PALI 10-K & 10-Q changes, risk factors and insider trading

Our business depends on the successful clinical development, regulatory approval, and commercialization of our therapeutic compounds, including our lead asset PALI-2108.

On October 9, 2024, Health Canada approved our Canadian Clinical Trial Application (“CTA”) to commence a Phase 1 clinical trial for PALI-2108 in Canada. On November 7, 2024, we commenced the Phase 1 clinical trial of PALI-2108. Our success depends on the development and clinical success of PALI-2108, which is subject to a number of risks, including:

our ability to retain third-party CROs on terms acceptable to us for the conduct and oversight of our current and anticipated clinical trials, including our Phase 1 clinical trial for PALI-2108trials;

the approval by the FDA, Health CanadaCanada, or other regulatory authorities to commence the marketing of our product candidates;

If we do not achieve one or more of these factors, many of which are beyond our control, in a timely manner or at all, we could experience significant delays or an inability to obtain regulatory approvals or commercialize our proposed product candidates. For example, we are currently enrolling and dosing subjects in our initial Phase 1 clinical trial of PALI-2108 in Canada. We maymust experience delays or difficulties in finding suitable trial subjects, or in completing enrollment. Such delays may result in increased costs and the failure to complete the Phase 1 clinical trial of PALI-2108 in Canada in a timely manner. Even if successfully completed, we mustalso complete a number of additional clinical trials prior to obtaining regulatory approval to commercialize our product candidates. Accordingly, we cannot make assurances that we will ever be able to generate sufficient revenue through the sale of any product candidates, if approved, to internally fund our business.

There are substantial risks in drug development, and, as a result, we may not be able to successfully develop any product candidate.candidate, including our lead clinical product candidate, PALI-2108.

We have initiatedcommenced a Phase 1our clinical trialtrials of PALI-2108 infor ourthe target indicationtreatment of IBD.UC and CD. Drug development requires a significant amount of capital and can take a long time to reach commercial viability, if it can be achieved at all. During the development process, we may experience technological barriers that we may be unable to overcome. Further, certain underlying premises in our development programs have not been proven. Because of these and similar uncertainties, it is possible that our product candidates will not reach commercialization. If we are unable to successfully develop and commercialize our product candidates, including our lead clinical product candidate, PALI-2108, we will be unable to generate revenue or build a sustainable or profitable business.

We depend on our license agreement with Giiant to permit us to use patents and patent applications relating to PALI-2108. Termination of these rights or the failure to comply with our obligations under the license agreement could materially harm our business and prevent us from developing or commercializing PALI-2108, our lead clinical product candidate.

The clinical development of product candidates is very expensive, time-consuming, difficult to design and implement, and the outcomes are inherently uncertain. Most product candidates that commence clinical trials are never approved by regulatory authorities for commercialization and of those that are approved, many do not generate sufficient revenue to cover their costs of development. In addition, we, any partner with which we may collaborate, the FDA, Health Canada, or any similar regulatory authority, state and local agencies, counterpart agencies in foreign countries, or the applicable Institutional Review Board ("IRB") at our trial sites, may suspend, delay, require modifications to or terminate our clinical trials, once begun, at any time.

We haveare commencedconducting a Phase 1 clinical trial forof ulcerative colitisPALI-2108 in Canada. However, we have not received approval from the FDA to commence any clinical trials in the U.S., and there is no guarantee that we will be able to obtain such approval in a timely manner, if at all. If our Phase 1 clinical trial is successful and we seek to initiate a Phase 2 clinical trial in the U.S, there is no certainty that the FDA will accept the data generated from our Canadian trial. The FDA’s acceptance of foreign clinical data is subject to certain conditions, including whether the trial was conducted in accordance with good clinical practices (“GCP”) and whether the FDA can validate the trial data through on-site inspections or other means. Moreover, the FDA will assess whether the trial design, patient population, endpoints, and other factors meet the standards expected for clinical trials conducted within the U.S.

Furthermore, while the FDA does have the ability to approve drugs that have undergone clinical trials in foreign jurisdictions, including Canada, approval is generally contingent on demonstrating that the trial data align with FDA standards and regulatory expectations. It is also possible that we may be required to conduct additional trials in the U.S. to address any concerns regarding the applicability of the foreign trial data to the U.S. population or regulatory environment. There can be no assurance that we will successfully obtain FDA approval to initiate a Phase 12 clinical trial in the U.S. or that if our Canadian trial is successful, a subsequent Phase 2 trial.

We are currently enrolling subjects in the Phase 1 clinical trial of PALI-2108 in Canada. Identifying and qualifying subjects to participate in our current and anticipated future clinical trials is critical to our success. Our inability to enroll patients in our clinical trials on a timely basis could result in the trials being delayed or never completed.

If we have difficulty enrolling a sufficient number of patients to conduct our clinical trials as planned, we may need to delay, limit or terminate ongoing or planned clinical trials, any of which would have an adverse effect on our business, financial condition, results of operations and prospects. There can be no assurances that we will be able to complete enrollment for our anticipated Phase 1 clinical trial for PALI-2108, and if we fail to do so, we may not be able to complete the trial on a timely basis, or at all.

We expect that our operations and development of PALI-2108 will require substantially more capital than we currently have, and we cannot guarantee when or if we will be able to secure such additional funding.

We have historically funded our operations and prior development efforts through the sale of our securities. BasedWe on our existing cash resources and our current business plan,believe we do notcurrently have adequatesufficient capital to fund our anticipated operations through themajor completionclinical development milestones including a Phase 2 primary efficacy readout of PALI-2108 for UC that is expected in the developmentsecond half of PALI-2108.2027 Asand a result,Phase 2 primary efficacy readout of PALI-2108 CD that is expected in 2028. Notwithstanding the foregoing, we willmay need to secure additional funding. If we are not able to obtain additional capital in the future or on acceptable terms, we may need to curtail our anticipated clinical trials as well as our operations.

Our product candidates, including our lead clinical product candidate, PALI-2108, may cause undesirable side effects or have other unexpected properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in post-approval regulatory action.

PALI-2108 will require significant development, clinical testing, possibly additional preclinical studies, and the investment of significant funds to gain regulatory approval before it can be commercialized. Although we commencedare conducting a Phase 1 clinical trial in Canada, there can be no assurances that gaining regulatory approval in Canadawe will result ingain regulatory approval from the FDA, or any other regulatory agency, includingto conduct our Phase 2 and/or Phase 3 clinical trials in the FDAU.S., ofor theother U.S.foreign jurisdictions. The results of our human clinical testing of PALI-2108 may not meet applicable regulatory requirements. If approved in a jurisdiction, PALI-2108 may also require the completion of post-market studies. The process of completing clinical testing and obtaining the required approvals is expected to take a number of years and require the use of substantial resources. Further, there can be no assurance that PALI-2108 will be shown to be safe and effective inthroughout our clinical trials or receive applicable regulatory approvals.

We are a biopharmaceutical company with a limited operating history that may make it difficult to evaluate the success of our business to date and to assess our future viability. While we were initially formed in 2001, our operations, to date,operations have historically been limited to business planning, raising capital and other research and development activities related to our product candidates. We additionally adopted a new business plan in September 2023 upon entering into the Giiant License Agreement. Since that time, we have not yet demonstrated an ability to successfully complete any clinical trials and have never completed the development of any product candidate,candidate through to commercialization, nor have we ever generated any revenue from product sales. Consequently, we have no meaningful operations upon which to evaluate our business, and predictions about our future success or viability may not be as accurate as they could be if we had a longer operating history or a history of successfully developing and commercializing biopharmaceutical products.

We have no approved drugs and thus have not begun to market or generate revenues from the commercialization of any products. We only have a limited history upon which we can evaluate our ability to develop PALI-2108. We commenced our initial Phase 1 clinical trial of PALI-2108 in November of 2024. Thus,While we have announced positive results from the SAD, MAD and FE cohorts in healthy volunteers, as well as the UC cohort portion of the study, and have dosed patients in an exploratory Phase 1b cohort in FSCD, we have limited experience and have not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields, particularly in the biopharmaceutical area.

Demonstratedemonstrate safety and efficacy of our drugproduct candidates in multiple human clinical studies;

Receivereceive approval from Healththe CanadaFDA and/or approval from similar foreign regulatory bodies, such as the FDAbodies;

Retainretain qualified CROs to oversee and manage ourthe Phasecontinued 1development clinical trial forof PALI-2108 through current and future clinical trials;

We may choose to discontinue the development or commercialization any of our product candidates, or may choose not to commercialize product candidates in approved indications, at any time during development or after approval, which could adversely affect us and our operations.

Disruptions at the FDA and other, other government agencies or comparable foreign regulatory authorities may also slow the time necessary for new drugs to be reviewed or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, the U.S. government has shut down several timestimes, including recently from October 1, 2025 through November 12, 2025, and certain regulatory agencies, such as the FDA,FDA and the SEC, have had to furlough critical employees from the FDA, SEC, and stopother government offices, halting critical activities. If aanother prolonged government shutdown occurs, it could significantly impact the ability of the FDA and other governmental agencies to timely review and process our regulatory submissions,submissions in a timely manner, which could have a material adverse effect on our business. Furthermore, in our operations as a public company, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.

We anticipatecurrently rely on and we intend to continue relying on third-party CROs and other third parties to conduct and oversee our clinical trials. If these third parties do not meet our requirements or otherwise conduct the trials as required, we may not be able to satisfy our contractual obligations forfor, obtain regulatory approval for, or commercialize our product candidates.

We have retained a CRO to oversee our Phase 1 clinical trial for PALI-2108 in Canada. We are likelyintend to rely on third-party CROs to conduct and oversee our other anticipated clinical trials and other aspects of product development. We also expect to rely on various medical institutions, clinical investigators and contract laboratories to conduct our trials in accordance with our clinical protocols and all applicable regulatory requirements, including the FDA’s regulations and 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. We expect to rely heavily on these parties for the execution of our clinical trials and any additionally required preclinical studies and will control only certain aspects of their activities. We and our CROs and other third-party contractors will be required to comply with GCP and GLP regulations, which are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities, such as Health Canada, with respect to our Phase 1 clinical trial for PALI-2108. Regulatory authorities enforce these GCP or GLP regulations through periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of these third parties fail to comply with applicable GCP and GLP regulations, or reveal noncompliance from an audit or inspection, any clinical data generated in our clinical trials may be deemed unreliable, and the FDA or other regulatory authorities may require us to perform additional clinical trials before approving our or our partners’ marketing applications. We cannot assure that upon inspection by a given regulatory authority such regulatory authority will determine whether any of our clinical trials comply with applicable GCP or GLP regulations. In addition, our clinical trials generally must be conducted with compounds produced under cGMP regulations. Our failure to comply with these regulations and policies may require us to repeat clinical trials, which would be costly and delay the regulatory approval process. In the event that we are unable to retain a qualified CRO for our Phase 1 clinical trial for PALI-2108, or any otherof our anticipated clinical trial,trials, it would delay planned clinical operations and result in additional cost and expense. Additionally, if our current CRO for our Phase 1 clinical trial in Canada or if any of our CROs that we retain in the future were to terminate their involvement with us, there is no assurance that we would be able to enter into arrangements with alternative CROs or do so on commercially reasonable terms.

We do not currently have, nor do we currently plan to acquire, the infrastructure or capability to supply, store, manufacture or distribute clinical or commercial quantities of drug substances or products. Although we have entered into a commercial supply agreement to provide us with such drug substances or products for our current Phase 1 clinical trial, our future ability to develop and commercialize, if approved, our product candidates is dependent on our ability to obtain the APIs and other substances and materials used in our 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 we fail to develop and maintain supply and other technical relationships with these third parties, we may be unable to continue to develop or commercialize our products and product candidates, which could adversely affect us and our business.

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

We are a clinical-stage biopharmaceutical company focuseddeveloping onnext-generation, developingonce-daily, oral phosphodiesterase-4 (“PDE4”) inhibitor prodrugs designed for targeted delivery to the terminal ileum and advancing novel therapeutics for patients living with autoimmune, inflammatory, and fibrotic diseases.colon. Our lead clinical product candidate, PALI-2108, is being developed as a treatment for patients living with inflammatory bowel disease ("IBD"), including ulcerative colitis ("UC") and Fibrostenotic Crohn's disease ("FSCDCD").

In addition to conducting clinical studies in Canada, we anticipate filingdata anfrom the exploratory Phase 1b cohort in FSCD together with results from the Phase 1/1b UC program will support Investigational New Drug Application (“IND”) withsubmissions to the United States Food and Drug Administration (“"FDA”") duringfor 2025.a IfPhase our2 INDUC is approved, we anticipate commencing clinical trials of PALI-2108study in the United States ("U.S.") during the firstsecond quarter of 2026 and a Phase 2 CD study in the second half of 2026.

Our operating loss for the year ended December 31, 20242025 was approximately $14.9$18.1 million, which consisted of research and development expenseexpenses and general and administrative expenseexpenses of approximately $9.1$10.2 million and $5.8$7.9 million, respectively. Net cash used in operating activities was approximately $12.2$10.8 million for the year ended December 31, 2024,2025, which includes a $14.4$16.8 million net loss adjusted for $1.4$1.6 million of net cash inflows related to changes in operating assets and liabilities and certain non-cash items impacting the net loss. Net cash provided by financing activities was approximately $9.6$134.4 million for the year ended December 31, 2024.2025. As of December 31, 2025, we have $133.4 million in cash, cash equivalents and restricted cash.

TheOur research and development expenses include:

Research and development expenses recognized in the year ended December 31, 2023 consisted primarily of costs directly incurred for the clinical development of our legacy product candidate, LB1148. On August 9, 2023, based on the results of the efficacy and safety data of the U.S. Phase 2 PROFILE study of LB 1148, we terminated the development of LB1148. Through the first nine monthsmajority of 2024, the nature of our research and development expenses incurred related primarily to the preclinical activities associated with our joint development of PALI-2108 with our collaboration partner, Giiant.Giiant Pharma Inc. ("Giiant"). With the approval to commence the Phase 1 clinical trial of PALI-2108, which we received from Health Canada on October 9, 2024, pursuant to terms of the research and collaboration agreement that we have with Giiant ("Giiant License Agreement"), we have assumed all development, manufacturing, regulatory and commercialization activities and costs of PALI-2108. Therefore, we expect our clinical research and development costs directly attributable to the clinical trials of PALI-2108 towere continuehigher in 2025 as compared to increase in 2025,2024, offset by a decrease in joint development costs associated with the Giiant License Agreement. We expect our clinical research and development costs will continue to increase in 2026 as we advance PALI-2108 through clinical studies in UC and CD.

Our direct research and development expenses are tracked by product candidate and consist primarily of external costs, such as fees paid under third-party license agreements and to outside consultants, CROs, clinical site,sites, contract manufacturing organizations (“CMOs”) and research laboratories in connection with our preclinical development, process development, manufacturing, clinical development, and regulatory activities. We do not allocate employee costs and costs associated with our discovery efforts, laboratory supplies and facilities, including other indirect costs, to specific product candidates because these costs are deployed across multiple programs and, as such, are not separately classified. As needed, we manage third parties that are engaged to conduct our (i) research activities, (ii) preclinical, clinical and translational science development activities, (iii) drug manufacturing activities, and (iiiiv) process development. When we perform any research and development or manufacturing activities under a co-development agreement, we record the expense reimbursement from the co-development partner as a reduction to research and development expense once the reimbursement amount is approved for payment by the co-development partner. Pursuant to agreements where we perform research and development activities under a joint development plan, such as our research and collaboration with Giiant, qualifying development costs are expensed as research and development costs as incurred. We recognize expense payments from Giiant, if any, as a reduction to research and development expense once the expense payments are realized or realizable, which is when we receive the cash or we have an undisputed claim to the cash that is probable of collection.

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

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

We expect to incur substantial losses for the foreseeable future. Since our inception, we have financed our operations through the sales of our securities, issuance of debt, the exercise of common stock warrants, and to a lesser degree, grants and research contracts as well as the licensing of our intellectual property to third parties. Refer to the paragraph under the heading "Going Concern" in the Financial Overview section above for management's assessment of our ability to continue as a going concern.

Changes in funding for the U.S. Food and Drug Administration (“FDA”) and other government agencies or comparable foreign regulatory authorities could hinder their ability to hire and retain key leadership and other personnel, or otherwise prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent these agencies or authorities from performing normal business functions on which the operations of our business may rely, which could negatively impact our business.

Investing in our securities involves a high degree of risk. Before investing in our securities, you should carefully consider the risks and uncertainties discussed under “Risk Factors” in our latest annual report on Form 10-K and subsequent quarterly reports on Form 10-Q and current reports on Form 8-K. Before making an investment decision, you should carefully consider each of the following risks described below, together with all other information set forth in or incorporated in this Quarterly Report on Form 10-Q, including the condensed consolidated financial statements and the related notes. The risks described in this Quarterly Report on Form 10-Q are not the only ones we face, but those that we consider to be material. Additional risks not presently known to us or that we currently believe are immaterial may also significantly impair our business operations and could result in a complete loss of your investment. Past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future reporting periods. If any of the following risks actually occur, our business, financial condition, results of operations or cash flow could be seriously harmed. This could cause the market price of our common stock to decline, and you could lose all or part of your investment.

On October 9, 2024, Health Canada approved our Canadian Clinical Trial Application (“CTA”) to commence a Phase 1 clinical trial for PALI-2108 in Canada. On November 7, 2024, we commenced the Phase 1 clinical trial of PALI-2108. On May 27, 2025, we announced positive results from the SAD, MAD and FE cohorts in healthy volunteers and on August 7, 2025 and September 17, 2025, we announced positive results from the UC cohort portion of the study. The clinical study successfully met its primary endpoints of safety, tolerability, and PK. On October 16, 2025, we dosed our first patients in an exploratory Phase 1b cohort in FSCD to evaluate the safety, tolerability, PK, and PD of once-daily oral dosing of PALI-2108 over a 14-day treatment period as well as evaluate tissue-level pharmacology and molecular responses using paired ileal biopsies and peripheral blood mononuclear cells. On March 30, 2026, we announced positive results from the exploratory Phase 1b cohort in FSCD. The study demonstrated favorable safety and tolerability, robust PD target engagement in ileal tissue, and encouraging early signals of clinical activity in the five patients with FSCD that were dosed. On June 29, 2026, we announced that the FDA has cleared our Investigational New Drug Application (“IND”) application for PALI-2108, enabling initiation of our global Phase 2 ASCENTRA-UC clinical trial. In parallel with our ASCENTRA-UC clinical trial, we continue to advance PALI-2108 development plans for the treatment of CD and currently anticipate submitting an IND application to the FDA for a Phase 2 ASCENTRA-CD clinical trial in the second half of 2026.

timely and successful completion of required clinical trials, which may be significantly slower or costlier than we anticipate and/or producesproduce results that do not achieve the primary or secondary endpoints of the trial(s);

the successful initiation and completion of our currentcurrently planned clinical trials and any additionallyadditional required preclinical studies, if anystudies;

We recently completed a Phase 1 clinical trial of PALI-2108 in Canada.Canada and have received approval from the FDA to conduct a Phase 2 clinical trial of PALI-2108 in the U.S. However, our Phase 2 clinical trial of PALI-2108 for the treatment of UC is designed as a global trial, and we have not received approval from theother FDAforeign regulatory authorities to commence any clinical trials inoutside of the U.S., and there is no guarantee that we will be able to obtain such approval in a timely manner, if at all. TheAlthough FDA’srequirements vary by jurisdiction, the acceptance of foreign clinical data is subject to certain conditions, including whether the trial was conducted in accordance with good clinical practices (“GCP”) and whether the FDAforeign regulatory authority can validate the trial data through on-site inspections or other means. Moreover, the FDAforeign regulatory authority will assess whether the trial design, patient population, endpoints, and other factors meet the standards expected for clinical trials conducted within thethat U.S.foreign jurisdiction.

In addition, regulatory approval for clinical trials and eventual drug approval in theforeign U.S.jurisdictions iscan a complex process,be influenced by several factors, including:

the adequacy and relevance of the Phase 1 clinical trial data in supporting progression to Phase 2, as evaluated by the FDAforeign regulatory authority;

the ability of the trial to meet safety, efficacy, and other scientific requirements set by the FDA,foreign regulatory authority, which may differ from those of Health Canada;

whether the foreign clinical trial was conducted under ana FDA-recognizedrecognized regulatory authority, and whether FDAforeign regulatory authority oversight is possible through monitoring or inspection of clinical sites; and the FDA’sforeign regulatory authority's consideration of the risk-benefit ratio for continuing clinical development in the U.S.,foreign jurisdiction, particularly based on data from a non-U.S.population population.other than their own.

Identifying and qualifying subjects to participate in our currentcurrently planned and anticipated future clinical trials is critical to our success. Our inability to enroll patients in our clinical trials on a timely basis could result in the trials being delayed or never completed.

We have historically funded our operations and prior development efforts through the sale of our securities. We believe we currently have sufficient capital to fund our operations through major clinical development milestones including a Phase 2 primary efficacy readout of PALI-2108our forASCENTRA-UC UCclinical trial that is expected in the second half of 2027 and a Phase 2 primary efficacy readout of PALI-2108our CDplanned ASCENTRA-CD clinical trial that is expected in early 2028. Notwithstanding the foregoing, we may need to secure additional funding. If we are not able to obtain additional capital in the future or on acceptable terms, we may need to curtail our anticipated clinical trials as well as our operations.

Unforeseen side effects from PALI-2108 could arise either during clinical development or, if approved, after it has been marketed. Undesirable side effects could cause us, any partners with which we 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 Healththe Canada,FDA, or comparable regulatory authorities like theHealth FDA.Canada.

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

preclinical and clinical data required for the submission of an IND or CTA;

PALI-2108 will require significant development, clinical testing, possibly additional preclinical studies, and the investment of significant funds to gain regulatory approval before it can be commercialized. Although we recently completedreceived aregulatory approval from the FDA to conduct our Phase 12 clinical trial inof Canada,PALI-2108 for the treatment of UC, there can be no assurancesassurance that we will gainreceive regulatory approval from the FDA, or any other regulatory agency, to conduct our Phase 2 clinical trial of PALI-2108 for the treatment of CD and/or Phase 3 clinical trials in the U.S., or other foreign jurisdictions. The results of our human clinical testing of PALI-2108 may not meet applicable regulatory requirements. If approved in a jurisdiction, PALI-2108 may also require the completion of post-market studies. The process of completing clinical testing and obtaining the required approvals is expected to take a number of years and require the use of substantial resources. Further, there can be no assurance that PALI-2108 will be shown to be safe and effective throughout our clinical trials or receive applicable regulatory approvals.

safety and efficacy results attained in preclinical and clinical studies to date may not be indicative of results that are obtained in our future clinical trials;

We have no approved drugs and thus have not begun to market or generate revenues from the commercialization of any products. We only have a limited history upon which we can evaluate our ability to develop PALI-2108. We commenced our initial Phase 1 clinical trial of PALI-2108 in November of 2024.2024 and we plan to commence our Phase 2 clinical trial of PALI-2108 for the treatment of UC in the second half of 2026. While we have completed thisthe Phase 1 clinical trial,trial and expect to commence the Phase 2 clinical trial soon, we have limited experience and have not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields, particularly in the biopharmaceutical area.

receive approval from the FDA and/or approval from similar foreign regulatory bodies to conduct future clinical trials as necessary;

We retained a CRO to oversee our Phase 1 clinical trial for PALI-2108 in Canada.Canada and we have retained PSI, a leading global CRO in IBD, to manage the execution of our global Phase 2 clinical trials of PALI-2108. We intend to continue to rely on third-party CROs to conduct and oversee our other anticipated clinical trials and other aspects of product development. We also expect to rely on various medical institutions, clinical investigators and contract laboratories to conduct our trials in accordance with our clinical protocols and all applicable regulatory requirements, including the FDA’s regulations and 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. We expect to rely heavily on these parties for the execution of our clinical trials and any additionally required preclinical studies and will control only certain aspects of their activities. We and our CROs and other third-party contractors will be required to comply with GCP and GLP regulations, which are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities, such as Health Canada, with respect to our clinical trials for PALI-2108. Regulatory authorities enforce these GCP or GLP regulations through periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of these third parties fail to comply with applicable GCP and GLP regulations, or reveal noncompliance from an audit or inspection, any clinical data generated in our clinical trials may be deemed unreliable, and the FDA or other regulatory authorities may require us to perform additional clinical trials before approving our or our partners’ marketing applications. We cannot assure that upon inspection by a given regulatory authority such regulatory authority will determine whether any of our clinical trials comply with applicable GCP or GLP regulations. In addition, our clinical trials generally must be conducted with compounds produced under cGMP regulations. Our failure to comply with these regulations and policies may require us to repeat clinical trials, which would be costly and delay the regulatory approval process. In the event that we are unable to retain a qualified CRO for any of our anticipated clinical trials, it would delay planned clinical operations and result in additional cost and expense. Additionally, if any of our CROs that we retain currently or in the future were to terminate their involvement with us, there is no assurance that we would be able to enter into arrangements with alternative CROs or do so on commercially reasonable terms.

In addition, foreign CMOsCDMOs may be subject to U.S. legislation, sanctions, trade restrictions and other foreign regulatory requirements which could increase the cost or reduce the supply of material available to us, delay the procurement or supply of such material or have an adverse effect on our ability to secure significant commitments from governments to purchase our potential therapies. For example, in December of 2025 the BIOSECURE Act was recently enacted, which prohibits U.S. federal agencies from entering into or renewing a contract with any company that uses biotechnology equipment or services produced or provided by a “biotechnology company of concern” in the performance of that contract. It would also prohibit loans or grant funding from U.S. federal agencies to entities that use any biotechnology equipment or services produced or provided by a “biotechnology company of concern” in the performance of the government grant or loan. The BIOSECURE Act restricts the ability of pharmaceutical companies that enter into contracts with or receive funding from U.S. federal agencies from purchasing certain services or equipment from certain Chinese biotechnology companies. The BIOSECURE Act does not specifically name WuXi AppTec, our current CMO for the manufacture and supply of API for PALI-2108, or Crystal Formulation Services, our drug product vendor, as “biotechnology companies of concern.” However, the Act provides a mechanism for Chinese companies to be designated as a “biotechnology company of concern” in the future, and it is possible that WuXi AppTec and/or Crystal Formulation Services could receive that designation in the future, which means we could be potentially restricted from pursuing U.S. federal government business for our products in the future if we continue to use WuXi AppTec, Crystal Formulation Services or other suppliers or partners identified as “biotechnology companies of concern.” In addition to the BIOSECURE Act, any additional executive action, legislative action, or potential sanctions with China could materially impact our work with these Chinese companies. U.S. executive agencies have the ability to designate entities and individuals on various governmental prohibited and restricted parties lists. Depending on the designation, potential consequences can range from a comprehensive prohibition on all transactions or dealings with designated parties, or a limited prohibition on certain types of activities, such as exports and financing activities, with designated parties.

Any supply shortages, quality concerns, or failure to obtain sufficient API, excipients, or components from our suppliers, including disruptions caused by, among other things, supply chain delays, public health emergencies, climate events, or political unrest would adversely affect our business, results of operations and financial condition. In particular, our suppliers may be impacted by epidemics, pandemics or other disease outbreaks or public health emergencies and general macroeconomic conditions, including inflationary pressures, economic slowdown or recession, relatively high interest rates, imposed tariffs, changes in monetary policy, potential U.S. federal government shutdowns, geopolitical conflictsconflicts, such as the conflict involving the U.S., Israel and Iran, and other hostilities in the Middle East, and financial institution instability, all of which may result in supply delays and cost increases.

The manufacturing process for pharmaceutical products is highly regulated, and regulatory agencies may from time to time shut down facilities that they believe do not comply with regulations. Our third-party manufacturers and suppliers are subject to numerous FDAhealth and Health Canadaauthority regulations, including those governing manufacturing processes, stability testing, record keeping, product serialization, and quality standards. Similar regulations apply in other jurisdictions where we may conduct business. Our third-party manufacturers and suppliers are independent entities who are subject to their own operational and financial risks which are out of our control.

If our remaining material weakness, which management concluded is still present as of the date of thesethis financialquarterly statements,report on Form 10-Q is not remediated, or if we identify further material weaknesses in our internal controls, our failure to establish and maintain effective disclosure controls and procedures and internal control over financial reporting could result in material misstatements in our condensed consolidated financial statements and a failure to meet our reporting and financial obligations.

As of the last business day of our most recently completed second fiscal quarter, although our public float was greater than $75 million, because our annual revenues are less than $250$100 million and therefore,we have a public float of less than $700 million, we qualify as a smaller reporting company under the low-revenue exemption of the SEC rules. As a smaller reporting company, we can take advantage of reduced disclosure requirements, such as simplified executive compensation disclosures and reduced financial statement disclosure requirements in our SEC filings. Such reduced disclosures in our SEC filings may make it harder for investors to analyze our results of operations and financial prospects. We cannot predict if investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We may take advantage of the reporting exemptions applicable to a smaller reporting company until we are no longer a smaller reporting company, which status would end once we have a public float greater than $250 million.million In that event, we could still be a smaller reporting company if ourand annual revenues arein belowexcess of $100 millionmillion, andor we have a public float of lessgreater than $700 million.

We are entitled under our Certificate of Incorporation to issue up to 300,000,000450,000,000 shares of common stock and 7,000,000 “blank check” shares of preferred stock. Shares of our blank check preferred stock provide our Board with broad authority to determine voting, dividend, conversion, and other rights of such preferred stock. As of MarchJune 31,30, 2026, we had outstanding, common stock or securities convertible into common stock, totaling 254,189,782257,466,354 shares. As a result, we are authorized to issue up to an additional 45,810,218192,533,646 shares of common stock or common stock equivalents under our Certificate of Incorporation. 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, we are authorized to issue up to an additional 6,800,000 shares of preferred stock. We expect that significant additional capital will be needed in the future to continue our planned operations. To the extent we raise additional capital by issuing equity securities, our existing stockholders will likely experience substantial dilution. We may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner that we determine from time to time. If we sell common stock, convertible securities or other equity securities in more than one transaction, investors will likely be materially diluted by the initial and subsequent sales. Additionally, new investors may gain rights superior to existing stockholders, depending on the terms of such transactions and types of securities. Pursuant to our 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 stockholders to experience additional dilution, which could cause our stock price to fall.

Our business could be adversely affected by the effects of health pandemics or epidemics, such as the COVID-19 pandemic, which could cause significant disruptions in our operations and those of our current or future CMOs,CDMOs, CROs, and other third parties upon whom we rely.

Health pandemics or epidemics, such as the COVID-19 pandemic, have in the past and could again in the future result in quarantines, stay-at-home orders, remote work policies, or other similar events that may disrupt businesses, delay our research and development programs and timelines, negatively impact productivity and increase risks associated with cybersecurity, the future magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations. More specifically, these types of events may negatively impact personnel at third-party manufacturing facilities or the availability or cost of materials, which could disrupt our supply chain. Moreover, our trials may be negatively affected. Clinical site initiation and patient enrollment may be delayed due to prioritization of hospital resources. Some patients may not be able or willing to comply with trial protocols if quarantines impede patient movement or interrupt healthcare services. Our ability to recruit and retain patients, principal investigators, and site staff (who as healthcare providers may have heightened exposure) may be hindered, which would adversely affect our trial operations. Disruptions or restrictions on our ability to travel to monitor data from our trials, or to conduct trials, or the ability of patients enrolled in our trials or staff at trial sites to travel, as well as temporary closures of our trial partners and CMOs’CDMOs’ facilities, would negatively impact our trial activities. In addition, we rely on independent clinical investigators, CROs, and other third-party service providers to assist us in managing, monitoring, and otherwise carrying out certain of our preclinical studies and clinical trials, including the collection of data from our trials, and the effects of health pandemics or epidemics, such as the COVID-19 pandemic, may affect their ability to devote sufficient time and resources to our programs or to travel to sites to perform work for us. Similarly, our trials could be delayed and/or disrupted. As a result, the expected timeline for data readouts, including incompleteness in data collection and analysis and other related activities, and certain regulatory filings may be negatively impacted, which would adversely affect our ability to obtain regulatory approval for and to commercialize our product candidates, increase our operating expenses, and adversely affect our business, financial condition, results of operations, and prospects. In addition, impact on the operations of the FDA or comparable foreign regulatory authorities could negatively affect our planned trials and approval processes. Finally, economic conditions and business activity may be negatively impacted and may not recover as quickly as anticipated.

Financial instability or a general decline in economic conditions in the U.S. and other countries, caused by political instability, conflict,conflicts, such as the conflict involving the U.S., Israel and Iran, and other hostilities in the Middle East, and economic challenges resulting from general health crises, has led to market disruptions, including significant volatility in commodity prices, credit and capital market instability, and supply chain interruptions. Such volatility, instability, and interruptions have contributed to record inflation globally and could adversely affect our operations. Increased inflation may result in higher operating costs (including labor costs), reduced liquidity, and limitations on our ability to access credit or raise capital on acceptable terms, if at all. Existing free trade laws and regulations, such as the United States-Mexico-Canada Agreement, provide certain beneficial duties and tariffs for qualifying imports and exports, subject to compliance with applicable classification and other requirements. However, changes in trade laws or policies, particularly increased trade restrictions, tariffs, or taxes on imports from countries where we manufacture products, such as Canada, China, and Mexico, could have a material adverse effect on our business and financial results. Since February of 2025, the U.S. government has enacted, and continues to enact, a series of new tariffs, including a tariff on all imports and additional “reciprocal” tariffs targeting imports from specified countries. These tariffs and other changes in U.S. trade policy have triggered, and could continue to trigger, retaliatory actions by affected countries, including retaliatory measures on U.S. goods and other protectionist measures that could limit our ability to offer our products and services outside of the U.S. The tariff policy environment has been and can be expected to continue to be dynamic. The ultimate impact of these newly enacted and potential future tariffs or other restrictions on international trade will depend on various factors, including the ultimate levels of such tariffs, how long such tariffs remain in place, and how other countries respond to the U.S. tariffs. Consequently, we cannot assure that any strategies we implement to mitigate the effects of such tariffs or trade actions will be successful. In addition, the U.S. Federal Reserve has raised, and may continue to raise, interest rates in response to concerns about inflation. Inflation, combined with reduced government spending and volatility in financial markets, may further increase economic uncertainty and heighten associated risks. Economic conditions and uncertainty regarding the broader macroeconomic environment are beyond our control and may make obtaining necessary debt or equity financing more difficult, costly, and dilutive. While we believe we have adequate capital resources to meet current working capital and capital expenditure requirements, an economic downturn or a significant increase in expenses could necessitate additional financing under less favorable conditions, including unattractive interest rates or excessively dilutive terms for existing stockholders. Failure to secure necessary financing in a timely manner and on favorable terms could materially and adversely affect our stock price and force us to delay or abandon clinical development plans.

Results of Operations — Analysis of our financial results comparing the three and six months ended MarchJune 31,30, 2026 and 2025.

We are a clinical-stage biopharmaceutical company developing next-generation, once-daily, oral phosphodiesterase-4 (“PDE4”) inhibitornext-generation prodrugs designed for targetedpatients deliverywith to the terminal ileuminflammatory and colon.fibrotic diseases. Our lead clinical product candidate, PALI-2108, is being developedadvanced into Phase 2 clinical trials as a treatment for patients living with inflammatory bowel disease ("IBD"), including ulcerative colitis ("UC") and Crohn's disease ("CD"). Despite the availability of multiple biologic and small-molecule therapies, many patients with UC and CD do not achieve durable remission, lose response over time, or discontinue treatment because of safety or tolerability limitations. We believe PALI-2108 has the potential to address these limitations through once-daily oral dosing, targeted lower-intestinal bioactivation and broad PDE4-mediated anti-inflammatory activity.

We are developing a biomarker-based patient selection approach that we believe may aid clinicians in identifying patients who may better respond to PALI-2108, thereby improving the rate of clinical response previously demonstrated with PDE4 inhibitors. Our approach involves the use of clinical and multiomics data from large patient populations to identify PDE4-related biomarkers that are correlated with IBD, its severity, and which are modified with local PDE4-inhibitor therapy in the colon. Based on our research, we have initiated the development of corresponding biomarker assays for these PDE4-related biomarkers that we expect to use in our future clinical studies with the aim of developing regulatory approvedregulatory-approved tests for selecting potential responders to PALI-2108.

On May 27, 2025, we announced positive results from the SAD, MAD and FE cohorts in healthy volunteers and on August 7, 2025 and September 17, 2025, we announced positive results from the open-label exploratory Phase 1b UC patient cohort portion of the study. The clinicalThis study also successfully met its primary endpoints of safety, tolerability, and PK. Although the results are preliminary and require validation in randomized, controlled trials, we also reported that the patients included in the UC cohort demonstrated rapid and consistent clinical activity, withtrials, all five of the patients respondingin tothe exploratory Phase 1b UC patient cohort demonstrated clinical improvement during treatment.

On October 16, 2025, we dosed our first patients in anthe open-label exploratory Phase 1b FSCD patient cohort in fibrostenotic Crohn's disease ("FSCD") to evaluate the safety, tolerability, PK, and PD of once-daily oral dosing of PALI-2108 over a 14-day treatment period as well as evaluate tissue-level pharmacology and molecular responses using paired ileal biopsies and peripheral blood mononuclear cells. The Phase 1b study incorporated paired ileal biopsies and advanced molecular analyses, including cAMP quantification and RNA sequencing, to characterize treatment-induced changes in inflammatory and fibrotic signaling pathways.

On March 30, 2026, we announced positive results from the open-label exploratory Phase 1b cohortFSCD inpatient FSCD.cohort. The study demonstrated favorable safety and tolerability, robust PD target engagement in ileal tissue, and encouraging early signals of clinical activity in the five patients with FSCD that were dosed.activity. We believe these datafindings support the continued development of PALI-2108 as a potential first therapy designed to addressfor both the inflammatory and fibrotic components of Crohn’s disease.CD.

We anticipate dosinginitiating patient enrollment in the first patient in a Phase 2ASCENTRA-UC clinical trial to assess PALI-2108’s efficacy, safety, and tolerability in patientsthe second half of 2026, with moderateprimary toefficacy severeresults UCexpected in the thirdsecond quarterhalf of 2026.2027.

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

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

Comparison of the three months ended MarchJune 31,30, 2026 and 2025

The following table summarizes our results of operations for the three months ended MarchJune 31,30, 2026 and 2025 (in thousands):

Our research and development expenses increased by approximately $5.4$5.7 million from approximately $1.7 million for the three months ended MarchJune 31,30, 2026, compared2025 to approximately $7.4 million for the three months ended MarchJune 31,30, 2025.2026. The increase is primarily attributable to (i) an approximately $2.4$2.6 million increase in research and development employee-related expenses, (ii)and an approximately $1.2$3.1 million net increase in clinical trial-related expenses associated with the ongoing clinical trials of PALI-2108, (iii) an approximately $1.2 million increase in chemistry, manufacturing and controls ("CMC") expenses, and (iv) an approximately $0.6 million reduction in research and development expenses directly related to the preclinical joint development of PALI-2108 thatprogram was recognized in the three months ended March 31, 2025 and did not recur in three months ended March 31, 2026.expenses.

The increase in research and development employee-related expenses for the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025, was primarily due to an approximately $2.0 million increase in non-cash share-based compensation expense and an approximately $0.4$0.6 million increase in research and development salaries and benefits expense due to higher research and development headcount necessary to support our PALI-2108 development strategy.

Our general and administrative expenses increased by approximately $3.0$3.6 million from approximately $1.4$1.2 million for the three months ended MarchJune 31,30, 2025 to approximately $4.4$4.8 million for the three months ended MarchJune 31,30, 2026. The increase was primarily as a result of (i) an approximately $2.5$3.0 million increase in general and administrative employee-related expenses duedriven toby an approximately $2.3$2.7 million increase in non-cash share-based compensation expense and an approximately $0.2$0.3 million increase in general and administrative salaries and benefits, and(ii) an approximately $0.5$0.3 million increase in professional fees, primarily legal fees.fees, (iii) an approximately $0.1 million increase in shareholder services expense due to the timing of our annual meeting of stockholders, which occurred in the second quarter of 2026 compared to the prior year's annual meeting of stockholders, which occurred in the fourth quarter of 2025, (iv) an approximately $0.1 million increase in patent-related costs, and (v) an approximately $0.1 million increase in taxes and insurance.

Other income, net, for the three months ended MarchJune 31,30, 2026 and 2025 consists primarily of dividend income from our investments of excess cash in money market funds with maturities of three months or less. The increase of $1.1 million for the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025, is due to the increased investment of excess cash in money market accounts after the October 2025 Offering, which is further described below.

The October 2025 Offering, as further described below, significantly increased our available working capital and our ability to fund our operations into the foreseeable future. Based on our current operating plan and our cash and cash equivalents balance of $132.6$125.2 million as of MarchJune 31,30, 2026, management believes that we have sufficient capital to fund our operations through major clinical development milestones including a Phase 2 primary efficacy readout of PALI-2108our forPhase UC2 ASCENTRA-UC clinical trial that is expected in the second half of 2027 and a Phase 2 primary efficacy readout of PALI-2108our forplanned CDPhase 2 ASCENTRA-CD clinical trial that is expected in early 2028.

Pursuant to the underwritten offering of common stock and pre-funded warrants we completed on October 2, 2025 (the "October 2025 Offering"), we issued and sold (a) 113,240,564 shares of our common stock, par value $0.01 per share, at a public offering price of $0.70 per share, and (b) 83,914,280 pre-funded warrants to purchase one share of the our common stock, par value $0.01 per share, at a public offering price of $0.6999 per share. Net proceeds from the offering, including the full exercise of the underwriter's over-allotment option, were approximately $127.6 million, consisting of gross cash proceeds of $138.0 million less underwriting discounts and commissions and other cash equity issuance costs of approximately $10.4 million. We intend to use the net proceeds from the offering for working capital and general corporate purposes, including the development of PALI-2108 for the treatment of UC and CD.

As of MarchJune 31,30, 2026, we had $132.7$125.2 million in cash, cash equivalents and restricted cash. The following table shows a summary of our cash flows for the threesix months ended MarchJune 31,30, 2026 and 2025 (in thousands):

Cash used in operating activities was approximately $2.3$11.5 million for the threesix months ended MarchJune 31,30, 2025,2026, which reflects an approximately $2.2$20.2 million net loss adjusted for (i) approximately $0.2$0.4 million of net cash outflows related to changes in operating assets and liabilities, and (ii) certain non-cash items impacting the net loss, consisting primarily of an approximately $0.1$9.1 million non-cash expense recognized for stock-based compensation and related charges. The net cash outflow from operating assets and liabilities was primarily attributable to (i) a net cash outflow of approximately $0.6$1.0 million driven by the payment of annual employee cash bonuses in the period, partially offset by the current period employee cash bonus accrual, (ii) a net cash outflow of approximately $0.9 million driven by increased prepaid expenses and other current assets, due primarily to the timing of payments for certain services and deferred equity issuance costs recognized that are associated with our shelf registration statement filed in May of 2026, and (iii) the recognition of a $0.5 million accounts receivable for license revenue recognized for the achievement of a milestone under the Newsoara Co-Development Agreement, of which there was none at December 31, 2025. These cash outflows were partially offset by an approximately $2.0 million cash inflow from an increase in accounts payable and accrued liabilities as of MarchJune 31,30, 2025,2026, compared to December 31, 2024. The increase in accounts payable and accrued liabilities was2025, primarily due to higher accruedpreclinical clinicaland trial-relatedtranslational science and CMC expenses partiallyin offsetthe by lower accrued joint development expenses associated with our research collaboration and license agreement with Giiant.period.

For the threesix months ended MarchJune 31,30, 2026, cash provided by financing activities of approximately $3.1$3.3 million was primarily attributable to net cash proceeds of approximately $3.2$3.3 million from the issuance of our common stock to an investor and the issuance of our common stock in association with the Crohn's and Colitis Foundation Research Program Funding Agreement, both of which are described in Note 5, Stockholders' Equity in Part I Item 1 of this Quarterly Report on Form 10-Q, and net cash proceeds of approximately $0.2 million from the exercise of our common stock purchase warrants by certain investors. These cash proceeds were partially offset by the payment of equity issuance costs of approximately $0.1 million related to thecertain Octoberrecently 2025completed Offeringfinancings and payments of approximately $0.1 million made on our insurance financing arrangement, which totaledexpired approximatelyin $0.1the million.second quarter of 2026 and was not renewed.

For the threesix months ended MarchJune 31,30, 2025, cash used in financing activities of approximately $0.3 million was attributable to the payment of equity issuance costs of approximately $0.2 million, primarily related to our underwritten equity offering completed in December of 2024, and payments made on our insurance financing arrangement of approximately $0.1 million.

We have incurred significant operating losses and negative cash flows from operations since our inception. To date, we have not been able to generate significant revenues nor achieve operating profitability. Based upon our cash and cash equivalents balance of $132.6$125.2 million as of MarchJune 31,30, 2026, we believe we have sufficient capital to fund our operations through major clinical development milestones including a Phase 2 primary efficacy readout of PALI-2108our forPhase UC2 ASCENTRA-UC clinical trial that is expected in the second half of 2027 and a Phase 2 primary efficacy readout of PALI-2108our forplanned CDASCENTRA-CD clinical trial that is expected in early 2028. Notwithstanding, should our anticipated level of operations significantly change, we may require additional financing sooner than anticipated. Further, beyond the readout expected in early 2028, we will require additional financing to continue at our expected level of operations, which would include a potential Phase 3 clinical trial and possible commercialization of PALI-2108 for the treatment of UC and CD.

Our critical accounting estimates are identifieddiscussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our most recently filed Annual Report on Form 10-K and include the discussion of estimates usedrelated forto accrued research and development expenses and our contingent consideration obligation. We believe there hashave been no significant changes in our critical accounting policies and significant judgments and estimates since those disclosed in our most recently filed Annual Report on Form 10-K.

See Note 2 to the notes to the condensed consolidated financial statements forin thePart quarter1 endedItem March1 31, 2026, included elsewhere inof this Quarterly Report on Form 10-Q.