PTNT 10-Q Quarter ended Sept. 30, 2025

(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 receptor (“MCR”) system. 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 MCR system has effects on food intake, metabolism, sexual function, inflammation, and immune system responses. There are five melanocortin receptors, MC1R through MC5R. Modulation of these receptors, through use of receptor-specific agonists, which activate receptor function, or receptor-specific antagonists, which block receptor function, can have significant pharmacological effects.

The Company’s product development activities focus primarily on use of MC4R agonists for treatment of obesity. The Company is developing MC4R peptides and small molecule agonists with potential utility in obesity and metabolic-related disorders, rare MC4R pathway diseases, such as hypothalamic obesity, and orphan indications.

The Company is also developing, dependent on resources for development activities, MC1R agonist products, 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, dependent on resources for development activities, peptides and small molecules that are active at more than one melanocortin receptor, with potential utility in obesity and metabolic-related disorders, rare MC4R pathway diseases, such as hypothalamic obesity, and orphan indications.

The Company’s prior commercial product, Vyleesi®, was approved by the U.S. Food and Drug Administration (“FDA”) in June 2019 for the treatment of hypoactive sexual desire disorder (“HSDD”) in premenopausal women. As disclosed in Note 4, this product was acquired by Cosette Pharmaceuticals, Inc. (“Cosette”) on December 19, 2023, including a release and settlement agreement on June 5, 2025.

Reverse Stock Split - On August 11, 2025, a reverse stock split of 1-for-50 of issued and outstanding common stock was made effective by the Company. Retroactive effect for the reverse stock split was made to the Company’s outstanding common stock, stock options, common stock warrants, and preferred stock conversion features, including all share and per-share data, for all periods presented in the consolidated financial statements.

Business Risks and Liquidity – The Company has incurred operating losses and negative cash flows from operations since inception and will need additional funding to complete its planned product development efforts. As shown in the accompanying consolidated financial statements, the Company had an accumulated deficit as of September 30, 2025 of $ 454,396,365 and net income for the three months ended September 30, 2025 of $ 4,677,534 . The Company anticipates incurring significant expenses in the future as a result of spending on its development programs and will require substantial additional financing or revenues to continue to fund its planned 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 September 30, 2025, the Company’s cash and cash equivalents were $ 1,273,083 and current liabilities were $ 8,218,261 . Management intends to utilize existing capital resources for general corporate purposes and working capital, including clinical development of the Company’s MC1R and MC4R programs, and development of other portfolio products.

The Company follows the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 205-40, Presentation of Financial Statements — Going Concern , which requires management to assess the Company’s ability to continue as a going concern for one year after the date the consolidated financial statements are issued. While the Company has raised funding in the past, the ability to raise funding in future periods is not considered probable, as defined under the accounting standards. As such, under the requirements of ASC 205-40, management may not consider the potential for future funding in their assessment of the Company’s ability to meet its obligations for the next year.

(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 months ended September 30, 2025, 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, 2025, filed with the U.S. Securities and Exchange Commission (“SEC”), which includes consolidated financial statements as of June 30, 2025 and 2024 and for the fiscal years then ended.

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(4) New Accounting Pronouncements

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income- Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. ASU 2024-03 enhances financial reporting by requiring additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. The guidance is effective for public business entities for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently planning to adopt this guidance when effective. The Company is assessing the impact of the adoption on the Company’s consolidated financial statements and accompanying footnotes but expects the impact will be enhanced disclosures related to income statement expenses.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures. ASU 2023-09 enhances the transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The guidance is effective for public business entities for annual periods beginning after December 15, 2024. For entities other than public business entities, the amendments are effective for annual periods beginning after December 15, 2025. Early adoption is permitted. The Company is currently planning to adopt this guidance when effective. The Company is assessing the impact of the adoption on the Company’s consolidated financial statements and accompanying footnotes.

In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures. This ASU requires that a public entity provide additional segment disclosures on an interim and annual basis. The amendments in this ASU should be applied retrospectively to all prior periods presented in the financial statements, unless impracticable. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. The ASU is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The Company has adopted this guidance for the year ended June 30, 2025.

(5) AGREEMENT WITH BOEHRINGER INGLEHEIM

On August 14, 2025, the Company entered into a Research Collaboration, License and Patent Assignment Agreement (the “Assignment Agreement”) with Boehringer Ingelheim International GmbH (“Boehringer Ingelheim” or “BI”) to research, develop and commercialize first-in-class melanocortin receptor-targeted peptides developed by the Company for the treatment of retinal diseases, including diabetic retinopathy.

Under the terms of the Assignment Agreement, the Company assigned certain patent rights and provided a license to Boehringer Ingelheim (the “Assigned Patents”), and the Company will conduct research services on behalf of with Boehringer Ingelheim at Boehringer Ingelheim’s expense focused on development during a two-year period, which Boehringer Ingelheim has the right to extend by up to six months. The Company retains an exclusive, fully-paid license to PL9643 for treatment of dry eye disease. The Company determined that two performance obligations exist under the Assignment Agreement (i) Patents and license assignment and (ii) Research and development services.

The Patents and license assignment performance obligation relates to intellectual property that is distinct from other performance obligations identified in the arrangement. The consideration received for this performance obligation includes both fixed cash consideration and variable consideration subject to constraint. During the three months ended September 30, 2025, the Company recorded $ 2,340,000 in revenue related to the assignment and transfer of the patents and license to BI for which BI can benefit and use. The Company received approximately $ 2,000,000 of cash related to the upfront payment as the cash received was net of foreign withholding taxes which were recognized in accounts receivable at September 30, 2025 as the Company expects to receive a refund during FY 2026. Additionally, during the three months ended September 30, 2025, the Company was notified that BI had successfully completed the first research milestone and accordingly the Company recorded $ 6,490,000 of revenue during the quarter. In October 2025, the Company received approximately $ 5,400,000 of cash related to the achievement of this milestone as the cash received was net of foreign withholding taxes that the Company expects to receive as a refund during FY 2026. Variable consideration related to the remaining future milestones was fully constrained because the Company cannot conclude that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur, given the inherent uncertainty of success with these future milestones. The Company may receive up to $ 21,200,000 in near-term research milestone payments and up to $ 307,000,000 in success-based development, regulatory, and commercial milestone payments, plus tiered royalties on net commercial sales of products.

The research and development services performance obligation relates to specific research activities during the research term, and BI will reimburse the Company for these activities at a Full-Time Equivalent (“FTE”) rate of €300,000 (approximately $346,341) per year per FTE, up to 3.25 FTEs, inclusive of direct labor, supplies, and allocated overhead. The Company will invoice BI for actual hours worked, and BI is obligated to pay within contractually defined timelines. During the three months ended September 30, 2025, the Company recorded $ 17,550 of revenue for research and development services performed.

During the three months ended September 30, 2025, the Company recorded $ 8,847,550 of revenue related to the Assignment Agreement, which consisted of the upfront payment for the Assigned Patents, the achievement of a research milestone during September 2025, and FTE related reimbursements as follows:

(6) ASSET PURCHASE AGREEMENT / RELEASE AND SETTLEMENT AGREEMENT

On December 19, 2023, the Company entered into an Asset Purchase Agreement (the “Cosette Agreement”) with Cosette pursuant to which Cosette acquired from the Company worldwide rights to Vyleesi®.

Under the terms of the Cosette Agreement, the Company sold certain assets (the “Purchased Assets”) to Cosette, comprising the exclusive right to market and sell Vyleesi for the treatment of hypoactive sexual desire disorder in women, and transferred or assigned contracts relating to manufacturing and distribution of Vyleesi and transferred or assigned the license agreement entered into on September 6, 2017 with Shanghai Fosun Pharmaceutical Industrial Development Co. Ltd. for exclusive rights to commercialize Vyleesi in China and the license agreement entered into on November 21, 2017 with Kwangdong Pharmaceutical Co., Ltd. for exclusive rights to commercialize Vyleesi in Korea, provided that the Company retains the right to receive a $ 3,000,000 milestone payment based on the first commercial sale in Korea. The Purchased Assets include applicable intellectual property pertaining to the marketing and sale of Vyleesi, including patents, patent applications, trademarks and copyrights. The Company received an upfront purchase price of $ 9,500,000 , $ 2,500,000 payable upon the settlement of certain purchase commitments, which was received November 1, 2024, and may receive sales-based milestone payments of up to $ 159,000,000 .

On June 5, 2025, the Company entered into a Release and Settlement Agreement (the “Settlement Agreement”) with Cosette pursuant to which the Cosette resolved all outstanding obligations and commercialization covenants related to such sales-based milestone payments and purchase commitments by remitting a single lump sum payment of $ 630,000 and the assumption of outstanding manufacturing and supply purchase commitments, with the Company retaining the right to receive 20% of a $ 3,000,000 milestone payment based on the first commercial sale in Korea, in full satisfaction and release of all such future obligations. As a result, the Company recorded a gain on the sale of Vyleesi of $ 3,130,000 and a gain on purchase commitments of $ 2,117,900 , for the fiscal year ended June 30, 2025.

(7) PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following:

(8) 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:

(9) ACCRUED EXPENSES

Accrued expenses consist of the following:

(10) COMMITMENTS AND CONTINGENCIES

Inventory Purchases – The Company had certain supply agreements with manufacturers and suppliers, including Catalent Belgium S.A (“Catalent”), Ypsomed AG (“Ypsomed”), and Lonza Ltd (“Lonza”), all of which have been transferred to Cosette. On June 5, 2025, the Company entered into the Settlement Agreement with Cosette pursuant to which Cosette released the Company from all outstanding obligations and commercialization covenants. As a result, the Company recorded a gain on purchase commitments of $ 2,117,900 which represented the Company’s remaining purchase commitment liabilities.

Contingencies – The Company accounts for litigation losses in accordance with ASC 450-20, Loss Contingencies . In addition, the Company is subject to other contingencies, such as product liability, arising in the ordinary course of 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.

On February 13, 2025, a complaint was filed in the Supreme Court of the State of New York, County of New York, captioned H.C. Wainwright & Co., LLC (“Wainwright”) v. Palatin Technologies, Inc., Case No: 650878/2025. The complaint names the Company as defendant, asserting three causes of action for breach of contract and seeking monetary damages and the award of warrants allegedly due under the parties’ agreement. The breach of contract claims each relate to the engagement agreement entered into by the Company and Wainwright on or about January 29, 2024. On March 20, 2025, the Company filed its answer in response to the complaint, in which it denied all liability and asserted several affirmative defenses. The Company is in discussions with Wainwright on a resolution to the lawsuit, but if no resolution is reached the Company plans to vigorously defend against the lawsuit and the action will proceed next to the discovery stage and for further proceedings.

Management has assessed the status of these proceedings and based on consultation with legal counsel, believes that while a loss is reasonably possible, it is not probable and therefore no accrual has been recorded. At this time, the Company is unable to reasonably estimate the potential loss or range of loss associated with these matters due to the inherent uncertainties of litigation. The Company will continue to monitor developments and will recognize a liability if and when a loss becomes both probable and estimable.

(11) SEGMENT INFORMATION

The Company views its operations and manages its business in one operating segment: life science. The table below summarizes the significant expense categories for the life science segment regularly provided to the Company’s Chief Financial Officer/Chief Operating Officer (the “CFO/COO”), its Chief Operating Decision Maker (the “CODM”).

The accounting policies of the Company’s segment are the same as those described in the summary of significant accounting policies. The CODM assesses performance for its segment based on net loss, which is reported on the consolidated statements of operations. The measure of segment assets is reported on the balance sheet as total assets. The CODM uses cash forecast models in deciding how to invest into the segment. The CODM analyzes the Company’s net loss and monitors budget versus actual results to assess the performance of the Company.

(12) STOCKHOLDERS’ EQUITY (DEFICIENCY)

Series D Convertible Preferred Stock - On June 10, 2025, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with certain accredited investors (the “Purchasers”), pursuant to which the Company agreed to sell and issue, in a private placement (the “June 2025 Private Placement”), (i) an aggregate of 3,400 shares of the Company’s newly designated Series D Convertible Preferred Stock, par value $0.01, with a stated value of $100 per share (the “Series D Preferred Stock”), initially convertible into up to 61,816 shares of the Company’s common stock (such shares underlying the Preferred Stock, the “Conversion Shares”), par value $0.01 per share at an initial conversion price of $ 5.50 , and (ii) Series I common stock purchase warrants (the “Series I Warrants”) to purchase up to an aggregate of 123,636 shares of Common Stock (such shares underlying the Series I Warrants, the “Series I Warrant Shares”). The Series D Preferred Stock and Series I Warrants were sold at a combined offering price of $ 5.50 per share of Preferred Stock and accompanying Series I Warrants. The Purchasers in the June 2025 Private Placement consisted of Carl Spana, the Company’s President and Chief Executive Officer, Stephen T. Wills, the Company’s Executive Vice President, Chief Financial Officer, and Chief Operating Officer, John K.A. Prendergast, a director on and Chairperson of the Company’s board of directors, and Alan W. Dunton, a director on the Company’s board of directors, who are all related parties of the Company. The Series D Preferred Stock has a dividend rate of 8 % per annum, which when declared may, at the option of the Company, be paid in cash or can accrete and be added to the stated value of the Series D Preferred Stock. Subject to the rights of any class or series of stock senior to or equivalent to the Series D Preferred Stock , the Series D Preferred Stock shall be entitled to be paid in the event of liquidation, dissolution or winding up of the Company, out of available funds and assets, prior and in preference to any distribution on any junior stock, an amount per share equal to the then stated value of the Series D Preferred Stock and declared but unpaid dividends. Each share of Series D Preferred Stock is convertible at any time, at the option of the holder, and such conversion could dilute the value of our common stock to current stockholders and could adversely affect the market price of our common stock. The conversion price decreases if we sell common stock (or equivalents) for a price per share less than the conversion price and is also subject to adjustment upon the occurrence of a merger, reorganization, consolidation, reclassification, stock dividend or stock split which results in an increase or decrease in the number of shares of common stock outstanding. The June 2025 Private Placement closed on June 13, 2025. The gross proceeds from the June 2025 Private Placement, before deducting offering expenses, were $ 340,000 .

Series A Convertible Preferred Stock - As of June 30, 2025, 4,030 shares of Series A Convertible Preferred Stock were outstanding. Each share of Series A Convertible Preferred Stock is convertible at any time, at the option of the holder, into the number of shares of common stock equal to $ 100 divided by the Series A Conversion Price. As of June 30, 2025, the Series A Conversion Price was $ 1,446.50 , and each share of Series A Convertible Preferred Stock is convertible into approximately .07 shares of common stock. The Series A Conversion Price is subject to adjustment, under certain circumstances, upon the sale or issuance of common stock for consideration per share less than either (i) the Series A Conversion Price in effect on the date of such sale or issuance, or (ii) the market price of the common stock as of the date of such sale or issuance. The Series A Conversion Price is also subject to adjustment upon the occurrence of a merger, reorganization, consolidation, reclassification, stock dividend or stock split which will result in an increase or decrease in the number of shares of common stock outstanding. Shares of Series A Convertible Preferred Stock have a preference in liquidation, including certain merger transactions, of $ 100 per share, or $ 403,000 in the aggregate as of June 30, 2025. Additionally, the Company may not pay a dividend or make any distribution to holders of any class of stock unless the Company first pays a special dividend or distribution of $ 100 per share to holders of the Series A Convertible Preferred Stock.