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Form 10-Q PALATIN TECHNOLOGIES For: Mar 31

May 16, 2022 4:06 PM EDT

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ptn_10q.htm

 

UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

 Washington, D.C. 20549

 

FORM 10-Q

 

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

 

 For the quarterly period ended March 31, 2022

 

or

 

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

 

For the transition period from ___________ to __________

 

Commission file number: 001-15543

ptn_10qimg10.jpg

PALATIN TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

95-4078884

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

4B Cedar Brook Drive

Cranbury, New Jersey

 

08512

(Address of principal executive offices)

 

(Zip Code)

 

(609) 495‑2200

(Registrant’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 $.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, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer 

Accelerated filer

Non-accelerated Filer 

Smaller reporting company

Emerging growth company 

 

 

  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) 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 shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date (May 13, 2022): 231,773,670

 

 

  

PALATIN TECHNOLOGIES, INC.

Table of Contents

 

 

 

 

Page

 

 

 

 

PART I – FINANCIAL INFORMATION

 

 

Item 1.

Financial Statements (Unaudited)

 

 

 

 

Consolidated Balance Sheets as of March 31, 2022 and June 30, 2021

 

1

 

 

Consolidated Statements of Operations for the Three and Nine Months Ended March 31, 2022 and 2021

 

2

 

 

Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended March 31, 2022 and 2021

 

3

 

 

Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2022 and 2021

 

5

 

 

Notes to Consolidated Financial Statements

 

6

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

17

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

22

 

Item 4.

Controls and Procedures

 

22

 

 

 

 

PART II – OTHER INFORMATION

 

 

Item 1.

Legal Proceedings

 

23

 

Item 1A.

Risk Factors

 

23

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

23

 

Item 3.

Defaults Upon Senior Securities

 

23

 

Item 4.

Mine Safety Disclosures

 

23

 

Item 5.

Other Information

 

23

 

Item 6.

Exhibits

 

24

 

 

 

 

 

 

Signatures

 

25

 

 

 

i

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,” the “Company” or “Palatin” mean Palatin Technologies, Inc. and its subsidiary.

 

Statements in this Quarterly Report, 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,” 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 do not constitute guarantees of future performance. Investors are cautioned that statements that are not strictly historical facts contained in this Quarterly Report, including, without limitation, the following are forward looking statements:

 

 

·

our business, financial condition, and results of operations may be adversely affected by conditions related to global health epidemics, including the novel strain of coronavirus (“COVID-19”) pandemic, such as, for example, the increase 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, which may be adversely affected by delays or disruptions related to the ongoing COVID-19 pandemic;

 

 

 

 

·

our ability to manage the infrastructure to successfully manufacture, through contract manufacturers, Vyleesi, and to develop the infrastructure 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”);

 

 

 

 

·

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 Vyleesifor 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, and PL8177, an oral peptide formulation for treatment of ulcerative colitis, which is scheduled to enter Phase 2 clinical trials in calendar year 2022;

 

 

 

 

·

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

 

 

 

 

·

our ability to achieve profitability;

 

 

 

 

·

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 the ongoing COVID-19 pandemic;

 

 

 

 

·

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 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;

 

 

ii

Table of Contents

 

 

·

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 of our management team, senior staff professionals, and third-party contractors and consultants;

 

 

 

 

·

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 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, including delays and additional costs related to the ongoing COVID-19 pandemic;

 

 

 

 

·

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 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 Quarterly Report, and any of those made in our other reports filed with the U.S. Securities and Exchange Commission (the “SEC”). Except as required by law, we do not intend, and undertake no obligation, to publicly update forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events.

 

Palatin Technologies® and Vyleesi® are registered 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.

 

 

iii

Table of Contents

 

PART I – FINANCIAL INFORMATION

 

Item 1.  Financial Statements.

 

PALATIN TECHNOLOGIES, INC.

and Subsidiary

Consolidated Balance Sheets

(unaudited)

 

 

 

 

 

 

 

 

 

March 31, 2022

 

 

June 30, 2021

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$37,719,531

 

 

$60,104,919

 

Accounts receivable

 

 

790,005

 

 

 

1,580,443

 

Inventories

 

 

1,031,988

 

 

 

1,162,000

 

Prepaid expenses and other current assets

 

 

2,704,886

 

 

 

3,059,679

 

Total current assets

 

 

42,246,410

 

 

 

65,907,041

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

544,622

 

 

 

94,817

 

Right-of-use assets - operating leases

 

 

968,957

 

 

 

1,237,813

 

Other assets

 

 

56,916

 

 

 

56,916

 

Total assets

 

$43,816,905

 

 

$67,296,587

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$2,402,739

 

 

$640,650

 

Accrued expenses

 

 

3,175,414

 

 

 

5,797,378

 

Short-term operating lease liabilities

 

 

367,478

 

 

 

351,853

 

Short-term finance lease liabilities

 

 

99,602

 

 

 

-

 

Other current liabilities

 

 

5,931,414

 

 

 

3,721,907

 

Total current liabilities

 

 

11,976,647

 

 

 

10,511,788

 

 

 

 

 

 

 

 

 

 

Long-term operating lease liabilities

 

 

621,660

 

 

 

900,520

 

Long-term finance lease liabilities

 

 

178,139

 

 

 

-

 

Other long-term liabilities

 

 

2,955,000

 

 

 

6,232,907

 

Total liabilities

 

 

15,731,446

 

 

 

17,645,215

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders equity:

 

 

 

 

 

 

 

 

Preferred stock of $0.01 par value authorized 10,000,000 shares: issued and outstanding designated as follows:

 

 

 

 

 

 

 

 

Series A Convertible: authorized 264,000 shares: issued and outstanding 4,030 shares as of March 31, 2022 and June 30, 2021

 

 

40

 

 

 

40

 

Common stock of $0.01 par value authorized 300,000,000 shares:

 

 

 

 

 

 

 

 

issued and outstanding 231,773,670 shares as of March 31, 2022 and 230,049,691 shares as of June 30, 2021

 

 

2,317,737

 

 

 

2,300,497

 

Additional paid-in capital

 

 

400,993,760

 

 

 

399,146,232

 

Accumulated deficit

 

 

(375,226,078)

 

 

(351,795,397)

Total stockholders equity

 

 

28,085,459

 

 

 

49,651,372

 

Total liabilities and stockholders equity

 

$43,816,905

 

 

$67,296,587

 

 

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

 

 
1

Table of Contents

 

PALATIN TECHNOLOGIES, INC.

and Subsidiary

Consolidated Statements of Operations

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

Nine Months Ended March 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUES

 

 

 

 

 

 

 

 

 

 

 

 

Product revenue, net

 

$216,097

 

 

$88,741

 

 

$447,719

 

 

$(363,790)

License and contract

 

 

-

 

 

 

-

 

 

 

250,000

 

 

 

-

 

Total revenues

 

 

216,097

 

 

 

88,741

 

 

 

697,719

 

 

 

(363,790)

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of products sold

 

 

46,908

 

 

 

55,440

 

 

 

130,012

 

 

 

110,040

 

Research and development

 

 

4,980,074

 

 

 

2,509,490

 

 

 

13,891,235

 

 

 

9,444,759

 

Selling, general and administrative

 

 

3,009,528

 

 

 

4,010,055

 

 

 

10,163,830

 

 

 

11,386,574

 

Gain on license termination agreement

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,623,795)

Total operating expenses

 

 

8,036,510

 

 

 

6,574,985

 

 

 

24,185,077

 

 

 

19,317,578

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(7,820,413)

 

 

(6,486,244)

 

 

(23,487,358)

 

 

(19,681,368)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment income

 

 

1,127

 

 

 

2,834

 

 

 

4,100

 

 

 

19,769

 

Foreign currency gain

 

 

190,719

 

 

 

753,750

 

 

 

64,000

 

 

 

8,748

 

Interest expense

 

 

(3,019)

 

 

-

 

 

 

(11,423)

 

 

(9,360)

Total other income, net

 

 

188,827

 

 

 

756,584

 

 

 

56,677

 

 

 

19,157

 

NET LOSS

 

$(7,631,586)

 

$(5,729,660)

 

$(23,430,681)

 

$(19,662,211)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per common share

 

$(0.03)

 

$(0.02)

 

$(0.10)

 

$(0.08)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding used in computing basic and diluted net loss per common share

 

 

238,805,370

 

 

 

236,832,283

 

 

 

238,444,206

 

 

 

236,525,514

 

 

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

 

 
2

Table of Contents

 

PALATIN TECHNOLOGIES, INC.

and Subsidiary

Consolidated Statements of Stockholders Equity

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months EndedMarch 31, 2022

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Total

 

 Balance,December 31, 2021

 

 

4,030

 

 

$40

 

 

 

231,695,273

 

 

$2,316,953

 

 

$400,473,806

 

 

$(367,594,492)

 

$35,196,307

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

111,000

 

 

 

1,110

 

 

 

532,669

 

 

 

-

 

 

 

533,779

 

Withholding taxes related to restricted stock units

 

 

-

 

 

 

-

 

 

 

(32,603)

 

 

(326)

 

 

(12,715)

 

 

-

 

 

 

(13,041)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(7,631,586)

 

 

(7,631,586)
Balance, March 31, 2022

 

 

4,030

 

 

$40

 

 

 

231,773,670

 

 

$2,317,737

 

 

$400,993,760

 

 

$(375,226,078)

 

$28,085,459

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months EndedMarch 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Paid-in 

 

 

Accumulated

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Total

 

 Balance, June 30, 2021

 

 

4,030

 

 

$40

 

 

 

230,049,691

 

 

$2,300,497

 

 

$399,146,232

 

 

$(351,795,397)

 

$49,651,372

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

1,735,158

 

 

 

17,352

 

 

 

1,772,595

 

 

 

-

 

 

 

1,789,947

 

Withholding taxes related to restricted stock units

 

 

-

 

 

 

-

 

 

 

(404,779)

 

 

(4,048)

 

 

(217,263)

 

 

-

 

 

 

(221,311)

Warrant exercises

 

 

-

 

 

 

-

 

 

 

350,000

 

 

 

3,500

 

 

 

276,500

 

 

 

-

 

 

 

280,000

 

Option exercises

 

 

-

 

 

 

-

 

 

 

43,600

 

 

 

436

 

 

 

15,696

 

 

 

-

 

 

 

16,132

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(23,430,681)

 

 

(23,430,681)
Balance, March 31, 2022

 

 

4,030

 

 

$40

 

 

 

231,773,670

 

 

$2,317,737

 

 

$400,993,760

 

 

$(375,226,078)

 

$28,085,459

 

 

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

 

 
3

Table of Contents

 

PALATIN TECHNOLOGIES, INC.

and Subsidiary

Consolidated Statements of Stockholders Equity

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months EndedMarch 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Total

 

 Balance, December 31, 2020

 

 

4,030

 

 

$40

 

 

 

230,034,307

 

 

$2,300,343

 

 

$397,666,196

 

 

$(332,131,453)

 

$67,835,126

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

21,875

 

 

 

219

 

 

 

775,086

 

 

 

-

 

 

 

775,305

 

Withholding taxes related to restricted stock units

 

 

-

 

 

 

-

 

 

 

(6,491)

 

 

(65)

 

 

(4,544)

 

 

-

 

 

 

(4,609)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(5,729,660)

 

 

(5,729,660)
Balance, March 31, 2021

 

 

4,030

 

 

$40

 

 

 

230,049,691

 

 

$2,300,497

 

 

$398,436,738

 

 

$(337,861,113)

 

$62,876,162

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months EndedMarch 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Total

 

 Balance, June 30, 2020

 

 

4,030

 

 

$40

 

 

 

229,258,400

 

 

$2,292,584

 

 

$396,079,127

 

 

$(318,198,902)

 

$80,172,849

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

958,090

 

 

 

9,581

 

 

 

2,449,581

 

 

 

-

 

 

 

2,459,162

 

Withholding taxes related to restricted stock units

 

 

-

 

 

 

-

 

 

 

(166,799)

 

 

(1,668)

 

 

(91,970)

 

 

-

 

 

 

(93,638)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(19,662,211)

 

 

(19,662,211)
Balance, March 31, 2021

 

 

4,030

 

 

$40

 

 

 

230,049,691

 

 

$2,300,497

 

 

$398,436,738

 

 

$(337,861,113)

 

$62,876,162

 

  

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

 

 
4

Table of Contents

 

PALATIN TECHNOLOGIES, INC.

and Subsidiary

Consolidated Statements of Cash Flows

(unaudited)

 

 

 

 

 

 

 

 

 

Nine Months Ended March 31,

 

 

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net loss

 

$(23,430,681)

 

$(19,662,211)
Adjustments to reconcile net loss to net cash

 

 

 

 

 

 

 

 

used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

84,244

 

 

 

38,561

 

Cash received in excess of gain on termination agreement

 

 

-

 

 

 

14,676,205

 

Decrease in right-of-use asset

 

 

268,856

 

 

 

240,580

 

Unrealized foreign currency transaction gain

 

 

(64,000)

 

 

(8,748)

Stock-based compensation

 

 

1,789,947

 

 

 

2,459,162

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

790,438

 

 

 

(1,869,120)

Prepaid expenses and other assets

 

 

354,793

 

 

 

(2,022,026)

Inventories

 

 

130,012

 

 

 

(296,923)

Accounts payable

 

 

1,762,089

 

 

 

148,340

 

Accrued expenses

 

 

(2,621,964)

 

 

(1,338)

Operating lease liabilities

 

 

(263,235)

 

 

(229,661)

Other liabilities

 

 

(1,004,400)

 

 

(7,584,420)

Net cash used in operating activities

 

 

(22,203,901)

 

 

(14,111,599)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(224,258)

 

 

(5,721)

Net cash used in investing activities

 

 

(224,258)

 

 

(5,721)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Payment of withholding taxes related to restricted

 

 

 

 

 

 

 

 

stock units

 

 

(221,311)

 

 

(93,638)

Payment of finance lease obligations

 

 

(32,050)

 

 

-

 

Proceeds from exercise of warrants

 

 

280,000

 

 

 

-

 

Proceeds from exercise of stock options

 

 

16,132

 

 

 

-

 

Net cash provided by (used in) financing activities

 

 

42,771

 

 

 

(93,638)

 

 

 

 

 

 

 

 

 

NET DECREASE IN CASH AND CASH EQUIVALENTS

 

 

(22,385,388)

 

 

(14,210,958)

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS, beginning of period

 

 

60,104,919

 

 

 

82,852,270

 

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS, end of period

 

$37,719,531

 

 

$68,641,312

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$11,423

 

 

$9,360

 

 

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

 

 
5

Table of Contents

 

PALATIN TECHNOLOGIES, INC.

and Subsidiary

 

Notes to Consolidated Financial Statements

(unaudited)

 

(1)           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 and natriuretic peptide receptor systems. The Company’s product candidates are targeted, receptor-specific therapeutics for the treatment of diseases with significant unmet medical need and commercial potential.

 

Melanocortin Receptor System. The melanocortin receptor (“MCr”) system is involved in the regulation of food intake, satiety, 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.

 

The Company’s 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”) in premenopausal women 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, the AMAG License Agreement was terminated effective July 24, 2020, and the Company is now marketing Vyleesi in the United States.

 

The Company’s 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. 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 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 rare disease and orphan indications.

 

Natriuretic Peptide Receptor System. The natriuretic peptide receptor (“NPR”) system regulates cardiovascular functions and tissue homeostasis, and therapeutic agents modulating this system have potential to treat cardiovascular and fibrotic diseases. The Company has designed and is developing potential NPR candidate drugs selective for one or more different natriuretic peptide receptors, including natriuretic peptide receptor-A (“NPR-A”), natriuretic peptide receptor B (“NPR-B”), and natriuretic peptide receptor C (“NPR-C”).

 

Business Risks and Liquidity – Since inception, the Company has generally incurred negative cash flows from operations, and has expended, and expects to continue to expend, substantial funds to develop the capability to market and distribute Vyleesi in the United States and complete its planned product development efforts. As shown in the accompanying consolidated financial statements, the Company had an accumulated deficit as of March 31, 2022 of $375,226,078 and a net loss for the three and nine months ended March 31, 2022 of $7,631,586 and $23,430,681, respectively. The Company anticipates incurring 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.

 

As of March 31, 2022, the Company’s cash and cash equivalents were $37,719,531 and current liabilities were $11,976,647. Management intends 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 the Company’s MC1r and MC4r peptide programs and natriuretic peptide program, and development of other portfolio products.

 

 
6

Table of Contents

 

PALATIN TECHNOLOGIES, INC.

and Subsidiary

 

Notes to Consolidated Financial Statements

(unaudited)

  

Management believes that the Company’s cash and cash equivalents as of March 31, 2022 will be sufficient to fund its current operating plans through at least June 2023. The Company will need additional funding to complete required clinical trials for 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. If the Company is unable to obtain approval or otherwise advance in the FDA approval process, the Company’s ability to sustain its operations could 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 by the Company may not be available on reasonable terms, or at all.

 

In March 2020, the World Health Organization declared COVID-19, a disease caused by a novel strain of coronavirus, a pandemic. The Company has taken steps to ensure the safety and well-being of its employees and clinical trial patients to comply with guidance from federal, state, and local authorities, while working to ensure the sustainability of its business operations as this unprecedented situation continues to evolve. In mid-March 2020, the Company transitioned to a company-wide work from home policy. Business-critical activities continue to be subject to heightened precautions to ensure safety of employees. The Company continues to assess its policies, business continuity plans, and employee support.

 

The Company continues to evaluate the impact of COVID-19 on the healthcare system and work with contract research organizations supporting its clinical, research, and development programs to mitigate risk to patients and its business and community partners, taking into account regulatory, institutional, and government guidance and policies.

 

The Company will receive a royalty on sales of Vyleesi by our licensees. We have licensed third parties to sell Vyleesi in China and Korea. The COVID-19 coronavirus could adversely impact the time required to obtain regulatory approvals to sell Vyleesi in China and Korea, which would delay when the Company receives royalty income from sales in those countries.

 

The Company cannot be certain what the overall impact of the ongoing COVID-19 pandemic will be on its business, including manufacturing, distribution, sales and marketing of Vyleesi, and whether it has the potential to materially adversely affect its business, financial condition and results of operations and cashflows during the remainder of fiscal year ending June 30, 2022 (“fiscal 2022”) and beyond.

 

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, cash equivalents, and accounts receivable. The Company’s cash and cash equivalents are primarily invested in one money market account sponsored by a large financial institution.

 

 (2)          BASIS OF 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 nine months ended March 31, 2022 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, 2021, filed with the U.S. Securities and Exchange Commission (“SEC”), which includes consolidated financial statements as of June 30, 2021 and 2020 and for the fiscal years then ended.

 

(3)           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

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

 

 
7

Table of Contents

 

PALATIN TECHNOLOGIES, INC.

and Subsidiary

 

Notes to Consolidated Financial Statements

(unaudited)

  

Use of Estimates – The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported 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 consisted of $37,651,838 and $59,730,428 in a money market account on March 31, 2022 and June 30, 2021, respectively.

 

Fair Value of Financial Instruments – The Company’s financial instruments consist primarily of cash equivalents, accounts receivable and accounts payable. Management believes that the carrying values of cash equivalents, accounts receivable and accounts payable are representative of their respective fair values based on the short-term nature of these instruments.

 

Credit Risk – Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, and 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 two specialty pharmacies.

 

Trade Accounts Receivable Trade accounts receivable are amounts owed to the Company by its customers for products that have been delivered. 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 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 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 $2,588,210 and $2,503,966 as of March 31, 2022 and June 30, 2021, respectively.

 

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.

 

 
8

Table of Contents

 

PALATIN TECHNOLOGIES, INC.

and Subsidiary

 

Notes to Consolidated Financial Statements

(unaudited)

 

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.

 

The Company has elected not to recognize an ROU asset and obligation for leases with an initial term of twelve months or less. The expense associated with short term leases is included in selling, general and administrative expense 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.

 

During the nine months ended March 31, 2022, the Company recorded an additional $309,791 in property and equipment and lease obligations for two new finance leases, each with a term of three years.

 

Revenue Recognition – The Company recognizes product revenues in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“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.

 

 
9

Table of Contents

 

PALATIN TECHNOLOGIES, INC.

and Subsidiary

 

Notes to Consolidated Financial Statements

(unaudited)

 

Gross product sales offset by product sales allowances for the three and nine months ended March 31, 2022 and 2021 are as follows:

 

 

 

Three Months Ended March 31,

 

 

Nine Months Ended March 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross product sales

 

$1,294,560

 

 

$1,780,020

 

 

$3,497,110

 

 

$3,533,070

 

Provision for product sales allowances and accruals

 

 

(1,078,463)

 

 

(1,691,279)

 

 

(3,049,391)

 

 

(3,896,860)

Net sales

 

$216,097

 

 

$88,741

 

 

$447,719

 

 

$(363,790)

 

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 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 such sales-based royalties and milestone payments will be recognized in the same period earned.

 

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 the research and development activities based upon its control of such activities, which is considered part of its ordinary activities.

 

Development milestone payments are generally due 30 business days after the milestone is achieved. Sales milestone payments are generally due 45 business days after the calendar year in which the sales milestone is achieved. Royalty payments are generally due on 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 accrues expenses and the amount of any reimbursement to be received from its collaborators based upon the estimated amount of work 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 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. Compensation costs for stock-based awards with time-based vesting are determined using the quoted market 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 on a straight-line basis, while awards containing a market condition are valued using multifactor Monte Carlo simulations and 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.

 

 
10

Table of Contents

 

PALATIN TECHNOLOGIES, INC.

and Subsidiary

 

Notes to Consolidated Financial Statements

(unaudited)

 

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 and lack of experience projecting future product revenue and sales-based royalty and milestone payments.

 

Net Loss per Common Share – Basic and diluted loss per common share (“EPS”) are calculated in accordance with the provisions of FASB ASC Topic 260, Earnings per Share.

 

For the three and nine months ended March 31, 2022 and 2021, no additional common shares were added to 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 and nine months ended March 31, 2022 and 2021 was 27,694,397 and 37,336,040 respectively.

 

Included in the weighted average common shares used in computing basic and diluted net loss per common share are 7,012,500 and 6,776,750 vested restricted stock units that had not been issued as of March 31, 2022 and 2021, 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.

 

(4)           New and recently Adopted Accounting Pronouncements

 

In May 2021, the FASB issued Accounting Standards Update (“ASU”) No. 2021-04, Earnings Per Share (Topic 260), Debt – Modifications and Extinguishments (Subtopic 470-50), Compensation – Stock Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. The FASB issued this update to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The amendments in ASU No. 2021-04 are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The amendments are applicable to the Company beginning July 1, 2022. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

 

In August 2020, the FASB issued ASU No. 2020-06, Debt (Topic 470) and Derivatives and Hedging (Topic 815): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The amendments in ASU No. 2020-06 address issues identified as a result of the complexity associated with applying U.S. GAAP for certain financial instruments with characteristics of liabilities and equity. The guidance is effective for public entities for fiscal years beginning after December 15, 2021, and for interim periods within those fiscal years, with early adoption permitted. The guidance is applicable to the Company beginning July 1, 2022. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

 

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application and simplify U.S. GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The guidance is effective for public entities for fiscal years beginning after December 15, 2020, and for interim periods within those fiscal years. The guidance was applicable to the Company beginning July 1, 2021. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

 

 
11

Table of Contents

 

PALATIN TECHNOLOGIES, INC.

and Subsidiary

 

Notes to Consolidated Financial Statements

(unaudited)

  

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, which requires measurement and recognition of expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This is different from the current guidance as this will require immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets. The new guidance will be effective for the Company on July 1, 2023, with early adoption permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

 

 (5)          AGREEMENTS WITH AMAG          

 

On January 8, 2017, the Company entered into the AMAG License Agreement pursuant to which the Company granted 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 Vyleesi (each a “Product”, and collectively, “Products”), (ii) a non-exclusive license in the Territory, with the right to grant sub-licenses, to manufacture the 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 AMAG License Agreement became effective on February 2, 2017. Under the AMAG License Agreement, in addition to certain initial and milestone payments, AMAG reimbursed the Company for certain reasonable, documented, direct out-of-pocket expenses incurred by the Company following February 2, 2017, in connection with development and regulatory activities necessary to file a New Drug Application (“NDA”) for Vyleesi for HSDD in the United States.

 

On June 4, 2018, the FDA accepted the Vyleesi NDA for filing and on June 21, 2019, the FDA granted approval of Vyleesi for use in the United States.

 

Effective July 24, 2020, the Company entered into a termination agreement (the “Termination Agreement”) with AMAG terminating the AMAG License Agreement. Under the terms of the Termination Agreement, the Company regained all development and commercialization rights for Vyleesi in the Territory. AMAG made a $12,000,000 payment to the Company at closing of the Termination Agreement and a $4,300,000 payment to the Company on March 31, 2021. The Company initially recorded a liability related to estimated losses on inventory purchase commitments of $18,194,000 as well as accrued expenses for an inventory production run obligation assumed of $2,300,000. The Company assumed all Vyleesi manufacturing agreements, and AMAG transferred information, data, and assets related exclusively to Vyleesi to the Company, including existing inventory and prepaid expenses with an estimated fair value of $5,817,795 as of the date of the Termination Agreement. As a result, the Company initially recorded a net gain for the Termination Agreement of $1,623,795 during the three months ended September 30, 2020. During the three months ended June 30, 2021, the Company reassessed the estimated net realizable value of the inventory, prepaid expenses and losses on the inventory purchase commitments resulting in recording of a loss on the Termination Agreement of $4,407,987 for the three months ended June 30, 2021 and a total loss on the Termination Agreement for the year ended June 30, 2021 of $2,784,192.

 

Under the Termination Agreement, AMAG provided certain transitional services to the Company for a period to ensure continued patient access to Vyleesi during the transition back to the Company. The Company reimbursed AMAG for the agreed upon costs of the transition services.

 

(6)           MANUFACTURING SUPPLY AGREEMENTS FOR VYLEESI

 

Pursuant to the Termination Agreement, the Company assumed Vyleesi manufacturing contracts with Catalent Belgium S.A. (“Catalent”); a subsidiary of Catalent Pharma Solutions, Inc., to manufacture drug product and prefilled syringes and assemble prefilled syringes into an auto-injector device (the “Catalent Agreement”), Ypsomed AG (“Ypsomed”); to manufacture the auto-injector device (the “Ypsomed Agreement”), and Lonza Ltd. (“Lonza”), to manufacture the active pharmaceutical ingredient peptide (the “Lonza Agreement”).

 

 
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PALATIN TECHNOLOGIES, INC.

and Subsidiary

 

Notes to Consolidated Financial Statements

(unaudited)

  

On September 29, 2020, the Company and Catalent entered into an agreement to terminate the Catalent Agreement (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 assumed as part of the Termination Agreement as discussed in Note 5.

 

The Company and Catalent then entered into a new Vyleesi manufacturing agreement (the “New 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 New Catalent Agreement provides that Catalent will provide manufacturing and supply services to Palatin related to production of Vyleesi, including that Catalent will supply specified minimums of Palatin’s requirements for Vyleesi during the term of the New Catalent Agreement through August 21, 2025, unless earlier terminated in accordance with the terms of the New Catalent Agreement. The initial term of the New 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 New Catalent Agreement also includes customary terms and conditions relating to forecasting and minimum commitments, ordering, delivery, inspection and acceptance, and termination, among other matters.

 

The term of the Lonza Agreement is through December 31, 2022. There are specified minimum purchase requirements under the Lonza Agreement, and under specified circumstances, termination fees may be payable upon termination of the Lonza Agreement by the Company (see Note 12).

 

The initial term of the Ypsomed Agreement is through December 31, 2025, with automatic renewal for successive one-year periods unless either party terminates the Ypsomed Agreement by ten months’ written notice prior to the expiration of the Ypsomed Agreement or any automatic renewal period. There are specified minimum purchase requirements under the Ypsomed Agreement, and under specified circumstances, termination fees may be payable upon termination of the Ypsomed Agreement by the Company (see Note 12).

 

(7)           AGREEMENT WITH FOSUN

 

On September 6, 2017, the Company entered into a license agreement with Shanghai Fosun Pharmaceutical Development Co. Ltd. (“Fosun”) for exclusive rights to commercialize Vyleesi in China (the “Fosun License Agreement”). Under the terms of the agreement, the Company received $4,500,000 in October 2017, which consisted of an upfront payment of $5,000,000 less $500,000 that was withheld in accordance with tax withholding requirements in China and recorded as an expense. Under the Fosun License Agreement, the Company is entitled to receive a $7,500,000 milestone payment when regulatory approval in China is obtained, provided that a commercial supply agreement for Vyleesi has been entered into. Palatin 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. For the nine months ended March 31, 2022, the Company recorded $250,000 of license and contract revenue from the Fosun License Agreement.

 

(8)           AGREEMENT WITH KWANGDONG

 

On November 21, 2017, the Company entered into a license agreement with Kwangdong Pharmaceutical Co. Ltd (“Kwangdong”) for exclusive rights to commercialize Vyleesi (the “Kwangdong License Agreement”) in Korea. Under the terms of the 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 recorded as an expense. Under the Kwangdong License Agreement, the Company is entitled to receive a $3,000,000 milestone payment based on the first commercial sale in Korea. Palatin 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.

 

(9)           PREPAID EXPENSES AND OTHER CURRENT ASSETS

 

Prepaid expenses and other current assets consist of the following:

 

 
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PALATIN TECHNOLOGIES, INC.

and Subsidiary

 

Notes to Consolidated Financial Statements

(unaudited)

  

 

 

March 31,

 

 

June 30,

 

 

 

2022

 

 

2021

 

Clinical / regulatory costs

 

$1,037,350

 

 

$454,750

 

Insurance premiums

 

 

39,864

 

 

 

259,468

 

Vyleesi contractual advances

 

 

815,750

 

 

 

1,200,000

 

Other

 

 

811,922

 

 

 

1,145,461

 

 

 

$2,704,886

 

 

$3,059,679

 

 

(10)         FAIR VALUE MEASUREMENTS

 

The fair value of cash equivalents 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’s or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

 

The following table provides the assets carried at fair value:

 

 

 

Carrying Value

 

 

Quoted prices in
active markets
(Level 1)

 

 

Other quoted/observable inputs (Level 2)

 

 

Significant unobservable inputs
(Level 3)

 

March 31, 2022:

 

 

 

 

 

 

 

 

 

 

 

 

Money Market Account

 

$37,651,838

 

 

$37,651,838

 

 

$-

 

 

$-

 

June 30, 2021:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money Market Account

 

$59,730,428

 

 

$59,730,428

 

 

$-

 

 

$-

 

 

(11)         ACCRUED EXPENSES

 

Accrued expenses consist of the following:

 

 

 

March 31,

 

 

June 30,

 

 

 

2022

 

 

2021

 

Clinical / regulatory costs

 

$1,338,025

 

 

$778,705

 

Other research related expenses

 

 

759,308

 

 

 

569,370

 

Professional services

 

 

47,797

 

 

 

84,094

 

Inventory purchases

 

 

-

 

 

 

2,340,000

 

Selling expenses

 

 

910,545

 

 

 

1,839,724

 

Other

 

 

119,739

 

 

 

185,485

 

 

 

$3,175,414

 

 

$5,797,378

 

 

(12)         COMMITMENTS AND CONTINGENCIES

 

Inventory Purchases - As a result of the Termination Agreement and subsequent activity, the Company has certain supply agreements with manufacturers and suppliers, including the New Catalent Agreement, Lonza Agreement, and Ypsomed Agreement. The Company is required to make certain payments for the manufacture and supply of Vyleesi. The following table summarizes the contractual obligations under the New Catalent Agreement, Lonza Agreement, and Ypsomed. Agreement as of March 31, 2022:

 

 
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PALATIN TECHNOLOGIES, INC.

and Subsidiary

 

Notes to Consolidated Financial Statements

(unaudited)

  

 

 

Total

 

 

Current

 

 

1 - 3 Years

 

 

4 - 5 Years

 

Inventory purchase commitments

 

$9,832,614

 

 

$5,931,414

 

 

$2,896,800

 

 

$1,004,400

 

 

As of March 31, 2022, the Company has $5,931,414 and $2,995,000 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, 2021, $3,721,907 and $6,232,907 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 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 future foreign currency exchange rate fluctuations.

 

Contingencies - The Company is subject to contingencies, such as product liability, arising in the ordinary course of 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 Company records legal expenses associated with such contingencies as incurred. 

 

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)         STOCKHOLDERS’ EQUITY

 

Financing Transactions – On June 21, 2019, the Company entered into an equity distribution agreement (the “2019 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 2019 Equity Distribution Agreement and related prospectus is limited to sales of up to an aggregate maximum $40.0 million of shares of the Company’s common stock. The Company pays Canaccord 3.0% of the gross proceeds as a commission.

 

No proceeds were raised under the 2019 Equity Distribution Agreement during the three and nine months ended March 31, 2022 and 2021.

 

Stock Purchase Warrants – During the nine months ended March 31, 2022, the Company received $280,000 and issued 350,000 shares of common stock upon the exercise provisions of 350,000 Series J warrants at an exercise price of $0.80 per share.

 

Stock Options – For the three and nine months ended March 31, 2022, the Company recorded stock-based compensation related to stock options of $329,146 and $1,108,693, respectively. For the three and nine months ended March 31, 2021, the Company recorded stock-based compensation related to stock options of $453,439 and $1,409,224, respectively.

 

 
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PALATIN TECHNOLOGIES, INC.

and Subsidiary

 

Notes to Consolidated Financial Statements

(unaudited)

  

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, 2021

 

 

21,882,500

 

 

$0.72

 

 

 

7.2

 

 

$1,034,273

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Granted

 

 

197,650

 

 

 

0.48

 

 

 

 

 

 

 

 

 

Forfeited

 

 

(240,528)

 

 

0.69

 

 

 

 

 

 

 

 

 

Exercised

 

 

(43,600)

 

 

0.37

 

 

 

 

 

 

 

 

 

Expired

 

 

(103,349)

 

 

0.81

 

 

 

 

 

 

 

 

 

Outstanding - March 31, 2022

 

 

21,692,673

 

 

$0.72

 

 

 

6.5

 

 

$237,370

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercisable at March 31, 2022

 

 

14,155,952

 

 

$0.75

 

 

 

5.5

 

 

$236,358

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expected to vest at March 31, 2022

 

 

7,536,721

 

 

$0.68

 

 

 

8.4

 

 

$1,012

 

 

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.

 

Included in the outstanding options in the table above are 1,605,573 and 332,785 unvested performance-based stock options granted to executive officers and other employees, respectively, which were granted in June 2020 and 2021. The performance-based stock options vest on annual performance criteria through the fiscal years ending June 30, 2025 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 three and nine months ended March 31, 2022, the Company recorded stock-based compensation related to restricted stock units of $204,633 and $681,254, respectively. For the three and nine months ended March 31, 2021, the Company recorded stock-based compensation related to restricted stock units of $321,866 and $1,049,938, respectively.

 

A summary of restricted stock unit activity is as follows:

 

Outstanding at June 30, 2021

 

 

14,840,762

 

Granted

 

 

-

 

Forfeited

 

 

(157,467)

Vested

 

 

(1,735,158)

Outstanding at March 31, 2022

 

 

12,948,137

 

 

Included in outstanding restricted stock units in the table above are 7,012,500 vested shares that have not been issued as of March 31, 2022 due to a provision in the restricted stock unit agreements to delay delivery.

 

Time-based restricted stock units granted to the Company’s executive officers, employees, and non-employee directors generally vest over 48 months, 48 months, and 12 months, respectively.

 

Included in the outstanding restricted stock units in the table above are 1,630,020 and 275,208 unvested performance-based restricted stock units granted to executive officers and other employees, respectively, which were granted in June 2019, 2020, and 2021. The performance-based restricted stock units vest on annual performance criteria through the fiscal years ending June 30, 2025 relating to advancement of MC1r programs, including initiation of clinical trials and licensing of Vyleesi in additional countries or regions.

 

In June 2021, the Company granted 450,000 performance-based restricted stock units included in the table above to its executive officers which vest if, prior to June 22, 2023, the price per share of the Company’s common stock, as traded on the NYSE American, was at least $2.00 for at least twenty consecutive trading days.

 

In connection with the vesting of restricted share units during the three and nine months ended March 31, 2022, the Company withheld 32,603, and 404,779 shares with aggregate values of $13,041 and $221,311, respectively in satisfaction of minimum tax withholding obligations.

 

(14)        SUBSEQUENT EVENTS

 

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 Convertible Redeemable Preferred Stock (“Series B Preferred Stock”) and 900,000 shares of Series C Convertible Redeemable 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 and is convertible into Palatin common stock at an initial conversion price of $0.45 per share. The investors in the Series B Preferred Stock and Series C Preferred Stock also received warrants to purchase up to 1,666,667 shares of common stock at an exercise price of $0.50 per share, which expire 48 months following issuance. Total gross proceeds from the offering, before deducting offering expenses, is $15 million.

 

The Series B Preferred Stock and Series C Preferred Stock is convertible, at the option of the holder and until the earlier of 90 days from closing and 30 days following stockholder approval of a reverse stock split of Palatin’s common stock, into 33,333,333 shares of common stock, computed by dividing the aggregate stated value of the preferred stock of $15 million by the conversion price of $0.45. Alternatively, during the same period the holders of Series B Preferred Stock and Series C Preferred Stock can elect to redeem for cash in an amount equal to stated value or in notes, having an aggregate principal amount equal to stated value, and will also receive a redemption fee of $750,000, representing 5% of the aggregate stated value of the preferred shares.

 

The Company expects to call a meeting of stockholders to 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 are entitled to vote only on the reverse stock split and any adjournment of the meeting relating to the reverse stock split. The common stock, outstanding Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock will vote as a single class on an as-if converted basis.  The holders of Series B Preferred Stock have 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 are entitled to 20,000 votes per share of common stock into which the Series C Preferred Stock is convertible but can only vote in the same proportion as the shares of common stock, Series A preferred stock, and Series B preferred stock are voted on the reverse stock split or any adjournment of the stockholder meeting relating thereto.

 

To the extent any shares of Series B Preferred Stock or Series C Preferred Stock are converted to common shares or redeemed for debt, the Company will use such net proceeds from this offering for working capital and general corporate purposes.

 

 

 
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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements filed as part of this report and the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended June 30, 2021.

 

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, 2021, 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, 2021, have not changed during the three and nine months ended March 31, 2022. We believe that our accounting policies and estimates relating to the carrying value of inventory, revenue recognition, accrued expenses, purchase commitment liabilities, and stock-based compensation are the most critical.

 

Our Business

 

We are a biopharmaceutical company developing first-in-class medicines based on molecules that modulate the activity of the melanocortin and natriuretic peptide receptor systems. Our product candidates are targeted, receptor-specific therapeutics for the treatment of diseases with significant unmet medical need and commercial potential.

 

In January 2020, our North American licensee for Vyleesi® (bremelanotide injection), AMAG Pharmaceuticals, Inc. (“AMAG”), announced that it had completed a strategic review of its product portfolio and business strategy, and was pursuing options to divest its female health products, including Vyleesi. On July 27, 2020, Palatin and AMAG announced that they had mutually terminated the license agreement for Vyleesi effective July 24, 2020, and that we were assuming responsibility for manufacturing, marketing, and distribution of Vyleesi in North America, including the United States.

 

Melanocortin Receptor System. The melanocortin receptor (“MCr”) system is involved in the regulation of food intake, satiety, 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 FDA on June 21, 2019, and since July 24, 2020 we have been marketing Vyleesi in the United States. Prior to July 24, 2020, the product was marketed in the United States by AMAG pursuant to a license agreement that was terminated on that date. Vyleesi, a melanocortin receptor agonist, is an “as needed” therapy used in anticipation of sexual activity and self-administered by premenopausal women with hypoactive sexual desire disorder (“HSDD”) in the thigh or abdomen via a single-use subcutaneous auto-injector. The most common adverse events are nausea, flushing, injection site reactions, headache, and vomiting. Vyleesi is contraindicated in women with uncontrolled hypertension or known cardiovascular disease. In addition, the Vyleesi label includes precautions that it may cause (i) small, transient increases in blood pressure with a corresponding decrease in heart rate; (ii) focal hyperpigmentation (darkening of the skin on certain parts of the body), including the face, gums (gingiva) and breasts; and (iii) nausea.

 

Our new product development activities focus primarily on peptides which are agonists at MC1r, and in some instances additional melanocortin receptors, 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 we are developing 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. We are also 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 rare disease and orphan indications.

 

 
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Natriuretic Peptide Receptor System. The natriuretic peptide receptor (“NPR”) system regulates cardiovascular functions, and therapeutic agents modulating this system have potential to treat fibrotic diseases and cardiovascular diseases, including reducing cardiac hypertrophy and fibrosis, heart failure, acute asthma, pulmonary diseases, and hypertension. We have designed and are developing potential NPR candidate drugs selective for one or more different natriuretic peptide receptors, including natriuretic peptide receptor-A (“NPR-A”), natriuretic peptide receptor B (“NPR-B”), and natriuretic peptide receptor C (“NPR-C”).

 

Pipeline Overview

 

The following chart illustrates the status of our drug development programs and Vyleesi, which has been approved by the FDA for the treatment of premenopausal women with acquired, generalized HSDD.

 

ptn_10qimg11.jpg

 

 
18

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Our Strategy

 

Key elements of our business strategy include:

 

 

·

Discovering and developing melanocortin-based therapeutics for treating inflammatory and autoimmune diseases, with a focus on ocular diseases;

 

 

 

 

·

Growing our Vyleesi net revenue by marketing Vyleesi in the United States and supporting the development activities of our existing licensees for China and South Korea;

 

 

 

 

·

Entering into licenses for the sale, distribution and marketing of Vyleesi in the United States and additional regions;

 

 

 

 

·

Recruiting and maintaining employees to discover, develop and commercialize our MCr and NPR therapeutic products;

 

 

 

 

·

Entering into strategic alliances and partnerships with pharmaceutical companies to facilitate the development, manufacture, marketing, sale, and distribution of therapeutic products we are developing;

 

 

 

 

·

Partially funding our therapeutic 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 therapeutic product candidates.

 

Corporate Information

 

We were incorporated under the laws of the State of Delaware on 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, where among other things, we make available free of charge on and through this website our Forms 3, 4 and 5, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) 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 Nine Months Ended March 31, 2022 Compared to the Three and Nine Months Ended March 31, 2021:

 

Revenues – For the three and nine months ended March 31, 2022, we recognized $216,097 and $447,719 in product revenue, net of allowances, respectively. For the three and nine months ended March 31, 2021, we recognized $88,741 of product revenue and $363,790 of negative product revenue, net of allowances, respectively, as the result of our regaining all North American development and commercialization rights to Vyleesi in July 2020 (see Note 5 of our accompanying consolidated financial statements). For the nine months ended March 31, 2022, we recognized $250,000 in license and contract revenue related to the Fosun License Agreement.

 

Cost of Products Sold – Cost of products sold was $46,908 and $130,012 for the three and nine months ended March 31, 2022, respectively, compared to $55,440 and $110,040 for the three and nine months ended March 31, 2021, respectively.

 

Research and Development – Research and development expenses were $4,980,074 and $13,891,235 for the three and nine months ended March 31, 2022, respectively, compared to $2,509,490 and $9,444,759 for the three and nine months ended March 31, 2021, respectively. The increase for the three and nine months ended March 31, 2022, as compared to the three and nine months ended March 31, 2021, is related to the overall increase in spending on our MCr programs.

 

Research and development expenses related to our Vyleesi, MCr programs and other preclinical programs were $3,560,507 and $9,957,780 for the three and nine months ended March 31, 2022, respectively, compared to $1,381,864 and $6,254,088 for the three and nine months ended March 31, 2021, respectively. The increase is primarily related to an increase in spending on our MCr programs.

 

 
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Table of Contents

 

The amounts of project spending above exclude general research and development spending, which was $1,419,567 and $3,933,455 for the three and nine months ended March 31, 2022, respectively, compared to $1,127,626 and $3,190,671 for the three and nine months ended March 31, 2021, respectively. The increase in general research and development spending for the three and nine months ended March 31, 2022 compared to the three and nine months ended March 31, 2021 is primarily attributable to an increase in compensation related expenses.

 

Cumulative spending from inception to March 31, 2022 was approximately $311,900,000 on our Vyleesi program and approximately $181,300,000 on all our other programs (which include PL3994, melanocortin receptor agonists, other discovery programs and terminated programs). Due to various risk factors described in our Annual Report on Form 10-K for the year ended June 30, 2021, 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 when, if ever, related net cash inflows will be generated.

 

Selling, General and Administrative – Selling, general and administrative expenses, which consist mainly of compensation and related costs, were $3,009,528 and $10,163,830 for the three and nine months ended March 31, 2022, respectively, compared $4,010,055 and $11,386,574 for the three and nine months ended March 31, 2021, respectively. The decrease in selling, general and administrative expenses for the three and nine months ended March 31, 2022 is primarily attributable to $857,151 and $3,990,614, respectively of selling expenses related to Vyleesi, partially offset by an increase in compensation cost.

 

Gain on License Termination Agreement – For the nine months ended March 31, 2021, we recorded a gain of $1,623,795 as a result of the Vyleesi Termination Agreement (see Note 5 of the accompanying consolidated financial statements).

 

Other Income (Expense) – Total other income, net was $188,827 and $56,677 for the three and nine months ended March 31, 2022, respectively, compared to $756,584 and $19,157 for the three and nine months ended March 31, 2021, respectively. For the three and nine months ended March 31, 2022, we recognized $190,719 and $64,000 of foreign currency exchange gain, respectively, and investment income of $1,127 and $4,100, respectively, offset by$3,019 and $11,423 of interest expense, respectively. For the three and nine months ended March 31, 2021, we recognized $753,750 and $8,748, respectively, of foreign currency exchange gain and investment income of $2,834 and $19,769, respectively, offset by $9,360 of interest expense for the nine months ended March 31, 2021. The decrease in other income for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 is substantially a result of decreased unrealized foreign currency gains on our inventory purchase commitments and the increase in other income for the nine months ended March 31, 2022 compared to the nine months ended March 31, 2021 is a result of increased unrealized foreign currency gains on our inventory purchase commitments.  

 

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 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 biopharmaceutical companies, which may include unanticipated problems and additional costs relating to:

 

•       the development and testing of products in animals and humans;

 

•       product approval or clearance;

 

•       regulatory compliance;

 

•       good manufacturing practices (“GMP”) compliance;

 

•       intellectual property rights;

 

•       product introduction;

 

•       marketing, sales, and competition; and

 

•       obtaining sufficient capital.

 

 
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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 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.

 

During the nine months ended March 31, 2022, net cash used in operating activities was $22,203,901 compared to $14,111,599 for the nine months ended March 31, 2021. The difference in cash used in operations for the nine months ended March 31, 2022 compared to the nine months ended March 31, 2021 was primarily related to cash received related to the termination agreement for Vyleesi during the nine months ended March 31, 2021 as well as in increase in spending in our MCr programs, partially offset by a reduction in payments made for inventory purchase commitments and other working capital changes.

 

During the nine months ended March 31, 2022, net cash used in investing activities was $224,258 compared to $5,721 for the nine months ended March 31, 2021.  The increase was related to purchases of equipment and leasehold improvements.

 

During the nine months ended March 31, 2022, net cash provided by financing activities was $42,771, which consisted of proceeds from the exercise of warrants of $280,000 and proceeds from the exercise of stock options of $16,132, partially offset by payment of withholding taxes related to restricted stock units of $221,311 and payment of finance lease obligations of $32,050. During the nine months ended March 31, 2021, net cash used in financing activities was $93,638, which consisted of payment of withholding taxes related to restricted stock units.

 

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 and to enter into additional licensing or collaboration arrangements. As of March 31, 2022, our cash and cash equivalents were $37,719,531, and our current liabilities were $11,976,647.

 

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 natriuretic peptide program, and development of other portfolio products.

 

We believe that our existing capital resources will be adequate to fund our operations through at least June 2023. 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, the COVID-19 pandemic and its resulting impact to 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 will continue to evaluate the impact that these events could have on the operations, financial position, and the results of operations and cash flows during the remainder of fiscal year 2022 and beyond.

 

We had a net loss for the three and nine months ended March 31, 2022 and fiscal year 2021. We may not attain profitability in future years, which is dependent on numerous factors, including, but not limited to, whether and when development and sales milestones are met, regulatory actions by the FDA and other regulatory bodies, the performance of our licensees, and market acceptance of our products.

 

We expect to incur significant expenses as we continue to develop marketing and distribution capability for Vylessi in the United States and continue to develop our natriuretic peptide and MC1r product candidates. These expenses, among other things, have had and will continue to have an adverse effect on our stockholders’ equity, total assets, and working capital.

 

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, 2021.

 

 
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Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

 

Not required to be provided by smaller reporting companies.

 

Item 4.  Controls and Procedures.

 

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as defined in Exchange Act Rules 13a-15(e) and 15d-15(e), as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2022. There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting. 

 

 
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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.

 

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, 2021.

 

The ongoing military conflict between Russia and Ukraine could cause geopolitical instability, economic uncertainty, financial markets volatility and capital markets disruption, which may adversely affect our revenue, financial condition, or results of operations.

 

The current military conflict between Russia and Ukraine may disrupt or otherwise adversely impact our operations and those of third parties upon which we rely. Related sanctions, export controls or other actions that have already been initiated or may in the future be initiated by nations including the U.S., the European Union or Russia (e.g., potential cyberattacks, disruption of energy flows, etc.) can adversely affect our business, our contract research organizations, and other third parties with which we conduct business. Resulting volatility, disruption, or deterioration in the credit and financial markets may further make any necessary debt or equity financing more difficult and more costly. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our business strategy, financial performance, and stock price and could require us to delay or abandon clinical development plans. In addition, there is a risk that one or more of our current service providers, manufacturers, or other partners may be adversely impacted by deteriorating economic conditions, which could directly affect our ability to attain our operating goals and to accurately forecast and plan our future business activities.

 

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

 

As disclosed in the table below, 32,603 shares were withheld during the three months ended March 31, 2022 at the direction of the employees 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:

 

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

 

January 1, 2022 through January 31, 2022

 

 

-

 

 

$-

 

 

 

-

 

 

 

-

 

February 1, 2022 through February 28, 2022

 

 

32,603

 

 

 

0.40

 

 

 

-

 

 

 

-

 

March 1, 2021 through March 31, 2022

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Total

 

 

32,603

 

 

$0.40

 

 

 

-

 

 

 

-

 

 

(1) Consists solely of 32,603 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.

 

 

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Table of Contents

 

Item 5.  Other Information.

 

Private Placement

 

On May 11, 2022, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Pontifax Medison Finance (Israel) L.P. and Pontifax Medison Finance (Cayman) L.P. (collectively, “Pontifax”), pursuant to which we agreed to issue and sell, in a private placement (the “Offering”), 8,100,000 shares of our Series B Convertible Redeemable Preferred Stock, par value $0.01 per share (“Series B Convertible Preferred Stock”), and 900,000 shares of Series C Convertible Redeemable Preferred Stock, par value $0.01 per share (“Series C Convertible Preferred Stock” and together with Series B Convertible Preferred Stock, “Preferred Stock”), for an aggregate offering price of $15,000,000. The Preferred Stock has a stated value of $1.666667 per share and is convertible into an aggregate of 33,333,340 shares of common stock of the Company. The Preferred Stock is also redeemable at the option of Pontifax either in cash, in an amount equal to their stated value, or in notes, having an aggregate principal amount equal to their stated value. We have also issued to Pontifax warrants to purchase up to a number of shares of our common stock equal to 5% of the conversion shares issuable upon Pontifax’s conversion of the Preferred Stock, with an exercise price equal to $0.50.

 

The Offering was made in reliance upon an exemption from the registration requirements of the Securities Act, pursuant to Section 4(a)(2) thereof, as a transaction by an issuer not involving any public offering.

 

Series B and C Preferred Stock

 

On May 11, 2022, we filed Certificates of Designations (“the Certificate of Designations”) with the Secretary of State of the State of Delaware to establish the preferences, limitations and relative rights of the Series B Convertible Preferred Stock and Series C Convertible Preferred Stock. The Certificates of Designations became effective upon filing. The number of authorized shares of Series B Convertible Preferred Stock and Series C Convertible Preferred Stock are 8,100,000 and 900,000 shares, respectively. The following is a summary of the principal terms of the Certificate of Designations:

  

Dividends

 

The holders of the Preferred Stock will be entitled to dividends, on an as-if converted basis, equal to and in the same form as dividends actually paid on shares of common stock, when and if actually paid.

 

Voting Rights

 

The Preferred Stock has no voting rights, except the right to vote, with the holders of common stock and any other class or series of capital stock of the Company entitled to vote on such matter, as a single class, with each share of Preferred Stock entitled to vote on an as-converted basis on any resolution presented to stockholders for the purpose of obtaining approval of a proposed amendment to the Company’s Restated Certificate of Incorporation, as amended, to effect a reverse split of the outstanding shares of the Common Stock at a ratio to be determined (the “Reverse Split Amendment”) and any proposal to adjourn any meeting of stockholders called for the purpose of voting on the Reverse Split Amendment.

 

Liquidation

 

Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary (a “Liquidation”), the then holders of the Preferred Stock shall be entitled to receive out of the assets of the Company available for distribution to stockholders an amount per share equal to the stated value of each outstanding shares of Preferred Stock plus an amount equal to any dividends that have been declared on such share but not yet paid.

 

Beneficial Ownership Limitation

 

The Preferred Stock cannot be converted to common stock if the holder and its affiliates would beneficially own more than 4.99% (or 9.99% at the election of the holder) of the outstanding common stock. However, any holder may increase or decrease such percentage to any other percentage not in excess of 9.99% upon notice to us, provided that any increase in this limitation will not be effective until 61 days after such notice from the holder to us and such increase or decrease will apply only to the holder providing such notice.

 

Trading Market

 

There is no established trading market for any of the Preferred Stock, and we do not expect a market to develop. We do not intend to apply for a listing for any of the Preferred Stock on any securities exchange or other nationally recognized trading system. Without an active trading market, the liquidity of the Preferred Stock will be limited.

 

Conversion and Redemption

 

See information included under the caption “Private Placement” above.

 

Certificate of Elimination and Certificate of Decrease

 

On May 11, 2022, we filed a Certificate of Elimination with the Secretary of State of the State of Delaware, eliminating our Series A Preferred Stock, par value $0.01 per share, and Series B Preferred Stock, par value $0.01 per share, and returning them to authorized but undesignated shares of our preferred stock. None of the authorized shares of Series A Preferred Stock and Series B Preferred Stock were outstanding prior to the filing of the Certificate of Elimination.

 

On May 11, 2022, we filed a Certificate of Decrease with the Secretary of State of the State of Delaware, reducing the allocation of Series A Convertible Preferred Stock, par value $0.01 per share, from 264,000 shares to 4,030 shares.

 

 
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Table of Contents

 

Item 6.  Exhibits.

 

Exhibits filed or furnished with this report:

 

Exhibit Number

 

Description

 

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 Designation of Series B Convertible Redeemable Preferred Stock

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3.4

 

Certificate of Designation of Series C Convertible Redeemable Preferred Stock

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3.5

 

Certificate of Elimination with respect to Series A Preferred Stock and Series B Preferred Stock

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3.6

 

Certificate of Decrease of Series A Convertible Preferred Stock

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10.1

 

Form of Securities Purchase Agreement, dated May 11, 2022, by and among Palatin Technologies, Inc., Pontifax Medison Finance (Israel) L.P. and Pontifax Medison Finance (Cayman) L.P.

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10.2

 

Form of Common Stock Purchase Warrant

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10.3

 

Form of Common Stock Purchase Warrant

 

X

 

 

 

 

 

 

 

31.1

 

Certification of Chief Executive Officer.

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31.2

 

Certification of Chief Financial Officer.

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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.

 

*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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.

 

*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101.INS

 

Inline XBRL Taxonomy Extension Instance Document (the instance document does not appear on the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document.

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101.DEF

 

Inline XBRL Taxonomy Extension Definition Linkbase Document.

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101.LAB

 

Inline XBRL Taxonomy Extension Label Linkbase Document.

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

104

 

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

 

 

 

*In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release Nos. 33-8238 and 34-47986, Final Rule: Management’s Reports on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, the certification furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Exchange Act. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

 

 
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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

Palatin Technologies, Inc.

 

 

 

(Registrant)

 

 

 

 

  /s/ Carl Spana

 

Date: May 16, 2022

 

Carl Spana, Ph.D.

President and

Chief Executive Officer (Principal

Executive Officer)

 

 

 

 

 

 

 

  /s/ Stephen T. Wills

 

Date: May 16, 2022

 

Stephen T. Wills, CPA, MST

Executive Vice President, Chief Financial Officer and Chief Operating Officer

(Principal Financial and Accounting Officer)

 

 

 
26

 



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