• Filing Date: 2013-09-27
  • Form Type: 10-K
  • Description: Annual report
v2.4.0.8
Document and Entity Information (USD $)
12 Months Ended
Jun. 30, 2013
Sep. 26, 2013
Dec. 31, 2012
Document And Entity Information      
Entity Registrant Name PALATIN TECHNOLOGIES INC    
Entity Central Index Key 0000911216    
Document Type 10-K    
Document Period End Date Jun. 30, 2013    
Amendment Flag false    
Current Fiscal Year End Date --06-30    
Is Entity a Well-known Seasoned Issuer? No    
Is Entity a Voluntary Filer? No    
Is Entity's Reporting Status Current? Yes    
Entity Filer Category Smaller Reporting Company    
Entity Public Float     $ 23,096,569
Entity Common Stock, Shares Outstanding   39,191,655  
Document Fiscal Period Focus FY    
Document Fiscal Year Focus 2013    
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Consolidated Balance Sheets (Unuadited) (USD $)
Jun. 30, 2013
Jun. 30, 2012
Current assets:    
Cash and cash equivalents $ 19,167,632 $ 3,827,198
Short-term investments 5,249,654   
Accounts receivable    27,631
Restricted Cash    350,000
Prepaid expenses and other current assets 332,267 532,010
Total current assets 24,749,553 4,736,839
Property and equipment, net 266,415 318,653
Other assets 58,131 324,992
Total assets 25,074,099 5,380,484
Current liabilities:    
Capital lease obligations 19,909 22,277
Accounts payable 338,726 294,894
Accrued expenses 1,701,727 2,706,496
Accrued compensation    433,333
Total current liabilities 2,060,362 3,457,000
Capital lease obligations    19,909
Deferred rent 35,460 72,677
Total liabilities 2,095,822 3,549,586
Stockholders' equity:    
Preferred stock of $.01 par value - authorized 10,000,000 shares; Series A Convertible; issued and outstanding 4,697 shares as of June 30, 2013 and 4,997 as of June 30, 2012 47 50
Common stock of $.01 par value - authorized 300,000,000 shares; issued and outstanding 39,116,948 shares as of June 30, 2013 and 34,900,591 as of June 30, 2012 391,169 349,006
Additional paid-in capital 282,692,520 240,725,127
Accumulated deficit (260,105,459) (239,243,285)
Total stockholders' equity 22,978,277 1,830,898
Total liabilities and stockholders' equity $ 25,074,099 $ 5,380,484
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Consolidated Balance Sheets (Unuadited) (Parenthetical) (USD $)
Jun. 30, 2013
Jun. 30, 2012
Statement of Financial Position [Abstract]    
Preferred stock, par value $ 0.01 $ 0.01
Preferred stock, shares authorized 10,000,000 10,000,000
Preferred stock, Series A Convertible, shares issued 4,697 4,997
Preferred stock, Series A Convertible, shares outstanding 4,697 4,997
Common stock, par value $ 0.01 $ 0.01
Common stock, shares authorized 200,000,000 100,000,000
Common stock, shares issued 39,116,948 34,900,591
Common stock, shares outstanding 39,116,948 34,900,591
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Consolidated Statements of Operations (Unaudited) (USD $)
12 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2011
REVENUES:      
License and contract $ 10,361 $ 73,736 $ 497,540
Grant       977,917
REVENUES: 10,361 73,736 1,475,457
OPERATING EXPENSES:      
Research and development 10,528,691 13,813,376 10,377,019
General and administrative 5,066,830 5,045,741 4,751,824
Total operating expenses 15,595,521 18,859,117 15,128,843
Loss from operations (15,585,160) (18,785,381) (13,653,386)
OTHER INCOME (EXPENSE):      
Investment income 42,734 32,133 99,258
Interest expense (8,411) (10,411) (10,606)
Increase in fair value of warrants (7,069,165)    (2,266)
Gain on sale of securities       119,346
Gain on disposition of supplies and equipment 4,620 442,248 (5,666)
Total other income (expense), net (7,030,222) 463,970 200,066
Loss before income taxes (22,615,382) (18,321,411) (13,453,320)
Income tax benefit 1,753,208 1,068,233 637,391
NET LOSS $ (20,862,174) $ (17,253,178) $ (12,815,929)
Basic and diluted net loss per common share $ (0.21) $ (0.49) $ (0.64)
Weighted average number of common shares outstanding used in computing basic and diluted net loss per common share 97,618,714 34,900,591 20,084,022
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Consolidated Statements of Comprehensive Loss (USD $)
12 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2011
Consolidated Statements Of Comprehensive Loss      
Net loss $ (20,862,174) $ (17,253,178) $ (12,815,929)
Other comprehensive loss      
Unrealized loss on investments       (19,304)
Comprehensive loss $ (20,862,174) $ (17,253,178) $ (12,835,233)
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Consolidated Statements Shareholders Equity (USD $)
Preferred Stock
Common Stock
Additional Paid-In Capital
Accumulated Other Comprehensive Income
Accumulated Deficit
Total
Stockholders' equity (deficit) - beginning at Jun. 30, 2010 $ 50 $ 117,028 $ 218,236,723 $ 138,650 $ (209,174,178) $ 9,318,273
Common stock, shares - beginning at Jun. 30, 2010   11,702,818        
Preferred stock, shares - beginning at Jun. 30, 2010 4,997          
Stock split adjustment for fractional shares   (46)        
Sale of common stock units, net of costs   230,000 15,688,150       15,918,150
Sale of common stock units, net of costs, shares   23,000,000        
Reclassification of warrants from liability to equity     5,115,130       5,115,130
Exercise of warrants   322 64,078       64,400
Exercise of warrants, shares   32,200        
Exercise of options, shares             
Stock-based compensation   1,835 754,762       756,597
Stock-based compensation, shares   183,500        
Payment of witholding taxes related to restricted stock units   (179) (26,017)       (26,196)
Payment of witholding taxes related to restricted stock units, shares   (17,881)        
Realized gain on sale of securities       119,346    119,346
Unrealized loss on investments       (19,304)    (19,304)
NET LOSS         (12,815,929) (12,815,929)
Total comprehensive loss           (12,835,233)
Stockholders' equity (deficit) - ending at Jun. 30, 2011 50 349,006 239,832,826    (221,990,107) 18,191,775
Common stock, shares - ending at Jun. 30, 2011   34,900,591        
Preferred stock, shares outstanding at Jun. 30, 2011 4,997          
Exercise of options, shares             
Stock-based compensation     892,301       892,301
NET LOSS         (17,253,178) (17,253,178)
Total comprehensive loss           (17,253,178)
Stockholders' equity (deficit) - ending at Jun. 30, 2012 50 349,006 240,725,127    (239,243,285) 1,830,898
Common stock, shares - ending at Jun. 30, 2012   34,900,591       34,900,591
Preferred stock, shares outstanding at Jun. 30, 2012 4,997         4,997
Sale of common stock units, net of costs   38,730 17,403,075       17,441,805
Sale of common stock units, net of costs, shares   3,873,000        
Reclassification of warrants from liability to equity     24,030,128       24,030,128
Exercise of options, shares             
Stock-based compensation   5,000 620,031       625,031
Stock-based compensation, shares   500,000        
Payment of witholding taxes related to restricted stock units   (1,583) (85,828)       (87,411)
Payment of witholding taxes related to restricted stock units, shares   (158,264)        
Series A Conversion (3) 16 (13)         
Series A Conversion, shares (300) 1,621        
NET LOSS             (20,862,174) (20,862,174)
Total comprehensive loss           (20,862,174)
Stockholders' equity (deficit) - ending at Jun. 30, 2013 $ 47 $ 391,169 $ 282,692,520    $ (260,105,459) $ 22,978,277
Common stock, shares - ending at Jun. 30, 2013   39,116,948       39,116,948
Preferred stock, shares outstanding at Jun. 30, 2013 4,697         4,697
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Consolidated Statements of Cash Flows (Unaudited) (USD $)
12 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net loss $ (20,862,174) $ (17,253,178) $ (12,815,929)
Adjustments to reconcile net loss to net cash used in operating activities:      
Depreciation and amortization 111,844 949,542 1,138,183
Accrued interest and amortization on premium/discount (1,365)      
Gain on sale of available-for-sale investments       (119,346)
Gain on sale of supplies and equipment (4,620) (442,248) 5,666
Stock-based compensation 625,031 892,301 756,597
Increase in fair value of warrants 7,069,165    2,266
Changes in operating assets and liabilities:      
Accounts receivable 27,631 103,518 (128,270)
Prepaid expenses, restricted cash and other assets 816,605 (340,268) 263,280
Accounts payable 43,832 (202,014) 341,113
Accrued expenses, compensation and deferred rent (1,475,319) 851,550 (519,899)
Unearned revenues    (46,105) 46,105
Net cash used in operating activities (13,649,370) (15,486,902) (11,030,234)
CASH FLOWS FROM INVESTING ACTIVITIES:      
Proceeds from sale/maturity of investments 750,000    3,442,885
Proceeds from sale of supplies and equipment 4,620 494,384 5,300
Purchases of property and equipment (59,607) (15,000)   
Purchases of investments 5,998,289      
Net cash (used in) provided by investing activities (5,303,276) 479,384 3,448,185
CASH FLOWS FROM FINANCING ACTIVITIES:      
Payments on capital lease obligations (22,277) (34,923) (22,960)
Payment of withholding taxes related to restricted stock units (87,411)    (26,196)
Proceeds from the sale of common stock units 34,402,768    21,095,414
Net cash provided by (used in) financing activities 34,293,080 (34,923) 21,046,258
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 15,340,434 (15,042,441) 13,464,209
CASH AND CASH EQUIVALENTS, beginning of period 3,827,198 18,869,639 5,405,430
CASH AND CASH EQUIVALENTS, end of period 19,167,632 3,827,198 18,869,639
SUPPLEMENTAL CASH FLOW INFORMATION:      
Cash paid for interest 8,411 9,984 10,606
Equipment acquired under financing arrangements       66,115
Unrealized loss on available-for-sale investments       $ (19,304)
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1. ORGANIZATION
12 Months Ended
Jun. 30, 2013
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
ORGANIZATION

Nature of Business – Palatin Technologies, Inc. (Palatin or the Company) is a biopharmaceutical company developing targeted, receptor-specific peptide therapeutics for the treatment of diseases with significant unmet medical need and commercial potential. Palatin’s programs are based on molecules that modulate the activity of the melanocortin and natriuretic peptide receptor systems. The melanocortin system is involved in a large and diverse number of physiologic functions, and therapeutic agents modulating this system may have the potential to treat a variety of conditions and diseases, including sexual dysfunction, obesity and related disorders, cachexia (wasting syndrome) and inflammation-related diseases. The natriuretic peptide receptor system has numerous cardiovascular functions, and therapeutic agents modulating this system may be useful in treatment of acute asthma, heart failure, hypertension and other cardiovascular diseases.

  The Company’s primary product in development is bremelanotide for the treatment of female sexual dysfunction (FSD). The Company also has drug candidates or development programs for obesity, erectile dysfunction, pulmonary diseases, cardiovascular diseases, dermatologic diseases and inflammatory diseases. The Company has an exclusive global research collaboration and license agreement with AstraZeneca AB (AstraZeneca) to commercialize compounds that target melanocortin receptors for the treatment of obesity, diabetes and related metabolic syndrome.

  Key elements of the Company’s business strategy include using its technology and expertise to develop and commercialize therapeutic products; entering into alliances and partnerships with pharmaceutical companies to facilitate the development, manufacture, marketing, sale and distribution of product candidates that the Company is developing; and partially funding its product candidate development programs with the cash flow generated from the Company’s license agreements with AstraZeneca and any other companies.

Business Risk and Liquidity – The Company has incurred negative cash flows from operations since its inception, and has expended, and expects to continue to expend in the future, substantial funds 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, 2013 of $260.1 million and incurred a net loss for fiscal 2013 of $20.9 million. The Company anticipates incurring additional losses in the future as a result of spending on its development programs. To achieve profitability, 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 profitability is highly uncertain, and there can be no assurance that the Company will be able to achieve profitability on a sustained basis, if at all.

As of June 30, 2013, the Company’s cash, cash equivalents and short-term investments were $24.4 million. The Company intends to utilize existing capital resources for general corporate purposes and working capital, including preparing for the Phase 3 clinical trial program with bremelanotide for FSD, preclinical development of its peptide melanocortin receptor-1 program, preclinical and clinical development of its PL-3994 program and preclinical development of other portfolio products. Management believes that the Phase 3 clinical trial program with bremelanotide will cost at least $78.0 million. The Company does not intend to initiate patient enrollment in the Phase 3 program unless the Company has adequate funds, or commitments for adequate funds, to complete the Phase 3 program. The Company intends to seek additional capital to support the Phase 3 program through collaborative arrangements on bremelanotide, public or private equity or debt financings, or other sources.

Management believes that the Company’s existing capital resources will be adequate to fund its currently planned operations, including submitting complete protocols for pivotal Phase 3 studies to the U.S. Food and Drug Administration (FDA) but not initiating patient enrollment, through at least calendar year 2014.

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 investments. The Company’s cash and cash equivalents are primarily invested in one money market fund sponsored by a large financial institution and the Company’s investments are invested in U.S government securities. For each of the years in the three-year period ended June 30, 2013, all license and contract revenues were from AstraZeneca.

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
12 Months Ended
Jun. 30, 2013
Accounting Policies [Abstract]  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Use of Estimates – The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents – Cash and cash equivalents include cash on hand, cash in banks and all highly liquid investments with a purchased maturity of less than three months. Cash equivalents consist of $16,284,184 and $3,344,146 in a money market fund at June 30, 2013 and 2012, respectively.

Investments – The Company determines the appropriate classification of its investments in debt and equity securities at the time of purchase and reevaluates such determinations at each balance sheet date. Debt securities are classified as held-to-maturity when the Company has the intent and ability to hold the securities to maturity. Debt securities for which the Company does not have the intent or ability to hold to maturity are classified as available-for-sale. Held-to-maturity securities are recorded as either short-term or long-term on the balance sheet, based on the contractual maturity date and are stated at amortized cost. Marketable securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and are reported at fair value, with unrealized gains and losses recognized in earnings. Debt and marketable equity securities not classified as held-to-maturity or as trading are classified as available-for-sale and are carried at fair market value, with the unrealized gains and losses, net of tax, included in the determination of comprehensive loss.

The fair value of substantially all securities is determined by quoted market prices. The estimated fair value of securities for which there are no quoted market prices is based on similar types of securities that are traded in the market.

Fair Value of Financial Instruments – The Company’s financial instruments consist primarily of cash equivalents, short-term investments, accounts receivable, accounts payable and capital lease obligations. Management believes that the carrying values of these assets and liabilities are representative of their respective fair values based on quoted market prices for investments and the short-term nature of the other instruments.

Property and Equipment – Property and equipment consists of office and laboratory equipment, office furniture and leasehold improvements and includes assets acquired under capital 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 capital 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.

Deferred Rent The Company’s operating leases provide for rent increases over the terms of the leases. Deferred rent consists of the difference between periodic rent payments and the amount recognized as rent expense on a straight-line basis, as well as tenant allowances for leasehold improvements. Rent expenses are being recognized ratably over the terms of the leases.

Revenue Recognition – Revenue from corporate collaborations and licensing agreements consists of up-front fees, research and development funding, and milestone payments. Non-refundable up-front fees are deferred and amortized to revenue over the related performance period. The Company estimates the performance period as the period in which it performs certain development activities under the applicable agreement. Reimbursements for research and development activities are recorded in the period that the Company performs the related activities under the terms of the applicable agreements. Revenue resulting from the achievement of milestone events stipulated in the applicable agreements is recognized when the milestone is achieved, provided that such milestone is substantive in nature. Revenue from grants is recognized as the Company provides the services stipulated in the underlying grants based on the time and materials incurred.

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 our development activities. We review the activities performed under significant contracts each quarter and accrue expenses and the amount of any reimbursement to be received from our collaborators based upon the estimated amount of work completed. Estimating the value or stage of completion of certain services requires judgment based on available information. If we do not identify services performed for us but not billed by the service-provider, or if we underestimate or overestimate 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. The Company determines the value of stock options utilizing the Black-Scholes option pricing model. Compensation costs for share-based awards with pro-rata vesting are allocated to periods on a straight-line basis.

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 a valuation allowance against its deferred tax assets based on the history of losses incurred.

During the years ended June 30, 2013, 2012 and 2011, the Company sold New Jersey state net operating loss carryforwards, which resulted in the recognition of $1,753,208, $1,068,233, and $637,391, respectively, in tax benefits.

Net Loss per Common Share – Basic and diluted earnings per common share (EPS) are calculated in accordance with the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 260, “Earnings per Share,” which includes guidance pertaining to the warrants, issued in connection with the July 3, 2012 private placement offering, that are exercisable for nominal consideration and, therefore, are to be considered in the computation of basic and diluted net loss per common share. The Series A 2012 warrants to purchase up to 31,988,151 shares of common stock were exercisable starting at July 3, 2012 and, therefore, are included in the weighted average number of common shares outstanding used in computing basic and diluted net loss per common share starting on July 3, 2012.

 

The Series B 2012 warrants to purchase up to 35,488,380 shares of common stock were considered contingently issuable shares and were not included in computing basic net loss per common share until the Company received stockholder approval for the increase in authorized underlying common stock on September 27, 2012 (see note 10). For diluted EPS, contingently issuable shares are to be included in the calculation as of the beginning of the period in which the conditions were satisfied, unless the effect would be anti-dilutive. The Series B 2012 warrants have been excluded from the calculation of diluted net loss per common share during the period from July 3, 2012 until September 27, 2012 as the impact would be anti-dilutive.

 

As of June 30, 2013, 2012 and 2011, there were 29,136,527, 27,179,180, and 27,130,580 common shares issuable upon conversion of Series A Convertible Preferred Stock, the exercise of outstanding options and warrants (excluding the warrants issued in connection with the July 3, 2013 private placement offering), and the vesting of restricted stock units, respectively. These share amounts have been excluded from the calculation of net loss per share as the impact would be anti-dilutive.

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3. NEW AND RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
12 Months Ended
Jun. 30, 2013
New And Recently Adopted Accounting Pronouncements  
New and recently adopted accounting pronouncements

In June 2011, the FASB issued an update to its authoritative guidance which allows only two options for presenting the components of net loss and other comprehensive loss: (1) in a single continuous financial statement or (2) in two separate but consecutive financial statements. The guidance is effective in two stages. The requirements to present a single continuous statement or two separate but consecutive statements was effective for us beginning July 1, 2012. The second stage requires us to disclose the effects of reclassification adjustments from other comprehensive loss to net loss and is effective for us on July 1, 2013. For items reclassified in their entirety, we are required to disclose the effect of the reclassification on each line of net loss that is affected by the reclassification adjustment. For items not reclassified in their entirety, we are required to add a cross reference to the U.S. generally accepted accounting principles disclosure that includes additional information about the effect of the reclassification. The adoption of these updates affect presentation only and therefore did not impact our results of operations, financial condition or cash flows.

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4. AGREEMENT WITH ASTRAZENECA
12 Months Ended
Jun. 30, 2013
Agreement With Astrazeneca  
AGREEMENT WITH ASTRAZENECA

In January 2007, the Company entered into an exclusive global research collaboration and license agreement with AstraZeneca to discover, develop and commercialize compounds that target melanocortin receptors for the treatment of obesity, diabetes and related metabolic syndrome. In June 2008, the license agreement was amended to include additional compounds and associated intellectual property developed by the Company. In December 2008, the license agreement was further amended to include additional compounds and associated intellectual property developed by the Company and extended the research collaboration for an additional year through January 2010. In September 2009, the license agreement was further amended to modify royalty rates and milestone payments. The collaboration is based on the Company’s melanocortin receptor obesity program and includes access to compound libraries, core technologies and expertise in melanocortin receptor drug discovery and development. As part of the September 2009 amendment to the research collaboration and license agreement, the Company agreed to conduct additional studies on the effects of melanocortin receptor specific compounds on food intake, obesity and other metabolic parameters.

In December 2009 and 2008, the Company also entered into clinical trial sponsored research agreements with AstraZeneca, under which the Company agreed to conduct studies of the effects of melanocortin receptor specific compounds on food intake, obesity and other metabolic parameters. Under the terms of these clinical trial agreements, AstraZeneca paid $5,000,000 as of March 31, 2009 upon achieving certain objectives and paid all costs associated with these studies. The Company recognized $10,361, $73,736, and $497,540, respectively, as revenue in the years ended June 30, 2013, 2012 and 2011 under these clinical trial sponsored research agreements.

The Company received an up-front payment of $10,000,000 from AstraZeneca on execution of the research collaboration and license agreement. Under the September 2009 amendment the Company was paid an additional $5,000,000 in consideration of reduction of future milestones and royalties and providing specific materials to AstraZeneca. The Company is now eligible for milestone payments totaling up to $145,250,000, with up to $85,250,000 contingent on development and regulatory milestones and the balance contingent on achievement of sales targets. In addition, the Company is eligible to receive mid to high single digit royalties on sales of any approved products. AstraZeneca assumed responsibility for product commercialization, product discovery and development costs, with both companies contributing scientific expertise in the research collaboration. The Company provided research services to AstraZeneca through January 2010, the expiration of the research collaboration portion of the research collaboration and license agreement, at a contractual rate per full-time-equivalent employee.

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5. FAIR VALUE MEASUREMENTS
12 Months Ended
Jun. 30, 2013
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS

The fair value of cash equivalents and short-term investments are 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 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, 2013:            
Money Market Fund  $     16,284,184  $        16,284,184  $                             -  $                                -
U.S. Government Securities           5,249,654              5,249,160                                 -                                    -
TOTAL  $     21,533,838  $        21,533,344  $                             -  $                                -
         
June 30, 2012:                 
Money Market Fund  $       3,344,146  $          3,344,146  $                             -  $                                -

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6. PROPERTY AND EQUIPMENT, NET
12 Months Ended
Jun. 30, 2013
Property, Plant and Equipment [Abstract]  
6. PROPERTY AND EQUIPMENT, NET
  June 30, June 30,
  2013 2012
Office equipment  $               1,180,210  $               1,157,553
Laboratory equipment                      311,369                      317,418
Leasehold improvements                      751,226                   7,088,462
                    2,242,805                   8,563,433
Less: Accumulated depreciation and amortization                 (1,976,390)                 (8,244,780)
   $                  266,415  $                  318,653
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7. ACCRUED EXPENSES
12 Months Ended
Jun. 30, 2013
Payables and Accruals [Abstract]  
7. ACCRUED EXPENSES

 

Accrued expenses consist of the following:

  June 30, June 30,
  2013 2012
Clinical study costs  $               1,054,270  $               1,752,392
Other research related expenses                      186,241                      253,968
Professional services                      208,731                      444,601
Insurance premiums payable                      125,671                      130,973
Other                      126,814                      124,562
   $               1,701,727  $               2,706,496

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8. COMMITMENTS AND CONTINGENCIES
12 Months Ended
Jun. 30, 2013
Commitments and Contingencies Disclosure [Abstract]  
8. COMMITMENTS AND CONTINGENCIES

 

Operating Leases – Effective January 31, 2011, the Company terminated the lease on 12,000 square feet of laboratory space in another building in the same center as the Company’s corporate offices and research and development facilities, which lease would have otherwise terminated in February 2012. Under the lease termination agreement the Company paid a $60,000 termination fee, which was charged to expense. Effective July 31, 2012, the lease on 28,000 square feet of the Company’s research and development facilities expired. The Company currently leases facilities under a non-cancelable operating leases, which expires in June 2015. Future minimum lease payments under these leases are as follows:

Year Ending June 30,  
2014  $           236,335
2015               236,335
   $           472,670

For the years ended June 30, 2013, 2012 and 2011, rent expense was $372,754, $915,469, and $1,242,708, respectively.

Capital Leases – The Company has acquired certain of its equipment under leases classified as capital leases. Scheduled future payments related to capital leases as of June 30, 2013 are as follows:

Year Ending June 30,  
2014  $             20,615
Amount representing interest                    (706)
Net  $             19,909

Employment Agreements – The Company has employment agreements with two executive officers which provide 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 18 to 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 one and one-half to 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, 2013, 2012 and 2011, Company contributions were $150,256, $124,351, and $153,780, respectively.

Contingencies – The Company accounts for litigation losses in accordance with ASC 450-20, “Loss Contingencies.” Under ASC 450-20, loss contingency provisions are recorded for probable losses when management is able to reasonably estimate the loss. Any outcome upon settlement that deviates from the Company’s best estimate may result in additional expense or in a reduction in expense in a future accounting period. The Company records legal expenses associated with such contingencies as incurred.

The Company is involved, from time to time, in various claims and legal proceedings arising in the ordinary course of its business. The Company is not currently a party to any such claims or proceedings that, if decided adversely to it, would either individually or in the aggregate have a material adverse effect on its business, financial condition or results of operations.

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9. GRANT REVENUE
12 Months Ended
Jun. 30, 2013
Notes to Financial Statements  
9. GRANT REVENUE

 

In October 2010, the Company was awarded $977,917 in grants under the Patient Protection and Affordable Care Act of 2010. The grants related to four of the Company’s projects: melanocortin agonists for sexual dysfunction; melanocortin agonists for obesity and related metabolic syndrome; natriuretic peptide mimetic PL-3994 for acute asthma; and subcutaneously-delivered natriuretic peptide mimetic PL-3994 for cardiovascular disease.

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10. STOCKHOLDERS EQUITY
12 Months Ended
Jun. 30, 2013
Equity [Abstract]  
STOCKHOLDERS' EQUITY

Series A Convertible Preferred Stock – As of June 30, 2013, 4,697 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, 2013, the Series A Conversion Price was $8.89, so each share of Series A Convertible Preferred Stock is currently convertible into approximately 11.25 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 $469,700 in the aggregate as of June 30, 2013. 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.

Common Stock Transactions – On July 3, 2012, the Company closed on a private placement offering in which the Company sold, for aggregate proceeds of $35.0 million, 3,873,000 shares of its common stock, Series A 2012 warrants to purchase up to 31,988,151 shares of common stock, and Series B 2012 warrants to purchase up to 35,488,380 shares of common stock. These warrants are exercisable at an exercise price of $0.01 per share, and expire ten years from the date of issuance. The holders may exercise the warrants on a cashless basis. The warrants are subject to a blocker provision prohibiting exercise of the warrants if the holder and its affiliates would beneficially own in excess of 9.99% of the total number of shares of common stock of the Company following such exercise (as may be adjusted to the extent set forth in the warrant). The warrants also provide that in the event of a Company Controlled Fundamental Transaction (as defined in the warrants), the Company may, at the election of the warrant holder, be required to redeem all or a portion of the warrants at an amount tied to the greater of the then market price of the Company’s common stock or the amount per share paid to any other person.

Because there were not sufficient authorized shares to cover all the outstanding Series B 2012 warrants in the private placement offering as of closing, under ASC 815, “Derivatives and Hedging,” the portion of the warrants above the then authorized level of common stock was required to be classified as a liability and carried at fair value on the Company’s balance sheet. The fair value, including the initial fair value liability of $16,960,963, was calculated by multiplying the number of shares underlying the Series B 2012 warrants above the then authorized level of the Company’s common stock by the closing price of its common stock less the exercise price of $0.01 per share. The warrants were liability classified through September 27, 2012, at which time the then fair value of the warrant liability was reclassified into stockholders’ equity upon stockholder approval of the increase in authorized common stock. The increase in fair value, as a result of the Company’s common stock increasing from $0.50 per share at date of issuance to $0.71 per share upon shareholder approval, of $7,069,165 has been recorded as a non-operating expense for the year ended June 30, 2013.

The purchase agreement for the private placement provides that the purchasers, funds under the management of QVT Financial LP, have certain rights until July 3, 2018, including rights of first refusal and participation in any subsequent equity or debt financing, provided that the funds own at least 20% of the outstanding common stock of the Company calculated as if warrants held by the funds were exercised. The purchase agreement also contains certain restrictive covenants so long as the funds continue to hold specified amounts of warrants or beneficially own specified amounts of the outstanding shares of common stock.

The net proceeds to the Company were $34.4 million, after deducting offering expenses payable by the Company and excluding the proceeds to the Company, if any, from the exercise of the warrants issued in the offering.

On March 1, 2011, the Company closed on a firm commitment public offering in which the Company sold 23,000,000 shares of its common stock, Series A Warrants to purchase up to 2,000,000 shares of its common stock, and Series B Warrants to purchase up to 21,000,000 shares of its common stock. The Series A Warrants are exercisable starting March 1, 2011 at an exercise price of $1.00 per share and are exercisable at any time until March 1, 2016. The Series B Warrants become exercisable starting on March 2, 2012 at an exercise price of $1.00 per share and are exercisable at any time until March 2, 2017.

Gross proceeds from this offering were $23,000,000, and net proceeds to the Company, after deducting underwriting discounts and other offering expenses, were $21,031,014. In connection with the offering, the Company also issued warrants to the underwriters as part of their compensation to purchase up to 575,000 shares of the Company’s common stock which become exercisable starting on March 2, 2012 at an exercise price of $1.00 per share and are exercisable at any time until February 23, 2016.

Because there was not an adequate level of authorized shares to cover all the outstanding warrants in the firm commitment public offering as of closing, under ASC 815, “Derivatives and Hedging,” the portion of the warrants above the then authorized level of common stock were required to be classified as a liability and carried at their current fair value on the Company’s balance sheet. The fair value was estimated using the Black-Scholes option-pricing model. The warrants were revalued through May 11, 2011, the date the warrants ceased to be classified as a liability upon stockholder approval of the increase in authorized common stock, at which time the then fair value of the warrant liability was reclassified into stockholders’ equity. The increase in fair value of $2,266 from the date of issuance through May 11, 2011 has been recorded as a non-operating expense.

Outstanding Stock Purchase Warrants – As of June 30, 2013, the Company had outstanding warrants exercisable for shares of common stock as follows:

Shares of Common Exercise Price per Latest Termination
Stock Share Date
317,776 $3.00 August 30, 2013
50,000 0.75 January 24, 2014
331,969 3.30 August 12, 2014
50,000 0.60 November 9, 2014
50,000 1.00 November 9, 2014
100,000 1.50 November 9, 2014
575,000 1.00 February 23, 2016
2,000,000 1.00 March 1, 2016
21,000,000 1.00 March 2, 2017
31,988,151 0.01 July 3, 2022
35,488,380 0.01 September 27, 2022
91,951,276    

During the fiscal year ended June 30, 2012, the Company issued warrants to consultants as part of their compensation to purchase up to 350,000 shares of the Company’s common stock. These warrants vest at various times and under certain conditions through November 2012. For the years ended June 30, 2013 and 2012, the Company recorded stock-based compensation related to these warrants of $26,000 and $41,134, respectively.

In August 2010, the Company received $64,400 and issued 32,200 shares of common stock pursuant to the exercise of warrants at an exercise price of $2.00 per share.

Stock Plan – The Company’s 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 27, 2013. The 2011 Stock Incentive Plan provides for incentive and nonqualified stock option grants and other stock-based awards to employees, non-employee directors and consultants for up to 7,000,000 shares of common stock. The 2011 Stock Incentive Plan is administered under the direction of the 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 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 remain outstanding in accordance with their terms. As of June 30, 2013, 2,936,331 shares were available for grant under the 2011 Stock Incentive Plan.

The Company also has outstanding options that were granted under a previous 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 for the years ended June 30, 2013, 2012 and 2011:

  2013   2012   2011
  Number of Shares Weighted Average Exercise Price   Number of Shares Weighted Average Exercise Price   Number of Shares Weighted Average Exercise Price
Outstanding at                 
 beginning of year     2,181,853  $          3.50       2,231,898  $          4.05          957,374  $        13.20
Granted     1,807,300              0.65            75,000              0.65       1,576,275              0.93
Forfeited        (74,985)              5.20          (90,870)              3.64        (234,951)            10.02
Exercised                   -                 -                        -                 -                        -                 -   
Expired        (62,720)            11.91          (34,175)            33.07          (66,800)            41.14
Outstanding at                 
 end of year     3,851,448              1.99       2,181,853              3.50       2,231,898              4.05
Exercisable at                 
 end of year     1,673,973              3.64       1,323,965              5.10          809,918              9.28
Weighted average                
grant-date fair                
value of options                
granted during                
the year    $          0.56      $          0.47      $          0.77

The following table summarizes options outstanding as of June 30, 2013:

    Number of Shares   Weighted Average Exercise Price   Weighted Average Remaining Term in Years   Aggregate Intrinsic Value
Options outstanding at end of                
year       3,851,448    $          1.99                      8.2    $               400
Options vested and exercisable                
at end of year       1,673,973    $          3.64                      6.8    $                    -
Unvested options expected to                
vest       1,976,752    $          0.73                      9.3    $               287

The fair value of option grants is estimated at the grant date using the Black-Scholes model. For grants during the year ended June 30, 2013, the Company’s weighted average assumptions for expected volatility, dividends, term and risk-free interest rate were 101%, 0%, 8.6 years and 1.8%, respectively. For grants during the year ended June 30, 2012, the Company’s weighted average assumptions for expected volatility, dividends, term and risk-free interest rate were 103%, 0%, 5.0 years and 0.92%, respectively. For grants during the year ended June 30, 2011, the Company’s weighted average assumptions for expected volatility, dividends, term and risk-free interest rate were 100%, 0%, 8.7 years and 2.9%, respectively. 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, 2013, 2012 and 2011 the Company recorded stock-based compensation related to stock options of $379,264, $533,445 and $437,480, respectively. The Company did not record a tax benefit related to stock-based compensation expense. As of June 30, 2013, there was $1,113,107 of unrecognized compensation cost related to unvested options, which is expected to be recognized over a weighted-average period of 1.4 years.

In June 2013, the Company granted 525,000 options to its executive officers, 394,300 options to its employees and 270,000 options to its non-employee directors under the Company’s 2011 Stock Incentive Plan. The Company will amortize the fair of these options of $287,000, $204,000 and $148,000, respectively, over the 48 month vesting period ending June 30, 2017.

In July 2012, the Company granted 285,000 options to its executive officers, 182,500 options to its employees and 112,500 options to its non-employee directors under the Company’s 2011 Stock Incentive Plan. The Company is amortizing the fair value of these options of $182,000, $108,000 and $72,000, respectively, over the 48 month vesting period ending July 31, 2016.

Restricted Stock Units – The following table summarizes restricted stock award activity for the years ended June 30, 2013, 2012 and 2011:

 

  2013   2012   2011
Outstanding at beginning of year                      250,000                        500,000                                   -
Granted                      757,500                                   -                        705,000
Forfeited                                 -                                   -                        (21,500)
Vested                    (250,000)                      (250,000)                      (183,500)
Outstanding at end of year                      757,500                        250,000                        500,000
           

In June 2013, the company granted 420,000 restricted stock units to its executive officers and 115,000 restricted stock units to employees under the Company’s 2011 Stock Incentive Plan. The Company will amortize the fair value of these restricted stock units of $260,000 and $71,000, respectively, over the 24 month vesting period ending June 30, 2015.

In July 2012, the Company granted 222,500 restricted stock units to its executive officers under the Company’s 2011 Stock Incentive Plan. The Company is amortizing the fair value of these restricted stock units of $160,000 over the 24 months ending July 2014. The Company recognized $114,659 of stock-based compensation expense related to these restricted stock units during the year ended June 30, 2013.

In June 2011, the Company granted 500,000 restricted stock units to its executive management under the Company’s 2011 Stock Incentive Plan. The grant date fair value of these restricted stock units of $430,000 is being amortized over the 24 month vesting period of the award. The Company recognized $105,108, $317,722 and $7,167, respectively, of stock-based compensation expense related to these restricted stock units during the years ended June 30, 2013, 2012 and 2011, respectively.

In July 2010, the Company granted 205,000 restricted stock units to its employees under the Company’s 2005 Stock Plan of which 183,500 shares of common stock vested during fiscal 2011 with the balance forfeited. The Company recognized $311,950 of stock-based compensation expense related to these restricted stock units during the year ended June 30, 2011.

In connection with the vesting of restricted share units during the years ended June 30, 2013, 2012 and 2011, the Company withheld 158,264, 0 and 17,881 shares with aggregate values of $87,411, 0 and $26,196, respectively, in satisfaction of minimum tax withholding obligations.

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11. INCOME TAXES
12 Months Ended
Jun. 30, 2013
Income Tax Disclosure [Abstract]  
11. INCOME TAXES

 

The Company has had no income tax expense or benefit since inception because of operating losses, except for amounts recognized for sales of New Jersey state net operating loss carryforwards. 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 net operating loss carryforwards and research and development credit carryforwards, given the provisions of existing tax laws.

As of June 30, 2013, the Company had federal and state net operating loss carryforwards of approximately $222,000,000 and $101,000,000, respectively, which expire between 2013 and 2033 if not utilized. As of June 30, 2013, the Company had federal research and development credits of approximately $6,600,000 that will begin to expire in 2013, if not utilized.

The Tax Reform Act of 1986 (the Act) provides for limitation on the use of net operating loss and research and development tax credit carryforwards following certain ownership changes (as defined by the Act) that could limit the Company’s ability to utilize these carryforwards. The Company may have experienced various ownership changes, as defined by the Act, as a result of past financings. Accordingly, the Company’s ability to utilize the aforementioned carryforwards may be limited. 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.

The Company’s net deferred tax assets are as follows:

  June 30, June 30,
  2013 2012
Net operating loss carryforwards  $             83,470,000  $             81,460,000
Research and development tax credits                   6,605,000                   6,364,000
Accrued expenses, deferred revenue and other                   1,698,000                   3,969,000
                  91,773,000                 91,793,000
Valuation allowance               (91,773,000)               (91,793,000)
Net deferred tax assets  $                             -  $                             -

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. Due to the Company’s history of losses, the deferred tax assets are fully offset by a valuation allowance as of June 30, 2013 and 2012.

During the years ended June 30, 2013, 2012 and 2011, the Company sold New Jersey state net operating loss carryforwards, which resulted in the recognition of $1,753,208, $1,068,233, and $637,391, respectively, in tax benefits.

 

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12. CONSOLIDATED QUARTERLY FINANCIAL DATA – UNAUDITED
12 Months Ended
Jun. 30, 2013
Quarterly Financial Information Disclosure [Abstract]  
12. CONSOLIDATED QUARTERLY FINANCIAL DATA – UNAUDITED

 

The following tables provide quarterly data for the years ended June 30, 2013 and 2012:

  Three Months Ended
  June 30,   March 31,   December 31,   September 30,
  2013   2013   2012   2012
  (amounts in thousands, except per share data)
Revenues  $                 -    $                 -    $                   7    $                    3
Operating expenses             4,720               4,024                  3,447                   3,404
Other income/(expense), net                    2                      9                       11                  (7,052)
Loss before income taxes            (4,718)              (4,015)                 (3,429)                (10,453)
Income tax benefit                     -                       -                  1,753                           -
Net loss  $        (4,718)    $        (4,015)    $           (1,676)    $          (10,453)
Basic and diluted net loss per              
common share  $          (0.04)    $          (0.04)    $             (0.02)    $              (0.15)
Weighted average number of              
common shares outstanding              
used in computing basic and              
diluted net loss per common              
share  106,435,741    106,424,443       106,424,443          71,669,170
               
  Three Months Ended
  June 30,   March 31,   December 31,   September 30,
  2012   2012   2011   2011
  (amounts in thousands, except per share data)
Revenues  $              11    $              24    $                 12    $                  27
Operating expenses             5,702               6,050                  3,713                   3,394
Other income/(expense), net                438                      6                         8                        12
Loss before income taxes            (5,253)              (6,020)                 (3,693)                  (3,355)
Income tax benefit                     -                       -                  1,068                           -
Net loss  $        (5,253)    $        (6,020)    $           (2,625)    $            (3,355)
Basic and diluted net loss per              
common share  $          (0.14)    $          (0.17)    $             (0.08)    $              (0.10)
Weighted average number of              
common shares outstanding              
used in computing basic and              
diluted net loss per common              
share    34,900,591      34,900,591         34,900,591          34,900,591

 

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
12 Months Ended
Jun. 30, 2013
Summary Of Significant Accounting Policies Policies  
Principles of Consolidation

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

               

Use of Estimates

Use of Estimates – The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and Cash Equivalents – 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 $16,284,184 and $3,344,146 in a money market fund at June 30, 2013 and 2012, respectively.

               

Investments

Investments – The Company determines the appropriate classification of its investments in debt and equity securities at the time of purchase and reevaluates such determinations at each balance sheet date. Debt securities are classified as held-to-maturity when the Company has the intent and ability to hold the securities to maturity. Debt securities for which the Company does not have the intent or ability to hold to maturity are classified as available-for-sale. Held-to-maturity securities are recorded as either short-term or long-term on the balance sheet, based on the contractual maturity date and are stated at amortized cost. Marketable securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and are reported at fair value, with unrealized gains and losses recognized in earnings. Debt and marketable equity securities not classified as held-to-maturity or as trading are classified as available-for-sale and are carried at fair market value, with the unrealized gains and losses, net of tax, included in the determination of comprehensive loss.

 

The fair value of substantially all securities is determined by quoted market prices. The estimated fair value of securities for which there are no quoted market prices is based on similar types of securities that are traded in the market.

               

Fair Value of Financial Instruments

Fair Value of Financial Instruments – The Company’s financial instruments consist primarily of cash equivalents, short-term investments, accounts receivable, accounts payable and capital lease obligations. Management believes that the carrying values of these assets and liabilities are representative of their respective fair values based on quoted market prices for investments and the short-term nature of the other instruments.

Property and Equipment

Property and Equipment – Property and equipment consists of office and laboratory equipment, office furniture and leasehold improvements and includes assets acquired under capital 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 capital 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

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.

Deferred Rent

Deferred Rent The Company’s operating leases provide for rent increases over the terms of the leases. Deferred rent consists of the difference between periodic rent payments and the amount recognized as rent expense on a straight-line basis, as well as tenant allowances for leasehold improvements. Rent expenses are being recognized ratably over the terms of the leases.

Revenue Recognition

Revenue Recognition – Revenue from corporate collaborations and licensing agreements consists of up-front fees, research and development funding, and milestone payments. Non-refundable up-front fees are deferred and amortized to revenue over the related performance period. The Company estimates the performance period as the period in which it performs certain development activities under the applicable agreement. Reimbursements for research and development activities are recorded in the period that the Company performs the related activities under the terms of the applicable agreements. Revenue resulting from the achievement of milestone events stipulated in the applicable agreements is recognized when the milestone is achieved, provided that such milestone is substantive in nature. Revenue from grants is recognized as the Company provides the services stipulated in the underlying grants based on the time and materials incurred.

Research and Development Costs

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

Accrued Expenses – Third parties perform a significant portion of our development activities. We review the activities performed under significant contracts each quarter and accrue expenses and the amount of any reimbursement to be received from our collaborators based upon the estimated amount of work completed. Estimating the value or stage of completion of certain services requires judgment based on available information. If we do not identify services performed for us but not billed by the service-provider, or if we underestimate or overestimate the value of services performed as of a given date, reported expenses will be understated or overstated.

Stock-Based Compensation

Stock-Based Compensation – The Company charges to expense the fair value of stock options and other equity awards granted. The Company determines the value of stock options utilizing the Black-Scholes option pricing model. Compensation costs for share-based awards with pro-rata vesting are allocated to periods on a straight-line basis.

Income Taxes

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 a valuation allowance against its deferred tax assets based on the history of losses incurred.

During the years ended June 30, 2013, 2012 and 2011, the Company sold New Jersey state net operating loss carryforwards, which resulted in the recognition of $1,753,208, $1,068,233, and $637,391, respectively, in tax benefits.

Net Loss per Common Share

Net Loss per Common Share – Basic and diluted earnings per common share (EPS) are calculated in accordance with the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 260, “Earnings per Share,” which includes guidance pertaining to the warrants, issued in connection with the July 3, 2012 private placement offering, that are exercisable for nominal consideration and, therefore, are to be considered in the computation of basic and diluted net loss per common share. The Series A 2012 warrants to purchase up to 31,988,151 shares of common stock were exercisable starting at July 3, 2012 and, therefore, are included in the weighted average number of common shares outstanding used in computing basic and diluted net loss per common share starting on July 3, 2012.

 

The Series B 2012 warrants to purchase up to 35,488,380 shares of common stock were considered contingently issuable shares and were not included in computing basic net loss per common share until the Company received stockholder approval for the increase in authorized underlying common stock on September 27, 2012 (see note 10). For diluted EPS, contingently issuable shares are to be included in the calculation as of the beginning of the period in which the conditions were satisfied, unless the effect would be anti-dilutive. The Series B 2012 warrants have been excluded from the calculation of diluted net loss per common share during the period from July 3, 2012 until September 27, 2012 as the impact would be anti-dilutive.

 

As of June 30, 2013, 2012 and 2011, there were 29,136,527, 27,179,180, and 27,130,580 common shares issuable upon conversion of Series A Convertible Preferred Stock, the exercise of outstanding options and warrants (excluding the warrants issued in connection with the July 3, 2013 private placement offering), and the vesting of restricted stock units, respectively. These share amounts have been excluded from the calculation of net loss per share as the impact would be anti-dilutive.

v2.4.0.8
5. FAIR VALUE MEASUREMENTS (Tables)
12 Months Ended
Jun. 30, 2013
Fair value of restricted stock units granted, amortized over 24 month vesting period  
Schedule of assets 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, 2013:            
Money Market Fund  $     16,284,184  $        16,284,184  $                             -  $                                -
U.S. Government Securities           5,249,654              5,249,160                                 -                                    -
TOTAL  $     21,533,838  $        21,533,344  $                             -  $                                -
         
June 30, 2012:                 
Money Market Fund  $       3,344,146  $          3,344,146  $                             -  $                                -
v2.4.0.8
6. PROPERTY AND EQUIPMENT, NET (Tables)
12 Months Ended
Jun. 30, 2013
Property, Plant and Equipment [Abstract]  
Property and equipment
  June 30, June 30,
  2013 2012
Office equipment  $               1,180,210  $               1,157,553
Laboratory equipment                      311,369                      317,418
Leasehold improvements                      751,226                   7,088,462
                    2,242,805                   8,563,433
Less: Accumulated depreciation and amortization                 (1,976,390)                 (8,244,780)
   $                  266,415  $                  318,653
v2.4.0.8
7. ACCRUED EXPENSES (Tables)
12 Months Ended
Jun. 30, 2013
Accrued Expenses Tables  
Accrued Expenses
  June 30, June 30,
  2013 2012
Clinical study costs  $               1,054,270  $               1,752,392
Other research related expenses                      186,241                      253,968
Professional services                      208,731                      444,601
Insurance premiums payable                      125,671                      130,973
Other                      126,814                      124,562
   $               1,701,727  $               2,706,496
v2.4.0.8
8. COMMITMENTS AND CONTINGENCIES (Tables)
12 Months Ended
Jun. 30, 2013
Commitments And Contingencies Tables  
Future minimum lease payments
Year Ending June 30,  
2014  $           236,335
2015               236,335
   $           472,670
Capital Leases
Year Ending June 30,  
2014  $             20,615
Amount representing interest                    (706)
Net  $             19,909
v2.4.0.8
10. STOCKHOLDERS EQUITY (Tables)
12 Months Ended
Jun. 30, 2013
Stockholders Equity Tables  
Outstanding Stock Purchase Warrants
Shares of Common Exercise Price per Latest Termination
Stock Share Date
317,776 $3.00 August 30, 2013
50,000 0.75 January 24, 2014
331,969 3.30 August 12, 2014
50,000 0.60 November 9, 2014
50,000 1.00 November 9, 2014
100,000 1.50 November 9, 2014
575,000 1.00 February 23, 2016
2,000,000 1.00 March 1, 2016
21,000,000 1.00 March 2, 2017
31,988,151 0.01 July 3, 2022
35,488,380 0.01 September 27, 2022
91,951,276    
Option activity
  2013   2012   2011
  Number of Shares Weighted Average Exercise Price   Number of Shares Weighted Average Exercise Price   Number of Shares Weighted Average Exercise Price
Outstanding at                 
 beginning of year     2,181,853  $          3.50       2,231,898  $          4.05          957,374  $        13.20
Granted     1,807,300              0.65            75,000              0.65       1,576,275              0.93
Forfeited        (74,985)              5.20          (90,870)              3.64        (234,951)            10.02
Exercised                   -                 -                        -                 -                        -                 -   
Expired        (62,720)            11.91          (34,175)            33.07          (66,800)            41.14
Outstanding at                 
 end of year     3,851,448              1.99       2,181,853              3.50       2,231,898              4.05
Exercisable at                 
 end of year     1,673,973              3.64       1,323,965              5.10          809,918              9.28
Weighted average                
grant-date fair                
value of options                
granted during                
the year    $          0.56      $          0.47      $          0.77
Outstanding options
    Number of Shares   Weighted Average Exercise Price   Weighted Average Remaining Term in Years   Aggregate Intrinsic Value
Options outstanding at end of                
year       3,851,448    $          1.99                      8.2    $               400
Options vested and exercisable                
at end of year       1,673,973    $          3.64                      6.8    $                    -
Unvested options expected to                
vest       1,976,752    $          0.73                      9.3    $               287
Restricted Stock Units
  2013   2012   2011
Outstanding at beginning of year                      250,000                        500,000                                   -
Granted                      757,500                                   -                        705,000
Forfeited                                 -                                   -                        (21,500)
Vested                    (250,000)                      (250,000)                      (183,500)
Outstanding at end of year                      757,500                        250,000                        500,000
v2.4.0.8
11. INCOME TAXES (Tables)
12 Months Ended
Jun. 30, 2013
Income Taxes Tables  
Deferred tax assets
  June 30, June 30,
  2013 2012
Net operating loss carryforwards  $             83,470,000  $             81,460,000
Research and development tax credits                   6,605,000                   6,364,000
Accrued expenses, deferred revenue and other                   1,698,000                   3,969,000
                  91,773,000                 91,793,000
Valuation allowance               (91,773,000)               (91,793,000)
Net deferred tax assets  $                             -  $                             -
v2.4.0.8
12. CONSOLIDATED QUARTERLY FINANCIAL DATA UNAUDITED (Tables)
12 Months Ended
Jun. 30, 2013
Consolidated Quarterly Financial Data Unaudited Tables  
QUARTERLY FINANCIAL DATA
  Three Months Ended
  June 30,   March 31,   December 31,   September 30,
  2013   2013   2012   2012
  (amounts in thousands, except per share data)
Revenues  $                 -    $                 -    $                   7    $                    3
Operating expenses             4,720               4,024                  3,447                   3,404
Other income/(expense), net                    2                      9                       11                  (7,052)
Loss before income taxes            (4,718)              (4,015)                 (3,429)                (10,453)
Income tax benefit                     -                       -                  1,753                           -
Net loss  $        (4,718)    $        (4,015)    $           (1,676)    $          (10,453)
Basic and diluted net loss per              
common share  $          (0.04)    $          (0.04)    $             (0.02)    $              (0.15)
Weighted average number of              
common shares outstanding              
used in computing basic and              
diluted net loss per common              
share  106,435,741    106,424,443       106,424,443          71,669,170
               
  Three Months Ended
  June 30,   March 31,   December 31,   September 30,
  2012   2012   2011   2011
  (amounts in thousands, except per share data)
Revenues  $              11    $              24    $                 12    $                  27
Operating expenses             5,702               6,050                  3,713                   3,394
Other income/(expense), net                438                      6                         8                        12
Loss before income taxes            (5,253)              (6,020)                 (3,693)                  (3,355)
Income tax benefit                     -                       -                  1,068                           -
Net loss  $        (5,253)    $        (6,020)    $           (2,625)    $            (3,355)
Basic and diluted net loss per              
common share  $          (0.14)    $          (0.17)    $             (0.08)    $              (0.10)
Weighted average number of              
common shares outstanding              
used in computing basic and              
diluted net loss per common              
share    34,900,591      34,900,591         34,900,591          34,900,591
v2.4.0.8
1. ORGANIZATION (Details Narrative) (USD $)
Jun. 30, 2013
Organization Details Narrative  
Cash and cash equivalents and short-term investments $ 24,400,000
v2.4.0.8
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) (USD $)
12 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2011
Cash equivalents $ 16,284,184 $ 3,344,146  
NOL carryforwards sold, resulting in tax benefits $ 1,753,208 $ 1,068,233 $ 637,391
Preferred Convertible Class A
     
Shares issuable upon conversion of warrants 29,136,527 27,179,180 27,130,580
v2.4.0.8
4. AGREEMENT WITH ASTRAZENECA (Details Narrative) (USD $)
12 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2011
Agreement With Astrazeneca Details Narrative      
Revenue recognized under clinical trail sponsored research agreements $ 10,361 $ 73,736 $ 497,540
v2.4.0.8
5. FAIR VALUE MEASUREMENTS (Details) (USD $)
Jun. 30, 2013
Jun. 30, 2012
Cash equivalents, fair value disclosure $ 21,533,838  
Quoted prices in active markets (Level 1)
   
Cash equivalents, fair value disclosure 21,533,344  
Other quoted/observable inputs (Level 2)
   
Cash equivalents, fair value disclosure     
Significant unobservable inputs (Level 3)
   
Cash equivalents, fair value disclosure     
Money Market Funds
   
Cash equivalents, fair value disclosure 16,284,184 3,344,146
Money Market Funds | Quoted prices in active markets (Level 1)
   
Cash equivalents, fair value disclosure 16,284,184 3,344,146
Money Market Funds | Other quoted/observable inputs (Level 2)
   
Cash equivalents, fair value disclosure      
Money Market Funds | Significant unobservable inputs (Level 3)
   
Cash equivalents, fair value disclosure      
US Government Securities
   
Cash equivalents, fair value disclosure     
US Government Securities | Quoted prices in active markets (Level 1)
   
Cash equivalents, fair value disclosure 5,249,160  
US Government Securities | Other quoted/observable inputs (Level 2)
   
Cash equivalents, fair value disclosure     
US Government Securities | Significant unobservable inputs (Level 3)
   
Cash equivalents, fair value disclosure     
v2.4.0.8
6. PROPERTY AND EQUIPMENT, NET (Details) (USD $)
Jun. 30, 2013
Jun. 30, 2012
Property, Plant and Equipment [Abstract]    
Office equipment $ 1,180,210 $ 1,157,553
Laboratory equipment 311,369 317,418
Leasehold improvements 751,226 7,088,462
Gross 2,242,805 8,563,433
Less: Accumulated depreciation and amortization (1,976,390) (8,244,780)
Net $ 266,415 $ 318,653
v2.4.0.8
6. PROPERTY AND EQUIPMENT, NET (Details Narrative) (USD $)
Jun. 30, 2013
Jun. 30, 2012
Property And Equipment Net Details Narrative    
Aggregate cost of assets acquired under capital leases $ 66,115 $ 152,765
Accumulated amortization associated with assets acquired under capital leases $ 27,548 $ 100,975
v2.4.0.8
7. ACCRUED EXPENSES (Details) (USD $)
Jun. 30, 2013
Jun. 30, 2012
Accrued Expenses Tables    
Clinical study costs $ 1,054,270 $ 1,752,392
Other research related expenses 186,241 253,968
Professional services 208,731 444,601
Insurance premiums payable 125,671 130,973
Other 126,814 124,562
Accrued expenses $ 1,701,727 $ 2,706,496
v2.4.0.8
8. COMMITMENTS AND CONTINGENCIES (Details) (USD $)
Jun. 30, 2013
Commitments And Contingencies Tables  
2014 $ 236,335
2015 236,335
Total $ 472,670
v2.4.0.8
8. COMMITMENTS AND CONTINGENCIES (Details 1) (USD $)
Jun. 30, 2013
Jun. 30, 2012
Commitments And Contingencies Details 1    
2014 $ 20,615  
Amount representing interest (706)  
Net $ 19,909 $ 22,277
v2.4.0.8
10. STOCKHOLDERS EQUITY (Details) (USD $)
12 Months Ended
Jun. 30, 2013
Shares of Common Stock 91,951,276
Range 1
 
Shares of Common Stock 317,776
Exercise Price per Share $ 3.00
Latest Termination Date Aug. 30, 2013
Range 2
 
Shares of Common Stock 50,000
Exercise Price per Share $ 0.75
Latest Termination Date Jan. 24, 2014
Range 3
 
Shares of Common Stock 331,969
Exercise Price per Share $ 3.3
Latest Termination Date Aug. 12, 2014
Range 4
 
Shares of Common Stock 50,000
Exercise Price per Share $ 0.6
Latest Termination Date Nov. 09, 2014
Range 5
 
Shares of Common Stock 50,000
Exercise Price per Share $ 1
Latest Termination Date Nov. 09, 2014
Range 6
 
Shares of Common Stock 100,000
Exercise Price per Share $ 1.5
Latest Termination Date Nov. 09, 2014
Range 7
 
Shares of Common Stock 575,000
Exercise Price per Share $ 1
Latest Termination Date Feb. 23, 2016
Range 8
 
Shares of Common Stock 2,000,000
Exercise Price per Share $ 1
Latest Termination Date Mar. 01, 2016
Range 9
 
Shares of Common Stock 21,000,000
Exercise Price per Share $ 1
Latest Termination Date Mar. 02, 2017
Range 10
 
Shares of Common Stock 31,988,151
Exercise Price per Share $ 0.01
Latest Termination Date Jul. 03, 2022
Range 11
 
Shares of Common Stock 35,488,380
Exercise Price per Share $ 0.01
Latest Termination Date Sep. 27, 2022
v2.4.0.8
10. STOCKHOLDERS EQUITY (Details 1) (USD $)
12 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2011
Stockholders Equity Tables      
Number of Options Outstanding, Beginning 2,181,853 2,231,898 957,374
Number of Options Granted 1,807,300 75,000 1,576,275
Number of Options Forfeited 74,985 90,870 234,951
Number of Options Exercised         
Number of Options Expired 62,720 34,175 66,800
Number of Options Outstanding, Ending 3,851,448 2,181,853 2,231,898
Number of Options Exercisable 1,673,973 1,323,965 809,918
Weighted Average Exercise Price Outstanding, Beginning $ 3.50 $ 4.05 $ 13.20
Weighted Average Exercise Price Granted $ 0.65 $ 0.65 $ 0.93
Weighted Average Exercise Price Forfeited $ 5.20 $ 3.64 $ 10.02
Weighted Average Exercise Price Exercised         
Weighted Average Exercise Price Expired $ 11.91 $ 33.07 $ 41.14
Weighted Average Exercise Price Outstanding, Ending $ 1.99 $ 3.50 $ 4.05
Weighted Average Exercise Price Exercisable $ 3.64 $ 5.10 $ 9.28
Weighted average grant date fair value of options granted during the year $ 0.56 $ 0.47 $ 0.77
v2.4.0.8
10. STOCKHOLDERS EQUITY (Details 2) (USD $)
12 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2011
Jun. 30, 2010
Stockholders Equity Tables        
Number of Options Outstanding, Ending 3,851,448 2,181,853 2,231,898 957,374
Options vested and exercisable at end of year 1,673,973      
Unvested options expected to vest 1,976,752      
Weighted Average Exercise Price Outstanding, Ending $ 1.99 $ 3.50 $ 4.05 $ 13.20
Weighted Average Exercise Price Options vested and exercisable at end of year $ 3.64      
Weighted Average Exercise Price Unvested options expected to vest $ 0.73      
Weighted Average Remaining Term in Years Options outstanding at end of year 8 years 2 months 12 days      
Weighted Average Remaining Term in Years Options vested and exercisable at end of year 6 years 9 months 18 days      
Weighted Average Remaining Term in Years Unvested options expected to vest 9 years 3 months 18 days      
Aggregate Intrinsic Value Options outstanding at end of $ 400      
Aggregate Intrinsic Value Options vested and exercisable at the end of year         
Aggregate Intrinsic Value Unvested options expected to vest $ 287