UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DCD.C. 20549

FORM 10-Q

~~(Mark One)~~

~~[X]~~

☒

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

For the quarterly period ended ~~December 31, 2017~~

September 30, 2023

~~[ ]~~

☐

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~~ 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~~

495‑2200

(~~Registrant's~~Registrant’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.

Yes ☒ No ☐

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.~~

Act:

Large accelerated filer ☐	☐	Accelerated filer	☐
Non-accelerated filer ☐ ~~(Do not check if a smaller reporting company)~~	☒	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) ~~for~~of the Exchange Act. ☐

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

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.~~

as of the latest practicable date (November 13, 2023): 13,737,137.

PALATIN TECHNOLOGIES, INC.

Table of Contents

			Page

PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)		5
	Consolidated Balance Sheets as of ~~December 31, 2017~~September 30, 2023 and June 30, ~~2017~~2023	3	5
	Consolidated Statements of Operations for the Three ~~and Six~~ Months Ended ~~December 31, 2017~~September 30, 2023 and ~~2016~~2022	4	6
	Consolidated Statements of ~~Comprehensive Income (Loss)~~Changes in Redeemable Convertible Preferred Stock and Stockholders’ (Deficiency) Equity for the Three ~~and Six~~ Months Ended ~~December 31, 2017~~September 30, 2023 and ~~2016~~2022	5	7
	Consolidated Statements of Cash Flows for the Three ~~and Six~~ Months Ended ~~December 31, 2017~~September 30, 2023 and ~~2016~~2022	6	8
	Notes to Consolidated Financial Statements	7	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22	25
Item 4.	Controls and Procedures	22	25

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings		26
Item ~~1. Legal Proceedings~~1A.	23 Risk Factors		26
~~Item 1A. Risk Factors~~	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23	26
Item 3.	Defaults Upon Senior Securities	23	27
Item 4.	Mine Safety Disclosures	23	27
Item 5.	Other Information	23	27
Item 6. ~~Exhibits~~	23 Exhibits		28
~~Signatures~~	24
Signatures			29

~~SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS~~

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” ~~means~~mean 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 ~~statements~~facts contained in this Quarterly Report, ~~on Form 10-Q,~~ including, without limitation, the following are forward looking statements:

●

~~estimates of our expenses, future revenue and capital requirements;~~

●

~~our ability to obtain additional financing on terms acceptable to us, or at all;~~

●

~~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;~~

●

our expectations regarding completion of required clinical trials and studies and validation of methods and controls used to manufacture bremelanotide for the treatment of premenopausal women with hypoactive sexual desire disorder (“HSDD”), which is a type of female sexual dysfunction (“FSD”);

●

~~our expectation regarding the timing of our regulatory submissions for approval of bremelanotide for HSDD in the United States and in certain other jurisdictions outside the United States;~~

●

~~our expectation regarding performance of our exclusive licensees of bremelanotide, including;~~

~~AMAG Pharmaceuticals, Inc. (“AMAG”) for North America,~~

Shanghai Fosun Pharmaceutical Industrial Development Co. Ltd. (“Fosun”), a subsidiary of Shanghai Fosun Pharmaceutical (Group) Co., Ltd. for the territories of mainland China, Taiwan, Hong Kong S.A.R. and Macau S.A.R., and

~~Kwangdong Pharmaceutical Co., Ltd. (“Kwangdong”) for the Republic of Korea;~~

●

~~the potential for commercialization of bremelanotide for HSDD in North America by AMAG and other product candidates, if approved, by us;~~

●

~~our expectations regarding the potential market size and market acceptance for bremelanotide for HSDD and our other product candidates, if approved for commercial use;~~

●

~~our ability to compete with other products and technologies similar to 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 Medicare, Medicaid, 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 retention of key management, employees and third-party contractors;~~

●

~~the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and technology;~~

●

~~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 legislative or regulatory healthcare reforms in the United States;~~

●

~~our ability to adapt to changes in global economic conditions; and~~

●

~~our ability to remain listed on the NYSE American stock exchange.~~

	·	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;

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 Annual~~Quarterly 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.~~

~~We expect~~. Except as required by law, we do not intend, and undertake no obligation, to ~~incur losses in~~publicly update forward-looking statements to reflect events or circumstances after the ~~future as a result~~date of ~~spending on our planned development programs and results may fluctuate significantly from quarter~~this document or to ~~quarter.~~

reflect the occurrence of unanticipated events.

Palatin Technologies® ~~is a~~and Vyleesi® are registered ~~trademark~~trademarks of Palatin Technologies, Inc.

, and Palatin™ and the Palatin logo are trademarks of Palatin Technologies, Inc. Other trademarks referred to in this report are the property of their respective owners.

Table of Contents

PART I -– FINANCIAL INFORMATION

Item 1. Financial ~~Statements~~

~~PALATIN TECHNOLOGIES, INC~~.
~~and Subsidiary~~
~~Consolidated Balance Sheets~~
~~(unaudited)~~

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

Statements.

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

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)

Table of Contents

PALATIN TECHNOLOGIES, INC.
and Subsidiary
Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ (Deficiency) Equity
(unaudited)

Three Months Ended September 30, 2023
	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	)

Three Months Ended September 30, 2022
	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

statements

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.~~

statements

Table of Contents

PALATIN TECHNOLOGIES, INC.

and Subsidiary

Notes to Consolidated Financial Statements

~~(unaudited)~~

(1)

~~ORGANIZATION:~~

ORGANIZATION

Nature of Business –- Palatin Technologies, Inc. (“Palatin” or the “Company”) is a biopharmaceutical company developing first-in-class medicines based on molecules that modulate the activity of the melanocortin receptor system. The Company’s product candidates are targeted, receptor-specific ~~peptide~~ therapeutics for the treatment of diseases with significant unmet medical need and commercial potential. ~~Palatin’s programs are based on molecules that modulate the activity of the melanocortin and natriuretic peptide receptor systems.~~

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 this~~immune system ~~may be useful in treatment~~responses. There are five melanocortin receptors, MC1r through MC5r. Modulation of ~~heart failure and other cardiovascular diseases.~~

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.

The Company’s ~~primary~~commercial product, Vyleesi®, was approved by the U.S. Food and Drug Administration (“FDA”) in ~~development is bremelanotide~~June 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 bowel~~rare disease and ~~ocular~~orphan indications.

Key elements of the Company’s business strategy include using its technology and expertise to develop and commercialize therapeutic products; entering into alliances and partnerships with pharmaceutical companies to facilitate the development, manufacture, marketing, sale and distribution of product candidates that the Company is developing; and partially funding its product candidate development programs with the cash flow generated from its relationships with third parties.

Business ~~Risk~~Risks and Liquidity – ~~Since inception, the~~The Company has incurred operating losses and negative cash flows from operations since inception and ~~has expended, and expects to continue to expend, substantial funds~~will need additional funding to complete its planned product development efforts. As shown in the accompanying consolidated financial statements, the Company had an accumulated deficit as of ~~December 31, 2017~~September 30, 2023 of ~~$343,614,797~~$421,423,982 and ~~had~~a net ~~income~~loss for the three ~~and six~~ months ended ~~December 31, 2017~~September 30, 2023 of ~~$2,530,193~~$5,888,399, and ~~$13,133,823, respectively. The~~the Company anticipates incurring ~~losses~~significant expenses in the future as a result of spending on developing marketing and distribution capabilities for Vyleesi in the United States and spending on its development programs and will require substantial additional financing or revenues to continue to fund its planned ~~developmental~~ activities. To achieve sustained profitability, if ever, the Company, alone or with others, must successfully develop and commercialize its technologies and proposed products, conduct successful preclinical studies and clinical trials, obtain required regulatory approvals, and successfully manufacture and market such technologies and proposed products. The time required to reach sustained profitability is highly uncertain, and the Company may never be able to achieve profitability on a sustained basis, if at all.

On November 21, 2017, the Company entered into a license agreement with Kwangdong for exclusive rights to develop and commercialize bremelanotide in the Republic of Korea. (“License Agreement with Kwangdong”) (Note 7).

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.~~

~~Management believes that its existing capital resources will be sufficient~~portfolio products.

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 least~~assess 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.

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 need~~is evaluating strategies to obtain additional funding for future operations which include but are not limited to ~~complete required clinical trials for~~obtaining 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 approval~~raise 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 may seek the additional capital necessary to fund its operations through public or private equity offerings, collaboration agreements, debt financings or licensing arrangements. Additional capital that is required byenter into a strategic transaction, then the Company may ~~not~~ be ~~available~~required to cease operations, which could cause its stockholders to lose all or part of their investment. The consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the continuity of operations, the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. Assuming no additional funding and based on ~~reasonable terms, or at all.~~

its current operating and development plans, the Company expects that existing cash, cash equivalents and marketable securities as of the date of this filing will be sufficient to fund currently anticipated operating expenses into the first half of calendar year 2024.

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, ~~and~~ cash equivalents, and accounts ~~receivable and investments.~~receivable. The Company’s cash, ~~and~~ cash equivalents, and marketable securities are primarily invested in one ~~money market~~investment account sponsored by a large financial institution. For the three and six months ended December 31, 2017, the Company reported $10,612,153 and $32,553,661, respectively, in license and contract revenue related to a license agreement with AMAG for bremelanotide for North America (“License Agreement with AMAG”) (Note 5). In addition, for the six months ended December 31, 2017, the Company reported $5,000,000 in license revenue related to a license agreement with Fosun for bremelanotide for China and certain other Asian territories (“License Agreement with Fosun”) (Note 6). The Company did not generate any revenue for the three and six months ended December 31, 2016.

~~PALATIN TECHNOLOGIES, INC.~~

~~and Subsidiary~~

~~Notes to Consolidated Financial Statements~~

~~(unaudited)~~

(2)

BASIS OF ~~PRESENTATION:~~

PRESENTATION

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, 2017~~September 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, ~~2017~~2023, and ~~2016~~2022 and for ~~each of~~ the fiscal years ~~in the three-year period ended June 30, 2017.~~

then ended.

(3)

SUMMARY OF SIGNIFICANT ACCOUNTING ~~POLICIES:~~

POLICIES

Principles of Consolidation– The consolidated financial statements include the accounts of ~~Palatin~~the Company and its wholly-owned inactive subsidiary. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates – The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. ~~GAAP~~GAAP”) requires management to make estimates and assumptions that affect the reported ~~amount~~amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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 equivalents ~~consist~~consisted of ~~$34,769,696 and $40,019,336~~$3,166,343 in a money market account ~~as of December 31, 2017~~at September 30, 2023, and $5,789,218 in a money market account and treasury bills at June 30, ~~2017, respectively.~~

~~Investments~~ –2023.

Marketable Securities - The ~~Company determines the appropriate classification~~Company’s marketable securities consist of ~~its investments in~~ debt ~~and equity~~ securities ~~at the time~~with original maturities of ~~purchase and reevaluates such determinations at each balance sheet date. Debt securities~~greater 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 securities~~available 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).

The fair value of substantially all securities is determined by quoted market prices. The estimated fair value of securities for which there are no quoted market prices is based on similar types of securities that are traded in the market.

sale securities.

Fair Value of Financial Instruments – The Company’s financial instruments consist primarily of cash equivalents, marketable securities, accounts receivable, ~~accounts payable~~ and ~~notes~~accounts payable. Management believes that the carrying values of cash equivalents, accounts receivable, ~~available-for-sale investments~~ and accounts payable are representative of their respective fair values based on the short-term nature of these instruments. ~~Management believes that the carrying amount of its notes payable approximates fair value based on the terms of the notes.~~

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, and ~~cash equivalents.~~accounts receivable. Total cash and cash equivalent balances have exceeded balances insured by the Federal Depository Insurance Company.

Currently, product revenues and related accounts receivable are generated primarily from one specialty pharmacy.

Trade 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 under ~~capital~~finance leases. Property and equipment are recorded at cost. Depreciation is recognized using the straight-line method over the estimated useful lives of the related assets, generally five years for laboratory and computer equipment, seven years for office furniture and equipment, and the lesser of the term of the lease or the useful life for leasehold improvements. Amortization of assets acquired under ~~capital~~finance leases is included in depreciation expense. Maintenance and repairs are expensed as incurred while expenditures that extend the useful life of an asset are capitalized. ~~Accumulated depreciation and amortization was $2,310,875 and $2,281,989 as of December 31, 2017 and June 30, 2017, respectively.~~

~~PALATIN TECHNOLOGIES, INC.~~

~~and Subsidiary~~

~~Notes to Consolidated Financial Statements~~

~~(unaudited)~~

Impairment 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.

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 Company ~~has generated~~recognizes product revenues in accordance with FASB ASC Topic 606, Revenue from Contracts with Customers. The provisions of ASC Topic 606 require the following steps to determine revenue recognition: (1) Identify the contract(s) with a customer; (2) Identify the performance obligations in the contract; (3) Determine the transaction price; (4) Allocate the transaction price to the performance obligations in the contract; and (5) Recognize revenue when (or as) the entity satisfies a performance obligation.

In 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 ~~through~~or 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.

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 unit~~part of ~~accounting only if both of~~its ordinary activities.

Development milestone payments are generally due 30 business days after the ~~following criteria~~milestone is achieved. Sales milestone payments are ~~met:~~

●

generally due 45 business days after the ~~delivered item has value to the customer on a stand-alone basis; and~~

●

~~if the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item is considered probable and substantially in control of the vendor.~~

~~Under FASB ASC Topic 605-25, if both of the criteria above are not met, then separate accounting for the individual deliverables is not appropriate.~~

The Company has determined that it is appropriate to recognize the consideration received under its License Agreement with AMAG as revenue using the input-based proportional method during the period of the Palatin Development Obligation as defined in the License Agreement with AMAG. Refer to Note 5 for additional information on this topic.

Under its License Agreement with Fosun (Note 6), the Company received consideration in the form of an upfront license fee payment and determined that it was appropriate to recognize such consideration as revenue in the first quarter of 2018, which was the quartercalendar year in which the ~~license was granted, since the license has stand-alone value and the upfront payment received by the Company~~sales milestone is ~~non-refundable.~~

Under its License Agreement with Kwangdong (Note 7), the Company received consideration in the form of an upfront license fee payment and has currently determined that it is appropriate to record such consideration as non-current deferred revenue because the upfront payment received by the Company is subject to certain refund provisions.

~~Revenue resulting from the achievement of development milestones is recorded in accordance with the accounting guidance for the milestone method of revenue recognition.~~

~~Amounts received prior to satisfying the revenue recognition criteria~~achieved. Royalty payments are ~~recorded as deferred revenue~~generally due on ~~the Company’s consolidated balance sheet. Amounts expected to be recognized as revenue in the next 12 months following the balance sheet date are classified as current liabilities.~~

a quarterly basis 20 business days after being invoiced.

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 and ~~accrue~~accrues expenses and the amount of any reimbursement to be received from its collaborators based upon the estimated amount of work ~~completed.~~completed considering milestones achieved. Estimating the value or stage of completion of certain services requires judgment based on available information. If the Company does not identify services performed for it but not billed by the service-provider, or if ~~the Company~~it underestimates or overestimates the value of services performed as of a given date, reported expenses will be understated or overstated.

Stock-Based Compensation –The Company charges to expense the fair value of stock options and other equity awards ~~granted. The Company determines the value of stock options utilizing the Black-Scholes option pricing model.~~granted to employees and nonemployees for services. Compensation costs for ~~share-based~~stock-based awards with ~~pro-rata~~time-based vesting are determined using the quoted market price of the Company’s common stock on the grant date ~~of grant~~or for stock options, the value determined utilizing the Black-Scholes option pricing model, and ~~allocated to periods~~are recognized on a straight-line basis, while awards containing a market condition ~~and performance conditions~~ are valued using multifactor Monte Carlo ~~simulations.~~

~~PALATIN TECHNOLOGIES, INC.~~

simulations and ~~Subsidiary~~

~~Notes to Consolidated Financial Statements~~

~~(unaudited)~~

are recognized over the derived service period. Compensation costs for awards containing a performance condition are determined using the quoted price of the Company’s common stock on the grant date or for stock options, the value determined utilizing the Black Scholes option pricing model and are recognized based on the probability of achievement of the performance condition over the service period. Forfeitures are recognized as they occur.

Income 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 losses ~~incurred.~~

~~Pursuant to the License Agreement with Fosun (Note 6)~~incurred and ~~the License Agreement with Kwangdong (Note 7), $500,000~~lack of experience projecting future product revenue and ~~$82,500, respectively, was withheld in accordance with tax withholding requirements in China~~sales-based royalty and the Republic of Korea, respectively, and will be recorded as an expense during the fiscal year ending June 30, 2018. For the three and six months ended December 31, 2017, the Company incurred $100,880 and $326,135, respectively, in income tax expense and the remaining balance of $256,365 was included in prepaid expenses and other current assets at December 31, 2017. Any potential credit to be received by the Company on its United States tax returns is currently offset by the Company’s valuation allowance.

On December 22, 2017, the U.S. government enacted wide-ranging tax legislation, the Tax Cuts and Jobs Act (the "2017 Tax Act"). The 2017 Tax Act significantly revises U.S. tax law by, among other provisions, (a) lowering the applicable U.S. federal statutory corporate income tax rate from 35% to 21%, (b) eliminating or reducing certain income tax deductions, such as deductions for interest expense, executive compensation expenses and certain employee expenses, and (c) repealing the federal alternative minimum tax ("AMT") and providing for the refund of existing AMT credits.

As a result of the 2017 tax Act, during the quarter ended December 31, 2017, the Company recorded a tax benefit of $500,000 related to the release of a valuation allowance against an AMT credit; accordingly $500,000 is included in Other long-term assets at December 31, 2017. In addition, as a result of the enactment of the new corporate income tax rate, the Company remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse and with the exception of the AMT credit, the Company continues to maintain a full valuation allowance against its net deferred tax assets.

milestone payments.

Net ~~Income (Loss)~~Loss per Common Share–Basic and diluted ~~earnings~~loss per common share (“EPS”) are calculated in accordance with the provisions of FASB ASC Topic 260, “Earnings per Share,” which includes guidance pertaining to the 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, that were exercisable for nominal consideration and, therefore, to the extent not yet exercised are considered in the computation of basic and diluted net loss per common share. As of December 31, 2017, all warrants exercisable for nominal value have been converted into common stock.

The following table is a reconciliation of net income (loss) and the shares used in calculating basic and diluted net income (loss) per common share for the three and six months ended December 30, 2017 and 2016:

~~PALATIN TECHNOLOGIES, INC.~~

~~and Subsidiary~~

~~Notes to Consolidated Financial Statements~~

~~(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)





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, 2017~~September 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.

The potential number of common shares excluded from diluted EPS during the three months ended September 30, 2023, and 2022 was 4,519,682 and 2,829,183, respectively.

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.

Table of Contents

PALATIN TECHNOLOGIES, INC.

and Subsidiary

Notes to Consolidated Financial Statements

(4)

NEW AND RECENTLY ADOPTED ACCOUNTING ~~PRONOUNCEMENTS:~~

~~In May 2017, the FASB issued ASU No. 2017-09,~~ ~~Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting~~, which clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. It is effective prospectively for the annual period ending June 30, 2019 and interim periods within that annual period. Early adoption is permitted. The Company is currently evaluating the effect that ASU No. 2017-09 will have on its consolidated financial statements and related disclosures.

PRONOUNCEMENTS

In June 2016, the FASB issued ~~ASU~~Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, which requires ~~measurement~~an entity to measure and ~~recognition of~~recognize expected credit losses for certain financial ~~assets~~instruments held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This ~~is different from~~update to the ~~current guidance as this will require~~standard 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.~~

~~In March 2016, the FASB issued ASU No. 2016-09,~~ ~~Compensation – Improvements to Employee Share-Based Payment Accounting~~, which amends the current guidance related to stock compensation. The updated guidance changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. Under this guidance, on a prospective basis, companies will no longer be able to record excess tax benefits and certain tax deficiencies as additional paid-in capital. Instead, companies will record all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement. In addition, the guidance eliminates the requirement that excess tax benefits be realized before companies can recognize them. The ASU requires a cumulative-effect adjustment for previously unrecognized excess tax benefits in opening retained earnings in the period of adoption. Effective July 1, 2017, the Company adopted this updated guidance and elected to recognize forfeitures when they occur using a modified retrospective approach.2023. The adoption of ~~ASU No. 2016-09~~this standard did not have a material impact on the Company’s consolidated financial ~~statements.~~

~~PALATIN TECHNOLOGIES, INC.~~

statements for the quarter ended September 30, 2023.

(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~~

~~Notes~~prefilled syringes and assemble prefilled syringes into an auto-injector device; Ypsomed AG (“Ypsomed”), to ~~Consolidated Financial Statements~~

~~(unaudited)~~

~~In February 2016,~~manufacture the ~~FASB issued ASU No. 2016-02,~~ ~~Leases~~auto-injector device (the “Ypsomed Agreement”); and Lonza Ltd. (“Lonza”), to manufacture the active pharmaceutical ingredient peptide (the “Lonza Agreement”).

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 recognition~~production 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 leases~~Vyleesi, including that ~~meet the definition~~Catalent 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.

~~In January 2016, the FASB issued ASU No. 2016-01,~~ ~~Financial Instruments: Recognition and Measurement of Financial Assets and Financial Liabilities~~. The new guidance relates to the recognition and measurement of financial assets and liabilities. The new guidance makes targeted improvements to U.S. GAAP impacting equity investments (other than those accounted for under the equity method or consolidated), financial liabilities accounted for under the fair value election, and presentation and disclosurePalatin’s requirements for ~~financial instruments, among other changes. The new guidance is effective for~~Vyleesi during the Company on July 1, 2018, with early adoption prohibited other than for certain provisions. The Company is evaluating the impact that ASU No. 2016-01 will have on its consolidated financial statements and related disclosures.

~~In November 2015, the FASB issued ASU No. 2015-17,Income Taxes: Balance Sheet Classification of Deferred Taxes,~~which simplifies the balance sheet classification of deferred taxes. The new guidance requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the new guidance. Effective July 1, 2017, the Company adopted this updated guidance, which did not have a material impact on the Company’s financial position or results of operations because its net deferred tax assets were fully offset by a valuation allowance based on the history of losses incurred.

~~In May 2014, the FASB issued ASU No. 2014-09,Revenue from Contracts with Customers~~, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In July 2015, the FASB voted to defer the effective dateterm of the ~~new standard until fiscal years beginning after December 15, 2017~~Catalent Agreement through August 21, 2025, unless earlier terminated in accordance with ~~early application permitted for fiscal years beginning after December 15, 2016. With the deferral, the new standard is effective for the Company on July 1, 2018.~~ ~~In addition, in April 2016 the FASB issued ASU No. 2016-10,~~ ~~Identifying Performance Obligations and Licensing~~, which addresses various issues associated with identifying performance obligations, licensing of intellectual property, royalty considerations, and other matters. ASU No. 2016-10 is effective in connection with ASU No. 2014-09. The two permitted transition methods under ASU 2014-09 are the full retrospective method, in which case the new standard would be applied to each prior period presented and the cumulative effect of applying the standard would be recognized as of the earliest period reported, or the modified retrospective method, in which case the cumulative effect of applying the new standard would be recognized as of the date of initial application. The Company is currently evaluating the impact that the implementation of this standard will have on the Company’s consolidated financial statements, including performing an assessment of the impact of the new standard on its collaboration arrangements with third parties.

~~(5)~~

~~AGREEMENT WITH AMAG:~~

~~On January 8, 2017, the Company entered into the License Agreement with AMAG. Under~~ the terms of the ~~License~~Catalent Agreement. The initial term of the Catalent Agreement will be automatically extended for one 24-month period unless either party notifies the other of its desire to terminate as of the end of the initial term. The Catalent Agreement also includes customary terms and conditions relating to forecasting and minimum commitments, ordering, delivery, inspection and acceptance, and termination, among other matters (see Note 12).

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.

~~Following the satisfaction of certain conditions to closing, the License~~Ypsomed Agreement ~~with AMAG became effective on February 2, 2017. On that date, AMAG paid the Company $60,000,000 as a one-time initial payment. Pursuant~~by ten months’ written notice prior to the ~~terms~~expiration of the Ypsomed Agreement or any automatic renewal period. There are specified minimum purchase requirements under the Ypsomed Agreement, and ~~subject to~~under specified circumstances, termination fees may be payable upon termination of the ~~conditions in the License~~Ypsomed Agreement ~~with AMAG, AMAG is required to reimburse the Company up to an aggregate amount of $25,000,000 for reasonable, documented, direct out-of-pocket expenses incurred~~ by the Company ~~following February 2, 2017,~~(see Note 12).

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 ~~connection~~a 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 HSDD~~Company 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.~~

~~PALATIN TECHNOLOGIES, INC.~~

~~and Subsidiary~~

~~Notes to Consolidated Financial Statements~~

~~(unaudited)~~

The Company has determined there is no stand-alone value for the license, and that the license and the reimbursable direct out-of-pocket expenses, pursuant to the terms of the License Agreement with AMAG, represent a combined unit of accounting which totals $85,000,000. The Company is recognizing revenue of the combined unit of accounting over the arrangement using the input-based proportional method as the Company completes its development obligations. For the three ~~and six~~ months ended December 31, 2017, the Company recognized $10,612,153 and $32,553,661, respectively, as license and contract revenue related to this transaction. As of December 31, 2017 and June 30, 2017, there was $9,548,228 and $35,050,572, respectively, of current deferred revenue on the consolidated balance sheet related to this transaction.

In addition, pursuant to the terms of and subject to the conditions in the License Agreement with AMAG, the Company is eligible to receive from AMAG: (i) up to $80,000,000 in specified regulatory payments upon achievement of certain regulatory milestones, and (ii) up to $300,000,000 in sales milestone payments based on achievement of annual net sales amounts for all Products in the Territory.

AMAG is also obligated to pay the Company tiered royalties on annual net sales of Products, on a product-by-product basis, in the Territory ranging from the high single-digits to the low double-digits. The royalties will expire on a product-by-product and country-by-country basis until the latest to occur of (i) the earliest date on which there are no valid claims of the Company’s patent rights covering such Product in such country, (ii) the expiration of the regulatory exclusivity period for such Product in such country and (iii) ten years following the first commercial sale of such Product in such country. Such royalties are subject to reductions in the event that: (a) AMAG must license additional third party intellectual property in order to develop, manufacture or commercialize a Product, or (b) generic competition occurs with respect to a Product in a given country, subject to an aggregate cap on such deductions of royalties otherwise payable to the Company. After the expiration of the applicable royalties for any Product in a given country, the license for such Product in such country will become a fully paid-up, royalty-free, perpetual and irrevocable license.

The Company engaged Greenhill & Co. LLC (“Greenhill”) as the Company’s sole financial advisor in connection with a potential transaction with respect to bremelanotide. Under the engagement agreement with Greenhill, the Company was obligated to pay Greenhill a fee equal to 2% of all proceeds and consideration paid to the Company by AMAG in connection with the License Agreement with AMAG, subject to a minimum fee of $2,500,000. The minimum fee of $2,500,000, less credit of $50,000 for an advisory fee previously paid by the Company, was paid to Greenhill upon the closing of the licensing transaction. This amount will be credited toward amounts that become due to Greenhill in the future, provided that the aggregate fee payable to Greenhill will not be less than 2% of all proceeds and consideration paid to the Company by AMAG in connection with the License Agreement with AMAG. The Company will pay Greenhill an aggregate total of 2% of all proceeds and consideration paid to the Company by AMAG in connection with the License Agreement with AMAG, including future milestone and royalty payments, after crediting the $2,500,000 that was paid to Greenhill upon entering into the License Agreement with AMAG. The Company also reimbursed Greenhill $7,263 for certain expenses incurred in connection with its advisory services.

Pursuant to the License Agreement with AMAG, the Company has assigned to AMAG the Company’s manufacturing and supply agreements with Catalent Belgium S.A. to perform fill, finish and packaging of bremelanotide.

2022. (see Note 12).

(6)

AGREEMENT WITH ~~FOSUN:~~

FOSUN

On September 6, 2017, the Company entered into ~~the License Agreement~~a license agreement with Shanghai Fosun Pharmaceutical Industrial Development Co. Ltd. (“Fosun”) for exclusive rights to commercialize ~~bremelanotide~~Vyleesi in ~~the territories of mainland~~ China ~~Taiwan, Hong Kong S.A.R. and Macau S.A.R.~~

(the “Fosun License Agreement”). Under the terms of the ~~agreement,~~Fosun License Agreement, the Company received $4,500,000 in October 2017, which consisted of an upfront payment of $5,000,000 less $500,000 ~~which~~that was withheld in accordance with tax withholding requirements in China and ~~will be~~ recorded as an expense during the ~~fiscal~~ year ~~ending~~ended June 30, 2018. For the three and six months ended December 31, 2017, the Company incurred $54,712 and $279,967, respectively, in income tax expense utilizing an estimated effective annual income tax rate applied to income for the three and six months ended December 31, 2017 and the remaining balance of $220,033 was included in prepaid expenses and other current assets at December 31, 2017. The Company ~~will~~is entitled to receive a $7,500,000 milestone payment when regulatory approval in China is obtained, provided that a commercial supply agreement for ~~bremelanotide~~Vyleesi has been entered into. ~~Palatin~~The Company has the potential to receive up to $92,500,000 in additional sales related milestone payments and high single-digit to low double-digit royalties on net sales in the licensed territory. All development, regulatory, sales, marketing, and commercial activities and associated costs in the licensed territory will be the sole responsibility of Fosun.

Table of Contents

PALATIN TECHNOLOGIES, INC.

and Subsidiary

Notes to Consolidated Financial Statements

(7)

AGREEMENT WITH ~~KWANGDONG:~~

KWANGDONG

On November 21, 2017, the Company entered into ~~the License Agreement~~a license agreement with Kwangdong Pharmaceutical Co., Ltd. (“Kwangdong”) for exclusive rights to commercialize ~~bremelanotide~~Vyleesi in ~~the Republic of Korea.~~

~~PALATIN TECHNOLOGIES, INC.~~

~~and Subsidiary~~

~~Notes to Consolidated Financial Statements~~

~~(unaudited)~~

Korea (the “Kwangdong License Agreement”). Under the terms of the ~~agreement,~~Kwangdong License Agreement, the Company received $417,500 in December 2017, consisting of an upfront payment of $500,000, less $82,500, which was withheld in accordance with tax withholding requirements in Korea and ~~will be~~ recorded as an expense during the ~~fiscal~~ year ~~ending~~ended June 30, 2018. Based upon certain refund provisions, the upfront payment has been recorded as non-current deferred revenue at December 31, 2017. For the three and six months ended December 31, 2017, the Company incurred $46,168 in income tax expense utilizing an estimated effective annual income tax rate applied to income for the three and six months ended December 31, 2017 and the remaining balance of $36,332 was included in prepaid expenses and other current assets at December 31, 2017. The Company ~~will~~is entitled to receive a $3,000,000 milestone payment based on the first commercial sale in Korea. ~~Palatin~~The Company has the potential to receive up to $37,500,000 in additional sales related milestone payments and mid-single-digit to low double-digit royalties on net sales in the licensed territory. All development, regulatory, sales, marketing, and commercial activities and associated costs in the licensed territory will be the sole responsibility of Kwangdong.

(8)

PREPAID EXPENSES AND OTHER CURRENT ~~ASSETS:~~

ASSETS

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)

~~INVESTMENTS:~~

~~The following summarizes the carrying value of the Company’s available-for-sale investments, which consist of corporate debt securities:~~

	~~December 31,~~ ~~2017~~	~~June 30,~~ ~~2017~~
~~Cost~~	$-	$~~262,023~~
~~Amortization of premium~~	-	~~(11,596~~)
~~Gross unrealized loss~~	-	~~(590~~)
~~Fair value~~	$-	$~~249,837~~

~~(10)~~

FAIR VALUE ~~MEASUREMENTS:~~

MEASUREMENTS

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 ~~asset~~asset’s or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

~~PALATIN TECHNOLOGIES, INC.~~

~~and Subsidiary~~

~~Notes to Consolidated Financial Statements~~

~~(unaudited)~~

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
$-
$-

~~(11)~~

~~ACCRUED EXPENSES:~~

~~Accrued expenses consist of the following:~~

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

~~(12)~~

~~NOTES PAYABLE:~~

~~Notes payable consist of the following:~~

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

On December 23, 2014, the Company closed on a $10,000,000 venture loan which was led by Horizon Technology Finance Corporation (“Horizon”). The debt facility 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-only payments for the first eighteen months followed by monthly payments of principal of $333,333 plus accrued interest through January 1, 2019. The lenders also received five-year immediately exercisable Series D 2014 warrants to purchase 666,666 shares of common stock exercisable at an exercise price of $0.75 per share. The Company recorded a debt discount of $267,820 equal 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 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 January 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 $209,367 of costs in connection with the loan. 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.

value:

	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	$	-	$	-

Table of Contents

PALATIN TECHNOLOGIES, INC.

and Subsidiary

Notes to Consolidated Financial Statements

~~(unaudited)~~

~~On July 2, 2015,~~

(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 facility~~Company 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-only~~required to make certain payments for the ~~first eighteen months followed~~manufacture 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 payments~~internal 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 ~~principal~~future 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 ~~lenders~~Company records legal expenses associated with such contingencies as incurred.

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 equal~~up 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.

The Company’s obligations under the 2015 amended and restated loan agreement, which includes both the 2014 venture loan and the 2015 venture loan, are secured by a first priority security interest in substantially all of its assets other than its intellectual property. The Company also has agreed to specified limitations on pledging or otherwise encumbering its intellectual property assets. The 2015 amended and restated loan agreement include customary affirmative and restrictive covenants, but does not include any covenants to attain or maintain specified financial metrics. The loan agreement includes customary events of default, including payment defaults, breaches of covenants, change of control and a material adverse change default. Upon the occurrence of an event of default and following any applicable cure periods, a default interest rate of an additional 5% may be applied to the outstanding loan balances, and the lenders may declare all outstanding obligations immediately due and payable and take such other actions as set forth in the loan agreement. As of December 31, 2017, the Company was in compliance with all of its loan covenants.

~~(13)~~

~~STOCKHOLDERS’ EQUITY (DEFICIENCY):~~

~~Financing Transactions –~~ On December 6, 2016, the Company closed on an underwritten public offering of units, with each unit consisting of a share of common stock and a Series J warrant to purchase 0.50 of a share of common stock. Gross proceeds were $16,500,000, with net proceeds to the Company, after deducting underwriting discounts and commissions and offering expenses, of $15,386,075. The Company issued 25,384,616 shares of common stock and Series J warrants to purchase 12,692,310 shares of common stock at an initial exercise price of $0.80 per share, which warrants are exercisable immediately upon issuance and expire on the fifth anniversary of the date of issuance. The Series J warrants are subject to limitation on exercise if the holder and its affiliates would beneficially own more than 9.99%, or 4.99% for certain holders, of the total number of the Company’s shares of common stock outstanding following such exercise.

On August 4, 2016, the Company closed on an underwritten offering of units, with each unit consisting of a share of common stock and a Series H warrant to purchase 0.75 of a share of common stock. Investors whose purchase of units in the offering would result in them beneficially owning more than 9.99% of the Company’s outstanding common stock following the completion of the offering had the option to acquire units with Series I prefunded warrants substituted for any common stock they would have otherwise acquired. Gross proceeds were $9,225,000, with net proceeds to the Company, after deducting offering expenses, of $8,470,897. The Company issued 11,481,481 shares of common stock and ten-year prefunded Series I warrants to purchase 2,218,04566,666 shares of common stock at an exercise price of ~~$0.01, together~~$12.50 per share, which expire 48 months following issuance. Total gross proceeds from the offering, before expenses, was $15,000,000 which was deposited in an escrow account. The escrowed proceeds were presented as a deduction to the Series B Preferred Stock and Series C Preferred Stock on the Company’s consolidated balance sheet. In November 2022, the investors provided the Company with Notices of Redemption, electing to have the Series HB Preferred Stock and Series C Preferred Stock redeemed in cash. Accordingly, the Company and investors directed the escrow agent for the escrow account to release $15,750,000 to the investors, comprising the total gross proceeds from the offering of $15,000,000 and a fee of $750,000.

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 10,274,646~~seek 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 price~~any time, at the option of ~~$0.70 per share.~~

the holder, into the number of shares of common stock equal to $100 divided by the Series A Conversion Price. As of September 30, 2023, the Series A Conversion Price was $113.18, so each share of Series A Convertible Preferred Stock is currently convertible into approximately 0.66 shares of common stock. The Series ~~I warrants were exercised during~~A Conversion Price is subject to adjustment, under certain circumstances, upon the ~~fiscal year ended June 30, 2017. The Series H warrants are exercisable at an initial exercise price~~sale or issuance of ~~$0.70~~common stock for consideration per share ~~are exercisable commencing six months following~~less than either (i) the Series A Conversion Price in effect on the date of such sale or issuance, ~~and expire on~~or (ii) the ~~fifth anniversary~~market price of the common stock as of the date of such sale or issuance. The Series ~~H warrants are~~A Conversion Price is also subject to adjustment upon the occurrence of a ~~limitation on their exercise if~~merger, reorganization, consolidation, reclassification, stock dividend or stock split which will result in an increase or decrease in the ~~holder and its affiliates would beneficially own more than 9.99% of the total~~ number of ~~the Company’s~~ shares of common stock ~~outstanding following such exercise.~~

~~On July 2, 2015,~~outstanding. Shares of Series A Convertible Preferred Stock have a preference in liquidation, including certain merger transactions, of $100 per share, or $403,000 in the aggregate as of September 30, 2023. Additionally, the Company ~~closed on~~may not pay a ~~private placement~~dividend or make any distribution to holders of any class of stock unless the Company first pays a special dividend or distribution of $100 per share to holders of the Series EA Convertible Preferred Stock.

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 ~~21,917,808~~up to 798,182 shares of ~~Palatin~~the Company’s common stock, and ~~Series F~~(iii) common stock warrants (the “Common Warrants”) to purchase ~~2,191,781~~up 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.

~~PALATIN TECHNOLOGIES, INC.~~

~~and Subsidiary~~

~~Notes to Consolidated Financial Statements~~

~~(unaudited)~~

Offering was completed on November 2, 2022.

The ~~Series E warrants were exercisable immediately upon issuance at~~Common 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 upon~~beginning six months after the date of issuance and will expire ~~on the fifth anniversary of~~five and one-half years from the date of issuance. The ~~Series F warrants~~Pre-Funded Warrants have an exercise price of $0.0001 per share, are ~~subject to limitation on exercise if QVT~~exercisable 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 purchase agreement for~~issuable upon exercise of the ~~private placement provides that the purchasers have certain rights until the earlier of approval of bremelanotide for FSD~~Common Warrants to or by the ~~FDA and July 3, 2018, including rights~~holder of ~~first refusal and participation~~such Common Warrants is not in ~~any subsequent equity or debt financing. The~~effect, on a cashless basis. During the year ended June 30, 2023, the institutional investor exercised the outstanding Pre-Funded Warrants to purchase ~~agreement also contains certain restrictive covenants so long as the funds continue to hold specified amounts of warrants or beneficially own specified amounts~~798,182 shares of the ~~outstanding~~Company’s common stock.

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.

~~During~~ The Company pays Canaccord 3.0% of the ~~six months ended December 31, 2017, and 2016,~~gross proceeds as a commission.

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 of~~had 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 11,438,356~~for shares of common stock ~~pursuant to~~as 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.~~

~~Stock Options~~ ~~– In December 2017,~~three months ended September 30, 2023, and 2022, the Company ~~granted 1,200,000~~recorded stock-based compensation related to stock options of $205,317 and $260,957, respectively.

Table of Contents

PALATIN TECHNOLOGIES, INC.

and Subsidiary

Notes to ~~its executive officers~~Consolidated 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 ~~225,000~~CEO 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 under~~them to purchase 143,360 and 124,220 shares, respectively, of the Company’s common stock to the 2011 Stock Incentive Plan. The ~~fair value~~stock 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.

Also, in December 2017, the Company granted 1,075,000 and 125,000 performance-based options to its executive officers and employees, respectively, which vest during a performance period ending on December 31, 2020, if and upon i) as to 100% of the target number of shares upon achievement of a closing price for the Company’s common stock equal to or greater than $1.50 per share for 20 consecutive trading days, which is considered a market condition; ii) as to thirty percent (30%) of the target number of shares, upon the acceptance for filingany consideration by the FDA of an NDA for bremelanotide for HSDD in premenopausal women during the performance period, which is considered a performance condition; iii) as to fifty percent (50%) of the target number of shares, upon the approval by the FDA of an NDA for bremelanotide for HSDD in premenopausal women during the performance period, which is also considered a performance condition; iv) as to twenty percent (20%) of the target number of shares, upon entry into a licensing agreement during the performance period for the commercialization of bremelanotide for female sexual dysfunction in at least two of the following geographic areas (a) four or more countries in Europe, (b) Japan, (c) two or more countries in Central and/or South America, (d) two or more countries in Asia, excluding Japan and China, and (e) Australia, which is also considered a performance condition. The fair value of these options, as calculated under a multifactor Monte Carlo simulation, is $602,760. The Company is amortizing the fair value over the derived service period of 1.1 years. The Company recognized $42,034 of stock-based compensation expense related to these options during the three and six months ended December 31, 2017.

~~In September 2017, the Company granted 54,000 options to a newly appointed non-employee director under the Company’s 2011~~ Company.

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.

In June 2017, the Company granted 1,797,000 options to its executive officers, 780,000 options to its employees and 378,000 options to its non-employee directors under the Company’s 2011 Stock Incentive Plan. The Company is amortizing the fair value of these options of $445,533, $194,689 and $89,220, respectively, over the vesting period of the options. The Company recognized $62,506 and $125,013, respectively, of stock-based compensation expense related to these options during the three and six months ended December 31, 2017.

In September 2016, the Company granted 828,000 options to its executive officers and 336,000 options to its employees under the Company’s 2011 Stock Incentive Plan. The Company is amortizing the fair value of the options vesting over a 48 month period, consisting of 595,000 options granted to its executive officers and all options granted to its employees, of $188,245 and $106,303, respectively, over the vesting period. The Company recognized $17,703 and $35,406, respectively, of stock-based compensation expense related to these options during the three and six months ended December 31, 2017 and $16,568 and $21,784, respectively, during the three and six months ended December 31, 2016. The remaining 233,000 options granted to the Company’s executive officers vested 12 months from the date of grant, and the Company amortized the fair value of these options of $67,160 over this vesting period. The Company recognized $11,193 of stock-based compensation expense related to these options during the six months ended December 31, 2017 and $15,111 and $19,868, respectively, during the three and six months ended December 31, 2016.

~~PALATIN TECHNOLOGIES, INC.~~

~~and Subsidiary~~

~~Notes to Consolidated Financial Statements~~

~~(unaudited)~~

In June 2015, the Company granted 570,000 options to its executive officers, 185,800 options to its employees and 160,000 options to its non-employee directors under the Company’s 2011 Stock Incentive Plan. The Company is amortizing the fair value of these options of $446,748, $145,439 and $111,876, respectively, over the vesting period. The Company recognized $36,478, and $72,957, respectively, of stock-based compensation expense related to these options during the three and six months ended December 31, 2017 and $35,192 and $67,485, respectively, during the three and six months ended December 31, 2016.

~~Unless otherwise stated, stock~~ options granted to the Company’s executive officers and employees generally vest over a 48-month period, while stock options granted to its non-employee directors vest over a 12-month period.

~~Restricted Stock Units~~ ~~– In December 2017,~~

Included in the ~~Company~~outstanding 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% on~~fiscal 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, third~~three months ended September 30, 2023, and ~~fourth anniversary dates from~~2022, 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 of~~recorded stock-based compensation ~~expense~~ related to ~~these restricted stock units during the three and six months ended December 31, 2017.~~

Also, in December 2017, the Company granted 1,075,000 performance-based restricted stock units to its executive officers and 670,000 performance-based restricted stock units to other employees which vest during a performance period, ending on December 31, 2020, if and upon i) as to 100% of the target number of shares upon achievement of a closing price for the Company’s common stock equal to or greater than $1.50 per share for 20 consecutive trading days, which is considered a market condition; ii) as to thirty percent (30%) of the target number of shares, upon the acceptance for filing by the FDA of an NDA for bremelanotide for HSDD in premenopausal women during the performance period, which is considered a performance condition; iii) as to fifty percent (50%) of the target number of shares, upon the approval by the FDA of an NDA for bremelanotide for HSDD in premenopausal women during the performance period, which is also considered a performance condition; iv) as to twenty percent (20%) of the target number of shares, upon entry into a licensing agreement during the performance period for the commercialization of bremelanotide for female sexual dysfunction in at least two of the following geographic areas (a) four or more countries in Europe, (b) Japan, (c) two or more countries in Central and/or South America, (d) two or more countries in Asia, excluding Japan and China, and (e) Australia, which is also considered a performance condition. The fair value of these awards, as calculated under a multifactor Monte Carlo simulation, is $913,750 and $569,500, respectively. The Company is amortizing the fair value over the derived service period of 1.1 years. The Company recognized $106,850 of stock-based compensation expense related to these restricted stock units during the three and six months ended December 31, 2017.

In September 2017, the Company granted 54,000 restricted stock units to a newly appointed non-employee director under the Company’s 2011 Stock Incentive Plan. The Company is amortizing the fair value of these restricted stock units of ~~$27,000 over a 48 month vesting period. The Company recognized $3,516~~$185,019 and ~~$4,414, respectively,~~$175,920, respectively.

A summary of ~~stock-based compensation expense related~~restricted 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

Table of Contents

PALATIN TECHNOLOGIES, INC.

and Subsidiary

Notes to ~~these~~Consolidated Financial Statements

Included in outstanding restricted stock units ~~during~~in the ~~three and six months ended December 31, 2017.~~

~~In June 2017, the Company granted 1,140,000 restricted stock units~~table above are 279,700 vested shares that have not been issued as of September 30, 2023, due to its executive officers, 780,000 restricted stock units to its employees and 378,000 restricted stock units to its non-employee directors under the Company’s 2011 Stock Incentive Plan. The Company is amortizing the fair value of these restricted stock units of $421,800, $288,600, and $139,860, respectively, over the vesting period. The Company recognized $171,574 and $323,204, respectively, of stock-based compensation expense related to these restricted stock units during the three and six months ended December 31, 2017.

In September 2016, the Company granted 558,000 restricted stock units to its executive officers, 350,500 of which vest over 24 months and 207,500 of which vested over 12 months, and 336,000 restricted stock units to its employees under the Company’s 2011 Stock Incentive Plan. The Company is amortizing the fair value ofa provision in the restricted stock ~~units of $284,580, and $171,360, respectively, over the vesting periods. The Company recognized $27,491 and $91,483, respectively, of stock-based compensation expense related~~unit agreements to ~~these restricted stock units during the three and six months ended December 31, 2017 and $80,228 and $100,732, respectively, during the three and six months ended December 31, 2016.~~

In December 2015, the Company granted 625,000 performance-based restricted stock units to its executive officers and 200,000 performance-based restricted stock units to its employees under the Company’s 2011 Stock Incentive Plan, which vest during the performance period, ending December 31, 2017, if and upon the earlier of: i) achievement of a closing price for the Company’s common stock equal to or greater than $1.20 per share for 20 consecutive trading days, which is considered a market condition, or ii) entering into a collaboration agreement (U.S. or global) of bremelanotide for FSD, which is considered a performance condition. This performance condition was deemed met as of February 2, 2017, the effective date of the License Agreement with AMAG. Prior to meeting the performance condition, the Company determined that it was not probable of achievement on the date of grant since meeting the condition was outside the control of the Company. The fair value of these awards, as calculated under a multifactor Monte Carlo simulation, was $338,250 and was recognized over the derived service period which was through December 2016. The Company recognized $55,410 and $142,289, respectively, of stock-based compensation expense related to these restricted stock units during the three and six months ended December 31, 2016. Upon the achievement of the performance condition, which occurred in the three month period ended March 31, 2017, the grant date fair value was utilized and an incremental $222,075 was recognized as stock-based compensation expense during the three months ended March 31, 2017.

Also, in December 2015, the Company granted 625,000 restricted stock units to its executive officers, 340,000 restricted stock units to its non-employee directors and 200,000 restricted stock units to its employees under the Company’s 2011 Stock Incentive Plan. For executive officers and employees, the restricted stock units vest 25% on the date of grant and 25% on the first, second and third anniversary dates from the date of grant. For non-employee directors, the restricted stock units vest 50% on the first and second anniversary dates from the date of grant. The Company is amortizing the fair value of these restricted stock units of $425,000, $231,200 and $136,000, respectively, over the vesting period of the restricted stock units. The Company recognized $35,553 and $77,010, respectively, of stock-based compensation expense related to these restricted stock units during the three and six months ended December 31, 2017 and $85,996 and $187,252, respectively, during the three and six months ended December 31, 2016.

In June 2015, the Company granted 400,000 restricted stock units to its executive officers, 185,800 restricted stock units to its employees and 160,000 restricted stock units to its non-employee directors under the Company’s 2011 Stock Incentive Plan. The Company is amortizing the fair value of these restricted stock units of $432,000, $200,664, and $172,800, respectively, over the vesting period. The Company recognized $7,067 and $13,954, respectively, of stock-based compensation expense related to these restricted stock units during the three and six months ended December 31, 2017 and $40,430 and $80,859, respectively, during the three and six months ended December 31, 2016.

~~Unless otherwise stated,~~delay delivery.

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.

~~Stock-based compensation expense for~~

Included in the ~~three and six months ended December 31, 2017 for equity-based instruments issued other than the stock options and~~outstanding restricted stock units ~~described~~in the table above ~~was $43,277~~are 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 ~~$121,098~~2023. 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 ~~three~~issuance 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.~~

will expire when exercised in full. There is no established public trading market for the October 2023 Pre-Funded Warrants and the Company does not intend to list the October 2023 Pre-Funded Warrants on any national securities exchange or nationally recognized trading system.

The net proceeds from the October 2023 Offering, after deducting the placement agent fees and offering expenses, were $4,573,948.

Table of Contents

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.~~

2023.

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.

~~Overview~~

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 are~~first-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 bremelanotide~~candidates are targeted, receptor-specific therapeutics for the treatment of ~~premenopausal women~~diseases 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.

~~The following drug development programs are actively under development:~~

●

Bremelanotide, an as-needed subcutaneous injectable product for the treatment of HSDD in premenopausal women. Bremelanotide is a synthetic peptide analog of the naturally occurring hormone alpha-MSH (melanocyte-stimulating hormone). In two pivotal Phase 3 clinical studies of bremelanotide for HSDD in premenopausal women ~~bremelanotide met~~pursuant to a license agreement between them for Vyleesi for North America, which was entered into on January 8, 2017 (the “AMAG License Agreement”). As disclosed in Note 5 to the ~~pre-specified co-primary efficacy endpoints~~Financial Statements, the AMAG License Agreement was terminated effective July 24, 2020, and we are now marketing Vyleesi in North America.

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 desire~~the 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”).

●

~~Melanocortin peptide system program, focused on development of treatments for a variety~~resolution of inflammatory ~~disease indications. PL-8177 is a selective~~responses. We are also developing peptides that are active at more than one melanocortin receptor, ~~1 (“MC1r”) agonist~~and MC4r peptide ~~we have designated as our lead clinical development candidate for inflammatory bowel diseases. We have filed an Investigational New Drug (“IND”) application~~ and ~~announced dosing of human subjects~~small molecule agonists with potential utility in ~~a Phase 1 clinical safety study in February, 2018. A dual melanocortin receptor 1~~obesity and 5 peptide we developed, PL-8331, is a preclinical development candidate for treating ocular inflammation. We anticipate completing IND preclinical enabling activities on PL-8331 later this calendar year;metabolic-related disorders, including rare disease and

●

~~Natriuretic peptide system program, including PL3994, a natriuretic peptide receptor-A (“NPR-A”) agonist, for treatment of cardiovascular~~ orphan indications. PL3994, a synthetic mimetic of the neuropeptide hormone atrial natriuretic peptide (“ANP”), is in development for treatment of heart failure, and is scheduled to start Phase 2A clinical trials later this calendar year. A dual natriuretic peptide receptor A and C agonist we developed, PL-5028, is in preclinical development for cardiovascular diseases, including reducing cardiac hypertrophy and fibrosis. We may file an IND application in the first half of calendar year 2019, and thereafter initiate a Phase 1 clinical safety study.

Table of Contents

Pipeline Overview

The following chart illustrates the status of our drug development ~~programs.~~

programs and Vyleesi, which has been approved by the FDA for the treatment of premenopausal women with acquired, generalized HSDD.

Our Strategy

Key elements of our business strategy include:

●

~~Using our technology and expertise to develop and commercialize products in our active drug development programs;~~

●

	·	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 distribution~~laws of ~~our product candidates;~~

●

~~Partially funding our product development programs with~~ the ~~cash flow generated from existing license agreements, as well as any future research, collaboration or license agreements with third parties; and~~

●

~~Completing development and seeking regulatory approval~~State of ~~certain of our product candidates.~~

~~We incorporated in~~ Delaware inon November 21, 1986 and commenced operations in the biopharmaceutical area in 1996. Our corporate offices are located at 4B Cedar Brook Drive, Cedar Brook Corporate Center, Cranbury, New Jersey 08512, and our telephone number is (609) 495-2200. We maintain an Internet site, ~~at http://www.palatin.com,~~ where among other things, we make available free of charge on and through this website our Forms 3, 4 and 5, ~~proxy statements, Annual Reports~~annual reports on Form 10-K, ~~Quarterly Reports~~quarterly reports on Form 10-Q, ~~Current Reports~~current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d)~~, Section 14A~~ and Section 16 of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our website and the information contained in it or connected to it are not incorporated into this Quarterly Report on Form 10-Q.

The reference to our website is an inactive textual reference only.

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, 2017~~September 30, 2023, Compared to the Three ~~and Six~~ Months Ended ~~December 31, 2016~~

~~Revenue~~September 30, 2022:

Revenues –For the three ~~and six~~ months ended ~~December 31, 2017,~~September 30, 2023, and 2022, we recognized ~~$10,612,153~~$2,105,977 and ~~$37,553,661, respectively,~~$869,654 in product revenue, net of ~~which $10,612,153~~allowances, respectively. The increase in net revenue was a result of increased sales volume of 100% and ~~$32,553,661, respectively, was attributable to our License Agreement with AMAG. For~~reduced product sales allowances as a percentage of gross sales during the ~~six~~three months ended ~~December 31, 2017, $5,000,000 in revenue~~September 30, 2023, compared to the three months ended September 30, 2022.

Table of Contents

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.~~

~~On January 8, 2017, we entered into the License Agreement with AMAG which provided for $60,000,000~~September 30, 2022, compared to no cost of products sold, as a one-time initial payment. Pursuant to the terms of and subject to the conditions in the License Agreement with AMAG, AMAG reimbursed us $25,000,000 for reasonable, documented, direct out-of-pocket expenses we incurred following the Effective Dateresult of the ~~License Agreement with AMAG in connection with the development and regulatory activities necessary to file an NDA~~sale of fully reserved inventory, for ~~bremelanotide for HSDD in the United States.~~

On September 6, 2017, we entered into the License Agreement with Fosun, for exclusive rights to commercialize bremelanotide in the territories of mainland China, Taiwan, Hong Kong S.A.R. and Macau S.A.R., which provided for $5,000,000 as a one-time non-refundable upfront payment. Pursuant to the License Agreement with Fosun, $500,000 was withheld in accordance with tax withholding requirements in China and will be recorded as an expense during the fiscal year ending June 30, 2018. For the three ~~and six~~ months ended ~~December 31, 2017, the Company incurred $54,712 and $279,967 in income tax expense related to this transaction.~~

On November 21, 2017, we entered into the License Agreement with Kwangdong, for exclusive rights to commercialize bremelanotide in the Republic of Korea, which provided for a $500,000 as a one-time refundable upfront payment, which has been recorded as non-current deferred revenue as of December 31, 2017. Pursuant to the License Agreement with Kwangdong, $82,500 was withheld in accordance with tax withholding requirements in South Korea and will be recorded as an expense during the fiscal year ending JuneSeptember 30, ~~2018. For the three and six months ended December 31, 2017, the Company incurred $46,168 in income tax expense related to this transaction.~~

2023.

Research and Development – Research and development expenses were ~~$6,045,884~~$5,014,630 and ~~$20,208,981, respectively~~$6,027,031 for the three ~~and six~~ months ended ~~December 31, 2017, compared to $8,134,575~~September 30, 2023, and ~~$19,360,659, respectively,~~2022. The decrease for the three ~~and six~~ months ended ~~December 31, 2016.~~

September 30, 2023, as compared to the three months ended September 30, 2022, was related to the overall decrease in spending on our MCr programs.

Research and development expenses related to our ~~bremelanotide, PL-3994, MC1r, MC4r~~Vyleesi, 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 $7,203,093~~September 30, 2023, and ~~$17,302,067, respectively, for the three and six months ended December 31, 2016. Spending to date has been~~2022, 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.

MCr programs.

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 $931,481~~September 30, 2023, and ~~$2,058,592, respectively, for the three and six months ended December 31, 2016.~~2022, respectively. The ~~increase~~decrease 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 ~~employee~~a decrease in compensation related expenses.

Cumulative spending from inception to ~~December 31, 2017 is~~September 30, 2023, was approximately ~~$297,700,000~~$311,900,000 on our ~~bremelanotide~~Vyleesi program and approximately ~~$126,900,000~~$216,600,000 on all our other programs (which include ~~PL3994, PL8177, other~~PL3994, 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 ~~generate~~when, if ever, related net cash ~~inflows.~~

inflows will be generated.

Selling, General and Administrative – ~~General~~Selling, general and administrative expenses, which consist mainly of compensation and related costs, were ~~$1,625,189~~$3,200,244 and ~~$3,169,764, respectively,~~$3,508,798 for the three ~~and six~~ months ended ~~December 31, 2017 compared to $1,306,300~~September 30, 2023, and ~~$2,515,646, respectively, for the three and six months ended December 31, 2016.~~2022, respectively. The ~~increase~~decrease in selling, general and administrative expenses isfor the three months ended September 30, 2023, and 2022 was primarily attributable to ~~professional services rendered for tax compliance~~a decrease to $1,109,501 from $1,246,567, respectively, of selling expenses related to Vyleesi, and ~~Internal Revenue Code Section 382 services and secondarily attributable to employee related expenses recognized~~a decrease in ~~the corresponding periods.~~

compensation cost.

Other Income (Expense) – ~~Other~~Total other income, ~~(expense)~~net was ~~$(310,007)~~$220,498 and ~~$(714,958), respectively,~~$497,263 for the three ~~and six~~ months ended ~~December 31, 2017 compared to $(588,544)~~September 30, 2023, and ~~$(1,205,884), respectively,~~2022, respectively. For the three months ended September 30, 2023, we recognized investment income of $71,630 and unrealized foreign currency gain of $159,750, offset by $10,882 of interest expense. For the three months ended September 30, 2022, we recognized investment income of $88,489 and unrealized foreign currency gain of $418,376 offset by $9,602 of interest expense. The decrease in other income (expense) for the three ~~and six~~ months ended ~~December 31, 2016. For~~September 30, 2023, compared to the three ~~and six~~ months ended December 31, 2017, we recognized $81,356 and $133,082, respectively, of investment income offset by $(391,363) and $(848,040), respectively, of interest expense primarily related to our venture debt. ForSeptember 30, 2022, was the three and six months ended December 31, 2016, we recognized $5,991 and $12,636, respectively, of investment income offset by $(594,535) and $(1,218,520), respectively, of interest expense primarily related to our venture debt.

~~Income Tax Benefit~~ – Net income tax benefit was $399,120 and $173,865, respectively, for the three and six months ended December 31, 2017. Pursuant to the 2017 Tax Act, during the quarter ended December 31, 2017, we recorded a tax benefit of $500,000 related to the releaseresult of a ~~valuation allowance against an AMT credit; accordingly this benefit is offset by $100,880 and $326,135, respectively,~~decrease in ~~income tax expense for the three and six months ended December 31, 2017. No income tax expense or benefit was recognized for the three and six months ended December 31, 2016.~~

unrealized foreign currency gains.

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 ~~collaboration~~collaborative 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 stage~~early-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 or technology rights;~~

●

~~product introduction;~~

●

~~marketing, sales and competition; and~~

●

~~obtaining sufficient capital.~~

	·	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 ~~increase~~generate 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.

Table of Contents

During the ~~six~~three 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 ~~six~~three months ended ~~December 31, 2016. Lower net~~September 30, 2022. The decrease in cash ~~outflows from~~used in operations infor the ~~six~~three months ended ~~December 31, 2017~~September 30, 2023, compared to the three months ended September 30, 2022, was primarily ~~the result of the cash payments received~~related 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.

net loss offset by working capital changes.

During the ~~six~~three 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 ~~maturity~~sale of ~~investments~~common 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.~~

During the six months ended December 31, 2017, net cash used in financing activities was $3,924,320, which consisted of $4,000,000 for the payment on notes payable, and $38,704 for capital lease payments and the payment of withholding taxes related to restricted stock units ~~offset by proceeds from the exercise~~and $26,704 for payment of ~~warrants of $114,384.~~finance lease obligations. During the ~~six~~three months ended ~~December 31, 2016,~~September 30, 2022, net cash ~~provided by~~used in financing activities ~~of $21,843,438~~was $24,731, which consisted of ~~net proceeds of $23,856,972 from the sale of common stock and warrants in August and December 2016, offset by $2,013,534 for the~~ payment of ~~principal on notes payable and capital~~finance lease ~~payments.~~

obligations.

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 ~~entering~~and 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.~~

$5,780,250 which include $3,752,850 in current liabilities as of September 30, 2023, and $2,027,400 included in other long-term liabilities.

We intend to utilize existing capital resources for general corporate purposes and working capital requirements, including ~~preparation~~establishing marketing and ~~filing of an NDA on bremelanotide~~distribution capabilities for ~~HSDD with~~Vyleesi 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.

~~We believe~~

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 adequate~~ability to ~~fund our planned operations through at least~~continue as a going concern for one year ~~after~~from the date ~~that these~~our 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.

Table of Contents

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.

However, current economic conditions may negatively impact our operations, including possible effects on our financial condition, ability to access the capital markets on attractive terms or at all, liquidity, operations, suppliers, industry, and workforce. We ~~anticipate incurring additional losses over at least~~will continue to evaluate the ~~next several years. To achieve or maintain profitability, if ever, we, alone or with others, must successfully develop~~impact that these events could have on the operations, financial position, and ~~commercialize our technologies~~the results of operations and ~~proposed products, conduct preclinical studies~~cash flows during fiscal year 2024 and clinical trials, obtain required regulatory approvals and successfully manufacture and market our technologies and proposed products. The time required to reach sustained profitability is highly uncertain, and we do not know whether we will be able to achieve profitability on a sustained basis, if at all.

beyond.

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.~~

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.

Table of Contents

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.

~~There~~

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.~~

2023.

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.

~~None.~~

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:

Table of Contents

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.

Table of Contents

Item 6. Exhibits.

Exhibits filed or furnished with this report:

Exhibit Number	~~Description~~	~~Filed Herewith~~ Description	~~Form~~	Filed Herewith	Form	Filing Date	SEC File No.
3.1		Amended and Restated Bylaws of Palatin Technologies, Inc.			8-K	September 17, 2021	001-15543
3.2		Restated Certificate of Incorporation of Palatin Technologies, Inc., as amended.			10-K	September 27, 2013	001-15543
3.3		Certificate of Amendment to the Restated Certificate of Incorporation of Palatin Technologies, Inc., as amended.			8-K	August 31, 2022	001-15543
3.4		Certificate of Decrease of Series A Convertible Preferred Stock.			10-Q	May 16, 2022	001-15543
4.1		Form of October 24, 2023 Private Warrant.			8-K	October 24, 2003	001-15543
4.2		Form of October 24, 2023 Placement Agent Warrant.			8-K	October 24, 2023	001-15543
4.3		Form of October 24, 2023 Pre-Funded Warrant.			8-K	October 24, 2023	001-15543
10.1		Form of Securities Purchase Agreement, dated October 20, 2023, between the Company and the Purchasers named therein.			8-K	October 24, 2023	001-15543
31.1		Certification of Chief Executive Officer.	X	X
31.2		Certification of Chief Financial Officer.	X	X
32.1		Certification of ~~principal executive officer~~Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	X	*
32.2		Certification of ~~principal financial officer~~Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	X	*
101.INS		Inline XBRL Taxonomy Extension Instance ~~Document.~~Document (the instance document does not appear on the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).	X	X
101.SCH		Inline XBRL Taxonomy Extension Schema Document.	X	X
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.	X	X
~~101.LAB~~ 101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.		X
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.	X	X
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.	X	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.


~~101.DEF~~	~~XBRL Taxonomy Extension Definition Linkbase Document.~~	X	28

Table of Contents

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		~~/s/ Carl Spana~~
~~Date: February 12, 2018~~		Carl Spana, Ph.D. President and Chief Executive Officer (Principal Executive Officer)



		~~/s/~~ /s/ Stephen T. Wills
Date: ~~February 12, 2018~~November 14, 2023		Stephen T. Wills, CPA, MST Executive Vice President, Chief Financial Officer and Chief Operating Officer (Principal Financial and Accounting Officer)

~~EXHIBIT INDEX~~

~~Exhibit Number~~

~~Description~~

~~Filed Herewith~~

~~Form~~

~~Filing Date~~

~~SEC File No.~~

~~31.1~~	~~Certification of Chief Executive Officer.~~	X
~~31.2~~	~~Certification of Chief Financial Officer.~~	X	29
~~32.1~~	~~Certification of principal executive officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~	X
~~32.2~~	~~Certification of principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~	X
~~101.INS~~	~~XBRL Instance Document.~~	X
~~101.SCH~~	~~XBRL Taxonomy Extension Schema Document.~~	X
~~101.CAL~~	~~XBRL Taxonomy Extension Calculation Linkbase Document.~~	X
~~101.LAB~~	~~XBRL Taxonomy Extension Label Linkbase Document.~~	X
~~101.PRE~~	~~XBRL Taxonomy Extension Presentation Linkbase Document.~~	X
~~101.DEF~~	~~XBRL Taxonomy Extension Definition Linkbase Document.~~	X

	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 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

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)

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

	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)

	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

	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
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