Filed 9 May 19

Document and Entity Information

Document and Entity Information - shares9 Months Ended
Mar. 31, 2019May 08, 2019
Document And Entity Information
Entity Registrant NamePALATIN TECHNOLOGIES INC
Entity Central Index Key0000911216
Document Type10-Q
Document Period End DateMar. 31,
2019
Amendment Flagfalse
Current Fiscal Year End Date--06-30
Is Entity's Reporting Status Current?Yes
Entity Filer CategoryAccelerated Filer
Entity Emerging Growth Companyfalse
Entity Small Businesstrue
Entity Common Stock, Shares Outstanding203,063,429
Document Fiscal Period FocusQ3
Document Fiscal Year Focus2019

Consolidated Balance Sheets (Un

Consolidated Balance Sheets (Unaudited) - USD ($)Mar. 31, 2019Dec. 31, 2018Jun. 30, 2018Mar. 31, 2018Dec. 31, 2017Jun. 30, 2017
Current assets:
Cash and cash equivalents $ 19,813,349 $ 38,000,171 $ 25,736,158 $ 40,200,324
Prepaid expenses and other current assets697,178 513,688
Total current assets20,510,527 38,513,859
Property and equipment, net156,648 164,035
Other assets338,916 338,916
Total assets21,006,091 39,016,810
Current liabilities:
Accounts payable474,773 2,223,693
Accrued expenses2,640,208 2,103,021
Notes payable, net of discount1,328,973 5,948,763
Other current liabilities495,169 487,488
Total current liabilities4,939,123 10,762,965
Notes payable, net of discount0 332,898
Deferred revenue0 500,000
Other non-current liabilities0 456,038
Total liabilities4,939,123 12,051,901
Stockholders' equity:
Preferred stock of $0.01 par value - authorized 10,000,000 shares: Series A Convertible: issued and outstanding 4,030 shares as of March 31, 2019 and June 30, 201840 40
Common stock of $0.01 par value - authorized 300,000,000 shares: issued and outstanding 203,063,429 shares as of March 31, 2019 and 200,554,205 shares as of June 30, 20182,030,634 2,005,542
Additional paid-in capital362,033,736 357,005,233
Accumulated deficit(347,997,442)(332,045,906)
Total stockholders' equity16,066,968 $ 21,139,698 26,964,909 $ 10,226,387 $ 9,626,053 $ (5,164,644)
Total liabilities and stockholders' equity $ 21,006,091 $ 39,016,810

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) - $ / sharesMar. 31, 2019Jun. 30, 2018
Statement of Financial Position [Abstract]
Preferred stock, par value $ 0.01 $ 0.01
Preferred stock, shares authorized10,000,000 10,000,000
Preferred stock, Series A Convertible, shares issued4,030 4,030
Preferred stock, Series A Convertible, shares outstanding4,030 4,030
Common stock, par value $ 0.01 $ 0.01
Common stock, shares authorized300,000,000 300,000,000
Common stock, shares issued203,063,429 200,554,205
Common stock, shares outstanding203,063,429 200,554,205

Consolidated Statements of Oper

Consolidated Statements of Operations (Unaudited) - USD ($)3 Months Ended9 Months Ended
Mar. 31, 2019Mar. 31, 2018Mar. 31, 2019Mar. 31, 2018
REVENUES:
License and contract $ 0 $ 8,962,709 $ 34,505 $ 46,516,370
OPERATING EXPENSES:
Research and development3,943,982 7,068,849 10,528,329 27,277,830
General and administrative1,818,796 2,411,302 5,947,943 5,581,066
Total operating expenses5,762,778 9,480,151 16,476,272 32,858,896
(Loss) income from operations(5,762,778)(517,442)(16,441,767)13,657,474
OTHER INCOME (EXPENSE):
Investment income107,460 86,496 361,212 219,578
Interest expense(71,812)(326,983)(370,981)(1,175,023)
Total other income (expense), net35,648 (240,487)(9,769)(955,445)
(Loss) income before income taxes(5,727,130)(757,929)(16,451,536)12,702,029
Income tax benefit0 18,746 0 192,611
NET (LOSS) INCOME $ (5,727,130) $ (739,183) $ (16,451,536) $ 12,894,640
Basic net (loss) income per common share $ (0.03) $ 0 $ (0.08) $ 0.07
Diluted net (loss) income per common share $ (0.03) $ 0 $ (0.08) $ 0.06
Weighted average number of common shares outstanding used in computing basic net income (loss) per common share207,016,304 197,485,758 206,148,695 197,277,286
Weighted average number of common shares outstanding used in computing diluted net income (loss) per common share207,016,304 197,485,758 206,148,695 202,712,963

Consolidated Statements of Comp

Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($)3 Months Ended9 Months Ended
Mar. 31, 2019Mar. 31, 2018Mar. 31, 2019Mar. 31, 2018
Consolidated Statements Of Comprehensive Loss
Net (loss) income $ (5,727,130) $ (739,183) $ (16,451,536) $ 12,894,640
Other comprehensive income:
Unrealized gain on available-for-sale investments0 0 0 590
Total comprehensive (loss) income $ (5,727,130) $ (739,183) $ (16,451,536) $ 12,895,230

Consolidated Statements of Stoc

Consolidated Statements of Stockholders' Equity - USD ($)Preferred StockCommon StockAdditional Paid-in CapitalAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal
Beginning balance, shares at Jun. 30, 20174,030 160,515,361
Beginning balance at Jun. 30, 2017 $ 40 $ 1,605,153 $ 349,974,538 $ (590) $ (356,743,785) $ (5,164,644)
Cumulative effect of accounting change4,835 (4,835)
Stock-based compensation, shares150,229
Stock-based compensation $ 1,503 2,369,469 2,370,972
Warrant exercises, shares34,782,807
Warrant exercises $ 347,828 (233,444)114,384
Option exercises, shares56,400
Option exercises $ 564 30,667 31,231
Unrealized gains on investments590 590
Withholding taxes related to restricted stock units, shares(27,465)
Withholding taxes related to restricted stock units $ (275)(20,511)(20,786)
Net (loss) income12,894,640 12,894,640
Ending balance, shares at Mar. 31, 20184,030 195,477,332
Ending balance at Mar. 31, 2018 $ 40 $ 1,954,773 352,125,554 0 (343,853,980)10,226,387
Beginning balance, shares at Dec. 31, 20174,030 195,373,239
Beginning balance at Dec. 31, 2017 $ 40 $ 1,953,732 350,787,078 0 (343,114,797)9,626,053
Stock-based compensation, shares75,158
Stock-based compensation $ 752 1,328,320 1,329,072
Option exercises, shares56,400
Option exercises $ 564 30,667 31,231
Withholding taxes related to restricted stock units, shares(27,465)
Withholding taxes related to restricted stock units $ (275)(20,511)(20,786)
Net (loss) income(739,183)(739,183)
Ending balance, shares at Mar. 31, 20184,030 195,477,332
Ending balance at Mar. 31, 2018 $ 40 $ 1,954,773 352,125,554 0 (343,853,980)10,226,387
Beginning balance, shares at Jun. 30, 20184,030 200,554,205
Beginning balance at Jun. 30, 2018 $ 40 $ 2,005,542 357,005,233 0 (332,045,906)26,964,909
Cumulative effect of accounting change500,000 500,000
Stock-based compensation, shares319,817
Stock-based compensation $ 3,198 2,863,581 2,866,779
Sale of common stock , net of costs, shares2,256,445
Sale of common stock , net of costs $ 22,564 2,230,244 2,252,808
Withholding taxes related to restricted stock units, shares(67,038)
Withholding taxes related to restricted stock units $ (670)(65,322)(65,992)
Net (loss) income(16,451,536)(16,451,536)
Ending balance, shares at Mar. 31, 20194,030 203,063,429
Ending balance at Mar. 31, 2019 $ 40 $ 2,030,634 362,033,736 0 (347,997,442)16,066,968
Beginning balance, shares at Dec. 31, 20184,030 203,063,429
Beginning balance at Dec. 31, 2018 $ 40 $ 2,030,634 361,379,336 0 (342,270,312)21,139,698
Stock-based compensation654,400 654,400
Net (loss) income(5,727,130)(5,727,130)
Ending balance, shares at Mar. 31, 20194,030 203,063,429
Ending balance at Mar. 31, 2019 $ 40 $ 2,030,634 $ 362,033,736 $ 0 $ (347,997,442) $ 16,066,968

Consolidated Statements of Cash

Consolidated Statements of Cash Flows (Unaudited) - USD ($)9 Months Ended
Mar. 31, 2019Mar. 31, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (16,451,536) $ 12,894,640
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization43,526 42,573
Non-cash interest expense47,312 143,837
Stock-based compensation2,866,779 2,370,972
Deferred income tax benefit0 (500,000)
Changes in operating assets and liabilities:
Accounts receivable0 15,116,822
Prepaid expenses and other assets(183,490)309,766
Accounts payable(1,748,920)(757,725)
Accrued expenses537,187 (4,601,842)
Deferred revenue0 (33,965,053)
Other liabilities51,643 155,218
Net cash used in operating activities(14,837,499)(8,790,792)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturity of investments0 250,000
Purchases of property and equipment(36,139)(9,500)
Net cash provided by investing activities(36,139)240,500
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital lease obligations0 (14,324)
Payment of withholding taxes related to restricted stock units(65,992)(45,165)
Payments on notes payable obligations(5,500,000)(6,000,000)
Proceeds from the exercise of common stock warrants0 114,384
Proceeds from the exercise of stock options0 31,231
Proceeds from the sale of common stock, net of costs2,252,808 0
Net cash used in financing activities(3,313,184)(5,913,874)
NET DECREASE IN CASH AND CASH EQUIVALENTS(18,186,822)(14,464,166)
CASH AND CASH EQUIVALENTS, beginning of period38,000,171 40,200,324
CASH AND CASH EQUIVALENTS, end of period19,813,349 25,736,158
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest316,159 876,394
Cash paid for income taxes $ 0 $ 500,000

ORGANIZATION

ORGANIZATION9 Months Ended
Mar. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]
ORGANIZATIONNature of Business A New Drug Application (“NDA”)
has been submitted to the U.S. Food and Drug Administration (“FDA”) for Vyleesi by our exclusive North American licensee,
AMAG Pharmaceuticals, Inc. (“AMAG”), and accepted for filing by the FDA, with an FDA decision on approval expected
in the second quarter of calendar year 2019. Palatin has also licensed rights to Vyleesi to Shanghai Fosun Pharmaceutical Industrial
Development Co. Ltd. (“Fosun”) for the territories of the People’s Republic of China, Taiwan, Hong Kong S.A.R.
and Macau S.A.R. (collectively, the “Chinese Territories”), and Kwangdong Pharmaceutical Co., Ltd. (“Kwangdong”)
for the Republic of Korea (“Korea”). Palatin’s new product development activities
primarily focus on melanocortin receptor 1 (“MC1r”) agonists, with potential to treat a number of inflammatory and
autoimmune diseases such as dry eye disease, also known as keratoconjunctivitis sicca, uveitis, diabetic retinopathy and inflammatory
bowel disease. Palatin has also designed and is developing potential natriuretic peptide receptor (“NPR”) candidate
drugs that are selective for one or more different natriuretic peptide receptors, including natriuretic peptide receptor-A (“NPR-A”),
natriuretic peptide receptor B (“NPR-B”), and natriuretic peptide receptor C (“NPR-C”), which may be useful
in the treatment of cardiovascular diseases, including reducing cardiac hypertrophy and fibrosis, heart failure, acute asthma,
other pulmonary diseases and hypertension. Business Risk and Liquidity – As of March 31, 2019, the Company’s
cash and cash equivalents were $19,813,349 and current liabilities were $4,939,123. The Company intends to utilize existing capital
resources for general corporate purposes and working capital, including preclinical and clinical development of our MC1r and MC4r
peptide programs and natriuretic peptide program, and development of other portfolio products. Management believes that the Company’s
existing capital resources, together with proceeds received from sales of common stock in the Company’s “at-the-market”
program (if any), will be adequate to fund the Company’s planned operations through at least May 31, 2020. The Company will
need additional funding to complete required clinical trials for its other product candidates and, assuming those clinical trials
are successful, as to which there can be no assurance, to complete submission of required applications to the FDA. If the Company
is unable to obtain approval or otherwise advance in the FDA approval process, the Company’s ability to sustain its operations
would be materially adversely affected. The Company may seek the additional capital
necessary to fund its operations through public or private equity offerings, collaboration agreements, debt financings or licensing
arrangements. Additional capital that is required by the Company may not be available on reasonable terms, or at all. Concentrations – Trading –

BASIS OF PRESENTATION

BASIS OF PRESENTATION9 Months Ended
Mar. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]
BASIS OF PRESENTATIONThe accompanying unaudited consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”)
for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information
and footnote disclosures required to be presented for complete financial statements. In the opinion of management, these consolidated
financial statements contain all adjustments (consisting of normal recurring adjustments) considered necessary for fair presentation.
The results of operations for the three and nine months ended March 31, 2019 may not necessarily be indicative of the results of
operations expected for the full 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, 2018, filed with the Securities and Exchange Commission (“SEC”), which
includes consolidated financial statements as of June 30, 2018 and 2017 and for each of the fiscal years in the three-year period
ended June 30, 2018.

SUMMARY OF SIGNIFICANT ACCOUNTI

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES9 Months Ended
Mar. 31, 2019
Accounting Policies [Abstract]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESPrinciples of Consolidation Use of Estimates Cash and Cash Equivalents Fair Value of Financial Instruments Credit Risk Property and Equipment Impairment of Long-Lived Assets Revenue Recognition Revenue from Contracts with Customers On July 1, 2018, the Company adopted ASC
Topic 606 using the modified retrospective approach, a practical expedient permitted under ASC Topic 606, and applied this approach
only to contracts that were not completed as of July 1, 2018. The Company calculated a one-time cumulative transition adjustment
of $500,000 which was recorded on July 1, 2018 to the opening balance of accumulated deficit related to its license agreement with
Kwangdong (the “Kwangdong License Agreement”) as the Company determined a significant revenue reversal would not occur
in a future period. The one-time adjustment consisted of the recognition of $500,000 of deferred revenue. Revenue Recognition for Periods Prior
to July 1, 2018 The Company has generated revenue solely
through license and collaboration agreements. Prior to July 1, 2018, the Company recognized revenue in accordance with FASB ASC
Topic 605-25, Revenue Recognition for Arrangements with Multiple Elements ·
the delivered item had value to the customer on a stand-alone basis; and ·
if the arrangement included a general right of return relative to the delivered item, delivery
or performance of the undelivered item was considered probable and substantially in control of the vendor. Under FASB ASC Topic 605-25, if both of the
criteria above were not met, then separate accounting for the individual deliverables was not appropriate. The Company determined that it was appropriate
to recognize such revenue using the input-based proportional method during the period of Palatin’s development obligations
as defined in the AMAG License Agreement. Refer to Note 5 for additional information. Under the Fosun License Agreement (Note 6),
the Company received consideration in the form of an upfront license fee payment and determined that it was appropriate to recognize
such consideration as revenue in the first quarter of fiscal year 2018, which was the quarter in which the license was granted,
since the license had stand-alone value and the upfront payment received by the Company was non-refundable. Under the Kwangdong License Agreement (Note
7), the Company received consideration in the form of an upfront license fee payment and determined that it was appropriate to
record such consideration as deferred revenue because the upfront payment received by the Company is subject to certain refund
provisions. Revenue resulting from the achievement of
development milestones was recorded in accordance with the accounting guidance for the milestone method of revenue recognition.
Amounts received prior to satisfying the revenue recognition criteria were recorded as deferred revenue on the Company’s
consolidated balance sheet. Revenue Recognition for Periods Commencing
July 1, 2018 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 will be 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 will be 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. The cumulative effect of applying ASC Topic
606 to the Company’s consolidated balance sheet was as follows:
Balance at June 30, 2018 Net Adjustment Balance at July 1, 2018
Deferred revenue $ 500,000 $ (500,000 ) $ -
Accumulated deficit (332,045,906 ) 500,000 (331,545,906 ) The impact of adoption of ASC Topic 606 on the Company’s consolidated
balance sheet as of March 31, 2019 is as follows:
As reported March 31, 2019 Adjustments As reported without adoption of ASC Topic 606
ASSETS
Current assets:
Cash and cash equivalents $ 19,813,349 $ - $ 19,813,349
Prepaid expenses and other current assets 697,178 - 697,178
Total current assets 20,510,527 - 20,510,527
-
Property and equipment, net 156,648 - 156,648
Other assets 338,916 - 338,916
Total assets $ 21,006,091 $ - $ 21,006,091
-
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 474,773 $ - $ 474,773
Accrued expenses 2,640,208 - 2,640,208
Notes payable, net of discount 1,328,973 - 1,328,973
Other current liabilities 495,169 - 495,169
Total current liabilities 4,939,123 - 4,939,123
-
Notes payable, net of discount - - -
Deferred revenue - 500,000 500,000
Other non-current liabilities - - -
Total liabilities 4,939,123 500,000 5,439,123
Stockholders’ equity:
Preferred stock 40 - 40
Common stock 2,030,634 - 2,030,634
Additional paid-in capital 362,033,736 - 362,033,736
Accumulated deficit (347,997,442 ) (500,000 ) (348,497,442 )
Total stockholders’ equity 16,066,968 (500,000 ) 15,566,968
Total liabilities and stockholders’ equity $ 21,006,091 $ - $ 21,006,091 ASC Topic 606 did not have an impact on the Company’s consolidated
statements of operations or cash flows. Research and Development Costs Accrued Expenses – Stock-Based Compensation – Income Taxes On December 22, 2017, the U.S. government enacted wide-ranging tax
legislation, the Tax Cuts and Jobs Act (the “2017 Tax Act”). The 2017 Tax Act significantly revises U.S. tax law by,
among other provisions, (a) lowering the applicable U.S. federal statutory corporate income tax rate from 35% to 21%, (b) eliminating
or reducing certain income tax deductions, such as deductions for interest expense, executive compensation expenses and certain
employee expenses, and (c) repealing the federal alternative minimum tax (“AMT”) and providing for the refund of existing
AMT credits. Other provisions enacted include a new provision designed to tax
low-taxed income of foreign subsidiaries (i.e., GILTI and a one-time transition tax on the deemed repatriation of post-1986 undistributed
foreign subsidiary earnings and profits from controlled foreign corporations. The Company does not have any foreign subsidiaries,
and thus these provisions do not apply. During the year ended June 30, 2018, the Company recorded income
tax expense of $82,500, which consisted of $500,000 that was withheld in accordance with tax withholding requirements in the Chinese
Territories related to the Fosun License Agreement (Note 6) and $82,500, which was withheld in accordance with tax withholding
requirements in Korea related to the Kwangdong License Agreement (Note 7), offset by an income tax benefit of $500,000. The tax
benefit of $500,000 resulted from the 2017 Tax Act, under which AMT credits became refundable, and therefore a $500,000 benefit
related to the release of a valuation allowance against an AMT credit was recorded during the three and nine months ended March
2018. The Company’s June 30, 2017 tax return was filed during the three months ended March 31, 2018 and the Company did not
incur an AMT liability. As a result, as of March 31, 2019 and June 30, 2018, the Company has a current income tax receivable of
$218,000 and a long-term income tax receivable of $282,000 from estimated fiscal 2018 AMT that can be refunded in the future. Net (Loss) Income per Common Share - Earnings per Share The following table is a reconciliation of net (loss) income and
the shares used in calculating basic and diluted net (loss) income per common share for the three and nine months ended March 31,
2019 and 2018:
Three Months Ended March 31, Nine Months Ended March 31,
2019 2018 2019 2018
Net (loss) income $ (5,727,130 ) $ (739,183 ) $ (16,451,536 ) $ 12,894,640
Denominator:
Weighted average common shares - Basic 207,016,304 197,485,758 206,148,695 197,277,286
Effect of dilutive shares:
Common stock equivalents arising from stock options,
warrants and conversion of preferred stock - - - 3,610,611
Restriced stock units - - - 1,825,066
Weighted average common shares - Diluted 207,016,304 197,485,758 206,148,695 202,712,963
Net (loss) income per common share:
Basic $ (0.03 ) $ (0.00 ) $ (0.08 ) $ 0.07
Diluted $ (0.03 ) $ (0.00 ) $ (0.08 ) $ 0.06 As of March 31, 2018, common shares issuable upon the exercise of
outstanding options and warrants, excluding outstanding warrants exercisable for nominal consideration, and the vesting of restricted
stock units in an aggregate amount of 1,146,250 shares were excluded from the weighted average number of common shares used in
computing diluted net income per common share because they were anti-dilutive during the period or the minimum performance requirements
or market conditions had not been met. For the three and nine months ended March 31, 2019 no additional common shares were added
to the computation of diluted EPS because to do so would have been anti-dilutive. The potential number of common shares excluded
from diluted EPS during the three and nine months ended March 31, 2019 was 40,819,113. Included in the weighted average common shares used in computing
basic and diluted net income (loss) per common share are 3,952,875 and 2,049,249 vested restricted stock units that had not been
issued as of March 31, 2019 and 2018, respectively, due to a provision in the restricted stock unit agreements to delay delivery.

NEW AND RECENTLY ADOPTED ACCOUN

NEW AND RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS9 Months Ended
Mar. 31, 2019
Notes to Financial Statements
NEW AND RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTSIn November 2018, the FASB
issued ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606. . The
guidance is effective for public entities for fiscal years beginning after December 15, 2019, and for interim periods within those
fiscal years, with early adoption permitted. The guidance is applicable to the Company beginning July 1, 2020. The Company
is currently evaluating the potential effects of this guidance on its consolidated financial statements. In August 2018, the SEC issued
Final Rule 33-10532, Disclosure Update and Simplification, which amends certain disclosure requirements that were redundant,
duplicative, overlapping or superseded by other SEC disclosure requirements. The amendments generally eliminated or otherwise reduced
certain disclosure requirements of various SEC rules and regulations. However, in some cases, the amendments require additional
information to be disclosed, including changes in stockholders’ equity in interim periods. The rule is effective 30 days
after its publication in the Federal Register. The rule was posted on October 4, 2018. On September 25, 2018, the SEC released
guidance advising it will not object to a registrant adopting the requirement to include changes in stockholders’ equity
in the Form 10-Q for the first quarter beginning after the effective date of the rule. The Company adopted this guidance effective
for the period ended September 30, 2018. In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock
Compensation (Topic 718): Scope of Modification Accounting In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments
- Credit Losses: Measurement of Credit Losses on Financial Instruments, In February 2016, the FASB issued ASU No. 2016-02, Leases, In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments:
Recognition and Measurement of Financial Assets and Financial Liabilities

AGREEMENT WITH AMAG

AGREEMENT WITH AMAG9 Months Ended
Mar. 31, 2019
Agreement With Amag
AGREEMENT WITH AMAGOn January 8, 2017, the Company entered into
the AMAG License Agreement. Under the terms of the AMAG License Agreement, the Company granted to AMAG (i) an exclusive license
in all countries of North America (the “Territory”), with the right to grant sub-licenses, to research, develop and
commercialize products containing Vyleesi (each a “Product”, and collectively, “Products”), (ii) a non-exclusive
license in the Territory, with the right to grant sub-licenses, to manufacture the Products, and (iii) a non-exclusive license
in all countries outside the Territory, with the right to grant sub-licenses, to research, develop and manufacture (but not commercialize)
the Products. Following the satisfaction of certain conditions
to closing, the license agreement became effective on February 2, 2017. On that date, AMAG paid the Company $60,000,000 as a one-time
initial payment. Pursuant to the terms of and subject to the conditions in the AMAG License Agreement, AMAG was required to reimburse
the Company up to an aggregate amount of $25,000,000 for reasonable, documented, direct out-of-pocket expenses incurred by the
Company following February 2, 2017, in connection with the development and regulatory activities necessary to file an NDA for Vyleesi
for HSDD in the United States related to Palatin’s development obligations. The Company determined there was no stand-alone
value for the license, and that the license and the reimbursable direct out-of-pocket expenses, pursuant to the terms of the License
Agreement, represented a combined unit of accounting which totaled $85,000,000. The Company recognized revenue of the combined
unit of accounting over the arrangement using the input-based proportional method as the Company completed its development obligations.
For the three and nine months ended March 31, 2018 the Company recognized $8,962,709 and $41,516,370, respectively, as license
and contract revenue. During the nine months ended March 31, 2019 license and contract revenue included additional billings for
AMAG related Vyleesi costs of $34,505. In addition, pursuant to the terms
of and subject to the conditions in the AMAG License Agreement, the Company will be eligible to receive from AMAG (i) up
to $60,000,000 upon FDA approval of Vyleesi, and (ii) up to $300,000,000 in sales milestone payments based on
achievement of certain annual net sales for all Products in the Territory. On June 4, 2018 the FDA accepted the Vyleesi NDA
for filing. The NDA was filed on March 23, 2018. The FDA’s acceptance triggered a $20,000,000 milestone payment to
Palatin from AMAG. As a result, the Company recognized $20,000,000 in revenue related to regulatory milestones for the year
ended June 30, 2018. AMAG is also obligated to pay the Company
tiered royalties on annual net sales of Products, on a product-by-product basis, in the Territory ranging from the high single-digits
to the low double-digits. The royalties will expire on a product-by-product and country-by-country basis until the latest to occur
of (i) the earliest date on which there are no valid claims of the Company’s patent rights covering such Product in such
country, (ii) the expiration of the regulatory exclusivity period for such Product in such country and (iii) ten years following
the first commercial sale of such Product in such country. Such royalties are subject to reductions in the event that: (a) AMAG
must license additional third-party intellectual property in order to develop, manufacture or commercialize a Product, or (b) generic
competition occurs with respect to a Product in a given country, subject to an aggregate cap on such deductions of royalties otherwise
payable to the Company. After the expiration of the applicable royalties for any Product in a given country, the license for such
Product in such country will become a fully paid-up, royalty-free, perpetual and irrevocable license. The Company engaged Greenhill & Co. LLC
(“Greenhill”) as the Company’s sole financial advisor in connection with a potential transaction with respect
to Vyleesi. Under the engagement agreement with Greenhill, the Company was obligated to pay Greenhill a fee equal to 2% of
all proceeds and consideration paid to the Company by AMAG in connection with the AMAG License Agreement, subject to a minimum
fee of $2,500,000. The minimum fee of $2,500,000, less a credit of $50,000 for an advisory fee previously paid by the Company,
was paid to Greenhill and recorded as an expense upon the closing of the licensing transaction. This amount will be credited toward
amounts that become due to Greenhill in the future, provided that the aggregate fee payable to Greenhill will not be less than
2% of all proceeds and consideration paid to the Company by AMAG in connection with the AMAG License Agreement. The Company will
pay Greenhill an aggregate total of 2% of all proceeds and consideration paid to the Company by AMAG in connection with the License
Agreement, including future milestone and royalty payments, after crediting the $2,500,000 that was paid to Greenhill upon entering
into the AMAG License Agreement. The Company also reimbursed Greenhill $7,263 for certain expenses incurred in connection with
its advisory services. Pursuant to the License Agreement, the Company
has assigned to AMAG the Company’s manufacturing and supply agreements with Catalent Belgium S.A. to perform fill, finish
and packaging of Vyleesi.

AGREEMENT WITH FOSUN

AGREEMENT WITH FOSUN9 Months Ended
Mar. 31, 2019
Agreement With Fosun
AGREEMENT WITH FOSUNOn September 6, 2017, the Company entered into the Fosun License
Agreement for exclusive rights to commercialize Vyleesi in the Chinese Territories. Under the terms of the agreement, the Company
received $4,500,000 in October 2017, which consisted of an upfront payment of $5,000,000 less $500,000 that was withheld in accordance
with tax withholding requirements in the Chinese Territories and recorded as an expense during the year ended June 30, 2018. The
Company will receive a $7,500,000 milestone payment when regulatory approval in Chinese Territories is obtained, provided that
a commercial supply agreement for Vyleesi has been entered into. Palatin has the potential to receive up to $92,500,000 in additional
sales related milestone payments and high single-digit to low double-digit royalties on net sales in the licensed territory. All
development, regulatory, sales, marketing, and commercial activities and associated costs in the licensed territory will be the
sole responsibility of Fosun.

AGREEMENT WITH KWANGDONG

AGREEMENT WITH KWANGDONG9 Months Ended
Mar. 31, 2019
Notes to Financial Statements
AGREEMENT WITH KWANGDONGOn November 21, 2017, the Company entered into the Kwangdong License
Agreement for exclusive rights to commercialize Vyleesi in Korea. Under the terms of the agreement, the Company received $417,500 in
December 2017, consisting of an upfront payment of $500,000, less $82,500, which was withheld in accordance with tax withholding
requirements in Korea and recorded as an expense during the year ended June 30, 2018. Based upon certain refund provisions, the
upfront payment was recorded as non-current deferred revenue at December 31, 2017. On July 1, 2018, in conjunction with the adoption
of ASC Topic 606, a one-time transition of adjustment of $500,000 was recorded to the opening balance of accumulated deficit as
the Company determined a significant revenue reversal would not occur in a future period. The Company will receive a $3,000,000
milestone payment based on the first commercial sale in Korea. Palatin has the potential to receive up to $37,500,000 in additional
sales related milestone payments and mid-single-digit to low double-digit royalties on net sales in the licensed territory. All
development, regulatory, sales, marketing, and commercial activities and associated costs in the licensed territory will be the
sole responsibility of Kwangdong.

PREPAID EXPENSES AND OTHER CURR

PREPAID EXPENSES AND OTHER CURRENT ASSETS9 Months Ended
Mar. 31, 2019
Prepaid Expenses And Other Current Assets
PREPAID EXPENSES AND OTHER CURRENT ASSETSPrepaid expenses
March 31, 2019 June 30, 2018
Clinical study costs $ 327,871 $ 145,994
Insurance premiums 7,746 42,605
Other 361,561 325,089
$ 697,178 $ 513,688

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS9 Months Ended
Mar. 31, 2019
Fair Value Disclosures [Abstract]
FAIR VALUE MEASUREMENTSThe fair value of cash equivalents is classified using a hierarchy
prioritized based on inputs. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset
or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.
Level 3 inputs are unobservable inputs based on management’s own assumptions used to measure assets and liabilities at fair
value. A financial asset’s or liability’s classification within the hierarchy is determined based on the lowest level
input that is significant to the fair value measurement. The following table provides the assets carried at fair value:
Carrying Value
Quoted prices in active markets (Level 1)
Other quoted/observable inputs (Level 2)
Significant unobservable inputs (Level 3)
March 31, 2019:
Money market account $ 19,645,741 $ 19,645,741 $ - $ -
June 30, 2018:
Money market account $ 37,808,099 $ 37,808,099 $ - $ -

ACCRUED EXPENSES

ACCRUED EXPENSES9 Months Ended
Mar. 31, 2019
Accrued Expenses
ACCRUED EXPENSESAccrued expenses
March 31, 2019 June 30, 2018
Clinical study costs $ 1,902,723 $ 983,410
Other research related expenses 439,029 590,236
Professional services 40,000 297,731
Severance 180,466 115,362
Other 77,990 116,282
$ 2,640,208 $ 2,103,021

NOTES PAYABLE

NOTES PAYABLE9 Months Ended
Mar. 31, 2019
Debt Disclosure [Abstract]
NOTES PAYABLENotes payable consist of the following:
March 31, 2019 June 30, 2018
Notes payable under venture loan $ 1,333,333 $ 6,333,334
Unamortized related debt discount (2,948 ) (33,535 )
Unamortized debt issuance costs (1,412 ) (18,138 )
Notes payable 1,328,973 6,281,661
Less: current portion 1,328,973 5,948,763
Long-term portion $ - $ 332,898 On December 23, 2014, the Company closed on a $10,000,000 venture
loan which was led by Horizon Technology Finance Corporation (“Horizon”). The debt facility was a four-year senior
secured term loan that bore interest at a floating coupon rate of one-month LIBOR (floor of 0.50%) plus 8.50%, and provided for
interest-only payments for the first eighteen months followed by monthly payments of principal of $333,333 plus accrued interest
through January 1, 2019. The lenders also received five-year immediately exercisable Series D 2014 warrants to purchase 666,666
shares of common stock exercisable at an exercise price of $0.75 per share. The Company recorded a debt discount of $267,820 equal
to the fair value of these warrants at issuance, which was amortized to interest expense over the term of the related debt. This
debt discount was offset against the note payable balance and included in additional paid-in capital on the Company’s balance
sheet. In addition, a final incremental payment of $500,000 was due on January 1, 2019, or upon early repayment of the loan. This
final incremental payment was accreted to interest expense over the term of the related debt and included in other liabilities
on the consolidated balance sheet. The Company incurred $209,367 of costs in connection with the loan. These costs were capitalized
as deferred financing costs and were offset against the note payable balance. These debt issuance costs were amortized to interest
expense over the term of the related debt. During the three months ended December 31, 2018, the loan matured, and on December 31,
2018, the Company made the final incremental payment of $500,000. On July 2, 2015, the Company closed on a $10,000,000 venture loan
led by Horizon. The debt facility is a four-year senior secured term loan that bears interest at a floating coupon rate of one-month
LIBOR (floor of 0.50%) plus 8.50% and provides for interest-only payments for the first eighteen months followed by monthly payments
of principal of $333,333 plus accrued interest through August 1, 2019. The lenders also received five-year immediately exercisable
Series G warrants to purchase 549,450 shares of the Company’s common stock exercisable at an exercise price of $0.91 per
share. The Company has recorded a debt discount of $305,196 equal to the fair value of these warrants at issuance, which is being
amortized to interest expense over the term of the related debt. This debt discount is offset against the note payable balance
and is included in additional paid-in capital on the Company’s balance sheet at March 31, 2019 and June 30, 2018. In addition,
a final incremental payment of $500,000 is due on August 1, 2019, or upon early repayment of the loan. This final incremental payment
is being accreted to interest expense over the term of the related debt and is included in other current liabilities on the consolidated
balance sheet as of March 31, 2019. The Company incurred $146,115 of costs in connection with the loan agreement. These costs were
capitalized as deferred financing costs and are offset against the note payable balance. These debt issuance costs are being amortized
to interest expense over the term of the related debt. The Company’s obligations under the 2015 amended and restated
loan agreement, which includes the 2015 venture loan, are secured by a first priority security interest in substantially all of
its assets other than its intellectual property. The Company also agreed to specified limitations on pledging or otherwise encumbering
its intellectual property assets. The 2015 amended and restated loan agreement includes customary affirmative and restrictive covenants,
but does not include any covenants to attain or maintain specified financial metrics. The loan agreement includes customary events
of default, including payment defaults, breaches of covenants, change of control and a material adverse change default. Upon the
occurrence of an event of default and following any applicable cure periods, a default interest rate of an additional 5% may be
applied to the outstanding loan balances, and the lenders may declare all outstanding obligations immediately due and payable and
take such other actions as set forth in the loan agreement. As of March 31, 2019, the Company was in compliance with all of its
loan covenants.

STOCKHOLDERS' EQUITY

STOCKHOLDERS' EQUITY9 Months Ended
Mar. 31, 2019
Equity [Abstract]
STOCKHOLDERS' EQUITYFinancing Transactions – The Company has no obligation to sell any shares under the Equity
Distribution Agreement and may at any time suspend solicitation and offers under the Equity Distribution Agreement. Stock Purchase Warrants Stock Options – In July 2018, the terms of certain options were modified to accelerate
vesting and extend the option life. As a result, the Company recorded additional stock-based compensation of $109,004 during the
nine months ended March 31, 2019. There were no such modifications during the nine months ended March 31, 2018. A summary of stock option activity is as follows:
Number of Shares Weighted Average Exercise Price Weighted Average Remaining Term in Years Aggregate Intrinsic Value
Outstanding - July 1, 2018 12,775,462 $ 0.76 7.7
Granted - -
Forfeited (164,913 ) 0.54
Expired (129,150 ) 1.77
Outstanding - March 31, 2019 12,481,399 $ 0.75 6.8 $ 2,950,910
Exercisable at March 31, 2019 6,870,074 $ 0.78 5.5 $ 1,560,726
Expected to vest at March 31, 2019 5,611,325 $ 0.73 8.5 $ 1,390,184 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 options outstanding above are 1,075,000 and 125,000
performance-based options granted in December 2017 to executive officers and employees, respectively, which vest during a performance
period ending on December 31, 2020, if and upon either i) as to 100% of the target number of shares upon achievement of a closing
price for the Company’s common stock equal to or greater than $1.50 per share for 20 consecutive trading days, which is considered
a market condition; or ii) as to thirty percent (30%) of the target number of shares, upon the acceptance for filing by the FDA
of an NDA for Vyleesi for HSDD in premenopausal women during the performance period, which is considered a performance condition;
iii) as to fifty percent (50%) of the target number of shares, upon the approval by the FDA of an NDA for Vyleesi for HSDD in premenopausal
women during the performance period, which is also considered a performance condition; iv) as to twenty percent (20%) of the target
number of shares, upon entry into a licensing agreement during the performance period for the commercialization of Vyleesi for
FSD in selected countries, which is also considered a performance condition. The fair value of these options was $602,760. The
Company amortized the fair value over the derived service period of 1.1 years or upon the attainment of the performance condition.
Pursuant to the FDA acceptance of the NDA filing of Vyleesi, 30% of the target number of options vested in June 2018. Restricted Stock Units – A summary of restricted stock unit activity is as follows:
Number of RSUs
Outstanding at July 1, 2018 9,323,876
Granted -
Forfeited (178,851 )
Vested and issued (319,817 )
Outstanding at March 31, 2019 8,825,208 Included in outstanding restricted stock units in the table above
are 3,952,875 vested shares that have not been issued as of March 31, 2019 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 24 months, 48 months and 12 months, respectively. In December 2017, the Company granted 1,075,000 performance-based
restricted stock units to its executive officers and 670,000 performance-based restricted stock units to other employees which
vest during a performance period, ending on December 31, 2020, if and upon either i) as to 100% of the target number of shares
upon achievement of a closing price for the Company’s common stock equal to or greater than $1.50 per share for 20 consecutive
trading days, which is considered a market condition; or ii) as to thirty percent (30%) of the target number of shares, upon the
acceptance for filing by the FDA of an NDA for Vyleesi for HSDD in premenopausal women during the performance period, which is
considered a performance condition; iii) as to fifty percent (50%) of the target number of shares, upon the approval by the FDA
of an NDA for Vyleesi for HSDD in premenopausal women during the performance period, which is also considered a performance condition;
iv) as to twenty percent (20%) of the target number of shares, upon entry into a licensing agreement during the performance period
for the commercialization of Vyleesi for FSD in at least two of the following geographic areas (a) four or more countries in Europe,
(b) Japan, (c) two or more countries in Central and/or South America, (d) two or more countries in Asia, excluding Japan and China,
and (e) Australia, which is also considered a performance condition. The fair value of these awards was $913,750 and $569,500,
respectively. The Company amortized the fair value over the derived service period of 1.1 years or upon the attainment of the performance
condition. Pursuant to the FDA acceptance of the NDA filing for Vyleesi, 30% of the target number of shares vested in June 2018.

ORGANIZATION (Policies)

ORGANIZATION (Policies)9 Months Ended
Mar. 31, 2019
Organization Policies
Nature of BusinessNature of Business A New Drug Application (“NDA”) has been submitted to
the U.S. Food and Drug Administration (“FDA”) for Vyleesi by our exclusive North American licensee, AMAG Pharmaceuticals,
Inc. (“AMAG”), and accepted for filing by the FDA, with an FDA decision on approval expected in the second quarter
of calendar year 2019. Palatin has also licensed rights to Vyleesi to Shanghai Fosun Pharmaceutical Industrial Development Co.
Ltd. (“Fosun”) for the territories of the People’s Republic of China, Taiwan, Hong Kong S.A.R. and Macau S.A.R.
(collectively, the “Chinese Territories”), and Kwangdong Pharmaceutical Co., Ltd. (“Kwangdong”) for the
Republic of Korea (“Korea”). Palatin’s new product development activities primarily focus
on melanocortin receptor 1 (“MC1r”) agonists, with potential to treat a number of inflammatory and autoimmune diseases
such as dry eye disease, also known as keratoconjunctivitis sicca, uveitis, diabetic retinopathy and inflammatory bowel disease.
Palatin has also designed and is developing potential natriuretic peptide receptor (“NPR”) candidate drugs that are
selective for one or more different natriuretic peptide receptors, including natriuretic peptide receptor-A (“NPR-A”),
natriuretic peptide receptor B (“NPR-B”), and natriuretic peptide receptor C (“NPR-C”), which may be useful
in the treatment of cardiovascular diseases, including reducing cardiac hypertrophy and fibrosis, heart failure, acute asthma,
other pulmonary diseases and hypertension.
Business Risk and LiquidityBusiness Risk and Liquidity – As of March 31, 2019, the Company’s cash and cash equivalents
were $19,813,349 and current liabilities were $4,939,123. The Company intends to utilize existing capital resources for general
corporate purposes and working capital, including preclinical and clinical development of our MC1r and MC4r peptide programs and
natriuretic peptide program, and development of other portfolio products. Management believes that the Company’s existing capital resources,
together with proceeds received from sales of common stock in the Company’s “at-the-market” program (if any),
will be adequate to fund the Company’s planned operations through at least May 31, 2020. The Company will need additional
funding to complete required clinical trials for its other product candidates and, assuming those clinical trials are successful,
as to which there can be no assurance, to complete submission of required applications to the FDA. If the Company is unable to
obtain approval or otherwise advance in the FDA approval process, the Company’s ability to sustain its operations would be
materially adversely affected. The Company may seek the additional capital necessary to fund its
operations through public or private equity offerings, collaboration agreements, debt financings or licensing arrangements. Additional
capital that is required by the Company may not be available on reasonable terms, or at all.
ConcentrationsConcentrations –
TradingTrading –

SUMMARY OF SIGNIFICANT ACCOUN_2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)9 Months Ended
Mar. 31, 2019
Accounting Policies [Abstract]
Principles of ConsolidationPrinciples of Consolidation
Use of EstimatesUse of Estimates
Cash and Cash EquivalentsCash and Cash Equivalents
Fair Value of Financial InstrumentsFair Value of Financial Instruments
Credit RiskCredit Risk
Property and EquipmentProperty and Equipment
Impairment of Long-Lived AssetsImpairment of Long-Lived Assets
Revenue RecognitionRevenue Recognition Revenue from Contracts
with Customers On July 1, 2018, the Company adopted ASC Topic 606 using the modified
retrospective approach, a practical expedient permitted under ASC Topic 606, and applied this approach only to contracts that were
not completed as of July 1, 2018. The Company calculated a one-time cumulative transition adjustment of $500,000 which was recorded
on July 1, 2018 to the opening balance of accumulated deficit related to its license agreement with Kwangdong (the “Kwangdong
License Agreement”) as the Company determined a significant revenue reversal would not occur in a future period. The one-time
adjustment consisted of the recognition of $500,000 of deferred revenue. Revenue Recognition for Periods Prior
to July 1, 2018 The Company has generated revenue solely through license and collaboration
agreements. Prior to July 1, 2018, the Company recognized revenue in accordance with FASB ASC Topic 605-25, Revenue Recognition
for Arrangements with Multiple Elements
● the delivered item had value to the customer on a stand-alone basis; and
● if the arrangement included a general right of return relative to the delivered item, delivery or performance of the undelivered item was considered probable and substantially in control of the vendor. Under FASB ASC Topic 605-25, if both of the criteria above were not
met, then separate accounting for the individual deliverables was not appropriate. The Company determined that it was appropriate to recognize such
revenue using the input-based proportional method during the period of Palatin’s development obligations as defined in the
AMAG License Agreement. Refer to Note 5 for additional information. Under the Fosun License Agreement (Note 6), the Company received
consideration in the form of an upfront license fee payment and determined that it was appropriate to recognize such consideration
as revenue in the first quarter of fiscal year 2018, which was the quarter in which the license was granted, since the license
had stand-alone value and the upfront payment received by the Company was non-refundable. Under the Kwangdong License Agreement (Note 7), the Company received
consideration in the form of an upfront license fee payment and determined that it was appropriate to record such consideration
as deferred revenue because the upfront payment received by the Company is subject to certain refund provisions. Revenue resulting from the achievement of development milestones
was recorded in accordance with the accounting guidance for the milestone method of revenue recognition. Amounts received prior
to satisfying the revenue recognition criteria were recorded as deferred revenue on the Company’s consolidated balance sheet. Revenue Recognition for Periods Commencing
July 1, 2018 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 will be 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 will be 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. The cumulative effect of applying ASC Topic 606 to the Company’s
consolidated balance sheet was as follows:
Balance at June 30, 2018 Net Adjustment Balance at July 1, 2018
Deferred revenue $ 500,000 $ (500,000 ) $ -
Accumulated deficit (332,045,906 ) 500,000 (331,545,906 ) The impact of adoption of ASC Topic 606 on the Company’s consolidated
balance sheet as of March 31, 2019 is as follows:
As reported March 31, 2019 Adjustments As reported without adoption of ASC Topic 606
ASSETS
Current assets:
Cash and cash equivalents $ 19,813,349 $ - $ 19,813,349
Prepaid expenses and other current assets 697,178 - 697,178
Total current assets 20,510,527 - 20,510,527
-
Property and equipment, net 156,648 - 156,648
Other assets 338,916 - 338,916
Total assets $ 21,006,091 $ - $ 21,006,091
-
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 474,773 $ - $ 474,773
Accrued expenses 2,640,208 - 2,640,208
Notes payable, net of discount 1,328,973 - 1,328,973
Other current liabilities 495,169 - 495,169
Total current liabilities 4,939,123 - 4,939,123
-
Notes payable, net of discount - - -
Deferred revenue - 500,000 500,000
Other non-current liabilities - - -
Total liabilities 4,939,123 500,000 5,439,123
Stockholders’ equity:
Preferred stock 40 - 40
Common stock 2,030,634 - 2,030,634
Additional paid-in capital 362,033,736 - 362,033,736
Accumulated deficit (347,997,442 ) (500,000 ) (348,497,442 )
Total stockholders’ equity 16,066,968 (500,000 ) 15,566,968
Total liabilities and stockholders’ equity $ 21,006,091 $ - $ 21,006,091 ASC Topic 606 did not have an impact on the Company’s consolidated
statements of operations or cash flows.
Research and Development CostsResearch and Development Costs
Accrued ExpensesAccrued Expenses –
Stock-Based CompensationStock-Based Compensation –
Income TaxesIncome Taxes On December 22, 2017, the U.S. government enacted wide-ranging tax
legislation, the Tax Cuts and Jobs Act (the “2017 Tax Act”). The 2017 Tax Act significantly revises U.S. tax law by,
among other provisions, (a) lowering the applicable U.S. federal statutory corporate income tax rate from 35% to 21%, (b) eliminating
or reducing certain income tax deductions, such as deductions for interest expense, executive compensation expenses and certain
employee expenses, and (c) repealing the federal alternative minimum tax (“AMT”) and providing for the refund of existing
AMT credits. Other provisions enacted include a new provision designed to tax
low-taxed income of foreign subsidiaries (i.e., GILTI and a one-time transition tax on the deemed repatriation of post-1986 undistributed
foreign subsidiary earnings and profits from controlled foreign corporations. The Company does not have any foreign subsidiaries,
and thus these provisions do not apply. During the year ended June 30, 2018, the Company recorded income
tax expense of $82,500, which consisted of $500,000 that was withheld in accordance with tax withholding requirements in the Chinese
Territories related to the Fosun License Agreement (Note 6) and $82,500, which was withheld in accordance with tax withholding
requirements in Korea related to the Kwangdong License Agreement (Note 7), offset by an income tax benefit of $500,000. The tax
benefit of $500,000 resulted from the 2017 Tax Act, under which AMT credits became refundable, and therefore a $500,000 benefit
related to the release of a valuation allowance against an AMT credit was recorded during the three and nine months ended March
2018. The Company’s June 30, 2017 tax return was filed during the three months ended March 31, 2018 and the Company did not
incur an AMT liability. As a result, as of March 31, 2019 and June 30, 2018, the Company has a current income tax receivable of
$218,000 and a long-term income tax receivable of $282,000 from estimated fiscal 2018 AMT that can be refunded in the future.
Net Income (Loss) per Common ShareNet (Loss) Income per Common Share - Earnings per Share The following table is a reconciliation of net (loss) income and
the shares used in calculating basic and diluted net (loss) income per common share for the three and nine months ended March 31,
2019 and 2018:
Three Months Ended March 31, Nine Months Ended March 31,
2019 2018 2019 2018
Net (loss) income $ (5,727,130 ) $ (739,183 ) $ (16,451,536 ) $ 12,894,640
Denominator:
Weighted average common shares - Basic 207,016,304 197,485,758 206,148,695 197,277,286
Effect of dilutive shares:
Common stock equivalents arising from stock options,
warrants and conversion of preferred stock - - - 3,610,611
Restriced stock units - - - 1,825,066
Weighted average common shares - Diluted 207,016,304 197,485,758 206,148,695 202,712,963
Net (loss) income per common share:
Basic $ (0.03 ) $ (0.00 ) $ (0.08 ) $ 0.07
Diluted $ (0.03 ) $ (0.00 ) $ (0.08 ) $ 0.06 As of March 31, 2018, common shares issuable upon the exercise of
outstanding options and warrants, excluding outstanding warrants exercisable for nominal consideration, and the vesting of restricted
stock units in an aggregate amount of 1,146,250 shares were excluded from the weighted average number of common shares used in
computing diluted net income per common share because they were anti-dilutive during the period or the minimum performance requirements
or market conditions had not been met. For the three and nine months ended March 31, 2019 no additional common shares were added
to the computation of diluted EPS because to do so would have been anti-dilutive. The potential number of common shares excluded
from diluted EPS during the three and nine months ended March 31, 2019 was 40,819,113. Included in the weighted average common shares used in computing
basic and diluted net income (loss) per common share are 3,952,875 and 2,049,249 vested restricted stock units that had not been
issued as of March 31, 2019 and 2018, respectively, due to a provision in the restricted stock unit agreements to delay delivery.

SUMMARY OF SIGNIFICANT ACCOUN_3

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)9 Months Ended
Mar. 31, 2019
Accounting Policies [Abstract]
Impact of adoption of ASC Topic 606The cumulative effect of applying ASC Topic 606 to the Company’s
consolidated balance sheet was as follows:
Balance at June 30, 2018 Net Adjustment Balance at July 1, 2018
Deferred revenue $ 500,000 $ (500,000 ) $ -
Accumulated deficit (332,045,906 ) 500,000 (331,545,906 ) The impact of adoption of ASC Topic 606 on the Company’s consolidated
balance sheet as of March 31, 2019 is as follows:
As reported March 31, 2019 Adjustments As reported without adoption of ASC Topic 606
ASSETS
Current assets:
Cash and cash equivalents $ 19,813,349 $ - $ 19,813,349
Prepaid expenses and other current assets 697,178 - 697,178
Total current assets 20,510,527 - 20,510,527
-
Property and equipment, net 156,648 - 156,648
Other assets 338,916 - 338,916
Total assets $ 21,006,091 $ - $ 21,006,091
-
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 474,773 $ - $ 474,773
Accrued expenses 2,640,208 - 2,640,208
Notes payable, net of discount 1,328,973 - 1,328,973
Other current liabilities 495,169 - 495,169
Total current liabilities 4,939,123 - 4,939,123
-
Notes payable, net of discount - - -
Deferred revenue - 500,000 500,000
Other non-current liabilities - - -
Total liabilities 4,939,123 500,000 5,439,123
Stockholders’ equity:
Preferred stock 40 - 40
Common stock 2,030,634 - 2,030,634
Additional paid-in capital 362,033,736 - 362,033,736
Accumulated deficit (347,997,442 ) (500,000 ) (348,497,442 )
Total stockholders’ equity 16,066,968 (500,000 ) 15,566,968
Total liabilities and stockholders’ equity $ 21,006,091 $ - $ 21,006,091
Schedule of net income (loss) per shareThree Months Ended March 31, Nine Months Ended March 31,
2019 2018 2019 2018
Net (loss) income $ (5,727,130 ) $ (739,183 ) $ (16,451,536 ) $ 12,894,640
Denominator:
Weighted average common shares - Basic 207,016,304 197,485,758 206,148,695 197,277,286
Effect of dilutive shares:
Common stock equivalents arising from stock options,
warrants and conversion of preferred stock - - - 3,610,611
Restriced stock units - - - 1,825,066
Weighted average common shares - Diluted 207,016,304 197,485,758 206,148,695 202,712,963
Net (loss) income per common share:
Basic $ (0.03 ) $ (0.00 ) $ (0.08 ) $ 0.07
Diluted $ (0.03 ) $ (0.00 ) $ (0.08 ) $ 0.06

PREPAID EXPENSES AND OTHER CU_2

PREPAID EXPENSES AND OTHER CURRENT ASSETS (Tables)9 Months Ended
Mar. 31, 2019
Disclosure Prepaid Expenses And Other Current Assets Tables Abstract
Schedule of prepaid expenses and other current assetsMarch 31, 2019 June 30, 2018
Clinical study costs $ 327,871 $ 145,994
Insurance premiums 7,746 42,605
Other 361,561 325,089
$ 697,178 $ 513,688

FAIR VALUE MEASUREMENTS (Tables

FAIR VALUE MEASUREMENTS (Tables)9 Months Ended
Mar. 31, 2019
Fair value of restricted stock units granted, amortized over 24 month vesting period
Schedule of assets at fair valueCarrying Value
Quoted prices in active markets (Level 1)
Other quoted/observable inputs (Level 2)
Significant unobservable inputs (Level 3)
March 31, 2019:
Money market account $ 19,645,741 $ 19,645,741 $ - $ -
June 30, 2018:
Money market account $ 37,808,099 $ 37,808,099 $ - $ -

ACCRUED EXPENSES (Tables)

ACCRUED EXPENSES (Tables)9 Months Ended
Mar. 31, 2019
Accrued Expenses
Accrued expensesMarch 31, 2019 June 30, 2018
Clinical study costs $ 1,902,723 $ 983,410
Other research related expenses 439,029 590,236
Professional services 40,000 297,731
Severance 180,466 115,362
Other 77,990 116,282
$ 2,640,208 $ 2,103,021

NOTES PAYABLE (Tables)

NOTES PAYABLE (Tables)9 Months Ended
Mar. 31, 2019
Debt Disclosure [Abstract]
Notes payableMarch 31, 2019 June 30, 2018
Notes payable under venture loan $ 1,333,333 $ 6,333,334
Unamortized related debt discount (2,948 ) (33,535 )
Unamortized debt issuance costs (1,412 ) (18,138 )
Notes payable 1,328,973 6,281,661
Less: current portion 1,328,973 5,948,763
Long-term portion $ - $ 332,898

STOCKHOLDERS' EQUITY (Tables)

STOCKHOLDERS' EQUITY (Tables)9 Months Ended
Mar. 31, 2019
Equity [Abstract]
Option activityNumber of Shares Weighted Average Exercise Price Weighted Average Remaining Term in Years Aggregate Intrinsic Value
Outstanding - July 1, 2018 12,775,462 $ 0.76 7.7
Granted - -
Forfeited (164,913 ) 0.54
Expired (129,150 ) 1.77
Outstanding - March 31, 2019 12,481,399 $ 0.75 6.8 $ 2,950,910
Exercisable at March 31, 2019 6,870,074 $ 0.78 5.5 $ 1,560,726
Expected to vest at March 31, 2019 5,611,325 $ 0.73 8.5 $ 1,390,184
Restricted stock unitsNumber of RSUs
Outstanding at July 1, 2018 9,323,876
Granted -
Forfeited (178,851 )
Vested and issued (319,817 )
Outstanding at March 31, 2019 8,825,208

ORGANIZATION (Details Narrative

ORGANIZATION (Details Narrative) - USD ($)3 Months Ended9 Months Ended
Mar. 31, 2019Mar. 31, 2018Mar. 31, 2019Mar. 31, 2018Jun. 30, 2018Jun. 30, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Accumulated deficit $ 347,997,442 $ 347,997,442 $ 332,045,906
Net (loss) income(5,727,130) $ (739,183)(16,451,536) $ 12,894,640
Cash and cash equivalents19,813,349 $ 25,736,158 19,813,349 $ 25,736,158 38,000,171 $ 40,200,324
Current liabilities $ 4,939,123 $ 4,939,123 $ 10,762,965

SUMMARY OF SIGNIFICANT ACCOUN_4

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($)Mar. 31, 2019Jun. 30, 2018
Deferred revenue $ 500,000
Accumulated deficit $ (347,997,442)(332,045,906)
Adjustments
Deferred revenue(500,000)
Accumulated deficit(500,000)500,000
As reported without adoption of ASC Topic 606
Deferred revenue0
Accumulated deficit $ (348,497,442) $ (331,545,906)

SUMMARY OF SIGNIFICANT ACCOUN_5

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($)Mar. 31, 2019Dec. 31, 2018Jun. 30, 2018Mar. 31, 2018Dec. 31, 2017Jun. 30, 2017
Current assets:
Cash and cash equivalents $ 19,813,349 $ 38,000,171 $ 25,736,158 $ 40,200,324
Prepaid expenses and other current assets697,178 513,688
Total current assets20,510,527 38,513,859
Property and equipment, net156,648 164,035
Other assets338,916 338,916
Total assets21,006,091 39,016,810
Current liabilities:
Accounts payable474,773 2,223,693
Accrued expenses2,640,208 2,103,021
Notes payable, net of discount1,328,973 5,948,763
Other current liabilities495,169 487,488
Total current liabilities4,939,123 10,762,965
Notes payable, net of discount0 332,898
Deferred revenue0 500,000
Other non-current liabilities0 456,038
Total liabilities4,939,123 12,051,901
Stockholders' equity:
Preferred stock40 40
Common stock2,030,634 2,005,542
Additional paid-in capital362,033,736 357,005,233
Accumulated deficit(347,997,442)(332,045,906)
Total stockholders' equity16,066,968 $ 21,139,698 26,964,909 $ 10,226,387 $ 9,626,053 $ (5,164,644)
Total liabilities and stockholders' equity21,006,091 39,016,810
Adjustments
Current assets:
Cash and cash equivalents0
Prepaid expenses and other current assets0
Total current assets0
Property and equipment, net0
Other assets0
Total assets0
Current liabilities:
Accounts payable0
Accrued expenses0
Notes payable, net of discount0
Other current liabilities0
Total current liabilities0
Notes payable, net of discount0
Deferred revenue500,000
Other non-current liabilities0
Total liabilities500,000
Stockholders' equity:
Preferred stock0
Common stock0
Additional paid-in capital0
Accumulated deficit(500,000)500,000
Total stockholders' equity(500,000)
Total liabilities and stockholders' equity0
As reported without adoption of ASC Topic 606
Current assets:
Cash and cash equivalents19,813,349
Prepaid expenses and other current assets697,178
Total current assets20,510,527
Property and equipment, net156,648
Other assets338,916
Total assets21,006,091
Current liabilities:
Accounts payable474,773
Accrued expenses2,640,208
Notes payable, net of discount1,328,973
Other current liabilities495,169
Total current liabilities4,939,123
Notes payable, net of discount0
Deferred revenue500,000
Other non-current liabilities0
Total liabilities5,439,123
Stockholders' equity:
Preferred stock40
Common stock2,030,634
Additional paid-in capital362,033,736
Accumulated deficit(348,497,442) $ (331,545,906)
Total stockholders' equity15,566,968
Total liabilities and stockholders' equity $ 21,006,091

SUMMARY OF SIGNIFICANT ACCOUN_6

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) - USD ($)3 Months Ended9 Months Ended
Mar. 31, 2019Mar. 31, 2018Mar. 31, 2019Mar. 31, 2018
Numerator:
Net loss (income) $ (5,727,130) $ (739,183) $ (16,451,536) $ 12,894,640
Denominator:
Weighted average common shares outstanding - Basic207,016,304 197,485,758 206,148,695 197,277,286
Effect of dilutive shares:
Common stock equivalents arising from stock options, warrants and conversion of preferred stock0 0 0 3,610,611
Restriced stock units0 0 0 1,825,066
Weighted average common shares outstanding - Diluted207,016,304 197,485,758 206,148,695 202,712,963
Net (loss) income per common share:
Basic $ (0.03) $ 0 $ (0.08) $ 0.07
Diluted $ (0.03) $ 0 $ (0.08) $ 0.06

SUMMARY OF SIGNIFICANT ACCOUN_7

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)3 Months Ended9 Months Ended
Mar. 31, 2019Mar. 31, 2019Jun. 30, 2018
Accounting Policies [Abstract]
Cash equivalents $ 19,645,741 $ 19,645,741 $ 37,808,099
Accumulated depreciation and amortization $ 2,382,085 $ 2,382,085 $ 2,338,558
Potential number of common shares excluded from diluted EPS40,819,113 40,819,113

PREPAID EXPENSES AND OTHER CU_3

PREPAID EXPENSES AND OTHER CURRENT ASSETS (Details) - USD ($)Mar. 31, 2019Jun. 30, 2018
Prepaid Expenses And Other Current Assets Details
Clinical study costs $ 327,871 $ 145,994
Insurance premiums7,746 42,605
Other361,561 325,089
Total prepaid expenses and other current assets $ 697,178 $ 513,688

FAIR VALUE MEASUREMENTS (Detail

FAIR VALUE MEASUREMENTS (Details) - USD ($)Mar. 31, 2019Jun. 30, 2018
Money market account $ 19,645,741 $ 37,808,099
Level 1
Money market account19,645,741 37,808,099
Level 2
Money market account0 0
Level 3
Money market account $ 0 $ 0

ACCRUED EXPENSES (Details)

ACCRUED EXPENSES (Details) - USD ($)Mar. 31, 2019Jun. 30, 2018
Accrued Expenses
Clinical study costs $ 1,902,723 $ 983,410
Other research related expenses439,029 590,236
Professional services40,000 297,731
Severance180,466 115,362
Other77,990 116,282
Accrued expenses $ 2,640,208 $ 2,103,021

NOTES PAYABLE (Details)

NOTES PAYABLE (Details) - USD ($)Mar. 31, 2019Jun. 30, 2018
Notes Payable Details
Notes payable under venture loan $ 1,333,333 $ 6,333,334
Unamortized related debt discount(2,948)(33,535)
Unamortized debt issuance costs(1,412)(18,138)
Notes payable1,328,973 6,281,661
Less: current portion1,328,973 5,948,763
Long-term portion $ 0 $ 332,898

STOCKHOLDERS' EQUITY (Details)

STOCKHOLDERS' EQUITY (Details)9 Months Ended
Mar. 31, 2019USD ($)$ / sharesshares
Stockholders' equity:
Number of Options Outstanding, Beginning | shares12,775,462
Number of Options Granted | shares0
Number of Options Forfeited | shares(164,913)
Number of Options Expired | shares(129,150)
Number of Options Outstanding, Ending | shares12,481,399
Number of Options Exercisable | shares6,870,074
Number of Options Expected to vest | shares5,611,325
Weighted Average Exercise Price Outstanding, Beginning | $ / shares $ 0.76
Weighted Average Exercise Price Granted | $ / shares0
Weighted Average Exercise Price Forfeited | $ / shares0.54
Weighted Average Exercise Price Expired | $ / shares1.77
Weighted Average Exercise Price Outstanding, Ending | $ / shares0.75
Weighted Average Exercise Price Exercisable | $ / shares0.78
Weighted Average Exercise Price Options Expected to vest | $ / shares $ 0.73
Weighted Average Remaining Term in Years Options outstanding at beginning of year7 years 8 months 12 days
Weighted Average Remaining Term in Years Options outstanding at end of year6 years 9 months 18 days
Weighted Average Remaining Term in Years Options exercisable at end of year5 years 6 months
Weighted Average Remaining Term in Years Options expected to vest8 years 6 months
Aggregate Intrinsic Value Options outstanding | $ $ 2,950,910
Aggregate Intrinsic Value Options exercisable | $1,560,726
Aggregate Intrinsic Value Options expected to vest | $ $ 1,390,184

STOCKHOLDERS' EQUITY (Details 1

STOCKHOLDERS' EQUITY (Details 1)9 Months Ended
Mar. 31, 2019shares
Stockholders' equity:
Outstanding at beginning of year9,323,876
Granted0
Forfeited(178,851)
Vested(319,817)
Outstanding at end of year8,825,208

STOCKHOLDERS' EQUITY (Details N

STOCKHOLDERS' EQUITY (Details Narrative) - USD ($)3 Months Ended9 Months Ended
Mar. 31, 2019Mar. 31, 2018Mar. 31, 2019Mar. 31, 2018
Stockholders' equity:
Stock based compensation, options $ 244,528 $ 403,464 $ 885,935 $ 767,791
Additional stock based compensation, options109,004
Stock based compensation, restricted stock units $ 409,871 $ 925,608 $ 1,871,839 $ 1,603,001