UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DCD.C. 20549
FORM 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 31, 2017
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: 001-15543
PALATIN TECHNOLOGIES, INC. | ||
(Exact name of registrant as specified in its charter) |
Delaware | 95-4078884 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
4B Cedar Brook Drive Cranbury, New Jersey | 08512 | |
(Address of principal executive offices) | (Zip Code) |
(609) 495-2200
(Registrant'sRegistrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||
Common Stock, par value $0.01 per share | PTN | NYSE American |
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, as amended 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.
Indicate by check mark whether the registrant has submitted electronically, and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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) forof 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 ☒
Indicate the number of February 9, 2018, 195,373,239 shares outstanding of each of the registrant’s classes of common stock, par value $0.01 per share, were outstanding.
Table of Contents
Page | ||||
5 | ||||
Consolidated Balance Sheets as of | 5 | |||
6 | ||||
7 | ||||
8 | ||||
9 | ||||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 21 | |||
25 | ||||
25 | ||||
26 | ||||
26 | ||||
26 | ||||
27 | ||||
27 | ||||
27 | ||||
28 | ||||
29 |
2 |
Table of Contents |
Special Note Regarding Forward-Looking Statements
In this Quarterly Report on Form 10-Q (this “Quarterly Report”) references to “we”, “our”, “us”“we,” “our,” “us,” the “Company” or “Palatin” meansmean Palatin Technologies, Inc. and its subsidiary.
Statements in this Quarterly Report, on Form 10-Q, as well as oral statements that may be made by us or by our officers, directors, or employees acting on our behalf, that are not historical facts constitute “forward-looking statements”,statements,” which are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The forward-looking statements in this Quarterly Report on Form 10-Q do not constitute guarantees of future performance. Investors are cautioned that statements that are not strictly historical statementsfacts contained in this Quarterly Report, on Form 10-Q, including, without limitation, the following are forward looking statements:
· | our significant operating losses since our inception and our need to obtain additional financing has caused management to determine there is substantial doubt regarding our ability to continue as a going concern; | |
· | our ability to obtain additional financing on terms acceptable to us, or at all, including unavailability of funds or delays in receiving funds as a result of economic disruptions; | |
· | our expectation that we will incur losses for the foreseeable future and may never achieve or maintain profitability; | |
· | our business, financial condition, and results of operations may be adversely affected by increases in costs of and delays in conducting human clinical trials and the performance of our contractors and suppliers, reduction in our productivity or the productivity of our contractors and suppliers, supply chain constraints, and labor shortages; | |
· | our ability to successfully commercialize Vyleesi® (the trade name for bremelanotide) for the treatment of premenopausal women with hypoactive sexual desire disorder (“HSDD”) in the United States; | |
· | our ability to manage the infrastructure to successfully manufacture, through contract manufacturers, Vyleesi, and to successfully market and distribute Vyleesi in the United States; | |
· | our ability to meet post-marketing commitments of the U.S. Food and Drug Administration (“FDA”) for Vyleesi; | |
· | our expectations regarding the potential market size and market acceptance for Vyleesi for HSDD in the United States and elsewhere in the world; | |
· | our expectations regarding performance of our exclusive licensees of Vyleesi for the treatment of premenopausal women with HSDD, which is a type of female sexual dysfunction (“FSD”), including: |
o | Shanghai Fosun Pharmaceutical Industrial Development Co. Ltd. (“Fosun”), a subsidiary of Shanghai Fosun Pharmaceutical (Group) Co., Ltd., for the territories of the People’s Republic of China, Taiwan, Hong Kong S.A.R. and Macau S.A.R. (collectively, “China”), and | |
o | Kwangdong Pharmaceutical Co., Ltd. (“Kwangdong”) for the Republic of Korea (“Korea”); |
· | our expectations and the ability of our licensees to timely obtain approvals and successfully commercialize Vyleesi in countries other than the United States; | |
· | the results of clinical trials with our late-stage products, including PL9643, an ophthalmic peptide solution for dry eye disease (“DED”), which entered Phase 3 clinical trials in the fourth quarter of calendar year 2021, with top line results from the first Phase 3 clinical trial projected by December 31, 2023, PL8177, an oral peptide formulation for treatment of ulcerative colitis, which entered Phase 2 clinical trials in the third quarter of calendar year 2022, and a proof-of-concept melanocortin agonist clinical trial for diabetic nephropathy, which entered a Phase 2 clinical in the fourth quarter of calendar year 2022; | |
· | estimates of our expenses, future revenue and capital requirements; | |
· | our ability to achieve profitability; | |
· | our ability to advance product candidates into, and successfully complete, clinical trials; | |
· | the initiation, timing, progress and results of future preclinical studies and clinical trials, and our research and development programs; | |
· | the timing or likelihood of regulatory filings and approvals; |
3 |
Table of Contents |
· | our expectations regarding the clinical efficacy and utility of our melanocortin agonist product candidates for treatment of inflammatory and autoimmune related diseases and disorders, including ocular indications; | |
· | our ability to compete with other products and technologies treating the same or similar indications as our product candidates; | |
· | the ability of our third-party collaborators to timely carry out their duties under their agreements with us; | |
· | the ability of our contract manufacturers to perform their manufacturing activities for us in compliance with applicable regulations; | |
· | our ability to recognize the potential value of our licensing arrangements with third parties; | |
· | the potential to achieve revenues from the sale of our product candidates; | |
· | our ability to obtain adequate reimbursement from private insurers and other healthcare payers; | |
· | our ability to maintain product liability insurance at a reasonable cost or in sufficient amounts, if at all; | |
· | the performance and retention of our management team, senior staff professionals, other employees, and third-party contractors and consultants; | |
· | the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and technology in the United States and throughout the world; | |
· | our compliance with federal and state laws and regulations; | |
· | the timing and costs associated with obtaining regulatory approval for our product candidates; | |
· | the impact of fluctuations in foreign exchange rates; | |
· | the impact of any geopolitical instability, economic uncertainty, financial markets volatility, or capital markets disruption resulting from the ongoing military conflict between Russia and Ukraine, and any resulting effects on our revenue, financial condition, or results of operations; | |
· | the impact of legislative or regulatory healthcare reforms in the United States; | |
· | our ability to adapt to changes in global economic conditions as well as competing products and technologies; and | |
· | our ability to remain listed on the NYSE American stock exchange. |
Such forward-looking statements involve risks, uncertainties and other factors that could cause our actual results to be materially different from historical results or from any results expressed or implied by such forward-looking statements. Our future operating results are subject to risks and uncertainties and are dependent upon many factors, including, without limitation, the risks identified under the caption “Risk Factors” and elsewhere in this report, in our AnnualQuarterly Report, on Form 10-K for the year ended June 30, 2017, and any of those made in our other reports filed with the U.S. Securities and Exchange Commission (“SEC”(the “SEC”) filings.
Palatin Technologies® is aand Vyleesi® are registered trademarktrademarks of Palatin Technologies, Inc.
4 |
Table of Contents |
PART I -– FINANCIAL INFORMATION
Item 1. Financial Statements
December 31, 2017 | June 30, 2017 | |
ASSETS | ||
Current assets: | ||
Cash and cash equivalents | $34,958,048 | $40,200,324 |
Available-for-sale investments | - | 249,837 |
Accounts receivable | - | 15,116,822 |
Prepaid expenses and other current assets | 1,288,504 | 1,011,221 |
Total current assets | 36,246,552 | 56,578,204 |
Property and equipment, net | 178,767 | 198,153 |
Other assets | 556,916 | 56,916 |
Total assets | $36,982,235 | $56,833,273 |
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY) | ||
Current liabilities: | ||
Accounts payable | $703,767 | $1,551,367 |
Accrued expenses | 5,527,776 | 10,521,098 |
Notes payable, net of discount and debt issuance costs | 7,889,152 | 7,824,935 |
Capital lease obligations | - | 14,324 |
Deferred revenue | 9,548,228 | 35,050,572 |
Total current liabilities | 23,668,923 | 54,962,296 |
Notes payable, net of discount and debt issuance costs | 2,321,124 | 6,281,660 |
Deferred revenue | 500,000 | - |
Other non-current liabilities | 866,135 | 753,961 |
Total liabilities | 27,356,182 | 61,997,917 |
Stockholders’ equity (deficiency): | ||
Preferred stock of $0.01 par value – authorized 10,000,000 shares: | ||
Series A Convertible: issued and outstanding 4,030 shares as of December 31, 2017 and June 30, 2017 | 40 | 40 |
Common stock of $0.01 par value – authorized 300,000,000 shares: | ||
issued and outstanding 195,373,239 shares as of December 31, 2017 and 160,515,361 shares as of June 30, 2017, respectively | 1,953,732 | 1,605,153 |
Additional paid-in capital | 350,787,078 | 349,974,538 |
Accumulated other comprehensive loss | - | (590) |
Accumulated deficit | (343,114,797) | (356,743,785) |
Total stockholders’ equity (deficiency) | 9,626,053 | (5,164,644) |
Total liabilities and stockholders’ equity (deficiency) | $36,982,235 | $56,833,273 |
PALATIN TECHNOLOGIES, INC. | ||||||||
and Subsidiary | ||||||||
Consolidated Balance Sheets | ||||||||
(unaudited) | ||||||||
|
|
|
|
|
|
| ||
|
| September 30, 2023 |
|
| June 30, 2023 |
| ||
ASSETS |
|
|
|
|
|
| ||
Current assets: |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 5,524,973 |
|
| $ | 7,989,582 |
|
Marketable securities |
|
| - |
|
|
| 2,992,890 |
|
Accounts receivable |
|
| 1,348,500 |
|
|
| 2,915,760 |
|
Inventories |
|
| 1,598,251 |
|
|
| 526,000 |
|
Prepaid expenses and other current assets |
|
| 1,333,733 |
|
|
| 1,897,281 |
|
Total current assets |
|
| 9,805,457 |
|
|
| 16,321,513 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
| 597,553 |
|
|
| 684,910 |
|
Right-of-use assets - operating leases |
|
| 787,538 |
|
|
| 876,101 |
|
Other assets |
|
| 56,916 |
|
|
| 56,916 |
|
Total assets |
| $ | 11,247,464 |
|
| $ | 17,939,440 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ (DEFICIENCY) EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 2,269,640 |
|
| $ | 4,303,527 |
|
Accrued expenses |
|
| 7,152,271 |
|
|
| 6,511,059 |
|
Short-term operating lease liabilities |
|
| 326,947 |
|
|
| 354,052 |
|
Short-term finance lease liabilities |
|
| 107,805 |
|
|
| 106,392 |
|
Other current liabilities |
|
| 3,752,850 |
|
|
| 3,856,800 |
|
Total current liabilities |
|
| 13,609,513 |
|
|
| 15,131,830 |
|
|
|
|
|
|
|
|
|
|
Long-term operating lease liabilities |
|
| 481,046 |
|
|
| 544,323 |
|
Long-term finance lease liabilities |
|
| 18,527 |
|
|
| 46,014 |
|
Other long-term liabilities |
|
| 2,027,400 |
|
|
| 2,083,200 |
|
Total liabilities |
|
| 16,136,486 |
|
|
| 17,805,367 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 12) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ (deficiency) equity: |
|
|
|
|
|
|
|
|
Preferred stock of $0.01 par value – authorized 10,000,000 shares: shares issued and outstanding designated as follows: Series A Convertible: authorized 4,030 shares as of September 30, 2023: issued and outstanding 4,030 shares as of September 30, 2023 and June 30, 2023 |
|
| 40 |
|
|
| 40 |
|
Common stock of $0.01 par value – authorized 300,000,000 shares: issued and outstanding 11,946,646 shares as of September 30, 2023 and 11,656,714 shares as of June 30, 2023 (Note 1) |
|
| 119,466 |
|
|
| 116,567 |
|
Additional paid-in capital |
|
| 416,415,454 |
|
|
| 415,553,049 |
|
Accumulated deficit |
|
| (421,383,982 | ) |
|
| (415,535,583 | ) |
Total stockholders’ (deficiency) equity |
|
| (4,889,022 | ) |
|
| 134,073 |
|
Total liabilities, and stockholders’ (deficiency) equity |
| $ | 11,247,464 |
|
| $ | 17,939,440 |
|
The accompanying notes are an integral part of these consolidated financial statements.
PALATIN TECHNOLOGIES, INC. | ||||
and Subsidiary | ||||
Consolidated Statements of Operations | ||||
(unaudited) | ||||
Three Months Ended December 31, | Six Months Ended December 31, | |||
2017 | 2016 | 2017 | 2016 | |
REVENUES: | ||||
License and contract revenue | $10,612,153 | $- | $37,553,661 | $- |
OPERATING EXPENSES: | ||||
Research and development | 6,045,884 | 8,134,575 | 20,208,981 | 19,360,659 |
General and administrative | 1,625,189 | 1,306,300 | 3,169,764 | 2,515,646 |
Total operating expenses | 7,671,073 | 9,440,875 | 23,378,745 | 21,876,305 |
Income (Loss) from operations | 2,941,080 | (9,440,875) | 14,174,916 | (21,876,305) |
OTHER INCOME (EXPENSE): | ||||
Interest income | 81,356 | 5,991 | 133,082 | 12,636 |
Interest expense | (391,363) | (594,535) | (848,040) | (1,218,520) |
Total other expense, net | (310,007) | (588,544) | (714,958) | (1,205,884) |
Income (Loss) before income taxes | 2,631,073 | (10,029,419) | 13,459,958 | (23,082,189) |
Income tax benefit, net | 399,120 | - | 173,865 | - |
NET INCOME (LOSS) | $3,030,193 | $(10,029,419) | $13,633,823 | $(23,082,189) |
Basic net income (loss) per common share | $0.02 | $(0.06) | $0.07 | $(0.13) |
Diluted net income (loss) per common share | $0.01 | $(0.06) | $0.07 | $(0.13) |
Weighted average number of common shares outstanding used in computing basic net income (loss) per common share | 197,238,056 | 177,798,511 | 197,175,316 | 171,823,390 |
Weighted average number of common shares outstanding used in computing diluted net income (loss) per common share | 202,711,616 | 177,798,511 | 200,430,824 | 171,823,390 |
5 |
Table of Contents |
PALATIN TECHNOLOGIES, INC. | ||||||||
and Subsidiary | ||||||||
Consolidated Statements of Operations | ||||||||
(unaudited) | ||||||||
|
|
|
|
|
|
| ||
|
| Three Months Ended September 30, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
REVENUES |
|
|
|
|
|
| ||
Product revenue, net |
| $ | 2,105,977 |
|
| $ | 869,654 |
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
Cost of products sold |
|
| - |
|
|
| 86,496 |
|
Research and development |
|
| 5,014,630 |
|
|
| 6,027,031 |
|
Selling, general and administrative |
|
| 3,200,244 |
|
|
| 3,508,798 |
|
Total operating expenses |
|
| 8,214,874 |
|
|
| 9,622,325 |
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
| (6,108,897 | ) |
|
| (8,752,671 | ) |
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE) |
|
|
|
|
|
|
|
|
Investment income |
|
| 71,630 |
|
|
| 88,489 |
|
Foreign currency (loss) gain |
|
| 159,750 |
|
|
| 418,376 |
|
Interest expense |
|
| (10,882 | ) |
|
| (9,602 | ) |
Total other income (expense), net |
|
| 220,498 |
|
|
| 497,263 |
|
NET LOSS |
| $ | (5,888,399 | ) |
| $ | (8,255,408 | ) |
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per common share |
| $ | (0.48 | ) |
| $ | (0.86 | ) |
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding used in computing basic and diluted net loss per common share |
|
| 12,170,699 |
|
|
| 9,634,684 |
|
The accompanying notes are an integral part of these consolidated financial statements.
PALATIN TECHNOLOGIES, INC. | ||||
and Subsidiary | ||||
Consolidated Statements of Comprehensive Income (Loss) | ||||
(unaudited) | ||||
Three Months Ended December 31, | Six Months Ended December 31, | |||
2017 | 2016 | 2017 | 2016 | |
Net income (loss) | $3,030,193 | $(10,029,419) | $13,633,823 | $(23,082,189) |
Other comprehensive income (loss): | ||||
Unrealized gain (loss) on available-for-sale investments | 153 | 515 | 590 | (62) |
Total comprehensive income (loss) | $3,030,346 | $(10,028,904) | $13,634,413 | $(23,082,251) |
6 |
Table of Contents |
PALATIN TECHNOLOGIES, INC. | ||||||||||||||||||||||||||||||||||||||||||||||||
and Subsidiary | ||||||||||||||||||||||||||||||||||||||||||||||||
Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ (Deficiency) Equity | ||||||||||||||||||||||||||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Three Months Ended September 30, 2023 |
|
|
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| ||||||||||||||||||||||||
|
| Redeemable Convertible Preferred Stock |
|
| Stockholders' (Deficiency) Equity |
| ||||||||||||||||||||||||||||||||||||||||||
|
| Series B |
|
| Series C |
|
|
|
| Series A Convertible Preferred Stock |
|
| Common Stock |
|
| Additional |
|
|
|
|
| |||||||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Escrowed Proceeds |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Paid-in Capital |
|
| Accumulated Deficit |
|
| Total |
| ||||||||||||
Balance June 30, 2023 |
|
| - |
|
| $ | - |
|
|
| - |
|
| $ | - |
|
| $ | - |
|
|
| 4,030 |
|
| $ | 40 |
|
|
| 11,656,714 |
|
| $ | 116,567 |
|
| $ | 415,553,049 |
|
| $ | (415,535,583 | ) |
| $ | 134,073 |
|
Stock-based compensation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 98,372 |
|
|
| 984 |
|
|
| 389,352 |
|
|
| - |
|
|
| 390,336 |
|
Withholding taxes related to restricted stock units |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (25,467 | ) |
|
| (255 | ) |
|
| (56,146 | ) |
|
| - |
|
|
| (56,401 | ) |
Sale of common stock, net of costs |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 217,027 |
|
|
| 2,170 |
|
|
| 529,199 |
|
|
| - |
|
|
| 531,369 |
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (5,888,399 | ) |
|
| (5,888,399 | ) |
Balance September 30, 2023 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 4,030 |
|
|
| 40 |
|
|
| 11,946,646 |
|
|
| 119,466 |
|
|
| 416,415,454 |
|
|
| (421,423,982 | ) |
|
| (4,889,022 | ) |
|
|
|
|
|
|
|
|
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|
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|
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|
|
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|
|
Three Months Ended September 30, 2022 |
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| |||||||
|
| Redeemable Convertible Preferred Stock | Stockholders' (Deficiency) Equity |
| ||||||||||||||||||||||||||||||||||||||||||||
|
| Series B |
|
|
| Series C |
|
|
|
|
| Series A Convertible Preferred Stock |
|
| Common Stock | Additional |
| |||||||||||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Escrowed Proceeds |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Paid-in Capital |
|
| Accumulated Deficit |
|
| Total |
| ||||||||||||
Balance June 30, 2022 |
|
| 8,100,000 |
|
| $ | 13,500,000 |
|
|
| 900,000 |
|
| $ | 1,500,000 |
|
| $ | (15,000,000 | ) |
|
| 4,030 |
|
| $ | 40 |
|
|
| 9,270,947 |
|
| $ | 92,709 |
|
| $ | 404,168,822 |
|
| $ | (387,993,696 | ) |
| $ | 16,267,875 |
|
Stock-based compensation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 19,600 |
|
|
| 196 |
|
|
| 436,681 |
|
|
| - |
|
|
| 436,877 |
|
Reverse stock split fractional shares |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
| (43 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (8,255,408 | ) |
|
| (8,255,408 | ) |
Balance September 30, 2022 |
|
| 8,100,000 |
|
|
| 13,500,000 |
|
|
| 900,000 |
|
|
| 1,500,000 |
|
|
| (15,000,000 | ) |
|
| 4,030 |
|
|
| 40 |
|
|
| 9,290,504 |
|
|
| 92,905 |
|
|
| 404,605,503 |
|
|
| (396,249,104 | ) |
|
| 8,449,344 |
|
The accompanying notes are an integral part of these consolidated financial statements.
PALATIN TECHNOLOGIES, INC. | ||
and Subsidiary | ||
Consolidated Statements of Cash Flows | ||
(unaudited) | ||
Six Months Ended December 31, | ||
2017 | 2016 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income (loss) | $13,633,823 | $(23,082,189) |
Adjustments to reconcile net income (loss) to net cash | ||
used in operating activities: | ||
Depreciation and amortization | 28,886 | 15,261 |
Non-cash interest expense | 104,108 | 160,711 |
Stock-based compensation | 1,041,900 | 853,241 |
Deferred income tax benefit | (500,000) | - |
Changes in operating assets and liabilities: | ||
Accounts receivable | 15,116,822 | - |
Prepaid expenses and other assets | (277,283) | 481,877 |
Accounts payable | (847,600) | 3,992,124 |
Accrued expenses | (4,968,942) | (320,908) |
Deferred revenue | (25,002,344) | - |
Other non-current liabilities | 112,174 | 168,358 |
Net cash used in operating activities | (1,558,456) | (17,731,525) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Proceeds from matured investments | 250,000 | - |
Purchases of property and equipment | (9,500) | - |
Net cash provided by investing activities | 240,500 | - |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Payments on capital lease obligations | (14,324) | (13,534) |
Payment of withholding taxes related to restricted | ||
stock units | (24,380) | - |
Payment on notes payable obligations | (4,000,000) | (2,000,000) |
Proceeds from the exercise of warrants | 114,384 | - |
Proceeds from the sale of common stock and | ||
warrants, net of costs | - | 23,856,972 |
Net cash (used in) provided by financing activities | (3,924,320) | 21,843,438 |
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (5,242,276) | 4,111,913 |
CASH AND CASH EQUIVALENTS, beginning of period | 40,200,324 | 8,002,668 |
CASH AND CASH EQUIVALENTS, end of period | $34,958,048 | $12,114,581 |
SUPPLEMENTAL CASH FLOW INFORMATION: | ||
Cash paid for interest | $632,185 | $891,717 |
Unrealized gain (loss) on available-for-sale investments | 590 | (62) |
Non-cash equity financing costs in accrued expenses | - | 50,861 |
7 |
Table of Contents |
PALATIN TECHNOLOGIES, INC. | ||||||||
and Subsidiary | ||||||||
Consolidated Statements of Cash Flows | ||||||||
(unaudited) | ||||||||
|
|
|
|
|
|
| ||
|
| Three Months Ended September 30, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
| ||
Net loss |
| $ | (5,888,399 | ) |
| $ | (8,255,408 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 87,357 |
|
|
| 59,625 |
|
Decrease in right-of-use asset |
|
| 88,563 |
|
|
| 91,734 |
|
Unrealized foreign currency transaction gain |
|
| (159,750 | ) |
|
| (418,376 | ) |
Stock-based compensation |
|
| 390,336 |
|
|
| 436,877 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| 1,567,260 |
|
|
| (242,730 | ) |
Prepaid expenses and other assets |
|
| 563,548 |
|
|
| (172,401 | ) |
Inventories |
|
| (1,072,251 | ) |
|
| 86,496 |
|
Accounts payable |
|
| (2,033,887 | ) |
|
| 682,920 |
|
Accrued expenses |
|
| 641,212 |
|
|
| (758,375 | ) |
Operating lease liabilities |
|
| (90,382 | ) |
|
| (91,682 | ) |
Net cash used in operating activities |
|
| (5,906,393 | ) |
|
| (8,581,320 | ) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Maturity of marketable securities |
|
| 2,992,890 |
|
|
| - |
|
Purchases of property and equipment |
|
| - |
|
|
| (141,228 | ) |
Net cash provided by (used in) investing activities |
|
| 2,992,890 |
|
|
| (141,228 | ) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Payment of withholding taxes related to restricted stock units |
|
| (56,401 | ) |
|
| (24,731 | ) |
Proceeds from the sale of common stock and warrants, net of costs |
|
| 531,369 |
|
|
| - |
|
Payment of finance lease obligations |
|
| (26,074 | ) |
|
| - |
|
Net cash provided by (used in) financing activities |
|
| 448,894 |
|
|
| (24,731 | ) |
|
|
|
|
|
|
|
|
|
NET DECREASE IN CASH AND CASH EQUIVALENTS |
|
| (2,464,609 | ) |
|
| (8,747,279 | ) |
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, beginning of period |
|
| 7,989,582 |
|
|
| 29,939,154 |
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, end of period |
| $ | 5,524,973 |
|
| $ | 21,191,875 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION: |
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ | 10,882 |
|
| $ | 9,602 |
|
The accompanying notes are an integral part of these consolidated financial statements.
8 |
Table of Contents |
PALATIN TECHNOLOGIES, INC.
and Subsidiary
Notes to Consolidated Financial Statements
(1)
Nature of Business
Melanocortin Receptor System. The melanocortin system is involved in a large and diverse number of physiologic functions, and therapeutic agents modulating this system may have the potential to treat a variety of conditions and diseases, including sexual dysfunction and inflammation-related diseases. The natriuretic peptide receptor system has numerous cardiovascular functions,effects on food intake, metabolism, sexual function, inflammation, and therapeutic agents modulating thisimmune system may be useful in treatmentresponses. There are five melanocortin receptors, MC1r through MC5r. Modulation of heart failure and other cardiovascular diseases.
The Company’s primarycommercial product, Vyleesi®, was approved by the U.S. Food and Drug Administration (“FDA”) in development is bremelanotideJune 2019 for the treatment of hypoactive sexual desire disorder (“HSDD”), in premenopausal women and is being marketed by the Company in North America.
The Company’s new product development activities focus primarily on MC1r agonists, with potential to treat inflammatory and autoimmune diseases such as dry eye disease, which is a type of female sexual dysfunction (“FSD”).also known as keratoconjunctivitis sicca, uveitis, diabetic retinopathy, and inflammatory bowel disease. The Company believes that the MC1r agonist peptides in development have broad anti-inflammatory effects and appear to utilize mechanisms engaged by the endogenous melanocortin system in regulation of the immune system and resolution of inflammatory responses. The Company is also has drug candidates or development programs for cardiovascular diseases,developing peptides that are active at more than one melanocortin receptor, and MC4r peptide and small molecule agonists with potential utility in obesity and metabolic-related disorders, including heart failure and fibrosis, and inflammatory diseases, including inflammatory bowelrare disease and ocularorphan indications.
Business RiskRisks and Liquidity –
As of December 31, 2017,September 30, 2023, the Company’s cash and cash equivalents were $34,958,048$5,524,973 and current liabilities were $14,120,695, net of deferred revenue of $9,548,228. The Company$13,609,513. Management intends to utilize existing capital resources for general corporate purposes and working capital, including establishing marketing and distribution capabilities for Vyleesi in the preparation of and filing a New Drug Application (“NDA”) on bremelanotide for HSDD with the U.S. Food and Drug Administration (“FDA”),United States and preclinical and clinical development of the Company’s MC1r and MC4r programs, and development of other product candidates and programs, including natriuretic peptide receptor and melanocortin receptor programs.
The Company follows the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 205-40, Presentation of Financial Statements — Going Concern, which requires management to fund its planned operations through at leastassess the Company’s ability to continue as a going concern for one year after the date the consolidated financial statements are issued. While the Company has raised funding in the past, the ability to raise funding in future periods is not considered probable, as defined under the accounting standards. As such, under the requirements of ASC 205-40, management may not consider the potential for future funding in their assessment of the Company’s ability to meet its obligations for the next year.
9 |
Table of Contents |
PALATIN TECHNOLOGIES, INC.
and Subsidiary
Notes to Consolidated Financial Statements
Based on our available cash and cash equivalents including the $4,573,948 raised in October 2023 (see Note 14), management has concluded that substantial doubt exists about the Company’s ability to continue as a going concern for one year from the date these consolidated financial statements are issued. The Company will needis evaluating strategies to obtain additional funding for future operations which include but are not limited to complete required clinical trials forobtaining equity financing, issuing debt, or reducing planned expenses. A failure to raise additional funding or to effectively implement cost reductions could harm the Company’s business, results of operations, and future prospects. If the Company is not able to secure adequate additional funding in future periods, the Company would be forced to make additional reductions in certain expenditures. This may include liquidating assets and suspending or curtailing planned programs. The Company may also have to delay, reduce the scope of, suspend, or eliminate one or more research and development programs or its other product candidates and, assuming those clinical trials are successful, as to which there can be no assurance, to complete submission of required applications to the FDA.commercialization efforts or pursue a strategic transaction. If the Company is unable to obtain approvalraise capital when needed or otherwise advance in the FDA approval process, the Company’s ability to sustain its operations would be materially adversely affected.
The Company will receive a royalty on sales of Vyleesi by its licensees. It has licensed third parties to sell Vyleesi in China and Korea. There may be delays in obtaining regulatory approvals to sell Vyleesi in China and Korea, which would delay when the Company receives royalty income from sales in those countries.
Concentrations –
Concentrations in the Company’s assets and operations subject it to certain related risks. Financial instruments that subject the Company to concentrations of credit risk primarily consist of cash,(2)
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnote disclosures required to be presented for complete financial statements. In the opinion of management, these consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) considered necessary for fair presentation. The results of operations for the three and six months ended December 31, 2017September 30, 2023, may not necessarily be indicative of the results of operations expected for the full fiscal year.
The accompanying unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2017,2023, filed with the SEC,U.S. Securities and Exchange Commission (“SEC”), which includes consolidated financial statements as of June 30, 20172023, and 20162022 and for each of the fiscal years in the three-year period ended June 30, 2017.
(3)
Principles of Consolidation
– The consolidated financial statements include the accounts ofUse of Estimates
– The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S.Cash and Cash Equivalents
– Cash and cash equivalents include cash on hand, cash in banks, and all highly liquid investments with a purchased maturity of less than three months. Cash equivalentsMarketable Securities - The Company determines the appropriate classificationCompany’s marketable securities consist of its investments in debt and equity securities at the timewith original maturities of purchase and reevaluates such determinations at each balance sheet date. Debt securitiesgreater than 90 days that are classified as held-to-maturity when the Company has the intent and ability to hold the securities to maturity. Debt securitiesavailable for which the Company does not have the intent or ability to hold to maturity are classified as available-for-sale. Held-to-maturity securities are recorded as either short-term or long-term on the balance sheet, based on the contractual maturity date and are stated at amortized cost. Marketable securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and are reported at fair value, with unrealized gains and losses recognized in earnings. Debt and marketable equity securities not classified as held-to-maturity or as trading are classified as available-for-sale and are carried at fair market value, with the unrealized gains and losses, net of tax, included in the determination of other comprehensive income (loss).
Fair Value of Financial Instruments
– The Company’s financial instruments consist primarily of cash equivalents, marketable securities, accounts receivable,10 |
Table of Contents |
PALATIN TECHNOLOGIES, INC.
and Subsidiary
Notes to Consolidated Financial Statements
Credit Risk
– Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, andTrade Accounts Receivable - Trade accounts receivable are amounts owed to the Company by its customers for product that has been delivered. The trade accounts receivable is recorded at the invoice amount, less prompt pay and other discounts, chargebacks, and an allowance for credit losses, if any. Credit losses have not been significant to date.
Inventories– Inventory is stated at the lower of cost or net realizable value, with cost being determined on a first-in, first-out basis.
On a quarterly basis, the Company reviews inventory levels to determine whether any obsolete, expired, or excess inventory exists. If any inventory is expected to expire prior to being sold, has a cost basis in excess of its net realizable value, is in excess of expected sales requirements as determined by internal sales forecasts, or fails to meet commercial sale specifications, the inventory is written down through a charge to operating expenses. Inventory consisting of Vyleesi has a shelf-life of three years from the date of manufacture.
Property and Equipment
– Property and equipment consists of office and laboratory equipment, office furniture, and leasehold improvements and includes assets acquired underImpairment of Long-Lived Assets
– The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. To determine recoverability of a long-lived asset, management evaluates whether the estimated future undiscounted net cash flows from the asset are less than its carrying amount. If impairment is indicated, the long-lived asset would be written down to fair value. Fair value is determined by an evaluation of available price information at which assets could be bought or sold, including quoted market prices, if available, or the present value of the estimated future cash flows based on reasonable and supportable assumptions.Leases - At lease inception, the Company determines whether an arrangement is or contains a lease. Operating leases are included in operating lease right-of-use (“ROU”) assets, short-term operating lease liabilities, and long-term operating lease liabilities in the consolidated financial statements. Finance leases are included in property and equipment for ROU assets, short-term finance lease liabilities, and long-term finance lease liabilities in the consolidated financial statements. ROU assets represent the Company’s right to use leased assets over the term of the lease. Lease liabilities represent the Company’s contractual obligation to make lease payments over the lease term. ROU assets and lease liabilities are recognized at the commencement date. The lease liability is measured as the present value of the lease payments over the lease term. The Company uses the rate implicit in the lease if it is determinable. When the rate implicit in the lease is not determinable, the Company uses an estimate based on a hypothetical rate provided by a third party as the Company currently does not have issued debt. Lease terms may include renewal or extension options to the extent they are reasonably certain to be exercised. The assessment of whether renewal or extension options are reasonably certain to be exercised is made at lease commencement. Factors considered in determining whether an option is reasonably certain of exercise include, but are not limited to, the value of any leasehold improvements, the value of renewal rates compared to market rates, and the presence of factors that would cause incremental costs to the Company if the option were not exercised.
The ROU asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred less any lease incentives received. For operating leases, the ROU asset is subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received. Lease expense for lease payments is recognized on a straight-line basis over the lease term. For finance leases, the ROU asset is subsequently amortized using the straight-line method from the lease commencement date to the earlier of the end of its useful life or the end of the lease term unless the lease transfers ownership of the underlying asset to the Company or the Company is reasonably certain to exercise an option to purchase the underlying asset. In those cases, the ROU asset is amortized over the useful life of the underlying asset. Amortization of the ROU asset is recognized and presented as an operating expense separately from interest expense on the lease liability.
11 |
Table of Contents |
PALATIN TECHNOLOGIES, INC.
and Subsidiary
Notes to Consolidated Financial Statements
The Company has elected not to recognize an ROU asset and obligation for leases with an initial term of 12 months or less. The expense associated with short-term leases is included in selling, general and administrative expenses in the statements of operations. To the extent a lease arrangement includes both lease and non-lease components, the Company has elected to account for the components as a single lease component.
Revenue Recognition
– The CompanyIn accordance with ASC Topic 606, the Company recognizes product revenue when its performance obligation is satisfied by transferring control of the product to a customer. Per the Company’s contracts with customers, control of the product is transferred upon the conveyance of title, which occurs when the product is sold to and received by a customer. Trade accounts receivable due to the Company from contracts with its customers are stated separately in the consolidated balance sheet, net of various allowances as described in the Trade Accounts Receivable policy above.
Product revenues consist of sales of Vyleesi in the United States. The Company sells Vyleesi to specialty pharmacies at the wholesale acquisition cost and payment is currently made within approximately 30 days. In addition to distribution agreements with customers, the Company enters into arrangements with healthcare payers that provide for privately negotiated rebates, chargebacks, and discounts with respect to the purchase of the Company’s products.
The Company records product revenues net of allowances for direct and indirect fees, discounts, co-pay assistance programs, estimated chargebacks and rebates. Product sales are also subject to return rights, which have not been significant to date.
Gross product sales offset by product sales allowances for the three months ended September 30, 2023, and 2022 are as follows:
|
| Three Months Ended September 30, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Gross product sales |
| $ | 4,587,150 |
|
| $ | 2,292,450 |
|
Product sales allowances and accruals |
|
| (2,481,173 | ) |
|
| (1,422,796 | ) |
Net sales |
| $ | 2,105,977 |
|
| $ | 869,654 |
|
For licenses of intellectual property, the Company assesses at contract inception whether the intellectual property is distinct from other performance obligations identified in the arrangement. If the licensing of intellectual property is determined to be distinct, revenue is recognized for nonrefundable, upfront license fees when the license is transferred to the customer and the customer can use and benefit from the license. If the licensing of intellectual property is determined not to be distinct, then the license is bundled with other promises in the arrangement into one performance obligation. The Company needs to determine if the bundled performance obligation is satisfied over time or at a point in time. If the Company concludes that the nonrefundable, upfront license fees will be recognized over time, the Company will need to assess the appropriate method of measuring proportional performance.
Regulatory milestone payments are excluded from the transaction price due to the inability to estimate the probability of reversal. Revenue relating to achievement of these milestones is recognized in the period in which the milestone is achieved.
Sales-based royalty and milestone payments resulting from customer contracts solely throughor predominately for the license of intellectual property will only be recognized upon occurrence of the underlying sale or achievement of the sales milestone in the future and collaboration agreements. such sales-based royalties and milestone payments will be recognized in the same period earned.
12 |
Table of Contents |
PALATIN TECHNOLOGIES, INC.
and Subsidiary
Notes to Consolidated Financial Statements
The Company recognizes revenue for reimbursements of research and development costs under collaboration agreements as the services are performed. The Company records these reimbursements as revenue and not as a reduction of research and development expenses as the Company is the principal in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 605-25, Revenue Recognition for Arrangements with Multiple Elements,the research and development activities based upon its control of such activities, which addresses the determination of whether an arrangement involving multiple deliverables contains more than one unit of accounting. A delivered item within an arrangement is considered a separate unitpart of accounting only if both ofits ordinary activities.
Development milestone payments are generally due 30 business days after the following criteriamilestone is achieved. Sales milestone payments are met:
Research and Development Costs
– The costs of research and development activities are charged to expense as incurred, including the cost of equipment for which there is no alternative future use.Accrued Expenses –
Third parties perform a significant portion of the Company’s development activities. The Company reviews the activities performed under all contracts each quarter andStock-Based Compensation –
The Company charges to expense the fair value of stock options and other equity awardsIncome Taxes
– The Company and its subsidiary file consolidated federal and separate-company state income tax returns. Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences or operating loss and tax credit carryforwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. The Company has recorded and continues to maintain a full valuation allowance against its deferred tax assets based on the history of lossesNet Income (Loss)Loss per Common Share
Three Months Ended December 31, | Six Months Ended December 31, | |||
2017 | 2016 | 2017 | 2016 | |
Net income (loss) | $3,030,193 | $(10,029,419) | $13,633,823 | $(23,082,189) |
Denominator: | ||||
Weighted average common shares outstanding - Basic | 197,238,056 | 177,798,511 | 197,175,316 | 171,823,390 |
Effect of dilutive shares: | ||||
Common stock equivalents arising from stock options, | ||||
warrants and conversion of preferred stock | 3,525,013 | - | 1,792,803 | - |
Restricted stock units | 1,948,547 | - | 1,462,705 | - |
Weighted average common shares outstanding - Diluted | 202,711,616 | 177,798,511 | 200,430,824 | 171,823,390 |
Net income (loss) per common share: | ||||
Basic | $0.02 | $(0.06) | $0.07 | $(0.13) |
Diluted | $0.01 | $(0.06) | $0.07 | $(0.13) |
For the three and six months ended December 31, 2017September 30, 2023, and 2016, common shares issuable upon conversion of Series A Convertible Preferred Stock, the exercise of outstanding options and warrants (excluding the Series A 2012, Series B 2012, Series C 2014, Series E 2015 and Series I 2016 warrants issued in connection with the July 3, 2012, December 23, 2014, and July 2, 2015 private placement offerings and the August 4, 2016 underwritten offering as such warrants, to the extent not yet exercised, are already included in the weighted average number of common shares outstanding used in computing basic net income (loss) per common share since they are exercisable for nominal consideration), and the vesting of restricted stock units amounted to an aggregate of 46,966,803 and 57,174,473 shares, respectively, and are excluded from the weighted average number of common shares outstanding used in computing basic net income (loss) per common share. For the three and six months ended December 31, 2017, an additional 5,473,560 and 3,255,508 of common shares, respectively, have been included in the computation of diluted EPS using the treasury stock and if-converted methods. However, for the three and six months ended December 31, 2016,2022, no additional common shares were added into the computation of diluted EPS because to do so would have been anti-dilutive.
Included in the weighted average common shares used in computing basic and diluted net loss per common share are 279,700 and 344,180 vested restricted stock units that had not been issued as of September 30, 2023, and 2022, respectively, due to a provision in the restricted stock unit agreements to delay delivery.
Translation of foreign currencies – Transactions denominated in currencies other than the Company’s functional currency (US Dollar) are recorded based on exchange rates at the time such transactions arise. Subsequent changes in exchange rates result in transaction gains and losses, which are reflected in the consolidated statements of operations as unrealized (based on the applicable period-end exchange rate) or realized upon settlement of the transactions.
13 |
Table of Contents |
PALATIN TECHNOLOGIES, INC.
and Subsidiary
Notes to Consolidated Financial Statements
(4)
In June 2016, the FASB issued ASUAccounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, which requires measurementan entity to measure and recognition ofrecognize expected credit losses for certain financial assetsinstruments held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This is different fromupdate to the current guidance as this will requirestandard requires immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets.instruments. The new guidance will be effective for the Company onadopted ASU 2016-13 as of July 1, 2020. Early adoption will be available on July 1, 2019. The Company is currently evaluating the effect that ASU No. 2016-13 will have on its consolidated financial statements and related disclosures.
(5) MANUFACTURING SUPPLY AGREEMENTS FOR VYLEESI
The Company has Vyleesi manufacturing contracts with Catalent Belgium S.A. (“Catalent”), a subsidiary of Catalent Pharma Solutions, Inc., to manufacture drug product and Subsidiary
On September 29, 2020, the Company and Catalent entered into an agreement to terminate a prior agreement (the “Original Catalent Agreement”) with Catalent (the “Catalent Termination Agreement”) in consideration for a one-time payment of six million euros (€6,000,000) which was paid in October 2020 and accrued as part of the estimated losses on inventory purchase commitments.
The Company and Catalent then entered into a new Vyleesi manufacturing agreement (the “Catalent Agreement”) which includes reduced minimum annual purchase requirements (see Note 12) as compared to the Original Catalent Agreement and modification of other financial terms. The Catalent Agreement provides that Catalent will provide manufacturing and supply services to Palatin related to the recognitionproduction of lease assets and lease liabilities. The new guidance requires lessees to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability, other than leasesVyleesi, including that meet the definitionCatalent will supply specified minimums of a short term lease, and requires expanded disclosures about leasing arrangements. The recognition, measurement, and presentation of expenses and cash flows arising from a lease have not significantly changed from the current guidance. Lessor accounting is similar to the current guidance, but updated to align with certain changes to the lessee model and the new revenue recognition standard. The new guidance is effective for the Company on July 1, 2019, with early adoption permitted. The Company is evaluating the impact that ASU No. 2016-02 will have on its consolidated financial statements and related disclosures.
The initial term of the Ypsomed Agreement is through December 31, 2025, with AMAG,automatic renewal for successive one-year periods unless either party terminates the Company granted to AMAG (i) an exclusive license in all countries of North America (the “Territory”), with the right to grant sub-licenses, to research, develop and commercialize products containing bremelanotide (each a “Product,” and collectively, “Products”), (ii) a non-exclusive license in the Territory, with the right to grant sub-licenses, to manufacture Products, and (iii) a non-exclusive license in all countries outside the Territory, with the right to grant sub-licenses, to research, develop and manufacture (but not commercialize) the Products.
The term of the Lonza Agreement was set to expire on December 31, 2022. In November 2022, Lonza and the Company amended the Lonza Agreement to extend contract peptide manufacturing services until June 30, 2024. The Company intends to seek to extend contract peptide manufacturing services with Lonza past June 30, 2024, and is also actively evaluating potential new contract manufacturers. Establishing a new contractual relationship and establishing and validating manufacturing in connectiona manner that complies with FDA regulations is a time-consuming and costly process. The amendment reduced certain minimum purchase commitments that were previously accrued for. As a result, the development and regulatory activities necessary to file an NDA for bremelanotide for HSDDCompany recorded a gain on the purchase commitment of $1,027,322 upon the reversal of the accrual in the United States related to Palatin’s development obligations.
(6)
On September 6, 2017, the Company entered into the License Agreementa license agreement with Shanghai Fosun Pharmaceutical Industrial Development Co. Ltd. (“Fosun”) for exclusive rights to commercialize bremelanotideVyleesi in the territories of mainland China Taiwan, Hong Kong S.A.R. and Macau S.A.R.
14 |
Table of Contents |
PALATIN TECHNOLOGIES, INC.
and Subsidiary
Notes to Consolidated Financial Statements
(7)
On November 21, 2017, the Company entered into the License Agreementa license agreement with Kwangdong Pharmaceutical Co., Ltd. (“Kwangdong”) for exclusive rights to commercialize bremelanotideVyleesi in the Republic of Korea.
(8)
Prepaid expensesand other current assets consist of the following:
December 31, 2017 | June 30, 2017 | |
Clinical costs | $753,614 | $657,069 |
Insurance premiums | 53,886 | 182,966 |
Foreign withholding tax (Notes 6 & 7) | 256,365 | - |
Other | 224,639 | 171,186 |
$1,288,504 | $1,011,221 |
|
| September 30, |
|
| June 30, |
| ||
|
| 2023 |
|
| 2023 |
| ||
Clinical / regulatory costs |
| $ | 140,222 |
|
| $ | 141,512 |
|
Insurance premiums |
|
| 201,629 |
|
|
| 342,645 |
|
Vyleesi contractual advances |
|
| 261,989 |
|
|
| 816,750 |
|
Other |
|
| 729,893 |
|
|
| 596,374 |
|
|
| $ | 1,333,733 |
|
| $ | 1,897,281 |
|
(9)
The fair value of cash equivalents and investments is classified using a hierarchy prioritized based on inputs. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on management’s own assumptions used to measure assets and liabilities at fair value. A financial assetasset’s or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
The following table provides the assets carried at fair value measured on a recurring basis:
Carrying Value | Quoted prices in active markets (Level 1) | Other quoted/observable inputs (Level 2) | Significant unobservable inputs (Level 3) | |
December 31, 2017: | ||||
Money market account | $34,769,696 | $34,769,696 | $- | $- |
TOTAL | $34,769,696 | $34,769,696 | $- | $- |
June 30, 2017: | ||||
Money market account | $40,019,336 | $40,019,336 | $- | $- |
Corporate debt securities | 249,837 | 249,837 | - | - |
TOTAL | $40,269,173 | $40,269,173 | $- | $- |
December 31, 2017 | June 30, 2017 | |
Clinical costs | $5,055,378 | $9,138,827 |
Other research related expenses | 180,820 | 217,307 |
Professional services | 51,732 | 434,768 |
Other | 239,846 | 730,196 |
$5,527,776 | $10,521,098 |
December 31, 2017 | June 30, 2017 | |
Notes payable under venture loan | $10,333,334 | $14,333,334 |
Unamortized related debt discount | (78,564) | (143,524) |
Unamortized debt issuance costs | (44,494) | (83,215) |
Notes payable | 10,210,276 | 14,106,595 |
Less: current portion | 7,889,152 | 7,824,935 |
Long-term portion | $2,321,124 | $6,281,660 |
|
| Carrying Value |
|
| Quoted prices in active markets (Level 1) |
|
| Other quoted/observable inputs (Level 2) |
|
| Significant unobservable inputs (Level 3) |
| ||||
September 30, 2023: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash equivalents - Money market funds |
| $ | 3,166,343 |
|
| $ | 3,166,343 |
|
| $ | - |
|
| $ | - |
|
June 30, 2023: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents - Money market funds |
| $ | 2,808,598 |
|
| $ | 2,808,598 |
|
|
| - |
|
|
| - |
|
Cash equivalents - Treasury bill |
|
| 2,980,620 |
|
|
| 2,980,620 |
|
|
| - |
|
|
| - |
|
Marketable securities - Treasury bill |
|
| 2,992,890 |
|
|
| 2,992,890 |
|
|
| - |
|
|
| - |
|
Total |
| $ | 8,782,108 |
|
| $ | 8,782,108 |
|
| $ | - |
|
| $ | - |
|
15 |
Table of Contents |
PALATIN TECHNOLOGIES, INC.
and Subsidiary
Notes to Consolidated Financial Statements
(10) INVENTORIES
Inventories consist of raw materials and work-in-process related to Vyleesi. The following table summarizes the components of inventories:
|
| September 30, 2023 |
|
| June 30, 2023 |
| ||
|
|
|
|
|
|
| ||
Raw materials |
| $ | 583,988 |
|
| $ | 526,000 |
|
Work-in-process |
|
| 1,014,263 |
|
|
| - |
|
|
| $ | 1,598,251 |
|
| $ | 526,000 |
|
(11) ACCRUED EXPENSES
Accrued expensesconsist of the following:
|
| September 30, |
|
| June 30, |
| ||
|
| 2023 |
|
| 2023 |
| ||
Clinical / regulatory costs |
| $ | 4,088,584 |
|
| $ | 2,960,126 |
|
Other research related expenses |
|
| 120,949 |
|
|
| 121,121 |
|
Professional Services |
|
| 65,640 |
|
|
| 339,258 |
|
Personnel costs |
|
| 506,300 |
|
|
| 1,563,847 |
|
Selling expenses |
|
| 1,465,400 |
|
|
| 1,266,653 |
|
Inventory purchases |
|
| 688,918 |
|
|
| - |
|
Other |
|
| 216,480 |
|
|
| 260,054 |
|
|
| $ | 7,152,271 |
|
| $ | 6,511,059 |
|
(12) COMMITMENTS AND CONTINGENCIES
Inventory Purchases - The Company closed on a $10,000,000 venture loan led by Horizon.has certain supply agreements with manufacturers and suppliers, including the Catalent Agreement, Ypsomed Agreement, and Lonza Agreement. The debt facilityCompany is a four-year senior secured term loan that bears interest at a floating coupon rate of one-month LIBOR (floor of 0.50%) plus 8.50% and provides for interest-onlyrequired to make certain payments for the first eighteen months followedmanufacture and supply of Vyleesi.
The following table summarizes the contractual obligations under the New Catalent Agreement, Yposmed Agreement, and Lonza Agreement as of September 30, 2023:
|
| Total |
|
| Current |
|
| 1 - 3 Years |
|
| 4 - 5 Years |
| ||||
Inventory purchase commitments |
| $ | 6,711,100 |
|
| $ | 4,683,700 |
|
| $ | 2,027,400 |
|
| $ | - |
|
As of September 30, 2023, the Company has $3,752,850 and $2,027,400 accrued within other current and long-term liabilities, respectively, in the consolidated balance sheet related to estimated losses for firm commitment contractual obligations under these agreements. As of June 30, 2023, $3,856,800 and $2,083,200 was accrued within other current and long-term liabilities, respectively. Losses on these firm commitment contractual obligations are recognized based upon the terms of the respective agreement and similar factors considered for the write-down of inventory, including expected sales requirements as determined by monthly paymentsinternal sales forecasts.
The commitment contractual obligation amounts above are denominated in Swiss Francs and Euros and have been translated using period end exchange rates. The Company may experience a negative impact on future earnings and equity solely as a result of principalfuture foreign currency exchange rate fluctuations.
Contingencies - The Company accounts for litigation losses in accordance with ASC 450-20, Loss Contingencies. In addition, the Company is subject to other contingencies, such as product liability, arising in the ordinary course of $333,333 plus accrued interest through August 1, 2019.business. Loss contingency provisions are recorded for probable losses when management is able to reasonably estimate the loss. Any outcome upon settlement that deviates from the Company’s best estimate may result in additional expense or in a reduction in expense in a future accounting period. The lendersCompany records legal expenses associated with such contingencies as incurred.
16 |
Table of Contents |
PALATIN TECHNOLOGIES, INC.
and Subsidiary
Notes to Consolidated Financial Statements
The Company is involved, from time to time, in various claims and legal proceedings arising in the ordinary course of its business. The Company is not currently a party to any such claims or proceedings that, if decided adversely to it, would either individually or in the aggregate have a material adverse effect on its business, financial condition, or results of operations.
(13) REDEEMABLE CONVERTIBLE PREFERRED STOCK, ESCROWED PROCEEDS, AND STOCKHOLDERS’ (DEFICIENCY) EQUITY
Series B and C Redeemable Convertible Preferred Stock – On May 11, 2022, Palatin entered into a securities purchase agreement with institutional investors, and on May 12, 2022, Palatin issued and sold 8,100,000 shares of Series B Redeemable Convertible Preferred Stock (“Series B Preferred Stock”) and 900,000 shares of Series C Redeemable Convertible Preferred Stock (“Series C Preferred Stock”). Each share of Series B Preferred Stock and Series C Preferred Stock had a purchase price of $1.67. The investors in the Series B Preferred Stock and Series C Preferred Stock also received five-year immediately exercisable Series G warrants to purchase 549,450 shares of the Company’s common stock exercisable at an exercise price of $0.91 per share. The Company has recorded a debt discount of $305,196 equalup to the fair value of these warrants at issuance, which is being amortized to interest expense over the term of the related debt. This debt discount is offset against the note payable balance and is included in additional paid-in capital on the Company’s balance sheet at December 31, 2017 and June 30, 2017. In addition, a final incremental payment of $500,000 is due on August 1, 2019, or upon early repayment of the loan. This final incremental payment is being accreted to interest expense over the term of the related debt. The Company incurred $146,115 of costs in connection with the loan agreement. These costs were capitalized as deferred financing costs and are offset against the note payable balance. These debt issuance costs are being amortized to interest expense over the term of the related debt.
Given that the fee and other costs were not refundable to the Company as of June 30, 2022, regardless of the election selected by the investors, the $750,000 fee, the fair value of the warrants ($234,443), and other costs of $150,995 were recorded as expenses within selling, general and administrative expenses during the year ended June 30, 2022.
The Company called a meeting of stockholders on June 24, 2022, to purchase 10,274,646seek approval of, among other things, an amendment to its certificate of incorporation authorizing a reverse stock split. Except as otherwise required by law, holders of the Series B Preferred Stock and Series C Preferred Stock were entitled to vote only on the reverse stock split and any adjournment of the meeting relating to the reverse stock split. The Company’s common stock, outstanding Series A Convertible Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock voted as a single class on an as-if converted basis. The holders of Series B Preferred Stock had votes equal to the number of shares of common stock into which the Series B Preferred Stock is convertible. The holders of Series C Preferred Stock were entitled to 20,000 votes per share of common stock into which the Series C Preferred Stock is convertible but could only vote in the same proportion as the shares of common stock, Series A Convertible Preferred Stock, and Series B Preferred Stock were voted on the reverse stock split or any adjournment of the stockholder meeting relating thereto. The holders of the Series B Preferred Stock agreed to vote in favor of the reverse stock split, which was approved and ultimately became effective on August 30, 2022.
Series A Convertible Preferred Stock – As of June 30, 2023, 4,030 shares of Series A Convertible Preferred Stock were outstanding. Each share of Series A Convertible Preferred Stock is convertible at an exercise priceany time, at the option of $0.70 per share.
17 |
Table of Contents |
PALATIN TECHNOLOGIES, INC.
and Subsidiary
Notes to Consolidated Financial Statements
Financing Transactions – On October 31, 2022, the Company entered into a securities purchase agreement with a certain institutional investor to sell, in a registered direct offering (the “Offering”), an aggregate of (i) 1,020,000 shares of the Company’s common stock, (ii) prefunded warrants (the “Pre-Funded Warrants”) to purchase 21,917,808up to 798,182 shares of Palatinthe Company’s common stock, and Series F(iii) common stock warrants (the “Common Warrants”) to purchase 2,191,781up to 1,818,182 shares of the Company’s common stock. Certain funds managed by QVT Financial LP (“QVT”) invested $5,000,000 and another accredited investment fund invested $15,000,000.Each share of common stock was offered with one accompanying Common Warrant with a combined offering price of $5.50. Each Pre-Funded Warrant was offered with one accompanying Common Warrant with a combined offering price of $5.4999. The funds paid $0.90 for each Series E warrant and $0.125 for each Series F warrant, resulting in gross proceeds to the Company of $20,000,000, with net proceeds, after deducting offering expenses, of $19,834,278.
The Series E warrants were exercisable immediately upon issuance atCommon Warrants have an initial exercise price of $0.01 per share. As of December 31, 2017, all of the Series E warrants have been exercised. The Series F warrants are exercisable at an initial exercise price of $0.91$5.83 per share, are exercisable immediately uponbeginning six months after the date of issuance and will expire on the fifth anniversary offive and one-half years from the date of issuance. The Series F warrantsPre-Funded Warrants have an exercise price of $0.0001 per share, are subject to limitation on exercise if QVTexercisable upon issuance, and its affiliates would beneficially own more than 9.99% (4.99%will expire when exercised in full. The Common Warrants will be exercisable for cash, or, solely during any period when a registration statement for the other accredited investment fund holder)issuance or resale of the total number of the Company’s shares of common stock outstanding following such exercise.
The proceeds from the Offering, after deducting the placement agent fees and expenses and other estimated offering expenses, were $9,109,117.
On April 12, 2023, the Company entered into a new equity distribution agreement (the “2023 Equity Distribution Agreement”) with Canaccord Genuity LLC (“Canaccord”), pursuant to which the Company may, from time to time, sell shares of the Company’s common stock at market prices by methods deemed to be an “at-the-market offering” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended. The 2023 Equity Distribution Agreement and related prospectus is limited to sales of up to an aggregate maximum $50.0 million of shares of the Company’s common stock.
Proceeds raised under the 2023 Equity Distribution Agreement are as follows:
|
| Three Months Ended September 30, 2023 |
|
| Cumulative from inception |
| ||||||||||
|
| Shares |
|
| Proceeds |
|
| Shares |
|
| Proceeds |
| ||||
Gross proceeds |
|
| 217,027 |
|
| $ | 547,803 |
|
|
| 721,061 |
|
| $ | 1,744,542 |
|
Fees |
|
| - |
|
|
| (16,434 | ) |
|
| - |
|
|
| (52,336 | ) |
Expenses |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (126,800 | ) |
Net proceeds |
|
| 217,027 |
|
| $ | 531,369 |
|
|
| 721,061 |
|
| $ | 1,565,406 |
|
As of September 30, 2023, the Company issued 23,344,451 and 27,989,685 shares, respectively of common stock pursuant to the cashless exercise provisions ofhad outstanding warrants at an exercise price of $0.01 per share, and during the six months ended December 31, 2017, the Company received $114,384 and issued 11,438,356for shares of common stock pursuant toas follows:
|
| Shares of Common |
|
| Exercise Price per |
|
| Latest Expiration | |||
Description |
| Stock |
|
| Share |
|
| Date | |||
May 2022 Warrants |
|
| 66,666 |
|
| $ | 12.50 |
|
| May 11, 2026 | |
November 2022 Common Warrants |
|
| 1,818,182 |
|
| $ | 5.83 |
|
| May 2, 2028 | |
November 2022 Placement Agent Warrants |
|
| 90,909 |
|
| $ | 6.88 |
|
| October 31, 2027 |
Stock Options – For the exercise of warrants at an exercise price of $0.01 per share. As of December 31, 2017, all warrants with an exercise price of $0.01 per share have been exercised.
18 |
Table of Contents |
PALATIN TECHNOLOGIES, INC.
and Subsidiary
Notes to its executive officersConsolidated Financial Statements
A summary of stock option activity is as follows:
|
| Number of Shares |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Term in Years |
|
| Aggregate Intrinsic Value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Outstanding - June 30, 2023 |
|
| 1,550,600 |
|
| $ | 8.27 |
|
|
| 8.4 |
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Granted |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
| |
Forfeited |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
| |
Exercised |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
| |
Expired |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
| |
Outstanding - September 30, 2023 |
|
| 1,550,600 |
|
| $ | 8.27 |
|
|
| 8.1 |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at September 30, 2023 |
|
| 550,973 |
|
| $ | 14.31 |
|
|
| 6.2 |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected to vest at September 30, 2023 |
|
| 999,627 |
|
| $ | 4.94 |
|
|
| 9.2 |
|
| $ | - |
|
On December 16, 2022, Carl Spana, President and 225,000CEO of the Company, and Stephen T. Wills, CFO, COO and Executive Vice President of the Company, voluntarily contributed stock options previously issued to its non-employee directors underthem to purchase 143,360 and 124,220 shares, respectively, of the Company’s common stock to the 2011 Stock Incentive Plan. The fair valuestock options were forfeited and cancelled without payment of these options is $691,171 and $126,130, respectively. The Company is amortizing the fair value of these options over a 48-month vesting period for its executive officers and over a 36-month vesting period for its non-employee directors. The Company recognized $17,904 of stock-based compensation expense related to these options during the three and six months ended December 31, 2017.
Stock Incentive Plan. The Company is amortizing the fair value of these options of $18,176 over a 48 month vesting period. The Company recognized $1,136 and $1,515, respectively, of stock-based compensation expense related to these options during the three and six months ended December 31, 2017.
Included in the Companyoutstanding options in the table above are 318,813 and 57,999 unvested performance-based stock options granted 1,200,000 restricted stock units to its executive officers, 225,000 restricted stock units to its non-employee directors and 545,000 restricted stock units to its employees under the Company’s 2011 Stock Incentive Plan. The fair value of these restricted stock units is $1,020,000, $191,250 and $463,250, respectively. For executive officers and other employees, respectively, which were granted in June 2020, 2021, 2022 and 2023. Grants in June 2020, 2021, 2022 and 2023 were 87,303, 95,167, 60,566, and 238,838, respectively. The performance-based stock options vest on annual performance criteria through the restricted stock units vest 25% onfiscal years ending June 30, 2027, relating to advancement of MC1r programs, including initiation of clinical trials and licensing of Vyleesi in additional countries or regions.
Restricted Stock Units – For the first, second, thirdthree months ended September 30, 2023, and fourth anniversary dates from2022, the date of grant. For non-employee directors, the restricted stock units vest 33 1/3% on the first, second and third anniversary dates from the date of grant. The Company recognized $46,940 ofrecorded stock-based compensation expense related to these restricted stock units during the three and six months ended December 31, 2017.
A summary of stock-based compensation expense relatedrestricted stock unit activity is as follows:
Outstanding at June 30, 2023 | 987,521 | |||
Granted | - | |||
Forfeited | (2,302 | ) | ||
Vested | (98,372 | ) | ||
Outstanding at September 30, 2023 | 886,847 |
19 |
Table of Contents |
PALATIN TECHNOLOGIES, INC.
and Subsidiary
Notes to theseConsolidated Financial Statements
Included in outstanding restricted stock units duringin the three and six months ended December 31, 2017.
Time-based restricted stock units granted to the Company’s executive officers, employees, and non-employee directors generally vest over 2448 months, 48 months, and 12 months, respectively.
Included in the three and six months ended December 31, 2017 for equity-based instruments issued other than the stock options andoutstanding restricted stock units describedin the table above was $43,277are 217,833 and $72,023,37,116 unvested performance-based restricted stock units granted to executive officers and other employees, respectively, which were granted in June 2020, 2021, 2022, and $121,0982023. Grants in June 2020, 2021, 2022, and $232,972, respectively,2023 were 52,679, 22,343, 40,707, and 152,432 restricted stock units, respectively. The performance-based restricted stock units vest on annual performance criteria through the fiscal years ending June 30, 2026, relating to advancement of MC1r programs, including initiation of clinical trials, and licensing of Vyleesi in additional countries or regions.
In connection with the vesting of restricted share units during the three months ended September 30, 2023, the Company withheld 25,467 shares, with aggregate value $56,401, in satisfaction of minimum tax withholding obligations.
(14) SUBSEQUENT EVENTS
On October 20, 2023, the Company entered into a securities purchase agreement (the “October 2023 Purchase Agreement”) with a certain institutional investor, to sell in a registered direct offering (the “October 2023 RD Offering”), an aggregate of (i) 1,325,000 shares of common stock, $0.01 par value per share (the “October 2023 Shares”), of the Company and (ii) pre-funded warrants (the “October 2023 Pre-Funded Warrants”) to purchase up to 1,033,491 shares of the Company’s common stock (the “October 2023 Pre-Funded Warrant Shares”). The October 2023 Purchase Agreement also provides that the Company will issue unregistered warrants (the “October 2023 Private Warrants”) to purchase up to 2,358,491 shares of the Company’s common stock (the “October 2023 Private Warrant Shares”) in a concurrent private placement (the “October 2023 Private Offering” and together with the October 2023 RD Offering, the “October 2023 Offering”). The October 2023 Shares and accompanying October 2023 Private Warrants were offered at a combined offering price of $2.12. The October 2023 Pre-Funded Warrants and accompanying October 2023 Private Warrants were offered at a combined offering price of $2.1199. The October 2023 Offering closed on October 24, 2023.
The October 2023 Private Warrants will be exercisable on the six-month anniversary of issuance for a period of five and one-half years from the issuance date, at an exercise price equal to $2.12 per October 2023 Private Warrant Share. The October 2023 Private Warrants will be exercisable for cash, or, solely during any period when a registration statement for the threeissuance or resale of the October 2023 Private Warrant Shares issuable upon exercise of the October 2023 Private Warrants to or by the holder of such October 2023 Private Warrants is not in effect, on a cashless basis.
The October 2023 Pre-Funded Warrants have an exercise price of $0.0001 per October 2023 Pre-Funded Warrant Share, are exercisable upon issuance, and six months ended December 31, 2016.
The net proceeds from the October 2023 Offering, after deducting the placement agent fees and offering expenses, were $4,573,948.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements filed as part of this report and the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended June 30, 2017.
The following discussion and analysis contain forward-looking statements within the meaning of the federal securities laws. You are urged to carefully review our description and examples of forward-looking statements included earlier in this Quarterly Report immediately prior to Part I, under the heading “Special Note Regarding Forward-Looking Statements.” Forward-looking statements are subject to risk that could cause actual results to differ materially from those expressed in the forward-looking statements. You are urged to carefully review the disclosures we make concerning risks and other factors that may affect our business and operating results, including those made in this Quarterly Report and our Annual Report on Form 10-K for the year ended June 30, 2023, as well as any of those made in our other reports filed with the SEC. You are cautioned not to place undue reliance on the forward-looking statements included herein, which speak only as of the date of this document. We do not intend, and undertake no obligation, to publish revised forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events.
Critical Accounting Policies and Estimates
Our significant accounting policies, which are described in the notes to our consolidated financial statements included in this report and in our Annual Report on Form 10-K for the year ended June 30, 2017,2023, have not changed as of December 31, 2017.during the three months ended September 30, 2023. We believe that our accounting policies and estimates relating to the carrying value of inventory, revenue recognition, accrued expenses, purchase commitment liabilities, and stock-based compensation are the most critical.
Our Business
We are a biopharmaceutical company developing targeted, receptor-specific peptide therapeutics for the treatment of diseases with significant unmet medical need and commercial potential. Our programs arefirst-in-class medicines based on molecules that modulate the activity of the melanocortin and natriuretic peptide receptor systems. Our lead product in clinical development is bremelanotidecandidates are targeted, receptor-specific therapeutics for the treatment of premenopausal womendiseases with significant unmet medical need and commercial potential.
Melanocortin Receptor System. The melanocortin receptor (“MCr”) system has effects on food intake, metabolism, sexual function, inflammation, and immune system responses. There are five melanocortin receptors, MC1r through MC5r. Modulation of these receptors, through use of receptor-specific agonists, which activate receptor function, or receptor-specific antagonists, which block receptor function, can have significant pharmacological effects.
Our commercial product, Vyleesi®, was approved by the U.S. Food and Drug Administration (“FDA”) in June 2019 and was being marketed in the United States by AMAG Pharmaceuticals, Inc. (“AMAG”) for the treatment of hypoactive sexual desire disorder (“HSDD”), which is a type of female sexual dysfunction (“FSD”), defined as low desire with associated distress. In addition, we have drug candidates and development programs for cardiovascular diseases and inflammatory diseases.
Our new product development activities focus primarily on MC1r agonists, with potential to treat inflammatory and autoimmune diseases such as dry eye disease, which is also known as keratoconjunctivitis sicca, uveitis, diabetic retinopathy, and inflammatory bowel disease. We believe that the MC1r agonist peptides in development have broad anti-inflammatory effects and appear to utilize mechanisms engaged by the endogenous melanocortin system in regulation of improvement in desirethe immune system and decrease in distress associated with low sexual desire as measured using validated patient-reported outcome instruments. We have licensed North American rights to bremelanotide to AMAG Pharmaceuticals, Inc. (“AMAG”), rights in China, Taiwan, Hong Kong and Macau to Shanghai Fosun Pharmaceutical Industrial Development Co. Ltd. (“Fosun”), and rights in the Republic of Korea to Kwangdong Pharmaceutical Co., Ltd. (“Kwangdong”).
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Pipeline Overview
The following chart illustrates the status of our drug development programs.
Our Strategy
Key elements of our business strategy include:
· | Maximizing revenue from Vyleesi by marketing Vyleesi in the United States, supporting our existing licensees for China and Korea, and licensing Vyleesi for the United States and additional regions; | |
· | Maintaining a team to create, develop and commercialize MCr products addressing unmet medical needs; | |
· | Entering into strategic alliances and partnerships with pharmaceutical companies to facilitate the development, manufacture, marketing, sale, and distribution of product candidates that we are developing; | |
· | Partially funding our product development programs with the cash flow generated from Vyleesi and existing license agreements, as well as any future research, collaboration, or license agreements; and | |
· | Completing development and seeking regulatory approval of certain of our other product candidates. |
Corporate Information
We were incorporated under the development, manufacturing, marketing, sale and distributionlaws of our product candidates;
The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC (www.sec.gov).
Results of Operations
Three and Six Months Ended December 31, 2017September 30, 2023, Compared to the Three and Six Months Ended December 31, 2016
Revenues –
For the three22 |
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Cost of Products Sold – Cost of products sold was attributable to our License Agreement with Fosun. We recognized no revenue$86,496 for the three and six months ended December 31, 2016.
Research and Development
– Research and development expenses wereResearch and development expenses related to our bremelanotide, PL-3994, MC1r, MC4rVyleesi, MCr programs and other preclinical programs were $4,850,502$3,459,587 and $18,035,608, respectively,$4,363,183 for the three and six months ended December 31, 2017, compared to $7,203,093September 30, 2023, and $17,302,067, respectively, for the three and six months ended December 31, 2016. Spending to date has been2022, respectively. The decrease was primarily related to a decrease in spending on our bremelanotide for the treatment of HSDD program. The fluctuations in research and development expenses for the periods presented are mainly attributable to the progression of the Phase 3 clinical trial and development of bremelanotide for HSDD program. The amount of such spending and the nature of future development activities are dependent on a number of factors, including primarily the availability of funds to support future development activities, success of our clinical trials and preclinical and discovery programs, and our ability to progress compounds in addition to bremelanotide and PL-3994 into human clinical trials.
The amounts of project spending noted above exclude general research and development spending, which was $1,195,382$1,555,043 and $2,173,373, respectively,$1,663,848 for the three and six months ended December 31, 2017 compared to $931,481September 30, 2023, and $2,058,592, respectively, for the three and six months ended December 31, 2016.2022, respectively. The increasedecrease in general research and development spending for the three months ended September 30, 2023, compared to the three months ended September 30, 2022, is primarily attributable to employeea decrease in compensation related expenses.
Cumulative spending from inception to December 31, 2017 isSeptember 30, 2023, was approximately $297,700,000$311,900,000 on our bremelanotideVyleesi program and approximately $126,900,000$216,600,000 on all our other programs (which include PL3994, PL8177, otherPL3994, melanocortin receptor agonists, other discovery programs and terminated programs). Due to various risk factors described herein and in our Annual Report on Form 10-K for the year ended June 30, 2017,2023, under “Risk Factors,” including the difficulty in currently estimating the costs and timing of future Phase 1 clinical trials and larger-scale Phase 2 and Phase 3 clinical trials for any product under development, we cannot predict with reasonable certainty when, if ever, a program will advance to the next stage of development or be successfully completed, or generatewhen, if ever, related net cash inflows.
Selling, General and Administrative
–Other Income (Expense)
–Liquidity and Capital Resources
Since inception, we have generally incurred net operating losses, primarily related to spending on our research and development programs. We have financed our net operating losses primarily through debt and equity financings and amounts received under collaborationcollaborative and license agreements.
Our product candidates are at various stages of development and will require significant further research, development, and testing and some may never be successfully developed or commercialized. We may experience uncertainties, delays, difficulties, and expenses commonly experienced by early stageearly-stage biopharmaceutical companies, which may include unanticipated problems and additional costs relating to:
· | the development and testing of products in animals and humans; | |
· | product approval or clearance; | |
· | regulatory compliance; | |
· | good manufacturing practices (“GMP”) compliance; | |
· | intellectual property rights; | |
· | product introduction; | |
· | marketing, sales, and competition; and | |
· | obtaining sufficient capital. |
Failure to enter into or successfully perform under collaboration agreements and obtain timely regulatory approval for our product candidates and indications would impact our ability to increasegenerate revenues and could make it more difficult to attract investment capital for funding our operations. Any of these possibilities could materially and adversely affect our operations and require us to curtail or cease certain programs.
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During the sixthree months ended December 31, 2017,September 30, 2023, net cash used in operating activities was $1,558,456,$5,906,393 compared to $17,731,525$8,581,920 for the sixthree months ended December 31, 2016. Lower netSeptember 30, 2022. The decrease in cash outflows fromused in operations infor the sixthree months ended December 31, 2017September 30, 2023, compared to the three months ended September 30, 2022, was primarily the result of the cash payments receivedrelated to a decrease in the period relating to our license agreements with AMAG, Fosun and Kwangdong. Our periodic prepaid expenses, accounts payable and accrued expenses balances will continue to be highly dependent on the timing of our operating costs.
During the sixthree months ended December 31, 2017,September 30, 2023, net cash provided by investing activities was $240,500, consisting$2,992,890 compared to cash used in investing activities of $250,000 in$141,228 for the three months ended September 30, 2022. The increase was primarily related to the maturity of marketable securities.
During the three months ended September 30, 2023, net cash provided by financing activities was $448,894, which consisted of proceeds from the maturitysale of investmentscommon stock of $531,369, offset by $9,500, which was used$56,401 for the purchase of equipment. There were no investing activities during the six months ended December 31, 2016.
We have incurred cumulative negative cash flows from operations since our inception, and have expended, and expect to continue to expend in the future, substantial funds to develop the capability to market and distribute Vylessi in the United States and to complete our planned product development efforts. Continued operations are dependent upon our ability to generate future income from sales of Vylessi in the United States and from existing licenses, including royalties and milestones, to complete equity or debt financing activities enteringand to enter into additional licensing agreements or collaboration arrangements. As of December 31, 2017,September 30, 2023, our cash and cash equivalents were $34,958,048$5,524,973, and our current liabilities were $14,120,695, net$13,609,513.
Our obligations include aggregate lease obligations of deferred revenue$434,752 for the year ending September 30, 2024, and $499,573 for the years ending September 30, 2025, 2026 and 2027, and aggregate inventory purchase commitments of $9,548,228.
We intend to utilize existing capital resources for general corporate purposes and working capital requirements, including preparationestablishing marketing and filing of an NDA on bremelanotidedistribution capabilities for HSDD withVyleesi in the FDA,United States and we intend to utilize existing capital resources for general corporate purposes and working capital, including establishing marketing and distribution capabilities for Vyleesi in the United States and preclinical and clinical development of our MC1r and MC4r peptide programs, and PL-3994 natriuretic peptide, and development of other portfolio products.
Based on our available cash and cash equivalents as of September 30, 2023, and the $4,573,948 raised in October 2023, we have concluded that substantial doubt exists about our existing capital resources will be adequateability to fund our planned operations through at leastcontinue as a going concern for one year afterfrom the date that theseour consolidated financial statements are issued. We are evaluating strategies to obtain additional funding for future operations which include but are not limited to obtaining equity financing, issuing debt, or reducing planned expenses. A failure to raise additional funding or to effectively implement cost reductions could harm our business, results of operations, and future prospects. If we are not able to secure adequate additional funding in future periods, we would be forced to make additional reductions in certain expenditures. This may include liquidating assets and suspending or curtailing planned programs. We may also have to delay, reduce the scope of, suspend, or eliminate one or more research and development programs or its commercialization efforts or pursue a strategic transaction. If we are unable to raise capital when needed or enter into a strategic transaction, then we may be required to cease operations, which could cause our stockholders to lose all or part of their investment. Based on our current operating and development plans, we expect that our existing cash and cash equivalents as of the date of this filing will be sufficient to enable the Company to fund its operations into the first half of the calendar year 2024.
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We will need additional funding to complete required clinical trials for our other product candidates and development programs and, if those clinical trials are successful (which we cannot predict), to complete submission of required regulatory applications to the FDA.
Off-Balance Sheet Arrangements
None.
Contractual Obligations
There have been no material changes outside the ordinary course of business to our contractual obligations and commitments, as disclosed in our Annual Report on Form 10-K for the year ended June 30, 2023.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not required to be provided by smaller reporting companies.
Item 4. Controls and Procedures.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as defined in Exchange Act Rules 13a-15(e) and 15d-15(e), as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2017.September 30, 2023. There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.
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PART II -– OTHER INFORMATION
Item 1. Legal Proceedings.
We may be involved, from time to time, in various claims and legal proceedings arising in the ordinary course of our business. We are not currently a party to any claim or legal proceeding.
Item 1A. Risk Factors.
This report and other documents we file with the SEC contain forward-looking statements that are based on current expectations, estimates, forecasts and projections about us, our future performance, our business, our beliefs, and our management’s assumptions. These statements are not guarantees of future performance, and they involve certain risks, uncertainties and assumptions that are difficult to predict. You should carefully consider the risks and uncertainties facing our business.
Other than set forth below, there have been no material changes to our risk factors disclosed in Part I, Item 1A, of our Annual Report on Form 10-K for the year ended June 30, 2017.
We are currently not in compliance with the continued listing standards of the NYSE American. Our failure to resume compliance with the continued listing standards or make continued progress toward compliance consistent with a plan of compliance that we [submitted] to NYSE Regulation may result in the delisting of our common stock.
Palatin received a notice from the staff of NYSE American LLC (the “Exchange”) that Palatin was not in compliance with the Exchange’s continued listing standards under Section 1003(a)(i) and (ii) of the NYSE American Company Guide. Section 1003(a)(i) requires a listed company to have stockholders’ equity $2 million or more if the listed company has reported losses from continuing operations and/or net losses in two of its three most recent fiscal years, and Section 1003(a)(ii) requires a listed company to have stockholders’ equity of $4 million or more if the listed company has reported losses from continuing operations and/or net losses in three of its four most recent fiscal years. Palatin is now subject to the procedures and requirements of Section 1009 of the NYSE American Company Guide. Palatin had until November 9, 2023, to submit a plan (the “Plan”) of actions it has taken or will take to regain compliance with the continued listing standards by April 10, 2025.
Palatin has timely delivered a Plan to the Exchange. If the Exchange accepts the Plan, Palatin will be able to continue its listing during the Plan period and will be subject to periodic reviews including quarterly monitoring for compliance with the Plan until it has regained compliance. If the Plan is not accepted by the Exchange, the notice stated that delisting proceedings will commence. The Company may appeal a staff delisting determination in accordance with Section 1010 and Part 12 of the Company Guide.
There can be no assurance that the Exchange will accept the Plan, or that Palatin will be able to meet milestones set forth in the Plan between now and April 10, 2025.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
As disclosed in the table below, 25,467 shares of common stock were withheld during the three months ended September 30, 2023, at the direction of the employees and as permitted under the 2011 Stock Incentive Plan in order to pay the minimum amount of tax liability owed by the employees from the vesting of previously issued restricted stock units:
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Fiscal Month Period |
| Total Number of Shares Purchased (1) |
|
| Weighted Average Price per Share |
|
| Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
|
| Maximum Number of Shares that May Yet be Purchased Under Announced Plans or Programs |
| ||||
July 1, 2023 through July 31, 2023 |
|
| - |
|
| $ | - |
|
|
| - |
|
|
| - |
|
August 1, 2023 through August 31, 2023 |
|
| 25,467 |
|
|
| 2.21 |
|
|
|
|
|
|
| - |
|
September 1, 2023 through September 30, 2023 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Total |
|
| - |
|
| $ | - |
|
|
| - |
|
|
| - |
|
(1) | Consists solely of 25,467 shares that were withheld to satisfy tax withholding amounts due from employees upon the vesting of previously issued restricted stock units. |
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits.
Exhibits filed or furnished with this report:
Exhibit Number | Description | Filed Herewith | Form | Filing Date | SEC File No. | |||||
8-K | September 17, 2021 | 001-15543 | ||||||||
Restated Certificate of Incorporation of Palatin Technologies, Inc., as amended. | 10-K | September 27, 2013 | 001-15543 | |||||||
8-K | August 31, 2022 | 001-15543 | ||||||||
Certificate of Decrease of Series A Convertible Preferred Stock. | 10-Q | May 16, 2022 | 001-15543 | |||||||
8-K | October 24, 2003 | 001-15543 | ||||||||
8-K | October 24, 2023 | 001-15543 | ||||||||
8-K | October 24, 2023 | 001-15543 | ||||||||
8-K | October 24, 2023 | 001-15543 | ||||||||
X | ||||||||||
X | ||||||||||
* | ||||||||||
* | ||||||||||
101.INS | Inline XBRL Taxonomy Extension Instance | X | ||||||||
101.SCH | Inline XBRL Taxonomy Extension Schema Document. | X | ||||||||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | X | ||||||||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | X | ||||||||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | X | ||||||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | X | ||||||||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
*In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release Nos. 33-8238 and 34-47986, Final Rule: Management’s Reports on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, the certification furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Exchange Act. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Palatin Technologies, Inc. | ||||||
(Registrant) | ||||||
/s/ Carl Spana | ||||||
Date: November 14, 2023 | ||||||
Carl Spana, Ph.D. President and Chief Executive Officer (Principal Executive Officer) | ||||||
/s/ Stephen T. Wills | ||||||
Date: | Stephen T. Wills, CPA, MST Executive Vice President, Chief Financial Officer and Chief Operating Officer (Principal Financial and Accounting Officer) |
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