PALISADE BIO, INC. Fair Value Disclosure
4. Fair Value Measurements
The following tables reflect the Company's fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2025 and December 31, 2024 (in thousands):
December 31, 2025 |
|
Financial Statement Classification |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
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Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money Market Funds |
|
Cash and cash equivalents |
|
$ |
132,399 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
132,399 |
|
Total |
|
|
|
$ |
132,399 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
132,399 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Share Liability |
|
Share Liability |
|
$ |
313 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
313 |
|
Derivative Liability |
|
Derivative Liability |
|
|
62 |
|
|
|
— |
|
|
|
— |
|
|
|
62 |
|
Contingent Consideration Obligation |
|
Contingent Consideration Obligation |
|
|
— |
|
|
|
— |
|
|
|
266 |
|
|
|
266 |
|
Total |
|
|
|
$ |
375 |
|
|
$ |
— |
|
|
$ |
266 |
|
|
$ |
641 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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December 31, 2024 |
|
Financial Statement Classification |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money Market Funds |
|
Cash and cash equivalents |
|
$ |
9,763 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
9,763 |
|
Total |
|
|
|
$ |
9,763 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
9,763 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Warrant Liability |
|
Warrant Liability |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
2 |
|
|
$ |
2 |
|
Contingent Consideration Obligation |
|
Contingent Consideration Obligation |
|
|
— |
|
|
|
— |
|
|
|
150 |
|
|
|
150 |
|
Total |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
152 |
|
|
$ |
152 |
|
Cash and Cash Equivalents
The Company invests its excess cash in money market funds that are classified as level 1 in the fair value hierarchy due to their short-term maturity of three months or less and are measured at fair value based on quoted prices in active markets for identical assets.
Share Liability and Derivative Liability
The Company's share liability and derivative liability (refer to Note 5, Stockholders' Equity) are each remeasured and carried at fair value at each balance sheet date based on the market value of the Company's common stock, which is a level 1 input.
Contingent Consideration Obligation
Pursuant to the Giiant License Agreement, the Company incurred a contingent consideration obligation related to future milestone payments. The Company has an obligation to make contingent consideration payments to Giiant, in either cash or shares of the Company’s common stock solely at the Company’s election, upon the achievement of development milestones. On August 2, 2024, the Company and Giiant entered into an amendment to the Giiant License Agreement, which among other things, reduced the milestone payments due to Giiant upon the achievement of certain development milestones (see Note 7, Collaborations and License Agreements, for further details).
The Company’s contingent consideration obligation is carried at fair value based on level 3 inputs. The fair value of the contingent consideration obligation is determined using a probability-based model that estimates the likelihood of success in achieving each of the defined milestones that is then discounted to present value using the Company's incremental borrowing rate. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in fair value measurement accounting. The significant
assumptions used in the calculation of the fair value as of December 31, 2025 included a discount rate of 15.26% and management's updated projections of the likelihood of success in achieving the one remaining defined milestone based on empirical, published industry data.
The following table summarizes the activity of the Company’s Level 3 contingent consideration obligation, which is measured at fair value on a recurring basis (in thousands):
|
|
Year Ended December 31, |
|
|||||
Contingent Consideration Obligation |
|
2025 |
|
|
2024 |
|
||
Fair value at beginning of year |
|
$ |
150 |
|
|
$ |
204 |
|
Change in fair value during the year |
|
|
351 |
|
|
|
(54 |
) |
Cash payments during the year |
|
|
(235 |
) |
|
|
— |
|
Fair value at end of year |
|
$ |
266 |
|
|
$ |
150 |
|
On October 16, 2025, the first of the Giiant Milestone Payments (see Note 7, Collaborations and License Agreements, for further details) was achieved with the dosing of the first patient in the Company's Phase 1b clinical trial of PALI-2108 in a Fibrostenotic Crohn's Disease ("FSCD") cohort. Pursuant to the terms of the Giiant License Agreement, the Company settled this Giiant Milestone Payment in cash in the amount of $235,000 within 30 days of the date the milestone was met. The remaining amount of the contingent consideration liability of approximately $266,000 was recognized as a noncurrent liability in Contingent consideration obligation in the consolidated balance sheet as of December 31, 2025 since it is not expected to be settled within one-year of the balance sheet date. As of December 31, 2024, the entire amount of the contingent consideration obligation of approximately $150,000 was classified as a noncurrent liability in Contingent consideration obligation in the consolidated balance sheet.
Financial Instruments Not Required to be Remeasured at Fair Value
The Company's other financial assets and liabilities, including restricted cash, other current receivables, accounts payable, and accrued liabilities are not remeasured to fair value, as the carrying amount of each approximates its fair value due to the short-term nature of these instruments. The carrying value of the Company’s insurance financing debt also approximates its fair value as of December 31, 2025 and December 31, 2024 due to the short-term nature of the instrument and the market rate of interest, which is based on level 2 inputs.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
None of the Company’s non-financial assets or liabilities are recognized at fair value on a nonrecurring basis.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 20, 2026 | Showing above |
| 2024 | Mar 24, 2025 | |
| 2023 | Mar 26, 2024 | |
| 2022 | Mar 22, 2023 | |
| 2021 | Mar 17, 2022 | |
| 2020 | Mar 22, 2021 | |
| 2019 | Mar 27, 2020 | |
| 2018 | Mar 22, 2019 | |
| 2017 | Apr 2, 2018 | |
| 2016 | Mar 23, 2017 | |
| 2015 | Mar 14, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.