equity issuance costs		93		114
Prepaid other		6		6
	$	762	$	2,350

Other receivables as of March 31, 2023 and December 31, 2022 includes a $47,600 receivable and $1.4 million receivable, respectively, for the cash exercise price of common stock purchase warrants that had been exercised but the cash had not yet been received by the Company as of each respective balance sheet date. The entire amount of these other receivables as of March 31, 2023 and December 31, 2022 were received in April 2023 and January 2023, respectively.

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

	March 31,		December 31,
	2023		2022
Prepaid insurance, less current portion	$	631	$	682
Other noncurrent assets		12		12
	$	643	$	694

Accrued liabilities consisted of the following (in thousands):

	March 31,		December 31,
	2023		2022
Accrued accounts payable	$	73	$	69
Accrued clinical trial costs		94		184
Accrued director stipends		108		141
Accrued severance and benefits (Note 9)		5		180
Accrued other		29		—
	$	309	$	574

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Note 4 - Common Stock Warrants

3 Months Ended

Mar. 31, 2023

Disclosure Text Block [Abstract]

Common Stock Warrants

4. Common Stock Warrants

The Company’s outstanding common stock warrants that are classified as equity warrants are included as a component of stockholder’s equity (deficit) at the date of grant at the relative fair value at that grant date. Common stock warrants accounted for as liabilities in accordance with the authoritative accounting guidance are included in non-current liabilities. The Company had common stock warrants outstanding of 1,604,421 and 1,055,672 at March 31, 2023 and December 31, 2022, respectively. Of the Company's common stock warrants exercisable at March 31, 2023, (i) 278,162 common stock warrants have an exercise price of $2.38, (ii) 1,012,631 common stock warrants have an exercise price of $2.375, (iii) 63,158 common stock warrants have an exercise price of $2.9668 and (iv) the remaining 250,470 common stock warrants have a weighted-average exercise price of $104.24. Only the 278,162 common stock warrants outstanding that have an exercise price of $2.38 are subject to down round price reset provisions.

Liability-Classified Warrants

The Company accounts for certain of its warrants as liability-classified in accordance with ASC 480 and ASC 815.

Senior Secured Promissory Note Warrants

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, the Company agreed to issued warrants to purchase shares of the Company’s common stock (“Senior Secured Promissory Note Warrants”). The Senior Secured Promissory Note Warrants expire five years from the date of registration of the warrants, or August 10, 2026. As of March 31, 2023, the Senior Secured Promissory Note Warrants outstanding were exercisable for 17,177 shares of the Company’s common stock at an exercise price of $194.00.

May 2021 Warrants

On May 20, 2021, pursuant to the terms of the Securities Purchase Agreement, the Company issued to the Investor warrants to purchase shares of common stock (the “May 2021 Warrants”). All of the outstanding May 2021 Warrants were exercised by the investor in the fourth quarter of 2021 and the first quarter of 2022 in exchange for 26,186 shares and 79,886 shares of the Company's common stock, respectively. As of March 31, 2023, there are no May 2021 Warrants outstanding.

July 2021 Warrants

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 consideration for the July 2021 Waiver Agreement, the Company issued the Investor additional warrants to purchase shares of the Company's common stock (the "July 2021 Warrants"). The July 2021 Warrants expire five years from the date of registration of the warrants, or August 19, 2026. As of March 31, 2023, the July 2021 Warrants outstanding were exercisable for 22,000 shares of the Company’s common stock at an exercise price of $181.50.

January 2022 Warrants

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 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 was 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 additional warrants to purchase 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 consolidated statements of operations for the three months ended March 31, 2022.

The January 2022 Warrants expire five and a half years from the date of issuance, or July 31, 2027. As of March 31, 2023, the January 2022 Warrants outstanding were exercisable for 45,000 shares of the Company’s common stock at an exercise price of $55.00.

Equity-Classified Warrants

The Company accounts for the majority of its warrants as equity-classified in accordance with ASC 480 and ASC 815. Equity-classified warrants are recorded in equity based on their relative fair value on the date of issuance.

January 2023 Registered Direct Offering and Private Placement Warrants

In connection with the January 2023 Offering (see Note 6, Stockholders' Equity (Deficit)), on January 4, 2023 the Company issued the (i) 37,000 pre-funded warrants to purchase shares of the Company's common stock at a purchase price of $2.3749, with such warrants having an exercise price of $0.0001 per share and a perpetual term (ii) 538,789 pre-funded warrants to purchase shares of the Company's common stock at a purchase price of $2.3749, with such warrants having an exercise price of $0.0001 per share and a perpetual term; (iii) 1,052,631 warrants to purchase shares of the Company's common stock at an exercise price of $2.375 per share and a term of five years, and (iv) 63,158 warrants to purchase shares of the Company's common stock to the offering placement agent at an exercise price of $2.9688 per share and a term of five years. All of the warrants issued in the January 2023 Offering were determined to be equity-classified. As of March 31, 2023, all of the pre-funded warrants issued with the January 2023 Offering have been exercised for shares of the Company's common stock.

The following table summarizes warrant activity during the three months ended March 31, 2023:

	Number of Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Warrants outstanding, December 31, 2022		1,055,672		$	26.48		3.32
Granted		1,691,578			1.59		4.76
Exercised		(1,142,829	)		1.18		1.40
Forfeited, expired or cancelled		—			—		—
Warrants outstanding, March 31, 2023		1,604,421			18.26		4.41

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Note 5 - Fair Value Measurements

3 Months Ended

Mar. 31, 2023

Disclosure Text Block [Abstract]

Fair Value Measurements

5. Fair Value Measurements

The Company has issued warrants that are accounted for as liabilities based upon the guidance of 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 in the condensed consolidated statement of operations.

As of March 31, 2023, the fair value of the Senior Secured Promissory Note Warrants outstanding was determined using a Black-Scholes option pricing model valuation model to be insignificant due to the low market price of the Company's stock at the date of valuation relative to the exercise price of the Senior Secured Promissory Note Warrants outstanding.

As of March 31, 2023, the fair value of the July 2021 Warrants outstanding was determined using a Monte Carlo simulation model to be insignificant due to the low market price of the Company's stock at the date of valuation relative to the exercise price of the Senior Secured Promissory Note Warrants outstanding.

As of March 31, 2023, the fair value of the January 2022 Warrants in the amount of $15,200 was determined using a Monte Carlo simulation model that used the following assumptions: (i) a starting stock price of $3.35, (ii) certain key event dates such as expected capital financings, (iii) an exercise price per share of $55.00, (iv) an expected re-levered volatility of 81.3 percent; (v) an estimated risk-free rate of 3.67 percent, (vi) estimated contractual terms of approximately 4.33 years, and (vii) a zero percent dividend rate.

The following table summarizes the activity of the Company’s Level 3 warrant liabilities during the three months ended March 31, 2023 and 2022 (in thousands):

	Three Months Ended March 31,
Warrant Liabilities	2023			2022
Fair value at beginning of period	$	61		$	2,651
Initial fair value at the original issuance date		—			1,110
Change in fair value during the period		(43	)		(793	)
Fair value of liability classified warrants exercised		—			(1,274	)
Fair value at end of period	$	18		$	1,694

The change in fair value of warrant liabilities during the three months ended March 31, 2023 and 2022 is included in Other income at the condensed consolidated statements of operations.

Seneca had certain common stock purchase warrants that were originally issued in connection with the 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, with only the August 2017 warrants recorded as a liability as of March 31, 2023. 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 these warrants during the quarter ended June 30, 2021. The put right became inactive in July 2021 and the remaining warrants had an insignificant value as of March 31, 2023, which was determined using a Black-Scholes option pricing model.

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Note 6 - Stockholders' Equity (Deficit)

3 Months Ended

Mar. 31, 2023

Disclosure Text Block [Abstract]

Stockholders' Equity (Deficit)

6. Stockholders’ Equity (Deficit)

Classes of Stock

Common Stock

As of March 31, 2023, the Company was authorized to issue 280,000,000 shares of $0.01 par value common stock. Each share of common stock entitles the holder thereof to one vote on each matter submitted to a vote at a meeting of stockholders.

On November 15, 2022, the Company effected the Reverse Stock Split. Accordingly, each of the Company’s shareholders received one new share of the Company's common stock for every 50 shares of the Company's common stock such shareholder held immediately prior to the effective time of the Reverse Stock Split. The Reverse Stock Split affected all of the Company’s issued and outstanding shares of the Company's common stock equally. The Reverse Stock Split also affected the Company’s outstanding stock options, warrants and other exercisable or convertible securities and resulted in the shares underlying such instruments being reduced and the exercise price being increased proportionately to the Reverse Stock Split ratio. No fractional shares were issued as a result of the Reverse Stock Split with any fractional shares that would have otherwise resulted from the Reverse Stock Split paid in cash, at an amount equal to the resulting fractional interest in one share of the Company's common stock to which the shareholder would otherwise be entitled, multiplied by the closing trading price of the Company's common stock on November 15, 2022. The amount of cash paid for fractional shares was insignificant.

As a result of the Reverse Stock Split, the number of issued and outstanding shares of the Company's common stock was adjusted from 77,080,169 shares to approximately 1,541,508 shares. Each share of the Company's common stock entitles the holder thereof to one vote on each matter submitted to a vote at a meeting of stockholders.

Preferred Stock

As of March 31, 2023, 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. As of March 31, 2023, the Company's Series A Convertible Preferred Stock issued in the amount of 200,000 preferred stock shares is convertible into 129 shares of common stock.

January 2023 Registered Direct Offering and Private Placement

On January 4, 2023, the Company announced that it had closed on a previously announced agreement with certain institutional and accredited investors pursuant to which it agreed to sell and issue, in a registered direct offering (the “January 2023 Registered Offering”), an aggregate of (i) 476,842 shares of the Company's common stock, par value $0.01 per share, at a purchase price per share of $2.375, and (ii) 37,000 pre-funded warrants to purchase shares of the Company's common stock at a purchase price of $2.3749, with such warrants having an exercise price of $0.0001 per share and a perpetual term. Additionally, in a concurrent private placement, the Company also agreed to sell and issue to such purchasers, an aggregate of (i) 538,789 pre-funded warrants to purchase shares of the Company's common stock at a purchase price of $2.3749, with such warrants having an exercise price of $0.0001 per share and a perpetual term; and (ii) 1,052,631 warrants to purchase shares of the Company's common stock at an exercise price of $2.375 per share and a term of five years (collectively, the “January 2023 Offering”). All the warrants are immediately exercisable from their date of issuance.

Pursuant to a placement agency agreement dated as of December 30, 2022, the Company engaged Ladenburg Thalmann & Co. Inc. (the “January 2023 Placement Agent”), to act as the exclusive placement agent in connection with the January 2023 Registered Offering and concurrent private placement transaction. The Company issued warrants to the January 2023 Placement Agent to purchase an aggregate of 63,158 shares of the Company's common stock (the "January 2023 Placement Agent Warrants"). The January 2023 Placement Agent Warrants have an exercise price of $2.9688 per share and a term of five years. The January 2023 Placement Agent Warrants are immediately exercisable from issuance. The fair value of the January 2023 Placement Agent Warrants was recognized by the Company as an equity issuance cost which reduced the additional paid-in capital recognized from the January 2023 Offering.

Gross cash proceeds from the January 2023 Offering were $2.5 million and net cash proceeds were approximately $2.2 million after deducting equity issuance costs of approximately $0.3 million, which excludes the grant date fair value of the January 2023 Placement Agent Warrants of approximately $0.2 million.

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Note 7 - Equity Incentive Plans

3 Months Ended

Mar. 31, 2023

Disclosure Text Block [Abstract]

Equity Incentive Plans

7. 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. 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”). As of March 31, 2023, there were 70,672 shares of the Company's common stock authorized and available for issuance as equity-based awards under the 2021 EIP Plan.

Also in April 2021, the Company's 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. As of March 31, 2023, there were 34,603 shares of the Company's common stock authorized and available under the ESPP and there have been no shares issued under the ESPP.

In November 2021, the Company's compensation committee of the Board adopted the Palisade Bio, Inc. 2021 Inducement Award Plan (the "2021 Inducement Plan"). The 2021 Inducement Plan was adopted in order to grant equity-based awards to individuals not previously employed by the Company, as an inducement to join the Company. As of March 31, 2023, there were 6,574 shares of the Company's common stock authorized and available for issuance as equity-based awards under the 2021 Inducement Plan.

Stock Options

The Company believes that stock options align the interests of its employees 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 but generally not to exceed ten-years, and generally vest in equal proportions each quarter over three years. The Company's equity incentive plans allow for the issuance of both incentive stock options and non-statutory stock options.

The fair value of options granted in the three months ended March 31, 2023 and March 31, 2022 is estimated as of the grant date using the Black-Scholes option pricing model using the assumptions in the following table:

	Three Months Ended March 31,
	2023			2022
Weighted-average exercise price per share	$	2.36		$	48.67
Weighted-average expected term (years)		5.81			5.81
Weighted-average risk-free interest rate		3.76	%		1.85	%
Weighted-average expected dividend yield		—			—
Weighted-average volatility		69.54	%		73.77	%

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 three months ended March 31, 2023:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2022		43,658		$	311.74		6.08	$	—
Granted		30,620			2.36		9.88		—
Exercised		—			—		—		—
Forfeited, expired or cancelled		(10,489	)		242.03		—		—
Outstanding at March 31, 2023		63,789			174.70		8.70		35,644
Vested and expected to vest at March 31, 2023		63,789			174.70		8.70		35,644
Exercisable at March 31, 2023		22,383			463.61		6.97		—

The weighted-average grant-date fair value of options granted during the three months ended March 31, 2023 was $1.51 per share. The fair value of the options vested during the three months ended March 31, 2023 was approximately $0.1 million.

On February 6, 2023, the Company conditionally granted to certain members of management a total of 81,500 stock options that are conditional subject to shareholder approval at the Company's annual shareholder meeting to be held on June 8, 2023. Accordingly, the Company has not recognized any share-based compensation expense related to the conditional stock options as of March 31, 2023. The Company will begin to recognize share-based compensation expense related to the conditional stock options if and when shareholder approval is received.

Restricted Stock Units

During the three months ended March 31, 2023, the Company granted under the 2021 EIP Plan time-based restricted stock units ("RSUs") to employees. The RSUs generally vest proportionally each quarter over a term of one or three years.

The following table summarizes RSU activity and related information under the 2021 EIP Plan for the three months ended March 31, 2023:

	Number of Restricted Stock Units			Weighted Average Grant Date Fair Value Per Share		Weighted Average Remaining Contractual Life (Years)
Non-vested at December 31, 2022		—		$	—		—
Granted		44,632			3.25		—
Vested		—			—		—
Forfeited		(2,479	)		3.15		—
Non-vested at March 31, 2023		42,153			3.26		1.47

None of the RSUs granted the during three months ended March 31, 2023 vested during the three months ended March 31, 2023.

On February 6, 2023, the Company conditionally granted to certain members of management a total of 59,500 restricted stock units that are conditional and subject to shareholder approval at the Company's annual shareholder meeting to be held on June 8, 2023. Accordingly, the Company has not recognized any share-based compensation expense related to the conditional restricted stock units as of March 31, 2023. The Company will begin to recognize share-based compensation expense related to the conditional RSUs if and when shareholder approval is received.

Performance Based Stock Units

On February 6, 2023, the Company conditionally granted to certain members of management a total of 68,700 performance-based stock units ("PSUs") which vest (a) 50% when the volume weighted average price of the Company’s common stock over 20 consecutive trading days is $3.20 or greater, and (b) 50% when such volume weighted average price of the Company’s common stock over 20 consecutive trading days is $4.25 or greater. The PSUs are conditional subject to shareholder approval at the Company's annual shareholder meeting to be held on June 8, 2023. Accordingly, the Company has not recognized any share-based compensation expense related to the conditional PSUs as of March 31, 2023. The Company will begin to recognize share-based compensation expense related to the conditional PSUs if and when shareholder approval is received.

Share-Based Compensation Expense

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

	Three Months Ended March 31,
	2023		2022
Research and development expense	$	49	$	52
General and administrative expense		44		306
Total	$	93	$	358

As of March 31, 2023, the unrecognized compensation cost related to outstanding options was $0.5 million, which is expected to be recognized over a weighted-average period of approximately 1.84 years and the unrecognized compensation cost related to outstanding RSUs was $0.1 million which is expected to be recognized over a weighted average period of approximately 1.47 years.

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Note 8 - Collaborations and License Agreements

3 Months Ended

Mar. 31, 2023

Disclosure Text Block [Abstract]

Collaborations and License Agreements

8. Collaborations and License Agreements

Co-Development and Distribution Agreement with Newsoara

LBS has entered into a co-development and distribution agreement with 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 development 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.

During the three months ended March 31, 2023, the Company recognized license revenue of $0.3 million earned upon Newsoara's achievement of a development milestone under the Co-Development Agreement during the period. Related to this, the Company has recognized $0.3 million in accounts receivable as of March 31, 2023, to which the Company has not recorded an allowance for estimated credit losses based on its relationship with Newsoara and Newsoara's history of timely payment of balances owed. In early May 2023, prior to the issuance of these condensed

consolidated financial statements, Newsoara has paid the entire balance of the accounts receivable outstanding as of March 31, 2023. During the three months ended March 31, 2022, 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. The Regents are entitled to certain development and sales milestones.

In conjunction with the Co-Development Agreement with Newsoara, the Company is obligated to pay the Regents a portion of the sublicense revenue ranging from 30 percent to 35 percent of one-third of the upfront payment and milestone payments received. As of March 31, 2023 and December 31, 2022 sublicensing payables of approximately $36,000 and $13,000 respectively, were included in accounts payable.

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Note 9 - Commitments and Contingencies

3 Months Ended

Mar. 31, 2023

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

9. 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 March 31, 2023, the Company recognized an operating right-of-use asset related to the Corporate Office Lease in the amount of $275,000 and a current and noncurrent operating lease liability related to the Corporate Office Lease of $109,000 and $182,000, respectively. As of March 31, 2023, the total remaining future minimum lease payments associated with the Corporate Office Lease of approximately $291,000, less imputed interest of $38,000 calculated using a discount rate of 10.75%, will be paid over the remaining lease term of approximately 2.4 years.

Maturities of the Company's operating lease liabilities as of March 31, 2023 are as follows:

Year ending December 31,
2023 (remaining)	$	100
2024		136
2025		93
Total operating lease payments		329
Less: imputed interest		(38	)
Total operating lease obligations	$	291

The Company recognized operating lease expense associated with its Corporate Office Lease and its predecessor corporate headquarters lease of approximately $32,000 and $49,000 in the three months ended March 31, 2023 and March 31, 2022, respectively.

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 March 31, 2023 and December 31, 2022, the aggregate remaining balance under the Company's insurance financing arrangements was zero 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 a reduction of approximately 20% in workforce to better align the Company’s resources on its clinical studies, including its lead asset, LB1148.

As of March 31, 2023 and December 31, 2022, the Company recognized accrued liabilities on its condensed consolidated balance sheets in the amount of approximately $5,000 and $180,000, respectively, related to severance and benefits owed pursuant to employment agreements and the execution of severance and release agreements associated with the restructuring. The Company made cash payments of approximately $175,000 in the three months ended March 31, 2023 related to the employee severance and benefits and expects to make remaining cash payments of $5,000 in the three months ending June 30, 2023. The Company recognized no restructuring expense related to the cost-reduction plan in the three months ended March 31, 2023 and 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 March 31, 2023, which will have, individually or in 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 10 - Related Party Transactions

3 Months Ended

Mar. 31, 2023

Related Party Transactions [Abstract]

Related Party Transactions

10. 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 7,549 shares of the Company's common stock at a price of $172.50 per share, subject to certain

adjustments (the "August 2021 Warrants"), all of which are outstanding as of March 31, 2023. 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 $107,500 and $141,250 as of March 31, 2023, and December 31, 2022, respectively.

Separation agreement with former Chief Executive Officer

On October 11, 2022, the Company entered into a separation agreement with its former Chief Executive Officer whereby the parties agreed to a mutual release of claims. Subsequent to paying an aggregate of $22,000 pursuant to the terms of the separation agreement, the Company determined that it is not probable that any additional compensation would be due to the former Chief Executive Officer and therefore, the Company has not recognized any accrual related to compensation or benefits owed pursuant to the separation agreement as of March 31, 2023.

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Note 11 - Subsequent Events

3 Months Ended

Mar. 31, 2023

Disclosure Text Block [Abstract]

Subsequent Events

11. Subsequent Events

April 2023 Offering

On April 3, 2023, the Company entered into securities purchase agreements (the “Securities Purchase Agreement”) with certain institutional and accredited investors pursuant to which the Company agreed to sell and issue, in a registered direct offering (the “April 2023 Registered Offering”), an aggregate of 756,317 shares of the Company's common stock, at a purchase price per share of $2.64. Additionally, in a concurrent private placement, the Company also agreed to sell and issue to such purchasers, an aggregate of (i) 455,242 unregistered shares of the Company's common stock, at a purchase price per share of $2.64, (ii) 1,061,164 prefunded warrants to purchase shares of the Company's common stock at a purchase price of 2.6399, with such warrants having an exercise price of $0.0001 per share and a perpetual term; and (iii) 2,272,723 common stock warrants to purchase shares of the Company's common stock at an exercise price of $2.64 per share and a term of five years from the date of issuance (the “Private Offering”) (collectively, April 2023 Registered Offering and Private Offering are referred to as the “April 2023 Offering”). All of the warrants issued in the Private Offering are immediately exercisable from their date of issuance.

Pursuant to a placement agency agreement dated as of April 3, 2023, the Company engaged Ladenburg Thalmann & Co. Inc. (the “April 2023 Placement Agent”), to act as the exclusive placement agent in connection with the April 2023 Offering. The Company issued warrants to the April 2023 Placement Agent to purchase an aggregate of 136,363 shares of the Company's common stock (the "April 2023 Offering Placement Agent Warrants"). The April 2023 Offering Placement Agent Warrants have an exercise price of $3.30 per share and a term of five years and are immediately exercisable from issuance.

Gross cash proceeds from the April 2023 Offering were $6.0 million and net cash proceeds are approximately $5.4 million after deducting cash equity issuance costs of approximately $0.6 million.

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Note 2 - Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2023

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, 2022, which was filed with the SEC on March 22, 2023. Certain prior period amounts in the condensed consolidated financial statements and accompanying notes have been reclassified to conform to the current period’s presentation.

The accompanying condensed consolidated financial statements 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.

Reverse Stock Split

Reverse Stock Split

On November 15, 2022, the Company effected a 1-for-50 reverse stock split of its issued and outstanding common stock (the "Reverse Stock Split"). As a result of the Reverse Stock Split, each of the Company’s shareholders received one new share of common stock for every 50 shares such shareholder held immediately prior to the effective time of the Reverse Stock Split. The Reverse Stock Split affected all the Company’s issued and outstanding shares of common stock equally. The par value and authorized shares of the Company's common stock was not adjusted as a result of the Reverse Stock Split. The Reverse Split also affected the Company’s outstanding stock options, common stock warrants and other exercisable or convertible securities and resulted in the shares underlying such instruments being reduced and the exercise price being increased proportionately. Unless otherwise noted, all common stock shares, common stock per share data and shares of common stock underlying convertible preferred stock, stock options and common stock warrants included in these condensed consolidated financial statements, including the exercise price of such equity instruments, as applicable, have been retrospectively adjusted to reflect the effect of the Reverse Stock Split for all periods presented.

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 its derivative financial 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 March 31, 2023 and December 31, 2022, 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 (See Note 11, Subsequent Events) or shelf registration statement. As of March 31, 2023 and December 31, 2022, deferred equity issuance costs of $93,000 and $114,000, respectively, were included in prepaid and other assets in the condensed consolidated balance sheet. 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 and accounts receivable. 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. The Company's entire accounts receivable balance as of March 31, 2023 is with the Company co-development partner, Newsoara Biopharma Co., Ltd. (“Newsoara”) (See Note 8, Collaborations and License Agreements). Management believes it is not exposed to significant credit risk on the accounts receivable based on its relationship with Newsoara and Newsoara's history of timely payment of balances owed. In early May 2023, prior to the issuance of these condensed consolidated financial statements, Newsoara has paid the entire balance of the accounts receivable outstanding as of March 31, 2023.

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 receivable, other current receivables, accounts payable, accrued liabilities, debt, and liability-classified warrants. The carrying amounts of financial instruments such as cash equivalents, restricted cash, accounts receivable, other current receivables, 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 as of December 31, 2022 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. None of the Company’s non-financial assets or liabilities are recorded at fair value on a nonrecurring basis.

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. 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 reassessed at the end of each reporting period.

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

The Company accounts for its common stock warrants in accordance with ASC 480, Distinguishing Liabilities from Equity ("ASC 480") and ASC 815, Derivatives and Hedging (“ASC 815”). Based upon the provisions of ASC 480 and ASC 815, the Company accounts for common stock warrants as liabilities if the warrant requires net cash settlement or gives the holder the option of net cash settlement, or 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.

Leases

Leases

In accordance with ASC 842, Leases, the Company assesses contracts for lease arrangements at inception. Operating right-of-use (“ROU”) assets and liabilities are recognized at the lease commencement date equal to the present value of future lease payments using the implicit, if readily available, or incremental borrowing rate based on the information readily available at the commencement date. ROU assets include any lease payments as of commencement and initial direct costs but exclude any lease incentives. Lease and non-lease components are generally accounted for separately and the Company recognizes operating lease expense straight-line over the term of the lease.

Milestone Revenue

Milestone Revenue

The Company uses the revenue recognition guidance established by ASC 606, Revenue From Contracts With Customers (“ASC 606”). When an agreement falls under the scope of other standards, such as ASC 808, Collaborative Arrangements, the Company will apply the recognition, measurement, presentation, and disclosure guidance in ASC 606 to the performance obligations in the agreements if those performance obligations are with a customer. The Company currently does not have any collaborative arrangements with counterparties that are also considered customers. For arrangements that include amounts to be paid to the Company upon the achievement of certain development milestones of technology licensed by the Company, the Company recognizes such license revenue using the most likely method. At the end of each reporting period, the Company re-evaluates the probability or achievement

of any potential milestones and any related constraints, and if necessary, adjusts its estimates of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenue in the period of adjustment. For the three months ended March 31, 2023, $0.3 million of license revenue related to milestones achieved on licensed technology was recognized as revenue and was reported in accounts receivable as of March 31, 2023, to which the Company has not recorded an allowance for estimated credit losses based on its relationship with the counterparty and the counterparty's history of timely payment of balances owed to the Company (see Note 8, Collaborations and License Agreements).

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 condensed 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 March 31, 2023 and December 31, 2022, the Company has accrued $94,000 and $184,000, 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 recognized in research and development expenses in the condensed consolidated statements of operations in the period incurred.

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.

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

The Company’s stock-based compensation expense generally includes time-based restricted stock units (“RSUs”) stock options, as well as performance-based RSUs (“PSUs”). The Company accounts for forfeitures as they occur for each type of award as a reduction of expense. Stock-based compensation expense related to time-based RSUs is based

on the market value of the underlying stock on the date of grant and the related expense is recognized ratably over the requisite service period, which is usually the vesting period. The Company estimates the fair value of employee and non-employee stock option grants using the Black-Scholes option pricing model. The determination of the fair value of stock-based payment awards on the date of grant using the Black-Scholes option pricing model is affected by the Company's stock price as well as assumptions, which include the expected term of the award, the expected stock price volatility, risk-free interest rate, and expected dividends over the expected term of the award. Stock-based compensation expense represents the cost of the estimated grant date fair value of employee and non-employee stock option grants recognized ratably over the requisite service period of the awards, which is usually the vesting period. For PSUs with vesting subject to market conditions, the fair value of the award is determined at grant date using the Monte Carlo simulation model, and expense is recognized ratably over the requisite service period regardless of whether or not the market condition is satisfied. The Monte Carlo simulation model considers a variety of potential future scenarios under the market condition vesting criteria, including but not limited to share prices for the Company and its peer companies in a selected market index.

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

Net Loss Per Common Share

Net Loss Per Common Share

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

As the Company was in a loss position for both periods, basic and diluted loss per common share for the three months ended March 31, 2023 and March 31, 2022 were calculated under the if-converted and treasury stock methods. For the three months ended March 31, 2023 and March 31, 2022, basic and diluted loss per common share were the same as all common stock equivalents were anti-dilutive for both periods.

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

	Three Months Ended March 31,
	2023			2022
Basic net loss per common share:
Net loss	$	(2,340	)	$	(4,205	)
Weighted average shares used in calculating basic loss per common share		4,315,526			324,473
Basic net loss per common share	$	(0.54	)	$	(12.96	)
Diluted net loss per common share:
Net loss	$	(2,340	)	$	(4,205	)
Weighted average shares used in calculating diluted loss per common share		4,315,526			324,473
Diluted net loss per common share	$	(0.54	)	$	(12.96	)

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

	March 31,
	2023		2022
Stock options		63,789		30,965
Restricted stock units		42,153		—
Warrants for common stock		1,604,421		106,921
Series A Convertible Preferred Stock		129		129
Total		1,710,492		138,015

Comprehensive Loss

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

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board ("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 adopted this standard as of January 1, 2023 and determined it did not have a material impact on its condensed consolidated financial statements and related disclosures for the three months ended March 31, 2023.

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Note 2 - Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2023

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 per share (in thousands, except share and per share amounts):

	Three Months Ended March 31,
	2023			2022
Basic net loss per common share:
Net loss	$	(2,340	)	$	(4,205	)
Weighted average shares used in calculating basic loss per common share		4,315,526			324,473
Basic net loss per common share	$	(0.54	)	$	(12.96	)
Diluted net loss per common share:
Net loss	$	(2,340	)	$	(4,205	)
Weighted average shares used in calculating diluted loss per common share		4,315,526			324,473
Diluted net loss per common share	$	(0.54	)	$	(12.96	)

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 per share because their effects would be anti-dilutive:

	March 31,
	2023		2022
Stock options		63,789		30,965
Restricted stock units		42,153		—
Warrants for common stock		1,604,421		106,921
Series A Convertible Preferred Stock		129		129
Total		1,710,492		138,015

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Note 3 - Balance Sheet Details (Tables)

3 Months Ended

Mar. 31, 2023

Table Text Block [Abstract]

Summary of Prepaid Expenses and Other Current Assets

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

	March 31,		December 31,
	2023		2022
Prepaid insurance	$	355	$	581
Other receivables		78		1,438
Prepaid subscriptions and fees		193		157
Prepaid software licenses		37		54
Deferred equity issuance costs		93		114
Prepaid other		6		6
	$	762	$	2,350

Schedule of Other Noncurrent Assets

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

	March 31,		December 31,
	2023		2022
Prepaid insurance, less current portion	$	631	$	682
Other noncurrent assets		12		12
	$	643	$	694

Schedule Of Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

	March 31,		December 31,
	2023		2022
Accrued accounts payable	$	73	$	69
Accrued clinical trial costs		94		184
Accrued director stipends		108		141
Accrued severance and benefits (Note 9)		5		180
Accrued other		29		—
	$	309	$	574

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Note 4 - Common Stock Warrants (Tables)

3 Months Ended

Mar. 31, 2023

Table Text Block [Abstract]

Schedule of Stockholders' Equity Note, Warrants or Rights

The following table summarizes warrant activity during the three months ended March 31, 2023:

	Number of Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Warrants outstanding, December 31, 2022		1,055,672		$	26.48		3.32
Granted		1,691,578			1.59		4.76
Exercised		(1,142,829	)		1.18		1.40
Forfeited, expired or cancelled		—			—		—
Warrants outstanding, March 31, 2023		1,604,421			18.26		4.41

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Note 5 - Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2023

Disclosure Text Block [Abstract]

Schedule of Fair Value of Options Granted

The following table summarizes the activity of the Company’s Level 3 warrant liabilities during the three months ended March 31, 2023 and 2022 (in thousands):

	Three Months Ended March 31,
Warrant Liabilities	2023			2022
Fair value at beginning of period	$	61		$	2,651
Initial fair value at the original issuance date		—			1,110
Change in fair value during the period		(43	)		(793	)
Fair value of liability classified warrants exercised		—			(1,274	)
Fair value at end of period	$	18		$	1,694

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Note 8 - Equity Incentive Plans (Tables)

3 Months Ended

Mar. 31, 2023

Table Text Block [Abstract]

Schedule of Fair Value of Options Granted

The fair value of options granted in the three months ended March 31, 2023 and March 31, 2022 is estimated as of the grant date using the Black-Scholes option pricing model using the assumptions in the following table:

	Three Months Ended March 31,
	2023			2022
Weighted-average exercise price per share	$	2.36		$	48.67
Weighted-average expected term (years)		5.81			5.81
Weighted-average risk-free interest rate		3.76	%		1.85	%
Weighted-average expected dividend yield		—			—
Weighted-average volatility		69.54	%		73.77	%

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 three months ended March 31, 2023:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2022		43,658		$	311.74		6.08	$	—
Granted		30,620			2.36		9.88		—
Exercised		—			—		—		—
Forfeited, expired or cancelled		(10,489	)		242.03		—		—
Outstanding at March 31, 2023		63,789			174.70		8.70		35,644
Vested and expected to vest at March 31, 2023		63,789			174.70		8.70		35,644
Exercisable at March 31, 2023		22,383			463.61		6.97		—

Schedule of Restricted Stock Units Activity

The following table summarizes RSU activity and related information under the 2021 EIP Plan for the three months ended March 31, 2023:

	Number of Restricted Stock Units			Weighted Average Grant Date Fair Value Per Share		Weighted Average Remaining Contractual Life (Years)
Non-vested at December 31, 2022		—		$	—		—
Granted		44,632			3.25		—
Vested		—			—		—
Forfeited		(2,479	)		3.15		—
Non-vested at March 31, 2023		42,153			3.26		1.47

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 March 31,
	2023		2022
Research and development expense	$	49	$	52
General and administrative expense		44		306
Total	$	93	$	358

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Note 9 - Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2023

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 March 31, 2023 are as follows:

Year ending December 31,
2023 (remaining)	$	100
2024		136
2025		93
Total operating lease payments		329
Less: imputed interest		(38	)
Total operating lease obligations	$	291

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Note 1 - Organization, Business and Financial Condition (Details) $ in Thousands	Mar. 31, 2023 USD ($)	Dec. 31, 2022 USD ($)	Mar. 31, 2022 USD ($)	Apr. 27, 2021
Retained earnings (Accumulated deficit), ending balance	$ 111,500
Cash and cash equivalents	$ 13,297	$ 12,383	$ 6,644
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)	3 Months Ended
	Mar. 31, 2023 USD ($) Segment	Mar. 31, 2022 USD ($)	Dec. 31, 2022 USD ($)
Summary Of Significant Accounting Policies [Line Items]
Number of operating segments | Segment	1
Restricted cash	$ 26,000		$ 26,000
Deferred equity issuance costs	93,000		114,000
Accrued clinical trial costs	94,000		$ 184,000
License revenue	250,000	$ 0
License [Member]
Summary Of Significant Accounting Policies [Line Items]
License revenue	$ 300

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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
		Mar. 31, 2023	Mar. 31, 2022
Basic net loss per common share:
Net loss		$ (2,340)	$ (4,205)
Weighted average shares used in calculating basic loss per common share	[1]	4,315,526	324,473
Basic net loss per common share	[1]	$ (0.54)	$ (12.96)
Diluted net (loss) per common share:
Net loss		$ (2,340)	$ (4,205)
Weighted average shares used in calculating diluted loss per common share	[1]	4,315,526	324,473
Diluted net loss per common share	[1]	$ (0.54)	$ (12.96)

[1] (*) Basic and diluted loss per common share and basic and diluted weighted average share used in computing basic and diluted loss per common share for the three months ended March 31, 2022 have been adjusted to reflect the 1-for-50 reverse stock split effected on November 16, 2022.

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Note 2 - Summary of Significant Accounting Policies - Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share (Details) - shares	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Anti-dilutive securities (in shares)	1,710,492	138,015
Stock option [Member]
Anti-dilutive securities (in shares)	63,789	30,965
Restricted Stock Units [Member]
Anti-dilutive securities (in shares)	42,153	0
Warrant [Member]
Anti-dilutive securities (in shares)	1,604,421	106,921
Series A Convertible Preferred Stock [Member]
Anti-dilutive securities (in shares)	129	129

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Note 3 - Balance Sheet Details - Summary of Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Disclosure Text Block [Abstract]
Prepaid insurance	$ 355	$ 581
Other receivables	78	1,438
Prepaid subscriptions and fees	193	157
Prepaid software licenses	37	54
Deferred equity issuance costs	93	114
Prepaid other	6	6
Prepaid expenses and other current assets	$ 762	$ 2,350

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Note 3 - Balance Sheet Details (Details) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Disclosure Text Block [Abstract]
Cash Receivable For Exercises Of Warrants Included In Prepaid And Other Assets And Other Noncurrent Assets	$ 47,600	$ 0	$ 1,400,000

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Note 3 - Balance Sheet Details - Summary of Other Noncurrent Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Disclosure Text Block [Abstract]
Prepaid insurance, less current portion	$ 631	$ 682
Other noncurrent assets	12	12
Other noncurrent assets, Total	$ 643	$ 694

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Note 3 - Balance Sheet Details - Summary of Accrued Liabilities (Details) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Disclosure Text Block [Abstract]
Accrued accounts payable	$ 73,000	$ 69,000
Accrued clinical trial costs	94,000	184,000
Accrued director stipends	108,000	141,000
Accrued severance and benefits	5,000	180,000
Accrued other	29,000
Accrued liabilities, current, Total	$ 309,000	$ 574,000

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Note 4 - Common Stock Warrants (Details) - USD ($)		3 Months Ended
	Jan. 04, 2024	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2021	Apr. 03, 2023	Jan. 04, 2023	Dec. 31, 2022	Jan. 31, 2022	Aug. 19, 2021
Warrants exercise price									$ 172.50
Weighted-average exercise price		$ 174.70					$ 311.74
Warrants outstanding		1,604,421					1,055,672
Warrant liability		$ 18,000					$ 61,000
Warrants and Rights Outstanding		$ 1,604,421					$ 1,055,672
Number of Options Exercised (in shares)		0
Private Placement [Member]
Warrants exercise price						$ 2.375
Date of issuance of warrant						5 years
Conversion of warrant into common stock						1,052,631
Private Placement [Member] | Subsequent Event [Member]
Warrants exercise price	$ 2.375				$ 2.64
Date of issuance of warrant	5 years				5 years
Conversion of warrant into common stock	1,052,631				2,272,723
Offering Placement [Member] | Subsequent Event [Member]
Warrants exercise price	$ 2.9688
Date of issuance of warrant	5 years
Conversion of warrant into common stock	63,158
278,162 common stock [Member]
Common stock warrants		278,162
Warrants exercise price		$ 2.38
1,012,631 Common Stock [Member]
Common stock warrants		1,012,631
Warrants exercise price		$ 2.375
63,158 common stock [Member]
Common stock warrants		63,158
Warrants exercise price		$ 2.9668
250,470 common stock [Member]
Common stock warrants		250,470
Weighted-average exercise price		$ 104.24
Pre Funded Warrants [Member] | Private Placement [Member]
Common stock warrants						2.3749
Warrants exercise price						$ 0.0001
Conversion of warrant into common stock						538,789
Pre Funded Warrants [Member] | Private Placement [Member] | Subsequent Event [Member]
Common stock warrants					2.6399
Warrants exercise price	$ 0.0001				$ 0.0001
Conversion of warrant into common stock	538,789				1,061,164
The Equity Warrant [Member]
Warrant liability								$ 1,100,000
Senior Secured Promissory Note Warrants [Member]
Warrants exercise price		$ 194.00
Conversion of warrant into common stock		17,177
Senior Secured Promissory Note Warrants [Member] | Altium Growth Fund, LP [Member]
Date of issuance of warrant		5 years
May 2021 Warrants [Member] | Altium Growth Fund, LP [Member]
Warrants outstanding		0
Number of Options Exercised (in shares)			79,886	26,186
July 2021 Warrants [Member] | Altium Growth Fund, LP [Member]
Warrants exercise price		$ 181.50
Conversion of warrant into common stock		22,000
January 2022 Warrants [Member] | Altium Growth Fund, LP [Member]
Warrants exercise price		$ 55.00
Conversion of warrant into common stock		45,000
January 2023 Registered Direct Offering and Private Placement Warrants [member] | Pre Funded Warrants [Member] | Subsequent Event [Member]
Common stock warrants	2.3749
Issuance of stock during period, Shares	37,000
January Two Thousand and Twenty Three Registered Direct Offering [Member] | Pre Funded Warrants [Member] | Subsequent Event [Member]
Warrants exercise price	$ 0.0001

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Note 4 - Common Stock Warrants - Summary of Warrant Activity (Details) - $ / shares	3 Months Ended	12 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Warrants and Rights Note Disclosure [Abstract]
Number of Warrants Outstanding, Beginning Balance	1,055,672
Number of Warrants Outstanding, Granted	1,691,578
Number of Warrants Outstanding, Exercised	(1,142,829)
Number of Warrants Outstanding, Ending Balance	1,604,421	1,055,672
Weighted Average Exercise Price, Warrants Outstanding	$ 18.26	$ 26.48
Weighted Average Exercise Price, Warrants outstanding, Granted	1.59
Weighted Average Exercise Price, Warrants outstanding, Exercised	$ 1.18
Weighted Average Remaining Contractual Life, Warrants Outstanding	4 years 4 months 28 days	3 years 3 months 25 days
Weighted Average Remaining Contractual Life, Granted	4 years 9 months 3 days
Weighted Average Remaining Contractual Life, Exercised	1 year 4 months 24 days

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Note 5 - Fair Value Measurements (Details) $ in Thousands	Mar. 31, 2023 USD ($)	Dec. 31, 2022 USD ($)
Warrant liability	$ 18	$ 61
January 2022 [Member]
Warrant liability	$ 15,200
Warrants and Rights Outstanding, Measurement Input	3.35
January 2022 [Member] | Measurement Input, Price Volatility [Member]
Warrants and Rights Outstanding, Measurement Input	81.3
January 2022 [Member] | Measurement Input, Risk Free Interest Rate [Member]
Warrants and Rights Outstanding, Measurement Input	3.67
January 2022 [Member] | Measurement Input, Expected Term [Member]
Warrants and Rights Outstanding, Measurement Input	4.33
January 2022 [Member] | Measurement Input, Expected Dividend Rate [Member]
Warrants and Rights Outstanding, Measurement Input	0
January 2022 [Member] | Measurement Input, Exercise Price [Member]
Warrants and Rights Outstanding, Measurement Input	55.00

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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
	Mar. 31, 2023	Mar. 31, 2022
Balance, Beginning	$ 61	$ 2,651
Initial fair value at the original issuance date	0	1,110
Change in fair value during the period	(43)	(793)
Fair value of liability classified warrants exercised	0	(1,274)
Balance, Ending	$ 18	$ 1,694

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Note 6 - Stockholders' Equity (Deficit) (Details Textual) - USD ($) $ / shares in Units, $ in Thousands			3 Months Ended
	Jan. 04, 2023	Nov. 15, 2022	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022	Dec. 30, 2022	Aug. 19, 2021
Common Stock, Shares Authorized (in shares)			280,000,000		280,000,000
Common Stock, Par or Stated Value Per Share (in dollars per share)			$ 0.01		$ 0.01
Warrants exercise price							$ 172.50
Proceeds from issuance of common stock and warrants			$ 2,231	$ 0
Payment of equity issuance costs			$ 413	$ 0
Common stock, shares outstanding (in shares)			4,563,977		2,944,306
Common stock, shares issued (in shares)			4,563,977		2,944,306
Private Placement [Member]
Warrants to purchase shares of common stock	1,052,631
Warrants exercise price	$ 2.375
Date of issuance of warrant	5 years
Private Placement [Member] | Pre Funded Warrants [Member]
Warrants to purchase shares of common stock	538,789
Warrants exercise price	$ 0.0001
Common stock warrants	2.3749
January 2023 Registered Direct Offering and Private Placement
Common Stock, Par or Stated Value Per Share (in dollars per share)	$ 0.01
Offering shares (Per share)	476,842
Shares Issued, Price Per Share	$ 2.375
Proceeds from issuance of common stock and warrants	$ 2,500
Payment of equity issuance costs	300
Net Proceeds	2,200
Grant date fair value	$ 200
January 2023 Registered Direct Offering and Private Placement | Pre Funded Warrants [Member]
Offering shares (Per share)	37,000
Warrants exercise price	$ 0.0001
Common stock warrants	2.3749
January 2023 Placement Agent Warrants
Warrants to purchase shares of common stock						63,158
Warrants exercise price						$ 2.9688
Date of issuance of warrant						5 years
Common Stock [Member]
Offering shares (Per share)		50
Common Stock [Member] | Maximum [Member]
Reverse stock split fractional share settlement			1,541,508
Common Stock [Member] | Minimum [Member]
Reverse stock split fractional share settlement			77,080,169
Series A 4.5% Convertible Preferred Stock [Member]
Preferred Stock, Shares Authorized (in shares)			1,000,000
Preferred Stock, Par or Stated Value Per Share (in dollars per share)			$ 0.01
Convertible Preferred Stock, Issuable Upon Conversion of All Shares (in shares)			129
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)			$ 0.01		$ 0.01
Preferred stock, shares issued (in shares)			200,000
Common stock, shares outstanding (in shares)			200,000
Common stock, shares issued (in shares)			200,000

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Note 7 - Equity Incentive Plans (Details Textual) $ / shares in Units, $ in Thousands		3 Months Ended
	Feb. 06, 2023 Days $ / shares shares	Mar. 31, 2023 USD ($) $ / shares shares	Dec. 31, 2013 shares
Number of Options Granted (in shares)		30,620
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value (in dollars per share) | $ / shares		$ 0.51
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value, Vested | $		$ 100
Share-based Payment Arrangement, Nonvested Award, Option, Cost Not yet Recognized, Amount | $		$ 500
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition (Year)		1 year 10 months 2 days
Management [Member]
Number of Options Granted (in shares)	81,500
Stock option [Member] | Management [Member]
Share based compensation expense | $		$ 0
Restricted Stock Units [Member]
Unrecognized compensation cost related to outstanding RSUs | $		$ 100
Number of Restricted Stock Units, Granted		0
Number of Restricted Stock Units, Vested		0
Non-vested, Weighted Average Contractual Life (Years)		1 year 5 months 19 days
Restricted Stock Units [Member] | Management [Member]
Number of Restricted Stock Units, Granted	59,500
Share based compensation expense | $		$ 0
Performance Based Stock Units [Member]
Number of Restricted Stock Units, Granted	68,700
Performance Based Stock Units [Member] | Tranche One [Member]
Exercise price | $ / shares	$ 3.20
Award Vesting Rights Percentage	50.00%
Consecutive trading day period | Days	20
Performance Based Stock Units [Member] | Tranche Two [Member]
Exercise price | $ / shares	$ 4.25
Award Vesting Rights Percentage	50.00%
Consecutive trading day period | Days	20
Performance Based Stock Units [Member] | Management [Member]
Share based compensation expense | $		$ 0
The 2021 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized		70,672
The 2021 Plan [Member] | Restricted Stock Units [Member]
Number of Restricted Stock Units, Granted		44,632
Number of Restricted Stock Units, Vested		0
Exercise price | $ / shares		$ 3.26
Non-vested, Weighted Average Contractual Life (Years)		1 year 5 months 19 days
2013 Plan [Member]
Common Stock, Capital Shares Reserved for Future Issuance (in shares)			0
The 2021 ESPP [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized		34,603
2021 Inducement Plan [Member]
Number of Options Granted (in shares)		6,574

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Note 7 - Equity Incentive Plans - Schedule of Fair Value of Options Granted (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Disclosure Text Block [Abstract]
Weighted-average exercise price per share	$ 2.36	$ 48.67
Weighted-average expected term (years)	5 years 9 months 21 days	5 years 9 months 21 days
Weighted-average risk-free interest rate	3.76%	1.85%
Weighted-average expected dividend yield	$ 0	$ 0
Weighted-average volatility	69.54%	73.77%

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Note 7 - Equity Incentive Plans - Schedule of Summarized Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Disclosure Text Block [Abstract]
Number of Options Outstanding (in shares)	43,658
Number of Options Granted (in shares)	30,620
Number of Options Exercised (in shares)	0
Number of Options Forfeited, expired or cancelled (in shares)	(10,489)
Number of Options Outstanding (in shares)	63,789	43,658
Number of Options Vested and expected to vest (in shares)	63,789
Number of Options Exercisable (in shares)	22,383
Options Outstanding, Weighted Average Exercise Price (in dollars per share)	$ 311.74
Options Granted, Weighted Average Exercise Price (in dollars per share)	2.36
Options Forfeited, expired or cancelled, Weighted Average Exercise Price (in dollars per share)	242.03
Options Outstanding, Weighted Average Exercise Price (in dollars per share)	174.70	$ 311.74
Options Vested and expected to vest, Weighted Average Exercise Price (in dollars per share)	174.70
Options Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 463.61
Options Outstanding, Weighted Average Remaining Contractual Life (Year)	8 years 8 months 12 days	6 years 29 days
Granted, Weighted Average Remaining Contractual Life (Year)	9 years 10 months 17 days
Options Vested and expected to vest, Weighted Average Remaining Contractual Life (Year)	8 years 8 months 12 days
Options Exercisable, Weighted Average Remaining Contractual Life (Year)	6 years 11 months 19 days
Options Outstanding, Aggregate Intrinsic Value	$ 35,644	$ 0
Options Vested and expected to vest, Aggregate Intrinsic Value	35,644
Options Exercisable, Aggregate Intrinsic Value	$ 0

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Note 7 - Equity Incentive Plans - Schedule of Restricted Stock Units Activity (Details) - Restricted Stock Units (RSUs) [Member]	3 Months Ended
	Mar. 31, 2023 $ / shares shares
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Number of Restricted Stock Units, Granted	0
Number of Restricted Stock Units, Vested	0
Non-vested, Weighted Average Contractual Life (Years)	1 year 5 months 19 days
The 2021 Plan [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Number of Restricted Stock Units, Non-vested	0
Number of Restricted Stock Units, Granted	44,632
Number of Restricted Stock Units, Vested	0
Number of Restricted Stock Units, Forfeited	(2,479)
Number of Restricted Stock Units, Non-vested	42,153
Granted, Weighted Average Grant Date Fair Value | $ / shares	$ 3.25
Forfeited, Weighted Average Grant Date Fair Value | $ / shares	3.15
Non-vested, Weighted Average Grant Date Fair Value | $ / shares	$ 3.26
Non-vested, Weighted Average Contractual Life (Years)	1 year 5 months 19 days

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Note 7 - Equity Incentive Plans - Schedule of Stock-based Compensation for all Stock Awards (Details - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Share-based compensation expense	$ 93	$ 358
Research and Development Expense [Member]
Share-based compensation expense	49	52
General and Administrative Expense [Member]
Share-based compensation expense	$ 44	$ 306

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Note 8 - Collaborations and License Agreements (Details Textual))	3 Months Ended		12 Months Ended
	Mar. 31, 2023 USD ($) Agreement	Mar. 31, 2022 USD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2022 USD ($)
Collaborations and License Agreements Upfront Fee			$ 1,000,000.0
Royalty Expense			$ 6,750,000
License revenue	$ 300,000
Accounts Receivable	$ 250,000			$ 0
Milestone Payments		$ 0
License Agreements with the Regents of the University of California [Member]
Number of License Agreements | Agreement	3
Accrued Royalties, Current	$ 36,000,000			$ 13,000,000
License Agreements with the Regents of the University of California [Member] | Maximum [Member]
Royalty Rate, Portion of Sublicense Income to Be Paid, Percentage of One-third of Upfront Payment and Milestone Payment Received		35.00%
License Agreements with the Regents of the University of California [Member] | Minimum [Member]
Royalty Rate, Portion of Sublicense Income to Be Paid, Percentage of One-third of Upfront Payment and Milestone Payment Received		30.00%

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Note 9 - Commitments and Contingencies (Details Textual)				3 Months Ended
	Jun. 01, 2022 USD ($)	May 24, 2022	May 09, 2022	Jun. 30, 2023 USD ($)	Mar. 31, 2023 USD ($)	Mar. 31, 2022 USD ($)	Dec. 31, 2022 USD ($)	Sep. 09, 2022	May 12, 2022 ft²
Loss Contingencies [Line Items]
Operating Lease, Right-of-Use Asset					$ 275,000		$ 300,000
Operating Lease, Liability, Current					109,000		105,000
Operating Lease, Liability, Noncurrent					182,000		211,000
Accrued severance and benefits					5,000		180,000
Imputed interest					38,000
Accrued Liabilities [Member]
Loss Contingencies [Line Items]
Accrued severance and benefits					5,000		180,000
Cost Reduction Plan [Member]
Loss Contingencies [Line Items]
Reduction In Work Force								20.00%
Restructuring Costs					0	$ 0
Employee Severance And Benefit
Loss Contingencies [Line Items]
Payments for restructuring					175,000
Employee Severance And Benefit | Forecast [Member]
Loss Contingencies [Line Items]
Payments for restructuring				$ 5,000
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					0		$ 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					275,000
Operating Lease, Liability, Current					109,000
Operating Lease, Liability, Noncurrent					$ 182,000
Lessee, Operating Lease, Discount Rate					10.75%
Lessee, Operating Lease, Remaining Lease Term					2 years 4 months 24 days
Operating Lease, Expense					$ 32,000	$ 49,000
Imputed interest					38,000
Total remaining future minimum lease payments					$ 291,000

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Note 9 - Commitments and Contingencies - Schedule of Maturities of the Company's operating lease liabilities (Details) $ in Thousands	Mar. 31, 2023 USD ($)
Commitments and Contingencies Disclosure [Abstract]
2023 (remaining)	$ 100
2024	136
2025	93
Total operating lease payments	329
Less: imputed interest	(38)
Total operating lease obligations	$ 291

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Note 10 - Related Party Transactions (Details Textual) - USD ($)	Mar. 31, 2023	Dec. 31, 2022	Oct. 11, 2022	Aug. 19, 2021
Warrants to purchase common stock				7,549
Warrants exercise price				$ 172.50
Warrants,expiration date	Aug. 26, 2026
Due to related parties, total	$ 107,500	$ 141,250
Chief Executive Officer [Member]
Compensation to the Former Chief Executive Officer			$ 22,000

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Note 11 - Subsequent Events (Details Textual) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended
	Apr. 03, 2023	Mar. 31, 2023	Mar. 31, 2022	Jan. 04, 2024	Jan. 04, 2023	Aug. 19, 2021
Subsequent Event [Line Items]
Warrants exercise price						$ 172.50
Proceeds from issuance of common stock and warrants		$ 2,231	$ 0
Payment of equity issuance costs		$ 413	$ 0
Private Placement [Member]
Subsequent Event [Line Items]
Warrants to purchase shares of common stock					1,052,631
Warrants exercise price					$ 2.375
Warrants and Rights Outstanding, Term (Year)					5 years
April 2023 Placement Agent Warrants [Member]
Subsequent Event [Line Items]
Warrants to purchase shares of common stock	136,363
Warrants exercise price	$ 3.30
Warrants and Rights Outstanding, Term (Year)	5 years
Pre Funded Warrants [Member] | Private Placement [Member]
Subsequent Event [Line Items]
Warrants to purchase shares of common stock					538,789
Common stock warrants					2.3749
Warrants exercise price					$ 0.0001
Subsequent Event [Member] | Private Placement [Member]
Subsequent Event [Line Items]
Warrants to purchase shares of common stock	2,272,723			1,052,631
Warrants exercise price	$ 2.64			$ 2.375
Warrants and Rights Outstanding, Term (Year)	5 years			5 years
Subsequent Event [Member] | April2023 Registered Direct Offering And Private Placement [Member]
Subsequent Event [Line Items]
Issuance of stock during period, Shares	756,317
Shares Issued, Price Per Share (in dollars per share)	$ 2.64
Proceeds from issuance of common stock and warrants	$ 6,000
Net Proceeds	5,400
Payment of equity issuance costs	$ 600
Subsequent Event [Member] | Unregistered Shares [Member] | April 2023 Offering [Member]
Subsequent Event [Line Items]
Issuance of stock during period, Shares	455,242
Shares Issued, Price Per Share (in dollars per share)	$ 2.64
Subsequent Event [Member] | Pre Funded Warrants [Member] | Private Placement [Member]
Subsequent Event [Line Items]
Warrants to purchase shares of common stock	1,061,164			538,789
Common stock warrants	2.6399
Warrants exercise price	$ 0.0001			$ 0.0001