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U.S. SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549  FORM 10-Q  [X]
     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934       [  ]
     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934          PALATIN TECHNOLOGIES, INC.(Exact name of registrant as specified in its charter)   Delaware
     95-4078884(State or other jurisdiction of
     incorporation or organization)
     (I.R.S. Employer Identification
     No.)103 Carnegie Center - Suite 200Princeton, New Jersey
     08540(Address of principal executive
     offices)
     (Zip Code)  (609) 520-1911


Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the Issuer was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
   Yes [X]   No [  ]

As of November 14, 2000, 10,886,185 shares of the registrants's common stock,
par value $.01 per share, were outstanding.

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PALATIN TECHNOLOGIES, INC.
                            Table of Contents

|Item 1. | Financial Statements (unaudited)                                                                                                                                                                                              |        
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------
|        |                                                                                                                                                                                                                               |        
|        | CONSOLIDATED BALANCE SHEETS -- As of
     September 30, 2000and June 30, 2000                                                                                                                                                 | Page 3 
|        |                                                                                                                                                                                                                               |        
|        | CONSOLIDATED STATEMENTS OF
     OPERATIONS -- For the Three Months Ended September 30, 2000
      and the Period from January 28, 1986
     (Commencement of Operations) through September 30, 2000                           | Page 4 
|        |                                                                                                                                                                                                                               |        
|        | CONSOLIDATED STATEMENTS OF CASH FLOWS
     --For the Three Months Ended September 30, 2000 and
     September 30,
     2000 and the Period from January 28, 1986 (Commencement of
     Operations) through September 30, 2000 | Page 5 
|        |                                                                                                                                                                                                                               |        
|        | Notes to Consolidated Financial
     Statements                                                                                                                                                                               | Page 6 
|        |                                                                                                                                                                                                                               |        
|Item 2. | Management's Discussion and Analysis of
     Financial Condition
     and Results of Operations                                                                                                                               | Page 10
|        |                                                                                                                                                                                                                               |        
|Item 3. | Quantitative and Qualitative
     Disclosures About Market Risk                                                                                                                                                               | Page 13
|        |                                                                                                                                                                                                                               |        

|Item 1. | Legal Proceedings                                        | Page 13
|------- | -------------------------------------------------------- | -------
|        |                                                          |        
|Item 2. | Changes in Securities and Use of
     Proceeds           | Page 14
|        |                                                          |        
|Item 3. | Defaults Upon Senior Securities                          | Page 14
|        |                                                          |        
|Item 4. | Submission of Matters to a Vote of
     Security Holders | Page 14
|        |                                                          |        
|Item 5. | Other Information                                        | Page 14
|        |                                                          |        
|Item 6. | Exhibits and Reports on Form 8-K                         | Page 14
|        |                                                          |        
|        | Signatures                                               | Page 15

-2-

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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements

PALATIN TECHNOLOGIES, INC.
                        (A Development Stage Enterprise)Consolidated Balance Sheets
                                 (unaudited)

`September 30, 2000   June 30, 2000
                                                                       ------------------   -------------
ASSETS
Current assets:
  Cash and cash equivalents                                              $  11,031,228     $   3,219,593
  Short-term investments                                                     2,831,350         2,155,617
  Accounts receivable                                                          795,081           953,163
  Prepaid expenses and other                                                   130,707           179,792
                                                                          -------------     -------------
      Total current assets                                                  14,788,366         6,508,165

Fixed assets, net of accumulated depreciation and amortization
  of  $981,464 and $914,846, respectively                                    1,522,390         1,573,140
Restricted cash                                                                263,075           263,075
Other                                                                          440,009           541,017
                                                                          -------------     -------------
                                                                         $  17,013,840     $   8,885,397
                                                                          =============     =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                                       $     699,712     $   1,012,070
  Accrued expenses                                                           1,083,237           968,166
                                                                          -------------     -------------
      Total current liabilities                                              1,782,949         1,980,236
                                                                          -------------     -------------


Commitments and contingencies (Note 5)


Stockholders' equity:
  Preferred stock of $.01 par value - authorized 10,000,000 shares;
    Series A Convertible; 30,917 and 31,561 shares issued and outstanding
      as of September 30, 2000 and June 30, 2000, respectively;                    309               316
    Series B Convertible; zero and 2,000 shares issued and outstanding
      as of September 30, 2000 and June 30, 2000 respectively;                       -                20
    Series C Convertible; 700,000 shares issued and outstanding
      as of September 30, 2000 and June 30, 2000 respectively;                   7,000             7,000
  Common stock of $.01 par value - authorized 75,000,000 shares;
    Issued and outstanding 10,022,969 and 7,902,372 shares as of
      September 30, 2000 and June 30, 2000, respectively;                      100,230            79,024
  Additional paid-in capital                                                60,851,233        50,324,603
  Deficit accumulated during development stage                             (45,727,881)      (43,505,802)
                                                                          -------------     -------------
      Total stockholders' equity                                            15,230,891         6,905,161
                                                                          -------------     -------------
                                                                         $  17,013,840     $   8,885,397
                                                                          =============     =============`

The accompanying notes to the consolidated financial statements
are an integral part of these financial statements.

-3-

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PALATIN TECHNOLOGIES, INC.
                        (A Development Stage Enterprise)Consolidated Statements of Operations
                                 (unaudited)

`Inception
                                                                                         (January 28, 1986)
                                                       Three Months Ended September 30,       through
                                                             2000             1999        September 30, 2000
                                                       --------------     -------------   ------------------
REVENUES:
     Grants and contracts                               $   855,081      $ 1,250,000      $  8,776,821
     License fees and royalties                                   -          500,000         1,734,296
     Other                                                        -                -           318,917
                                                         ------------     ------------     -------------

          Total revenues                                    855,081        1,750,000        10,830,034
                                                         ------------     ------------     -------------

OPERATING EXPENSES:
     Research and development                             2,455,597        2,448,623        35,202,885
     General and administrative                             706,575          769,434        20,058,849
     Net intangibles write down                                   -                -           259,334
                                                         ------------     ------------     -------------

          Total operating expenses                        3,162,172        3,218,057        55,521,068
                                                         ------------     ------------     -------------

OTHER INCOME (EXPENSES):
     Interest income                                         87,292           71,315         1,441,282
     Interest expense                                        (2,280)         (25,236)       (1,953,129)
     Merger costs                                                 -                -          (525,000)
                                                         ------------     ------------     -------------

          Total other income/(expenses)                      85,012           46,079        (1,036,847)
                                                         ------------     ------------     -------------

NET LOSS                                                 (2,222,079)      (1,421,978)      (45,727,881)

PREFERRED STOCK DIVIDEND                                          -                -        (3,121,525)
                                                         ------------     ------------     -------------

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS
                                                        $(2,222,079)     $(1,421,978)     $(48,849,406)
                                                         ============     ============     =============


Basic and diluted net loss per common share             $     (0.27)     $     (0.20)     $     (29.69)
                                                         ============     ============     =============

Weighted average number of common shares
     outstanding used in computing basic and
     diluted net loss per common share                    8,080,352        7,203,601         1,830,301
                                                         ============     ============     =============`

The accompanying notes to the consolidated financial statements
are an integral part of these financial statements.

-4-

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PALATIN TECHNOLOGIES, INC.
                        (A Development Stage Enterprise)Consolidated Statements of Cash Flows
                                 (unaudited)

`Inception
                                                                                          (January 28, 1986)
                                                        Three Months Ended September 30,       Through
                                                            2000              1999        September 30, 2000
                                                        ------------      -------------   ------------------

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                             $(2,222,079)      $(1,421,978)       (45,727,881)                                                                                           $
  Adjustments to reconcile net loss to net cash
    used for operating activities:
      Depreciation and amortization                         69,120            59,170          1,154,890
      License fee                                                -                 -            500,000
      Interest expense on note payable                           -                 -             72,691
      Accrued interest on long-term financing                    -                 -            796,038
      Accrued interest on short-term financing                   -                 -              7,936
      Intangibles and equipment write down                       -                 -            278,318
      Common stock and notes payable issued for                                    -            751,038
expenses                          -
      Settlement with consultant                                 -                 -            (28,731)
      Acceleration of options previously granted                 -                 -          1,170,000
      Amortization of stock based compensation                   -             18,558         3,444,926
      Changes in certain operating assets and
liabilities:
        Accounts receivable                                 158,082       (1,250,000)          (795,081)
        Prepaid expenses and other                          147,591           148,459        (1,148,894)
        Accounts payable                                  (312,358)           209,872           699,712
        Accrued expenses and other                          115,071            20,816           622,070
                                                        ------------      ------------      -------------
            Net cash used for operating activities      (2,044,573)       (2,215,103)       (38,202,968)
                                                        ------------      ------------      -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of short-term investments                     (675,733)         (402,630)        (2,831,350)
  Purchases of property and equipment                      (15,868)           (4,812)        (2,559,195)
                                                        ------------      ------------      -------------
            Net cash used for investing activities        (691,601)         (407,442)        (5,390,545)
                                                        ------------      ------------      -------------

 CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from notes payable, related party                     -                 -            302,000
  Payments on notes payable, related party                       -                 -           (302,000)
  Proceeds from senior bridge notes payable                      -                 -          1,850,000
  Payments on senior bridge notes payable                        -                 -         (1,850,000)
  Proceeds from notes payable and long-term debt                 -                 -          3,951,327
  Payments on notes payable and long-term debt                   -                 -         (1,951,327)
  Proceeds from Common stock, stock option
     and warrant issuances, net                         10,547,809            13,948         28,416,082
  Proceeds from Preferred stock, net                             -        11,000,000         24,210,326
  Purchase of treasury stock                                     -                 -             (1,667)
                                                        ------------      ------------      -------------
            Net cash provided by financing activities   10,547,809        11,013,948         54,624,741
                                                        ------------      ------------      -------------

NET INCREASE (DECREASE) IN CASH
  AND CASH EQUIVALENTS                                   7,811,635         8,391,403         11,031,228

CASH AND CASH EQUIVALENTS, beginning
   of period                                             3,219,593         2,333,801                  -
                                                        ------------      ------------      -------------

CASH AND CASH EQUIVALENTS, end of period               $11,031,228       $10,725,204        $11,031,228                                                                                            $
                                                        ============      ============      =============`

The accompanying notes to the consolidated financial statements
are an integral part of these financial statements.

-5-

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PALATIN TECHNOLOGIES, INC.
                        (A Development Stage Enterprise)Notes to Consolidated Financial Statements
                                 (unaudited)

## (1)      Organization
Activities:

Nature of Business -- Palatin Technologies, Inc.,
headquartered in Princeton, NJ with its research facility in Edison, NJ, is a
development-stage, pharmaceutical company dedicated to developing and
commercializing products and technologies for diagnostic imaging and ethical
drug development utilizing peptide, monoclonal antibody, and radiopharmaceutical
technologies. We are in the early stages of developing pharmaceutical products
and technologies. We are concentrating our efforts on the following:

| | MIDAS, a peptide technology which may be useful to develop drugs to
treat diseases or for diagnostic imaging. A peptide is a short chain of amino
acids. We are engaged in research and development of this technology to treat
obesity and eating disorders and for neural regeneration, and believe that this
technology may have applications in a variety of other areas as well, including
immune disorders, cancers and cardiology.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | PT-141, a drug to treat sexual dysfunction, initially male erectile
dysfunction. PT-141 is a stabilized peptide that works like a natural hormone.
PT-141 is in preclinical testing, and we expect to start clinical trials in late
2000 or early 2001.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | LeuTech®, a diagnostic imaging product used to image and locate the
site of infection or inflammation within the body. We have completed clinical
trials with LeuTech for the diagnosis of equivocal appendicitis and filed an
application with the United States Food and Drug Administration for approval to
market LeuTech for that indication. FDA review of our clinical efficacy and
safety data is complete and the FDA has not requested any further data on
efficacy or safety. However, the FDA has requested additional manufacturing and
process validation data. We are currently working on responding to the
FDAs request for additional data.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Business Risk and Liquidity  As shown in the
accompanying financial statements, we have incurred substantial net losses of
$2,222,079 for the three months ended September 30, 2000 and have a deficit
accumulated during development stage of $45,727,881. We anticipate incurring
additional losses over at least the next several years, and such losses are
expected to increase as we expand our research and development activities
relating to various technologies. To achieve profitability, we must, alone or
with others, successfully develop and commercialize our technologies and
proposed products, conduct pre-clinical 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 we will be able to achieve
profitability on a sustained basis, if at all.

In September and October of 2000, we received gross proceeds of
$15.15 million in a private placement of common stock and warrants.

Management plans to continue to refine operations, control
expenses, evaluate alternative methods to conduct its business, and seek
available and attractive sources of financing and sharing of development costs.
There can be no assurance that the Companys efforts will be successful.
Management believes that adequate financing has been obtained to fund operations
through September 30, 2001, based on current expenditure levels.

-6-

---

## (2)      Basis of
Presentation:

The accompanying
unaudited financial statements have been prepared in accordance with generally
accepted accounting principles and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnote disclosures required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
these financial statements contain all adjustments (consisting of only normal
recurring adjustments) considered necessary to present fairly the financial
position as of September 30, 2000 and the results of operations and cash flows
for the three month period ended September 30, 2000 and 1999 and for the period
from inception (January 28, 1986) to September 30, 2000. The results of
operations for the three month period ended September 30, 2000 may not
necessarily be indicative of the results of operations expected for the full
year, except that the Company expects to incur a significant loss for the fiscal
year ended June 30, 2001.

The accompanying
financial statements should be read in conjunction with the audited financial
statements and notes thereto included in our annual report on Form 10-K, filed
with the Securities and Exchange Commission, which includes financial statements
as of June 30, 2000 and 1999 and for each of the three fiscal years in the
period ended June 30, 2000.

## (3)      Recent Accounting
Pronouncements

In March 2000, the FASB issued interpretation No. 44, (FIN
44), Accounting for certain transactions Involving Stock
Compensation  an Interpretation of APB 25. This Interpretation
clarifies the definition of employee for purposes of applying APB 25 and
provides the accounting consequences of various modifications to the terms of a
previously fixed stock option or award. This Interpretation is effective July 1,
2000. The adoption of FIN 44 does not have a material impact on our financial
statements.

In December 1999, the Securities and Exchange Commission issued
Staff Bulletin No. 101, Revenue Recognition in Financial Statements
(SAB 101) which is effective for fiscal years beginning after December 15, 1999.
The bulletin draws on existing accounting rules and provides specific guidance
on how those accounting rules should be applied, and specifically addresses
revenue recognition for non-refundable technology access fees in the
biotechnology industry. We expect that we will be required to defer
non-refundable technology fees recorded in 1999 and recognize the related
revenue over future periods. The SEC has extended the implementation date of SAB
101 until the fourth quarter of fiscal years beginning after December 15, 1999.
In accordance with SAB 101, we expect to report a change in accounting principle
and to record the impact of this change as a cumulative effect in our statement
of operations.

## (4)      Summary of
Significant Accounting Policies:

Principles of Consolidation -- The consolidated financial
statements include the accounts of our wholly-owned inactive subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation.

Use of Estimates -- The preparation of consolidated
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and

-7-

---

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.

Short-Term Investments --We account for investments in
accordance with Statement of Financial Accounting Standards No. 115
Accounting For Certain Investments in Debt and Equity Securities. We
classify such investments as available for sale investments and as such all
investments are recorded at fair value. The investments consist of certificates
of deposit. Unrealized gains and losses are classified as a separate component
of stockholders equity. As of September 30, 2000 the unrealized gain on
investments was immaterial. Realized gains and losses are recorded in the
statement of operations in the period that the transaction occurs.

Fixed Assets -- Fixed assets consist of equipment, office
furniture and leasehold improvements. Fixed assets are stated at cost.
Depreciation is recognized using the straight-line method over the estimated
useful lives of 5 years for equipment, 7 years for office furniture and over the
term of the lease for leasehold improvements. Maintenance and repairs are
expensed as incurred while expenditures that extend the useful life of an asset
are capitalized.

Impairment of Long-Lived Assets -- We comply with
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of. We review our 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 our long-lived assets, we
evaluate the probability that future undiscounted net cash flows, without
interest charges, will be less than the carrying amount of the assets.
Impairment is measured at 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
discounted cash flows based on reasonable and supportable assumptions.

Revenue Recognition -- Grant and contract revenues
are recognized as services stipulated in the underlying grants and/or contracts
are provided based on the time and materials incurred. License revenues are
recognized when the license fee is received and we have no further obligations.

Research and Development Costs -- The costs of research
and development activities are expensed as incurred.

Stock Options and Warrants -- Warrants and the majority
of common stock options have been issued at exercise prices greater than, or
equal to, their fair market value at the date granted. Accordingly, no value has
been assigned to these instruments. However, certain stock options were issued
under non-plan option agreements and a non-qualified stock option plan at
exercise prices below market value. The difference between the exercise price
and the market value of these securities has been recorded as deferred
compensation and is being expensed over the vesting period of the option.

Income Taxes -- We intend to file consolidated federal
and combined state income tax returns. We account for income taxes in accordance
with Statement of Financial Accounting Standards No. 109 (SFAS 109),
Accounting for Income Taxes. SFAS 109 requires, among other things,
the use of the liability method in computing deferred income taxes.

We provide for deferred income taxes relating to timing
differences in the recognition of income and expense items (primarily relating
to depreciation, amortization and certain leases) for

-8-

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financial and tax reporting purposes. Such amounts are measured
using current tax laws and regulations in accordance with the provisions of SFAS
109.

In accordance with SFAS 109, we have recorded a valuation
allowance against the realization of its deferred tax assets. The valuation
allowance is based on managements estimates and analysis, which includes
tax laws which may limit our ability to utilize tax loss carryforwards.

Net Loss per Common Share -- We apply SFAS No. 128,
Earnings per Share (SFAS 128). SFAS 128 requires dual
presentation of basic and diluted earnings per share (EPS) for
complex capital structures on the face of the statement of operations. Basic EPS
is computed by dividing the income (loss) by the weighted average number of
common shares outstanding for the period. Diluted EPS reflects the potential
dilution from the exercise or conversion of securities into common stock, such
as stock options. For the three months ended September 30, 2000 and 1999 and for
the period from inception (January 28, 1986) through September 30, 2000, there
were no dilutive effects of stock options or warrants as we incurred a net loss
in each period. Options and warrants to purchase 6,267,192 shares of common
stock at prices ranging from $0.20 to $360 per share were outstanding at
September 30, 2000.

Fair Value of Financial Instruments -- Statement of
Financial Accounting Standards No. 107 (SFAS 107), Disclosures
about Fair Value of Financial Instruments, requires disclosures of fair
value information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate the value. In cases where
quoted market prices are not available, fair values are based on estimates using
present value or other valuation techniques. These techniques are significantly
affected by the assumptions used, including discount rate and estimates of
future cash flows. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases, could not
be realized in immediate settlement of the instrument. SFAS 107 excludes certain
financial instruments and all non-financial instruments from its disclosure
requirements. Accordingly, the aggregate fair value amounts presented do not
represent our underlying value. Based on the above, the amount reported on the
balance sheet approximates the fair value.

Reclassifications Certain reclassifications have
been made to the prior year financial statements to conform to the current year
presentation.

## (5)      Commitments and
Contingencies:

Leases We lease two facilities in New Jersey under
non-cancelable operating leases.

License Agreements  We currently maintain four
license agreements that require minimum yearly payments. The cost to maintain
these license agreements for the fiscal year ending June 30, 2001 amounts to
$230,000. There were no payments due during the three months ended September 30,
2000 under these agreements.

## (6)      Stockholders
Equity:

In September and October of 2000, we received gross proceeds of
$15.15 million in a private placement common stock and warrants. Investors
purchased 2,532,368 shares of common stock in two tranches: 1,800,000 shares at
$6.00 per share and 732,368 shares at $5.94 per share. For every five shares
purchased, the investors also received a five-year warrant to purchase one share
of common stock at an exercise price of $7.50 for the first tranche and $7.42
for the second tranche.

-9-

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Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations.

General

The following discussion and analysis should be read in
conjunction with the consolidated financial statements and accompanying notes
filed as part of this report.

We make forward-looking statements in this report. Sometimes
these statements contain words such as anticipates,
plans, intends, expects and similar
expressions to identify forward-looking statements. These statements are not
guarantees of our future performance. Our business involves known and unknown
risks, uncertainties and other factors which may cause our actual results,
performance or achievements to be materially different from what we say in this
report. We describe a number of these factors in our annual report on Form 10-K
for the year ended June 30, 2000. Given these uncertainties, you should not
place undue reliance on these forward-looking statements, which speak only as of
the date of this report. We will not revise these forward-looking statements to
reflect events or circumstances after the date of this report or to reflect the
occurrence of unanticipated events.

We expect to incur substantial operating losses over the next
several years due to continuing expenses associated with our research and
development programs, including pre-clinical testing, clinical trials and
manufacturing. Operating losses may fluctuate from quarter to quarter as a
result of differences in the timing of when we incur expenses.

## Results of Operations

Three Month Period Ended September 30, 2000 Compared to Three
Month Period Ended September 30, 1999.

Grants and Contracts Contract revenue decreased to
$795,081 for the three month period ended September 30, 2000 compared to
$1,250,000 for the three month period ended September 30, 1999, mainly due to
decreased shared development costs of LeuTech pursuant to our strategic
collaboration agreement with Mallinckrodt, Inc. We recorded $60,000 as grant
revenue for the three months ended September 30, 2000. We had no revenue from
grants recorded for the three-month period ended September 30, 1999.

License Fees and Royalties  We did not record any
revenues from license fees for the three-month period ended September 30, 2000.
We recorded $500,000 in license fees as revenue during the three month period
ended September 30, 1999. We received these fees as a one-time, non-refundable
payment pursuant to our strategic collaboration agreement with Mallinckrodt.

Research and development - Research and development
expenses increased slightly to $2,455,597 for the three month period ended
September 30, 2000 compared to $2,448,623 for the three month period ended
September 30, 1999. These expenses related primarily to the development of
LeuTech, including expenses for manufacturing scale-up and regulatory
consulting. We expect research and development expenses to continue to increase
in future quarters as we expand clinical trials and manufacturing efforts on
LeuTech and expand our efforts to develop our MIDAS and PT-141 technologies.

General and administrative - General and administrative
expenses decreased to $706,575 for the three month period ended September 30,
2000 compared to $769,434 for the three month period ended September 30, 1999.
The decrease in general and administrative expenses is mainly

-10-

---

attributable to a decrease in administrative salaries following
the resignation of our former president and CEO in June 2000.

Interest income - Interest income increased to $87,292
for the three month period ended September 30, 2000 compared to $71,315 for the
three month period ended September 30, 1999. Interest income increased primarily
from the additional funds available pursuant to our recent financing.

Interest expense - Interest expense decreased to $2,280
for the three month period ended September 30, 2000 compared to $25,236 for the
three month period ended September 30, 1999. Interest expense decreased because
of the repayment of debt in the three months ended September 30, 1999.

Net loss - Net loss increased to $2,222,079 for the three
month period ended September 30, 2000 compared to $1,421,978 for the three month
period ended September 30, 1999. The increase is due to the reduction of
revenues recorded pursuant to the provisions of our strategic collaboration
agreement with Mallinckrodt.

Liquidity and Capital Resources

Since inception, we have incurred net operating losses. As of
September 30, 2000, we had a deficit accumulated during development stage of
$45,727,882. We have financed our net operating losses through September 30,
2000 by a series of debt and equity financings. At September 30, 2000, we had
cash and investments of $14,513,139.

For the three months ended September 30, 2000, the net increase
in cash was $7,811,635. Net cash used for operating activities was $2,044,573,
net cash used for investing activities was $69,601 and net cash provided by
financing activities was $10,547,809.

In September and October 2000, we received gross proceeds of
$15.15 million in a private placement of common stock and warrants. Investors,
consisting of European financial institutions and other foreign accredited
investors, purchased approximately 2.5 million shares of common stock in two
tranches: 1,800,000 shares at $6.00 per share and 732,368 shares at $5.94 per
share. The net proceeds of approximately $14.1 million will be used primarily
for general corporate purposes, especially for the development and clinical
trials of new products based on our proprietary technologies.

We have three license agreements that require minimum yearly
payments. Future minimum fiscal year payments under the license agreements are:
2001 - $230,000, 2002 - $280,000, 2003 - $280,000, 2004 - $280,000 and 2005 -
$280,000.

As of April 2000, we entered into an amendment to our research
facilitys lease, which increased our rentable space from approximately
10,500 square feet to approximately 15,800. Our aggregate future minimum lease
payments escalate from approximately $203,000 until July 13, 2002 to $300,000
from July 14, 2002 through July 13, 2007.

On March 15, 2000 we entered into an agreement with Watson
Laboratories Inc. (f/k/a TheraTech, Inc.) to terminate our License and
Development Agreement with Watson dated March 18, 1998. In connection with the
termination, we paid Watson approximately $500,000.

As of December 7, 1999, we entered into a five-year lease on
administrative offices in Princeton, New Jersey. Minimum future lease payments
range from approximately $187,374 in year one to approximately $202,070 in year
five. We have entered into a sublease agreement with Derma Sciences, Inc. on our
former administrative offices. Under the sublease agreement Derma reimburses us
100% of all rents and utility charges.

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On August 16, 1999, we entered into a strategic collaboration
agreement with Mallinckrodt, a large international healthcare products company,
to jointly develop and market LeuTech. Under the terms of the agreement,
Mallinckrodt:

| | received an exclusive worldwide license
     (excluding Europe) for sales, marketing and distributions of LeuTech and
     paid a licensing fee of $500,000;                                                                                                                                           
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | agreed to make milestone payments totaling
     $5,000,000 upon FDA approval of the first LeuTech indication and $5,000,000
     on the attainment of sales goals following product launch;                                                                                                            
| | agreed to reimburse us for 50% of all ongoing
     LeuTech development costs, subject to a cap, which can be
     amended;                                                                                                                                                                             
| | agreed to pay to us a transfer price for each
     LeuTech product unit delivered to Mallinckrodt and a quarterly royalty on
     Mallinckrodt's future net sales of LeuTech;                                                                                                                          
| | purchased 700,000 restricted shares of our
     non-voting Series C convertible preferred stock for $13,000,000;
     and                                                                                                                                                                              
| | agreed that the Series C convertible preferred
     stock would be convertible after five years, or earlier upon the occurrence
     of a change in control (as defined in the agreement), into 700,000 shares
     of our common stock with certain registration rights and anti-dilution
     rights.

In March 1997, we entered into a ten-year lease on research and
development facilities in Edison, New Jersey, which commenced August 1, 1997.
Minimum future lease payments escalate from approximately $116,000 per year to
$200,000 per year after the fifth year of the lease term. The lease will expire
in fiscal year 2007.

We are and expect to continue actively searching for certain
products and technologies to license or acquire, now or in the future. If we are
successful in identifying a product or technology for acquisition, we may
require substantial funds for such an acquisition and subsequent development or
commercialization. We do not know whether any acquisition will be consummated in
the future.

We have incurred negative cash flows from operations since our
inception, and have expended, and expect to continue to expend in the future,
substantial funds to complete our planned product development efforts. We expect
our existing capital resources, including the funds we received in September and
October 2000, will be adequate to fund our projected operations through
September 30, 2001, based on current expenditure levels.

We anticipate incurring additional losses over at least the next
several years, and we expect our losses to increase as we expand our research
and development activities relating to MIDAS, LeuTech and PT-141. To achieve
profitability, we, alone or with others, must successfully develop and
commercialize our technologies and proposed products, conduct pre-clinical
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 we do not know
whether we will be able to achieve profitability on a sustained basis, if at
all.

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Item 3. Quantitative and Qualitative
Disclosures About Market Risk

Interest Rate Risk. Our exposure to market risk related
to changes in interest rates relates primarily to our investment portfolio. We
invest in instruments that meet high credit quality standards, and we limit the
amount of credit exposure as to any one issue, issuer and type of investments.

As of September 30, 2000, our cash and cash equivalents and
investments consisted of $14,250,064, most of which were short term investments
having a maturity of less than one year. Due to the average maturity and
conservative nature of our investment portfolio, we do not believe that short
term fluctuations in interest rates would materially affect the value of our
securities.

# PART II - OTHER INFORMATION

Item 1.     Legal
Proceedings.

On March 14, 2000, we announced that we would not be extending
the merger consummation date of March 31, 2000 for our previously announced
proposed merger with San Diego-based Molecular Biosystems, Inc. and would not be
proceeding with the merger. Our decision not to proceed with the merger was
based on managements view that the merger was not in the best interests of
our stockholders.

On or about April 28, 2000, Molecular Biosystems commenced a
legal action against us and against Evergreen Merger Corporation, our
wholly-owned shell subsidiary, in the Superior Court of the State of Delaware,
County of New Castle. In the complaint, Molecular Biosystems seeks damages
against us and Evergreen arising from the alleged improper termination of the
merger agreement dated November 11, 1999, among Molecular Biosystems, Palatin
and Evergreen. Under the merger agreement, Evergreen would have merged with and
into Molecular Biosystems, which would have become a wholly-owned subsidiary of
ours.

As a consequence of the claims alleged in the complaint,
Molecular Biosystems contends that it is entitled to an award of damages against
us and Evergreen in amounts to be determined at trial, but in any event, at
least equal to $1,765,305. This figure represents the amount of a breakup
fee of $1,000,000 provided for in the merger agreement and $765,305 for
the costs and expenses incurred by Molecular Biosystems in connection with the
proposed merger. In addition, Molecular Biosystems seeks consequential damages
in an unstated amount plus interest and Molecular Biosystems costs and
expenses of the action.

In our response filed in June of 2000, we have denied the
material allegations. Management believes that we have good and meritorious
defenses to the action and we intend vigorously to defend the action.

We are involved in various claims and litigation arising in the
normal course of business, consisting of actions commenced against Palatin prior
to the RhoMed merger. We believe that the outcome of such claims and litigation
will not have a material adverse effect on our business.

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Item
2.     Changes in Securities and Use of Proceeds.

In a private placement of common stock and warrants in September
and October 2000, we sold 2,532,368 shares of our $.01 par value common stock to
a total of nine investors in two tranches: 1,800,000 shares at $6.00 per share
and 732,368 shares at $5.94 per share. The gross proceeds were approximately
$15.15 million and the net proceeds were approximately $14.1 million. For every
five shares purchased, the investors also received an immediately exercisable
five-year warrant to purchase one share of common stock. The warrants for
360,000 shares issued in the first tranche have an exercise price of $7.50 per
share, and the warrants for 146,472 shares issued in the second tranche have an
exercise price of $7.42. We made the private placement solely to foreign
accredited investors pursuant to Regulation D under the Securities Act of 1933.
The investors represented to us that they were purchasing the securities for
their own accounts for investment and not with a view toward resale or
distribution to others. The certificates representing the shares of common stock
and warrants bear restrictive legends.

In connection with the private placement, we paid a finder's fee
of $1,060,391 and issued five-year warrants to the finder to purchase 216,000
shares of common stock at $6.60 per share and 87,884 shares of common stock at
$6.53 per share.

Item
3.     Defaults Upon Senior Securities.

None.

Item
4.     Submission of Matters to a Vote of Security
Holders.

None.

Item 5.     Other
Information.

None.

Item
6.     Exhibits and Reports on Form 8-K.

(a) Exhibits



| | 10.1 Form of stock purchase agreement for the
     September-October 2000 private placement.     
| | -------------------------------------------------------------------------------------------------
| |                                                                                                  
| | 10.2 Form of registration rights agreement for the
     September-October 2000 private placement.
| |                                                                                                  
| | 10.3 Form of warrant issued to purchasers in the
     September-October 2000 private placement.  
| |                                                                                                  
| | 27 Financial Data Schedule                                                                       
| |                                                                                                  

(b) Reports on Form
8-K

| | During the quarter ended September 30, 2000, we filed one
     report on Form 8-K. On September 21, 2000, we filed a report dated
     September 19, 2000, containing Item 5, Other Information, and Item 7,
     Exhibits. Item 5 reported our announcement that we received gross proceeds
     of $10.8 million in the first tranche of our private placement of stock and
     warrants. The Item 7 exhibit was our press release concerning the receipt
     of proceeds in the offering.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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Signatures

In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

|                        |  | Palatin Technologies, Inc.
     (Registrant)                                                             
|----------------------- |  | ---------------------------------------------------------------------------------------------------------
|                        |  |                                                                                                          
|                        |  |                                                                                                          
|                        |  |                                                                                                          
|Date: November 14, 2000 |  | /s/ Carl Spana
     Carl Spana, Ph.D.
     President and 
     Chief Executive Officer                   
|                        |  |                                                                                                          
|                        |  |                                                                                                          
|Date: November 14, 2000 |  | /s/ Stephen T. Wills
     Stephen T. Wills
     Executive Vice President and Chief Financial
     Officer

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