PALATIN TECHNOLOGIES INC

Previous wording

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, 2024, have not changed during the three and six months ended December 31, 2024. We believe that our accounting policies and estimates relating to the carrying value of inventory, revenue recognition, accrued expenses, purchase commitment liabilities, warrants and stock-based compensation are the most critical.

Current wording

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, 2024, have not changed during the three and nine months ended March 31, 2025. We believe that our accounting policies and estimates relating to the carrying value of inventory, revenue recognition, accrued expenses, purchase commitment liabilities, warrants and stock-based compensation are the most critical.

Previous wording

Our new product development activities focus on obesity, including co-administration of bremelanotide with tirzepatide, a GLP-1 agonist for treatment of obesity, which has completed Phase 2 in the fourth quarter of calendar year 2024, with topline results expected in the first quarter of calendar year 2025; and secondarily on ocular indications, including PL9643, an ophthalmic peptide solution for dry eye disease (“DED”), which completed Phase 3 clinical trials and announced top line results from the first Phase 3 clinical trial in the first quarter of calendar year 2024; ulcerative colitis, including PL8177, an oral peptide formulation, which entered Phase 2 ulcerative colitis clinical trials in the third quarter of calendar year 2022 and is expected to report topline results in the first quarter of calendar year 2025. We are actively engaged in discussions with potential partners and licensees that have the financial and operational resources to progress our products for ocular conditions through development, approval and commercialization.

Current wording

Our new product development activities focus on obesity, including co-administration of bremelanotide with tirzepatide, a GLP-1 agonist for treatment of obesity, which has completed Phase 2 in the fourth quarter of calendar year 2024, with topline results expected in the first quarter of calendar year 2025 announced in March 2025, in which co-administration demonstrated an increased weight loss over tirzepatide alone; and secondarily on ocular indications, including PL9643, an ophthalmic peptide solution for dry eye disease (“DED”), which completed Phase 3 clinical trials and announced top line results from the first Phase 3 clinical trial in the first quarter of calendar year 2024; ulcerative colitis, including PL8177, an oral peptide formulation, which entered Phase 2 ulcerative colitis clinical trials in the third quarter of calendar year 2022 and announced topline results in March 2025, with one-third of patients dosed with PL8177 achieving clinical remission while the placebo group saw no clinical remission is expected to report topline results later this quarter. We are actively engaged in discussions with potential partners and licensees that have the financial and operational resources to progress our products for ocular conditions through development, approval and commercialization.

Previous wording

Three and Six Months Ended December 31, 2024, Compared to the Three and Six Months Ended December 31, 2023:

Current wording

Three and Nine Months Ended March 31, 2025, Compared to the Three and Nine Months Ended March 31, 2024:

Previous wording

Revenues – For the six months ended December 31, 2024, we recognized $0 in product revenue, net of allowances. For the three and six months ended December 31, 2023, we recognized $2,034,113 and $4,140,090 in product revenue, net of allowances, respectively. The decrease in product revenue, net of allowances is a result of the sale to Cosette of worldwide rights to Vyleesi.

Current wording

Revenues – For the nine months ended March 31, 2025, we recognized $0 in product revenue, net of allowances. For the nine months ended March 31, 2024, we recognized $4,140,090 in product revenue, net of allowances, respectively. The decrease in product revenue, net of allowances is a result of the sale to Cosette of worldwide rights to Vyleesi.

Previous wording

*Cost of Products Sold –*Cost of products sold was $0 for the six months ended December 31, 2024 compared to $97,637 for the three and six months ended December 31, 2023. The decrease is a result of the sale to Cosette of worldwide rights to Vyleesi.

Current wording

*Cost of Products Sold –*Cost of products sold was $0 for the nine months ended March 31, 2025 compared to $97,637 for the nine months ended March 31, 2024. The decrease is a result of the sale to Cosette of worldwide rights to Vyleesi.

Previous wording

Research and Development – Research and development expenses were $3,429,479 and $9,173,233 for the three and six months ended December 31, 2024, respectively, compared to $5,554,200 and $10,568,830 for the three and six months ended December 31, 2023, respectively. The decrease was primarily related to a decrease in spending on our MCr programs.

Current wording

Research and Development – Research and development expenses were $3,755,158 and $12,928,391 for the three and nine months ended March 31, 2025, respectively, compared to $7,159,686 and $17,728,516 for the three and nine months ended March 31, 2024, respectively. The decrease was primarily related to a decrease in spending on our MCr programs.

Previous wording

Research and development expenses related to our MCr other preclinical programs were $1,888,065 and $5,969,102 for the three and six months ended December 31, 2024, respectively compared to $3,828,383 and $7,287,971 for the three and six months ended December 31, 2023, respectively. The decrease was primarily related to a decrease in spending on our MCr programs.

Current wording

Research and development expenses related to our MCr other preclinical programs were $1,853,851 and $7,822,953 for the three and nine months ended March 31, 2025, respectively compared to $5,487,259 and $12,775,229 for the three and nine months ended March 31, 2024, respectively. The decrease was primarily related to a decrease in spending on our MCr programs.

Previous wording

The amounts of project spending above exclude general research and development spending, which was $1,662,717 and $3,204,131 for the three and six months ended December 31, 2024, respectively, compared to $1,725,817 and $3,280,859 for the three and six months ended December 31, 2023, respectively. The decrease is primarily attributable to a decrease in compensation-related expenses.

Current wording

The amounts of project spending above exclude general research and development spending, which was $1,901,307 and $5,105,438 for the three and nine months ended March 31, 2025, respectively, compared to $1,672,427 and $4,953,286 for the three and nine months ended March 31, 2024, respectively. The decrease is primarily attributable to an decrease in compensation-related expenses.

Previous wording

Cumulative spending from inception to December 31, 2024, was approximately $311,900,000 on our Vyleesi program and approximately $243,100,000 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, 2024, 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.

Current wording

Cumulative spending from inception to March 31, 2025, was approximately $311,900,000 on our Vyleesi program and approximately $246,800,000 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, 2024, 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.

Previous wording

Selling, General and Administrative – Selling, general and administrative expenses, which consist mainly of compensation and related costs, were $1,681,844 and $3,702,775 for the three and six months ended December 31, 2024, respectively, compared to $3,032,613 and $6,232,857 for the three and six months ended December 31, 2023, respectively. The decrease is a result of the elimination of selling expenses relating to Vyleesi.

Current wording

Selling, General and Administrative – Selling, general and administrative expenses, which consist mainly of compensation and related costs, were $1,474,019 and $5,176,794 for the three and nine months ended March 31, 2025, respectively, compared to $2,033,410 and $8,266,267 for the three and nine months ended March 31, 2024, respectively. The decrease is a result of the elimination of selling expenses relating to Vyleesi.

Previous wording

Gain on Sale of Vyleesi – For the three and six months ended December 31, 2024, the Company recorded a gain of $2,500,000 on the sale of Vyleesi as a result of the settlement of certain purchase commitments. For the three and six months ended December 31, 2024, the Company recorded a gain of $7,823,482 on the sale of worldwide rights to Vyleesi. The gain represents the upfront purchase price of $9,500,000 less the cost of net assets transferred to the purchaser.

Current wording

Gain on Sale of Vyleesi – For the nine months ended March 31, 2025, the Company recorded a gain of $2,500,000 on the sale of Vyleesi as a result of the settlement of certain purchase commitments. For the three and nine months ended March 31, 2024, the Company recorded a loss of $25,202 and a gain of $7,798,280 on the sale of Vyleesi. The gain represents the upfront purchase price of $9,500,000 less the cost of net assets transferred to the purchaser.

Previous wording

*Other Income (Expense) –*For the three and six months ended, December 31, 2024, total other income (expense), net was $168,841 and $109,877, respectively. For the three and six months ended December 31, 2023, other (expense) income was $(9,017,179) and $(8,114,281), respectively. The increase in other income (expense) for the three and six months ended December 31, 2024 compared to the three and six months ended December 31, 2023 was driven primarily by the change in fair values of the warrant liability, a decrease in offering expenses and foreign currency transaction gains.

Current wording

*Other Income (Expense) –*For the three and nine months ended, March 31, 2025, total other income (expense), net was $1,757 and $111,634, respectively. For the three and nine months ended March 31, 2024, other income (expense) income was $782,648 and $(7,331,633), respectively. The decrease in other income (expense) for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was driven primarily by the change in fair values of the warrant liability and foreign currency transaction gains. The increase in other income (expense), net for the nine months ended March 31, 2025 compared to the nine months ended March 31, 2024 was primarily driven by the an increase in the change in fair value of warrant liabilities and offering expenses.

Previous wording

During the six months ended December 31, 2024, net cash used in operating activities was $11,863,319 compared to $16,382,079 for the six months ended December 31, 2023. The decrease was primarily related to a decrease in net loss during the period and working capital changes.

Current wording

During the nine months ended March 31, 2025, net cash used in operating activities was $17,217,595 compared to $24,988,985 for the nine months ended March 31, 2024. The decrease was primarily related to a decrease in net loss during the period and working capital changes.

Previous wording

During the six months ended December 31, 2024, net cash provided by investing activities was $2,500,000, which consisted of proceeds from the sale of Vyleesi. During the six months ended December 31, 2023, net cash provided by investing activities was $12,455,275, which consisted of $9,500,000 of proceeds from the sale of Vyleesi and $2,992,890 proceeds from the maturity of marketable securities, offset by $37,615 used for the purchase of property and equipment.

Current wording

During the nine months ended March 31, 2025, net cash provided by investing activities was $2,500,000, which consisted of proceeds from the sale of Vyleesi. During the nine months ended March 31, 2024, net cash provided by investing activities was $12,455,275, which consisted of $9,500,000 of proceeds from the sale of Vyleesi and $2,992,890 proceeds from the maturity of marketable securities, offset by $37,615 used for the purchase of property and equipment.

Previous wording

During the six months ended December 31, 2024, net cash provided by financing activities was $3,252,527, which consisted of $3,398,023 of proceeds from the exercise of warrants, offset by $99,482 for payment of withholding taxes related to restricted stock units and $46,014 for payment of finance lease obligations. During the six months ended December 31, 2023, net cash provided by financing activities was $5,422,474, which consisted of proceeds from the sale of common stock of $5,531,266, proceeds from the exercise of warrants of $103, offset by $56,401 for payment of withholding taxes related to restricted stock units and $52,494 for payment of finance lease obligations.

Current wording

During the nine months ended March 31, 2025, net cash provided by financing activities was $7,710,261, which consisted of $3,398,237 of proceeds from the exercise of warrants and 4,457,520 from the sale of common stock, offset by $99,482 for payment of withholding taxes related to restricted stock units and $46,014 for payment of finance lease obligations. During the nine months ended March 31, 2024, net cash provided by financing activities was $14,558,216, which consisted of proceeds from the sale of common stock of $14,693,779, proceeds from the exercise of warrants of $103, offset by $56,401 for payment of withholding taxes related to restricted stock units and $79,265 for payment of finance lease obligations.

Previous wording

We have incurred cumulative negative cash flows from operations since our inception, and have expended substantial funds to advance our planned product development efforts. Continued operations are dependent upon our ability to complete equity or debt financing activities and to enter into additional licensing or collaboration arrangements. As of December 31, 2024, our cash and cash equivalents were $3,416,604, and our current liabilities were $9,558,756.

Current wording

We have incurred cumulative negative cash flows from operations since our inception, and have expended substantial funds to advance our planned product development efforts. Continued operations are dependent upon our ability to complete equity or debt financing activities and to enter into additional licensing or collaboration arrangements. As of March 31, 2025, our cash and cash equivalents were $2,520,062, and our current liabilities were $10,048,349.

Previous wording

Our obligations include short-term lease obligations in an aggregate amount of $257,673 in current liabilities as of December 31, 2024, $100,071 in long-term lease liabilities, inventory purchase commitments in an aggregate amount of $1,964,450 which consists of $932,150 in current liabilities as of December 31, 2024, and $1,032,300 in other long-term liabilities.

Current wording

Current liabilities include short-term lease obligations in an aggregate amount of $194,972 and inventory purchase commitments in an aggregate amount of $1,576,350. Our long-term obligations consist of $67,248 in long-term lease liabilities.

Previous wording

As a result of our sale of worldwide rights to Vyleesi pursuant to the Purchase Agreement, we currently do not have a recurring source of revenue. Based on our available cash and cash equivalents as of December 31, 2024, and $4,309,641 received in February 2025, the Company has concluded that substantial doubt exists about our ability to continue as a going concern for one year from the date our consolidated financial statements are issued. We are evaluating strategies to obtain additional funding for future operations which include but are not limited to obtaining equity financing, issuing debt, or reducing planned expenses. A failure to raise additional funding or to effectively implement cost reductions could harm our business, results of operations, and future prospects. If we are not able to secure adequate additional funding in future periods, we would be forced to make additional reductions in certain expenditures. This may include liquidating assets and suspending or curtailing planned programs. We may also have to delay, reduce the scope of, suspend, or eliminate one or more research and development programs or its commercialization efforts or pursue a strategic transaction. If we are unable to raise capital when needed or enter into a strategic transaction, then we may be required to cease operations, which could cause our stockholders to lose all or part of their investment. Based on our current operating and development plans, we expect that our existing cash and cash equivalents as of the date of this filing will be sufficient to enable the Company to fund its operations into the second half of the calendar year 2025.

Current wording

As a result of our sale of worldwide rights to Vyleesi pursuant to the Purchase Agreement, we currently do not have a recurring source of revenue. Based on our available cash and cash equivalents as of March 31, 2025, the Company has concluded that substantial doubt exists about our ability to continue as a going concern for one year from the date our consolidated financial statements are issued. We are evaluating strategies to obtain additional funding for future operations which include but are not limited to obtaining equity financing, issuing debt, or reducing planned expenses. A failure to raise additional funding or to effectively implement cost reductions could harm our business, results of operations, and future prospects. If we are not able to secure adequate additional funding in future periods, we would be forced to make additional reductions in certain expenditures. This may include liquidating assets and suspending or curtailing planned programs. We may also have to delay, reduce the scope of, suspend, or eliminate one or more research and development programs or its commercialization efforts or pursue a strategic transaction. If we are unable to raise capital when needed or enter into a strategic transaction, then we may be required to cease operations, which could cause our stockholders to lose all or part of their investment. Based on our current operating and development plans, we expect that our existing cash and cash equivalents as of the date of this filing will be sufficient to enable the Company to fund its operations into the second half of the calendar year 2025.

Previous wording

We will need additional funding to complete required clinical trials for our product candidates and development programs and, if those clinical trials are successful (which we cannot predict), to complete submission of required regulatory applications to the FDA. However, current economic conditions may negatively impact our operations, including possible effects on our financial condition, ability to access the capital markets on attractive terms or at all, liquidity, operations, suppliers, industry, and workforce. We 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 fiscal year 2025 and beyond.

Current wording

We will need additional funding to complete required clinical trials for our product candidates and development programs and, if those clinical trials are successful (which we cannot predict), to complete submission of required regulatory applications to the FDA. However, current economic conditions (including current economic uncertainty, high interest rates, rising inflation, tariffs, and the potential for local and/or global economic recession) 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 fiscal year 2025 and beyond.