PALATIN TECHNOLOGIES INC 10-K

Item 8. Financial Statements and Supplementary Data. Table of Contents Consolidated Financial Statements The following consolidated financial statements are filed as part of this Annual Report: Page Report of Independent Registered Public Accounting Firm 44 Consolidated Balance Sheets 45 Consolidated Statements of Operations 46 Consolidated Statements of Changes in Stockholders’ Deficiency 47 Consolidated Statements of Cash Flows 48 Notes to Consolidated Financial Statements 49 43 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors Palatin Technologies, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Palatin Technologies, Inc. and subsidiary (the Company) as of June 30, 2025 and 2024, the related consolidated statements of operations, changes in stockholders’ deficiency, and cash flows for the fiscal years then ended, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2025 and 2024, and the results of its operations and its cash flows for the fiscal years then ended, in conformity with U.S. generally accepted accounting principles. Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, 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 that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. /s/ KPMG LLP We have served as the Company’s auditor since 2002. Philadelphia, Pennsylvania September 23, 2025 44 Table of Contents PALATIN TECHNOLOGIES, INC. and Subsidiary Consolidated Balance Sheets June 30, 2025 June 30, 2024 ASSETS Current assets: Cash and cash equivalents $ 2,564,265 $ 9,527,396 Other receivables 29,468 - Prepaid expenses and other current assets 325,695 242,272 Total current assets 2,919,428 9,769,668 Property and equipment, net 129,444 388,361 Right-of-use assets - operating leases 161,166 527,321 Other assets 56,916 56,916 Total assets $ 3,266,954 $ 10,742,266 LIABILITIES AND STOCKHOLDERS DEFICIENCY Current liabilities: Accounts payable $ 6,998,806 $ 4,101,929 Accrued expenses 881,412 4,185,046 Short-term operating lease liabilities 129,812 380,542 Short-term finance lease liabilities - 46,014 Other current liabilities - 944,150 Total current liabilities 8,010,030 9,657,681 Long-term operating lease liabilities 33,969 163,782 Other long-term liabilities - 1,032,300 Total liabilities 8,043,999 10,853,763 Commitments and contingencies (Note 10) Stockholders deficiency: Preferred stock of $ 0.01 par value authorized 10,000,000 shares: shares issued and outstanding designated as follows: Series A Convertible: authorized 4,030 shares as of June 30, 2025: issued and outstanding 4,030 shares as of June 30, 2025 and June 30, 2024 40 40 Series D Convertible: authorized 3,400 shares as of June 30, 2025: issued and outstanding 3,400 shares as of June 30, 2025 34 - Common stock of $ 0.01 par value authorized 300,000,000 shares: issued and outstanding 929,597 shares as of June 30, 2025 and 358,532 shares as of June 30, 2024 9,296 3,585 Additional paid-in capital 454,287,484 441,651,428 Accumulated deficit ( 459,073,899 ) ( 441,766,550 ) Total stockholders deficiency ( 4,777,045 ) ( 111,497 ) Total liabilities and stockholders deficiency $ 3,266,954 $ 10,742,266 The accompanying notes are an integral part of these consolidated financial statements 45 Table of Contents PALATIN TECHNOLOGIES, INC. and Subsidiary Consolidated Statements of Operations Year Ended June 30, 2025 2024 REVENUES Product revenue, net $ - $ 4,490,090 OPERATING EXPENSES Cost of products sold - 97,637 Research and development 14,898,494 22,400,372 Selling, general and administrative 7,809,345 12,270,046 Loss (Gain) on sale of Vyleesi ( 3,130,000 ) ( 7,781,844 ) Gain on purchase commitment ( 2,117,900 ) - Total operating expenses 17,459,939 26,986,211 Loss from operations ( 17,459,939 ) ( 22,496,121 ) OTHER INCOME (EXPENSE) Investment income 167,665 376,843 Foreign currency transaction (loss) gain ( 50 ) 59,753 Interest expense ( 15,025 ) ( 17,114 ) Offering expenses - ( 696,912 ) Change in fair value of warrant liabilities - ( 6,962,562 ) Total other income (expense), net 152,590 ( 7,239,992 ) NET LOSS $ ( 17,307,349 ) $ ( 29,736,113 ) Basic and diluted net loss per common share $ ( 32.15 ) $ ( 101.16 ) Weighted average number of common shares outstanding used in computing basic and diluted net loss per common share 538,348 293,951 The accompanying notes are an integral part of these consolidated financial statements 46 Table of Contents PALATIN TECHNOLOGIES, INC. and Subsidiary Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders (Deficiency) Equity Stockholders' Equity Series A Series D Convertible Convertible Contigently Redeemable Convertible Preferred Stock Preferred Preferred Common Additional redeemable Series B Series C Escrowed Stock Stock Stock paid-in Accumulated warrants Shares Amount Shares Amount Proceeds Shares Amount Shares Amount Shares Amount Capital Deficit Total Balance, June 30, 2023 5,268 - - - - - 4,030 40 - - 233,134 2,331 410,048,195 ( 412,030,437 ) ( 1,979,871 ) Stock-based compensation - - - - - - - - - - 1,967 20 1,872,678 - 1,872,698 Withholding taxes related to restricted stock units - - - - - - - - - - ( 509 ) ( 5 ) ( 56,396 ) - ( 56,401 ) Sale of common stock, net of costs - - - - - - - - - - 40,971 410 9,663,065 - 9,663,475 Conversion of liability classified warrants - - - - - - - - - - - - 11,423,203 - 11,423,203 Conversion of liability classified warrants upon warrant exercise - - - - - - - - - - 47,170 472 2,389,431 - 2,389,903 Warrant exercises - - - - - - - - 64,666 647 6,047,562 - 6,048,209 Shares held in abeyance - - - - - - - - ( 28,866 ) ( 289 ) 289 - - Reclassification of contingently redeemable warrants ( 5,268 ) - - - - - - - - - - - 263,400 - 263,400 Net loss - - - - - - - - - - - - - ( 29,736,113 ) ( 29,736,113 ) Balance June 30, 2024 - - - - - - 4,030 $ 40 - - 358,533 $ 3,585 $ 441,651,428 $ ( 441,766,550 ) $ ( 111,497 ) Stock-based compensation - - - - - - - - - - 4,659 47 1,382,234 - 1,382,281 Withholding taxes related to restricted stock units - - - - - - - - - - ( 1,094 ) ( 11 ) ( 99,471 ) - ( 99,482 ) Sale of common stock, net of costs - - - - - - - - 3,400 34 460,480 4,605 7,956,126 - 7,960,765 Warrant exercises - - - - - - - - - - 78,154 782 3,397,455 - 3,398,237 Shares released from abeyance - - - - - - - - - - 28,866 289 ( 289 ) - - Net loss - - - - - - - - - - - - - ( 17,307,349 ) ( 17,307,349 ) Balance June 30, 2025 - - - - - - 4,030 40 3,400 $ 34 929,597 9,296 454,287,484 ( 459,073,899 ) ( 4,777,045 ) The accompanying notes are an integral part of these consolidated financial statements 47 Table of Contents PALATIN TECHNOLOGIES, INC. and Subsidiary Consolidated Statements of Cash Flows Year Ended June 30, 2025 2024 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 17,307,349 ) $ ( 29,736,113 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 258,917 339,075 Decrease in right-of-use asset 366,155 348,780 Unrealized foreign currency transaction loss (gain) 50 ( 59,753 ) Stock-based compensation 1,382,281 1,872,698 Change in fair value of liability classified warrants - 6,962,562 Gain on sale of Vyleesi ( 3,130,000 ) ( 7,781,844 ) Gain on purchase commitment ( 2,117,900 ) - Changes in operating assets and liabilities: Accounts receivable - 2,915,760 Other receivables ( 29,468 ) - Prepaid expenses and other assets ( 83,423 ) 1,218,846 Inventories - ( 1,154,355 ) Accounts payable 2,896,877 ( 201,598 ) Accrued expenses ( 3,303,634 ) ( 2,367,651 ) Operating lease liabilities ( 380,543 ) ( 354,051 ) Other liabilities 141,400 ( 3,463,797 ) Net cash used in operating activities ( 21,306,637 ) ( 31,461,441 ) CASH FLOWS FROM INVESTING ACTIVITIES: Maturity of marketable securities - 2,992,890 Proceeds from sale of Vyleesi 3,130,000 9,500,000 Purchases of property and equipment - ( 42,526 ) Net cash provided by investing activities 3,130,000 12,450,364 CASH FLOWS FROM FINANCING ACTIVITIES: Payment of withholding taxes related to restricted stock units ( 99,482 ) ( 56,401 ) Proceeds from the sale of common stock and warrants, net 7,960,765 14,666,042 Payment of finance lease obligations ( 46,014 ) ( 106,392 ) Proceeds from exercise of warrants 3,398,237 6,045,642 Net cash provided by financing activities 11,213,506 20,548,891 NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ( 6,963,131 ) 1,537,814 CASH AND CASH EQUIVALENTS, beginning of period 9,527,396 7,989,582 CASH AND CASH EQUIVALENTS, end of period $ 2,564,265 $ 9,527,396 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest $ 15,025 $ 17,114 Conversion of liability classified warrants 11,423,203 Conversion of liability classified warrants upon warrant exercise - 2,389,903 The accompanying notes are an integral part of these consolidated financial statements 48 Table of Contents PALATIN TECHNOLOGIES, INC. and Subsidiary Notes to Consolidated Financial Statements (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 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 melanocortin receptor 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 June 30, 2025, of $ 459,073,899 and a net loss for the year ended June 30, 2025, of $ 17,307,349 . 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 June 30, 2025, the Company’s cash and cash equivalents were $ 2,564,265 and current liabilities were $ 8,010,030 . 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. 49 Table of Contents Based on our available cash and cash equivalents as of June 30, 2025, management has concluded that substantial doubt exists about the Company’s ability to continue as a going concern for one year from the date these consolidated financial statements are issued. The Company is 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 the Company’s business, results of operations, and future prospects. If the Company is not able to secure adequate additional funding in future periods, the Company would be forced to make additional reductions in certain expenditures. This may include liquidating assets and suspending or curtailing planned programs. The Company may also have to delay, reduce the scope of, suspend, or eliminate one or more research and development programs or its commercialization efforts or pursue a strategic transaction. If the Company is unable to raise capital when needed or enter into a strategic transaction, then the Company may be required to cease operations, which could cause its stockholders to lose all or part of their investment. The consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the continuity of operations, the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. Assuming no additional funding and based on its current operating and development plans, the Company expects that existing cash and cash equivalents as of the date of this filing will be sufficient to fund currently anticipated operating expenses through the second half of calendar year 2025. 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 investment account sponsored by a large financial institution. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation – The consolidated financial statements include the accounts of the Company and its wholly-owned inactive subsidiary. All intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates – The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) 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, Cash Equivalents – Cash and cash equivalents include cash on hand, cash in banks, and all highly liquid investments with a purchased maturity of less than three months. Cash equivalents consist of $ 2,286,603 and $ 9,089,113 in money market accounts at June 30, 2025 and 2024, respectively. Fair Value of Financial Instruments – The Company’s financial instruments consist primarily of cash equivalents, marketable securities, and accounts payable. Management believes that the carrying values of cash equivalents and accounts payable are representative of their respective fair values based on the short-term nature of these instruments. Credit Risk – Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. Total cash and cash equivalent balances have exceeded balances insured by the Federal Depository Insurance Company. 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. 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. 50 Table of Contents Leases - At lease inception, the Company determines whether an arrangement is or contains a lease. Operating leases are included in operating lease right-of-use (“ROU”) assets, short-term operating lease liabilities, and long-term operating lease liabilities in the consolidated financial statements. Finance leases are included in property and equipment for ROU assets, short-term finance lease liabilities, and long-term finance lease liabilities in the consolidated financial statements. ROU assets represent the Company’s right to use leased assets over the term of the lease. Lease liabilities represent the Company’s contractual obligation to make lease payments over the lease term. ROU assets and lease liabilities are recognized at the commencement date. The lease liability is measured as the present value of the lease payments over the lease term. The Company uses the rate implicit in the lease if it is determinable. When the rate implicit in the lease is not determinable, the Company uses an estimate based on a hypothetical rate provided by a third party as the Company currently does not have issued debt. Lease terms may include renewal or extension options to the extent they are reasonably certain to be exercised. The assessment of whether renewal or extension options are reasonably certain to be exercised is made at lease commencement. Factors considered in determining whether an option is reasonably certain of exercise include, but are not limited to, the value of any leasehold improvements, the value of renewal rates compared to market rates, and the presence of factors that would cause incremental costs to the Company if the option were not exercised. The ROU asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred less any lease incentives received. For operating leases, the ROU asset is subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received. Lease expense for lease payments is recognized on a straight-line basis over the lease term. For finance leases, the ROU asset is subsequently amortized using the straight-line method from the lease commencement date to the earlier of the end of its useful life or the end of the lease term unless the lease transfers ownership of the underlying asset to the Company or the Company is reasonably certain to exercise an option to purchase the underlying asset. In those cases, the ROU asset is amortized over the useful life of the underlying asset. Amortization of the ROU asset is recognized and presented as an operating expense separately from interest expense on the lease liability. 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. Revenue Recognition (prior to the sale of Vyleesi) – The Company recognizes product revenues in accordance with FASB ASC Topic 606, Revenue from Contracts with Customers . The provisions of ASC Topic 606 require the following steps to determine revenue recognition: (1) Identify the contract(s) with a customer; (2) Identify the performance obligations in the contract; (3) Determine the transaction price; (4) Allocate the transaction price to the performance obligations in the contract; and (5) Recognize revenue when (or as) the entity satisfies a performance obligation. In accordance with ASC Topic 606, the Company recognizes product revenue when its performance obligation is satisfied by transferring control of the product to a customer. Per the Company’s contracts with customers, control of the product is transferred upon the conveyance of title, which occurs when the product is sold to and received by a customer. Trade accounts receivable due to the Company from contracts with its customers are stated separately in the consolidated balance sheet, net of various allowances as described in the Trade Accounts Receivable policy above. Product revenues consist of sales of Vyleesi in the United States. Prior to selling the Vyleesi product to Cosette in December 2023, the Company sold 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. 51 Table of Contents The Company records product revenues net of allowances for direct and indirect fees, discounts, co-pay assistance programs, estimated chargebacks and rebates. Product sales are also subject to return rights, which have not been significant to date. Gross product sales offset by product sales allowances for the years ended June 30, 2025 and 2024 are as follows: Year Ended June 30, 2025 2024 Gross product sales $ - $ 8,875,153 Product sales allowances and accruals - ( 4,385,063 ) Net sales $ - $ 4,490,090 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 to employees and nonemployees for services. 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. 52 Table of Contents 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 years ended June 30, 2025 and 2024, no additional common shares were added to the computation of diluted EPS because doing so would have been anti-dilutive. The potential number of common shares excluded from diluted EPS during the year ended June 30, 2025 and June 30, 2024 was 828,978 and 225,553 respectively. Included in the weighted average common shares used in computing basic and diluted net loss per common share are 9,980 and 10,160 vested restricted stock units that had not been issued as of June 30, 2025 and 2024, 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. (3) New and recently Adopted 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 and has updated its disclosures within its footnotes herein to include the required additional segment disclosures. (4) ASSET PURCHASE AGREEMENT / RELEASE AND SETTLEMENT AGREEMENT On December 19, 2023, the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Cosette pursuant to which Cosette acquired from the Company worldwide rights to Vyleesi®. 53 Table of Contents Under the terms of the Purchase 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 sales-based milestone payments of up to $ 159,000,000 . On June 5, 2025, the Company entered into a Release and Settlement Agreement (the “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. (5) PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets consist of the following: June 30 June 30, 2025 2024 Clinical / regulatory costs $ 24,080 $ 23,926 Insurance premiums 86,043 71,097 Other 215,572 147,249 $ 325,695 $ 242,272 (6) 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) June 30, 2025: Cash equivalents - Money market funds $ 2,286,603 $ 2,286,603 $ - $ - June 30, 2024: Cash equivalents - Money market funds $ 9,089,113 $ 9,089,113 $ - $ - 54 Table of Contents The fair value of the May 2022, October 2022, and October 2023 warrants was determined using the Black-Scholes option-pricing model and are classified as a Level 2 financial instrument. The key assumptions used to determine the fair value was the term of the warrants, the risk-free rate and volatility. The weighted average assumptions used in the Black-Scholes model in estimating the fair value of the warrants issued for the following non-recurring measurement dates presented were as follows. October 24, 2023 (Issuance date October 2023 warrants) January 24, 2024 (Final measurement date) Expected term 5.5 4.82 Volitility 82 % 88 % Risk free rate 5 % 4 % The warrant liabilities were initially measured at fair value at the day of issuance and on a recurring basis. The change in fair value of warrant liabilities is recognized in the consolidated statement of operations. A summary of warrant liability activity for the period ended June 30, 2024 is as follows. Balance June 30, 2023 $ 1,850,544 October 2023 issuance 4,976,415 Change in fair value 6,962,562 Reclassification of warrants to equity ( 11,423,203 ) Conversion of liability classified warrants upon exercise ( 2,366,318 ) Balance June 30, 2024 - (7) LEASES The Company has operating leases for office and laboratory space, which expire on June 30, 2025 and October 31, 2026, respectively. The components of operating lease cost are as follows: Operating lease cost Year ended June 30, 2025 Year ended June 30, 2024 Operating lease cost $ 264,426 $ 263,859 Variable lease cost 114,403 113,708 Total operating lease cost $ 378,829 $ 377,567 The components of finance lease cost are as follows: Finance lease cost Year ended June 30, 2025 Year ended June 30, 2024 Right-of-use asset amortization $ 45,973 $ 106,390 Interest expense 610 5,507 Total finance lease cost $ 46,583 $ 111,897 Supplemental lease term and discount rate information related to leases was as follows: June 30, 2025 June 30, 2024 Weighted-average remaining lease term (years) operating leases 4.2 1.7 Weighted-average remaining lease term (years) finance leases 0 0.4 Weighted-average discount rate operating leases 5.50 % 5.50 % Weighted-average discount rate finance leases 0.00 % 5.29 % 55 Table of Contents Supplemental cash flow information related to leases was as follows: Year ended June 30, 2025 Year ended June 30, 2024 Cash paid for the amounts included in the measurement of lease liabilities: Operating cash flows for operating leases $ 397,616 $ 387,910 Operating cash flows for finance leases 610 5,507 Financing cash flows for finance leases 46,014 106,392 $ 444,240 $ 499,809 The following table summarizes the maturity of the Company’s lease liabilities as of June 30, 2025: Operating leases: Year Ending June 30 2026 134,973 2027 33,894 Less imputed interest ( 5,086 ) Total $ 163,781 (8) PROPERTY AND EQUIPMENT, NET Property and equipment, net, consists of the following: June 30, June 30, 2025 2024 Office equipment $ 1,229,300 $ 1,229,300 Laboratory equipment 1,220,395 1,220,395 Leasehold improvements 1,196,706 1,196,706 3,646,401 3,646,401 Less: Accumulated depreciation and amortization ( 3,516,957 ) ( 3,258,040 ) $ 129,444 $ 388,361 Included in property and equipment, net as of June 30, 2025, is $ 309,791 in equipment under finance leases and $ 263,777 related accumulated amortization. (9) ACCRUED EXPENSES Accrued expenses consist of the following: June 30 June 30, 2025 2024 Clinical / regulatory costs $ 282,761 $ 1,509,797 Other research related expenses 86,372 65,972 Professional Services 323,510 284,215 Personnel costs - 1,771,694 Selling expenses - 351,485 Other 188,769 201,883 $ 881,412 $ 4,185,046 (10) COMMITMENTS AND CONTINGENCIES Inventory Purchases The Company had certain supply agreements with manufacturers and suppliers, including Catalent Belgium S.A (“Catalent”), Ypsomed AG (the “Ypsomed ”), and Lonza Ltd (“Lonza”), all of which have been transferred to Cosette. On June 5, 2025, the Company entered into a Release and 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. 56 Table of Contents As of June 30, 2024, the Company had $ 944,150 and $ 1,032,300 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. The commitment contractual obligation amounts above were denominated in Swiss Francs and Euros and have been translated using period end exchange rates. Employment Agreements – The Company has employment agreements with two executive officers which provides a stated annual compensation amount, subject to annual increases, and annual bonus compensation in an amount to be approved by the Company’s board of directors. Each agreement allows the Company or the employee to terminate the agreement in certain circumstances. In some circumstances, early termination by the Company may result in severance pay to the employee for a period of 24 months at the salary then in effect, continuation of health insurance premiums over the severance period and immediate vesting of all stock options and restricted stock units. Termination following a change in control will result in a lump sum payment of two times the salary then in effect and immediate vesting of all stock options and restricted stock units. Employee Retirement Savings Plan – The Company maintains a defined contribution 401(k) plan for the benefit of its employees. The Company currently matches a portion of employee contributions to the plan. For the years ended June 30, 2025, and 2024, Company contributions were $265,806 and $336,164, respectively. 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 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”). 57 Table of Contents 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. Year Ended June 30, 2025 2024 Total Revenues $ - $ 4,490,090 Less: Cost of Product Sales - 97,637 Program Spend 8,548,616 15,512,148 Personnel Costs 9,496,251 12,053,825 Administrative Costs (a) 4,662,973 7,107,888 Gain on Sale of Vyleesi ( 3,130,000 ) ( 7,781,844 ) Gain on Purchase Commitment ( 2,117,900 ) - Offering expenses - ( 696,912 ) Change in fair value of warrant liabilities - ( 6,962,562 ) Other Segment Items (b) ( 152,591 ) ( 419,482 ) Segment net loss $ ( 17,307,349 ) $ 29,736,113 (a) Contains depreciation and amortization which is disclosed in the consolidated financial statements (b) Other segement items include investment income, interest expense and foreign currency (gain)loss, which are disclosed in the consolidated financial statements. (12) STOCKHOLDERS’ 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 “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 (the “Common Stock”) at an initial conversion price of $ 5.50 , and (ii) Series I common stock purchase warrants (the “Warrants”) to purchase up to an aggregate of 123,636 shares of Common Stock (such shares underlying the Warrants, the “Warrant Shares”). The Series D Preferred Stock and Warrants were sold at a combined offering price of $ 5.50 per share of Preferred Stock and accompanying Warrants. The Purchasers in the 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 or less than the market price of the common stock 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 Private Placement closed on June 13, 2025. The gross proceeds from the Private Placement, before deducting offering expenses, were $ 340,000 . The Company intends to use the net proceeds received from the Private Placement for general working capital purposes. 58 Table of Contents 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 0.07 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. Financing Transactions – On May 7, 2025, the Company announced the closing of a reduced previously announced public offering with participation from institutional and accredited investors consisting of 146,479 shares of common stock together with Series F warrants to purchase up to 146,479 shares of common stock (the “Series F Warrants“), Series G warrants to purchase up to 146,479 shares of common stock (the “Series G Warrants“), and Series H warrants to purchase up to 146,479 shares of common stock (the “Series H Warrants“), at a combined public offering price of $ 7.50 per share of common stock and accompanying warrants (the “May 2025 Offering“). The Series F Warrants have an exercise price of $ 15.00 per share, are immediately exercisable and expire on the five-year anniversary of the original issuance date, subject to the certain terms as defined in such warrant. The Series G Warrants have an exercise price of $ 7.50 per share, are immediately exercisable and expire on the earlier of (i) the 24-month anniversary of the original issuance date or (ii) the expiration of the FDA Exercise Period (as such term is defined in the Series G Warrant). The Series H Warrants will be issuable to the holder upon their exercise of the Series G Warrants, will have an exercise price of $ 11.25 per share, will be immediately exercisable upon issuance and will expire on the 24-month anniversary of its issuance date. The Company received aggregate gross proceeds from the May 2025 Offering of approximately $ 1.1 million. The Company intends to use the net proceeds from the Offering primarily for working capital and general corporate purposes. On February 10, 2025, the Company entered into definitive agreements with a single healthcare focused institutional investor for the purchase and sale of 93,760 shares of its common stock (or common stock equivalents in lieu thereof) in a registered direct offering (the “February 2025 RD Offering”) at a purchase price of $ 50.00 per share. The Company also agreed to issue to the same investor in a concurrent private placement warrants to purchase up to an aggregate of 93,760 shares of common stock (the “February 2025 Private Placement” and, together with the February 2025 RD Offering, the “February 2025 Offering”). The warrants issued in the concurrent February 2025 Private Placement will have an exercise price of $ 50.00 per share, will be exercisable 181 days after their issuance and will expire approximately five and a half years from the date of issuance. The gross proceeds from the February 2025 Offering totaled $ 4,687,786 with net proceeds after deducting the placement agent fees and offering expenses, amounting to $ 4,309,641 . The Company is using the net proceeds from the Offering for general corporate purposes. The Company paid the placement agents a cash fee equal to 7.0 % of the aggregate gross proceeds of the February 2025 Offering. On January 29, 2024, the Company entered into a securities purchase agreement (the “January 2024 Purchase Agreement”) to sell in a registered direct offering (the “January 2024 RD Offering”), an aggregate of 36,630 shares of common stock, of the Company. Pursuant to the January 2024 Purchase Agreement, the Company issued to the investors in the January 2024 RD Offering unregistered warrants (the “January 2024 Private Warrants”) to purchase up to 36,630 shares of the Company’s common stock (the “January 2024 Private Warrant Shares”) in a concurrent private placement (the “January 2024 Private Offering” and together with the January 2024 RD Offering, the “January 2024 Offering”). The shares of common stock and accompanying January 2024 Private Warrants were offered at a combined offering price of $ 273.00 . The January 2024 Private Warrants are exercisable on the six-month anniversary of the issuance date for a period of four years from the issuance date, at an exercise price equal to $ 273.00 per January 2024 Private Warrant Share. The January 2024 Private Warrants are exercisable for cash, or, solely during any period when a registration statement for the issuance or resale of the January 2024 Private Warrant Shares issuable upon exercise of the January 2024 Private Warrants to or by the holder of such January 2024 Private Warrants is not in effect, on a cashless basis. The Company paid the placement agent a cash fee equal to 7.0 % of the aggregate gross proceeds of the January 2024 Offering and for certain expenses and legal fees in connection with the January 2024 Offering. In addition, the Company also issued to the placement agent or its designees warrants (the “January 2024 Placement Agent Warrants”) to purchase up to 1,831 shares of the Company’s common stock (the “January 2024 Placement Agent Warrant Shares”) as part of the compensation payable to the placement agent. The January 2024 Placement Agent Warrants have substantially the same terms as the January 2024 Private Warrants, except that the January 2024 Placement Agent Warrants have an exercise price of $ 341.25 per share. 59 Table of Contents On March 14, 2024, the Company filed a registration statement on Form S-1 to register the January 2024 Private Warrants and the January 2024 Placement Agent Warrants, which registration statement was declared effective on March 28, 2024 and a prospectus was filed on the same date. The gross proceeds from the January 2024 Offering totaled $ 10,000,006 , with net proceeds from the January 2024 Offering, after deducting the placement agent fees and offering expenses, amounting to $ 9,224,056 . The Company used the net proceeds received from the January 2024 Offering for general working capital purposes. On October 20, 2023, the Company entered into a securities purchase agreement (the “October 2023 Purchase Agreement”) with a certain institutional investor, to sell in a registered direct offering (the “October 2023 RD Offering”), an aggregate of (i) 26,500 shares of common stock (the “October 2023 Shares”), of the Company and (ii) pre-funded warrants (the “October 2023 Pre-Funded Warrants”) to purchase up to 20,670 shares of the Company’s common stock (the “October 2023 Pre-Funded Warrant Shares”). Pursuant to the October 2023 Purchase Agreement the Company also issued unregistered warrants (the “October 2023 Private Warrants”) to purchase up to 47,170 shares of the Company’s common stock (the “October 2023 Private Warrant Shares”) in a concurrent private placement (the “October 2023 Private Offering” and together with the October 2023 RD Offering, the “October 2023 Offering”). The October 2023 Shares and accompanying October 2023 Private Warrants were offered at a combined offering price of $106.00. The October 2023 Pre-Funded Warrants and accompanying October 2023 Private Warrants were offered at a combined offering price of $105.995 . The October 2023 Offering closed on October 24, 2023. The October 2023 Private Warrants are exercisable on the six-month anniversary of issuance for a period of five and one-half years from the issuance date, at an exercise price equal to $ 106.00 per October 2023 Private Warrant Share. The October 2023 Private Warrants will be exercisable for cash, or, solely during any period when a registration statement for the issuance or resale of the October 2023 Private Warrant Shares issuable upon exercise of the October 2023 Private Warrants to or by the holder of such October 2023 Private Warrants is not in effect, on a cashless basis. The October 2023 Pre-Funded Warrants had an exercise price of $ 0.0001 per October 2023 Pre-Funded Warrant Share and were exercisable upon issuance. During the three months ended December 31, 2023, the institutional investor exercised the outstanding October 2023 Pre-Funded Warrants to purchase 20,670 shares of the Company’s common stock. The net proceeds from the October 2023 Offering, after deducting the placement agent fees and offering expenses, were $ 4,573,948 . The January 2024 Placement Agent Warrants were issued to non-employees in exchange for services related to the offering are accounting for in accordance ASC 718 which requires the fair value of the warrants to be recognized as an offering expense. The placement agent warrants contain certain contingent cash settlement features that are not probable of occurring and not within the control of Company, therefore the placement agent warrants are classified out of permanent equity. On January 24, 2024, the Company and warrant holders amended the terms of warrants related to the October 2022 and October 2023 financings. As a result, all liability classified warrants were reclassified to additional paid-in capital. On February 11, 2025, the Company entered into a sales agreement (the “2025 Sales Agreement”) with A.G.P./Alliance Global Partners (“A.G.P.”), 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 “Securities Act”). The 2025 Sales Agreement and related prospectus is limited to sales of up to an aggregate maximum of $6.0 million of shares of the Company’s common stock. The Company pays A.G.P. 3.0% of the gross proceeds as a commission . For the year ended June 30, 2025, a total of 220,238 shares of common stock were sold through A.G.P. under the 2025 Sales Agreement for net proceeds of $ 2,567,569 after payment of commission fees of $ 88,684 and other related expenses of $ 186,556 . On April 12, 2023, the Company entered into a new equity distribution agreement (the “2023 Equity Distribution Agreement”) with Canaccord Genuity LLC (“Canaccord”), pursuant to which the Company may, from time to time, sell shares of the Company’s common stock at market prices by methods deemed to be an “at-the-market offering” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended. The 2023 Equity Distribution Agreement and related prospectus is limited to sales of up to an aggregate maximum $50.0 million of shares of the Company’s common stock. The Company pays Canaccord 3.0% of the gross proceeds as a commission . 60 Table of Contents Proceeds raised under the 2023 Equity Distribution Agreement are as follows: Year Ended June 30, 2024 Shares Proceeds Gross proceeds 4,341 $ 547,803 Fees - ( 16,434 ) Expenses - - Net proceeds 4,341 $ 531,369 No proceeds were raised under the 2023 Equity Distribution Agreement during year ended June 30, 2025. Stock Warrants - On December 13, 2024, the Company entered into a letter agreement (the “December 2024 Inducement Letter”) with a holder (the “December 2024 Exercising Holder”) of outstanding common stock purchase warrants that the Company issued on June 24, 2024, with an initial exercise price of $ 94.00 , and October 24, 2023, with an initial exercise price of $ 106.00 (the “December 2024 Existing Warrants”). To induce the exercise of a portion of the December 2024 Existing Warrants by the December 2024 Exercising Holder, the Company agreed to adjust the exercise price of such portion of the December 2024 Existing Warrants to $43.75. Pursuant to the December 2024 Inducement Letter, the December 2024 Exercising Holder agreed to exercise, for cash, the December 2024 Existing Warrants to purchase an aggregate of 78,153 shares of common stock at the adjusted exercise price in exchange for the Company’s agreement to issue to the December 2024 Exercising Holder Series C common stock purchase warrants to purchase 78,153 shares of common stock (the “Series C Warrants”) and Series D common stock purchase warrants to purchase 39,076 shares of common stock (the “Series D Warrants” and together with the Series C Warrants, the “December 2024 Inducement Warrants,” and the shares issuable upon exercise of the December 2024 Inducement Warrants, the “December 2024 Inducement Warrant Shares”) . The Company received aggregate gross proceeds of $ 3,419,219 from the exercise of the December 2024 Existing Warrants by the December 2024 Exercising Holder (the “December 2024 Warrant Inducement”). The incremental value of the December 2024 Warrant Inducement was recorded as an offering expense against the proceeds received in additional paid-in capital. On June 20, 2024, the Company entered into a letter agreement (the “June 2024 Inducement Letter”) with a holder (the “June 2024 Exercising Holder”) of outstanding common stock purchase warrants that the Company issued on November 2, 2022, and October 24, 2023 (the “June 2024 Existing Warrants”). Pursuant to the June 2024 Inducement Letter, the June 2024 Exercising Holder agreed to exercise, for cash, June 2024 Existing Warrants to purchase, in the aggregate, 64,666 shares of common stock in exchange for the Company’s agreement to (i) lower the exercise price to $94.00 per share for the 64,666 June 2024 Existing Warrants being exercised pursuant to the June 2024 Inducement Letter and (ii) issue to the June 2024 Exercising Holder an aggregate of 96,998 warrants to purchase shares of common stock, comprised of Series A common stock purchase warrants to purchase 54,545 shares of common stock (the “June 2024 Series A Warrants”) and Series B common stock purchase warrants to purchase 42,453 (of which 32,484 shares of common stock were approved July 25, 2025) shares of common stock (the “June 2024 Series B Warrants” and together with the June 2024 Series A Warrants, the “June 2024 Inducement Warrants”). The Company received aggregate gross proceeds of $6,078,561 from the exercise of the June 2024 Existing Warrants by the June 2024 Exercising Holder (the “Warrant Inducement”) . As part of the agreement, 28,866 shares of common stock were held in abeyance on behalf of the June 2024 Exercising Holder. During the year ended June 30, 2025, at the request of the June 2024 Exercising Holder, 28,866 shares were released from abeyance. The incremental value of the June 2024 Warrant Inducement was recorded as an offering expense against the proceeds received in additional paid-in capital. 61 Table of Contents As of June 30, 2025, the Company had outstanding warrants for shares of common stock as follows: Shares of Common Exercise Price per Latest Expiration Description Stock Share Date May 2022 Warrants 1,333 $ 625.00 May 11, 2026 October 2022 Placement Agent Warrants 1,818 $ 343.75 October 31, 2027 October 2023 Placement Agent Warrants 2,358 $ 132.50 October 20, 2028 January 2024 Private Warrants 36,630 $ 273.00 February 1, 2028 January 2024 Placement Agent Warrants 1,831 $ 341.25 February 1, 2028 June 2024 Series B Warrants 37,712 $ 94.00 June 24, 2029 * December 2024 Series C Warrants 78,153 $ 43.75 December 17, 2029 December 2024 Series D Warrants 39,076 $ 43.75 July 25, 2030 February 2025 Series E Warrants 93,760 $ 50.00 August 12, 2030 May 2025 Series F Warrants 146,479 $ 15.00 May 8, 2030 May 2025 Series G Warrants 146,479 $ 7.50 May 8, 2027 May 2025 Series I Warrants 146,479 $ 5.50 July 25, 2030 * 32,484 shares expire on the five year anniversary following stockholder approval of the warrant issuance and the balance expire on June 24, 2029. Stock Plan – The Company’s 2011 Stock Incentive Plan (“2011 Stock Incentive Plan”) was approved by the Company’s stockholders at the annual meeting of stockholders held in May 2011 and amended at the annual meeting of stockholders held on June 8, 2017, June 26, 2018, June 25, 2020, June 24, 2022, June 20, 2023, June 27, 2024 and again at the annual meeting of stockholders held on July 25, 2025. The 2011 Stock Incentive Plan, as amended, provides for incentive and nonqualified stock option grants, restricted stock unit awards and other stock-based awards to employees, non-employee directors and consultants for up to 146,000 shares of common stock. The 2011 Stock Incentive Plan is administered under the direction of the Company’s board of directors, which may specify grant terms and recipients. Options granted by the Company generally expire ten years from the date of grant and generally vest over three to four years. The Company’s former 2005 Stock Plan was terminated and replaced by the 2011 Stock Incentive Plan, and shares of common stock that were available for grant under the 2005 Stock Plan became available for grant under the 2011 Stock Incentive Plan. No new awards can be granted under the 2005 Stock Plan, but awards granted under the 2005 Stock Plan remained outstanding in accordance with their terms. As of June 30, 2025, 4,647 shares were available for grant under the 2011 Stock Incentive Plan. The Company expects to settle option exercises under any of its plans with authorized but currently unissued shares. The following table summarizes option activity and related information for the years ended June 30, 2025 and 2024: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Term in Years Aggregate Intrinsic Value Outstanding - June 30, 2023 31,012 $ 413.50 8.4 - - Granted 14,856 91.50 Forfeited ( 380 ) 189.50 Exercised - - Expired ( 219 ) 1,049.00 Outstanding - June 30, 2024 45,269 $ 305.50 8.2 Granted - - Forfeited - - Exercised - - Expired ( 464 ) 654.50 Outstanding - June 30, 2025 44,805 $ 302.00 7.3 $ - Exercisable at June 30, 2025 25,151 $ 435.00 6.4 $ - Expected to vest at June 30, 2025 19,654 $ 132.00 8.4 $ - 62 Table of Contents 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 8,379 and 1,778 unvested performance-based stock options granted to executive officers and other employees, respectively, which were granted in June 2021, 2022 and 2023. Grants in June 2021, 2022, 2023 and 2024 were 1,903 , 1,211 , 4,777 and 5,299 , respectively. The performance-based stock options vest on annual performance criteria through the fiscal years ending June 30, 2028 relating to advancement of MC1R programs, including initiation of clinical trials and licensing of Vyleesi in additional countries or regions. The Company did not grant stock options for the year ended June 30, 2025. For the year ended June 30, 2024, the fair value of option grants was estimated at the grant date using the Black-Scholes model. The Company’s weighted average assumptions for the years ended June 30, 2024 and 2023 were as follows: Year Ended June 30, 2024 Risk-free interest rate 4.3 % Volatility factor 75.8 % Dividend yield 0 % Expected option life (years) 6.1 Weighted average grant date fair value $ 41.00 Expected volatilities are based on the Company’s historical volatility. The expected term of options is based upon the simplified method, which represents the average of the vesting term and the contractual term. The risk-free interest rate is based on U.S. Treasury yields for securities with terms approximating the expected term of the option. For the years ended June 30, 2025 and 2024, the Company recorded stock-based compensation related to stock options of $ 702,789 and $ 873,633 , respectively. As of June 30, 2025, there was $ 741,767 of unrecognized compensation cost related to unvested options, which is expected to be recognized over a weighted-average period of 2.3 years. Restricted Stock Units – The following table summarizes restricted stock award activity for the years ended June 30, 2025 and 2024. Year Ended June 30, Year Ended June 30, 2025 2024 Outstanding at beginning of year 27,500 19,750 Granted - 10,356 Forfeited - ( 233 ) Vested ( 4,659 ) ( 1,967 ) Expirations ( 54 ) ( 406 ) Outstanding at end of year 22,787 27,500 For the years ended June 30, 2025 and 2024, the Company recorded stock-based compensation related to restricted stock units of $ 679,492 and $ 839,335 , respectively. Included in outstanding restricted stock units in the table above are 9,987 vested shares that have not been issued as of June 30, 2025 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 5,491 and 1,197 unvested performance-based restricted stock units granted to executive officers and other employees, respectively, which were granted in June 2021, 2022, 2023, and 2024. Grants in June 2021, 2022, 2023 and 2024 were 447 , 814 , 3,049 and 3,689 restricted stock units, respectively. The performance-based restricted stock units vest on annual performance criteria through the fiscal years ending June 30, 2028 relating to advancement of MC1R programs, including initiation of clinical trials, and licensing of Vyleesi in additional countries or regions. 63 Table of Contents In connection with the vesting of restricted share units during the years ended June 30, 2025 and 2024, the Company withheld 1,094 and 509 , shares, respectively, with aggregate values of $ 99,482 and $ 56,401 , respectively, in satisfaction of minimum tax withholding obligations. (13) INCOME TAXES For fiscal 2025 and 2024, the Company recorded no income tax expense as a result of the generation of operating losses that were subject to a full valuation allowance. Deferred tax assets and liabilities are determined based on the estimated future tax effect of differences between the financial statement and tax reporting basis of assets and liabilities, as well as for, NOL carryforwards and R&D credit carryforwards, given the provisions of existing tax laws. As of June 30, 2025, the Company had state NOL carryforwards of approximately $ 202,000,000 , which will expire, if not utilized, between 2036 and 2045, federal NOL carryforwards of approximately $ 151,000,000 and federal R&D credits of approximately $ 10,000,000 , which expire, if not utilized, between 2035 and 2045, and foreign tax credits of $ 582,500 , which expire, if not utilized, in 2028. In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and the application of loss limitation provisions related to ownership changes. The Company assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. The Company also considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax‑planning strategies in making this assessment. Based on a history of losses incurred, the Company has recognized a full valuation allowance against its deferred tax assets during the years ended June 30, 2025 and 2024. The Company’s valuation allowance increased by $ 7,591,000 and $ 11,193,000 for the years ended June 30, 2025 and 2024, respectively. A sustained period of profitability in the Company’s operations is required before it would change its judgment regarding the need for a full valuation allowance against its net deferred tax assets. Until such time, the use of NOL carryforwards and tax credits to offset profits, if any, will reduce the overall level of deferred tax assets subject to valuation allowance. The Tax Reform Act of 1986 (the “Tax Reform Act”) provides for limitation on the use of the Company’s NOL and R&D tax credit carryforwards following certain ownership changes (as defined by the Tax Reform Act) that could limit the Company’s ability to utilize these carryforwards. Since its inception, the Company has completed several financings and sales of common stock which has resulted in multiple ownership changes defined by Section 382 of the Tax Reform Act. Accordingly, the Company’s ability to utilize the aforementioned carryforwards are subject to limitation under Section 382. If the Company undergoes a future ownership change or as it completes its Section 382 limitation assessments, any unutilized carryforwards that were not previously subject to a Section 382 limitation may become subject to limitation which may result in a significant limitation and loss of NOL carryforwards and R&D credits. Additionally, U.S. tax laws limit the time during which these carryforwards may be applied against future taxes; therefore, the Company may not be able to take full advantage of these carryforwards for federal income tax purposes. Accordingly, a portion of the carryforwards may expire unutilized. The Company’s net deferred tax assets are as follows: June 30, June 30, 2025 2024 Net operating loss carryforwards $ 46,054,000 $ 40,051,000 Research and development and AMT tax credits 9,995,000 9,464,000 Foreign tax credits 583,000 583,000 Basis differences in fixed assets and other 13,668,000 12,611,000 70,300,000 62,709,000 Valuation allowance ( 70,300,000 ) ( 62,709,000 ) Net deferred tax assets $ - $ - 64 Table of Contents The Company recognizes interest expense and penalties on uncertain income tax positions as a component of interest expense. No interest expense or penalties were recorded for uncertain income tax matters in fiscal 2025 or 2024. As of June 30, 2025 and 2024, the Company had no liabilities for uncertain income tax matters. (14) SUBSEQUENT EVENTS During August 2025, investors exercised 43,759 Series G warrants at an exercise price of $ 7.50 per share. As a result, the company received $ 328,199 , and the investors received 43,759 Series H warrants at an exercise price of $ 11.25 per share. On August 14, 2025, the Company entered into a Research Collaboration, License and Patent Assignment Agreement (the “Agreement”) with Boehringer Ingelheim International GmbH (“Boehringer Ingelheim”) 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 Agreement, the Company assigned certain patent rights to Boehringer Ingelheim (the “Assigned Patents”), and the Company will conduct collaborative research 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 6 months. Under the terms of the Agreement, Palatin received an upfront payment of $2,300,000 (received September 2025), and 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 . On September 22, 2025, the Company announced the achievement of a research milestone under its collaboration with Boehringer Ingelheim. This milestone triggers a payment to the Company of approximately $ 6,500,000 . 65 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.