** **

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

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## **FORM 10-Q**

## ** **

**ý****                                ****QUARTERLY REPORT PURSUANT TO SECTION 13OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

** **

**For thequarterly period ended March 31, 2006**

** **

**o****                                ****TRANSITION REPORT PURSUANT TO SECTION 13OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

** **

**For thetransition period from                                          to                                          **

** **

**CommissionFile Number:  0-21134**

 

**Paligent Inc.**

(Exact name of registrant as specified in its charter)

 
| **Delaware**                                 | ** ** | **04-2893483**      |
|----------------------------------------------|------------|---------------------|
| (State or other jurisdiction of              |       | (I.R.S. Employer    |
| incorporation or organization)               |       | Identification No.) |
|                                         |       |                |
| **10 East 53rd Street, New York, New  York** | ** ** | **10022**           |
| (Address of principal executive offices)     |       | (zip code)          |

 

**(212) 755-5461**

(Registrant’s telephone number, includingarea code)

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the registrant was required to file suchreports), and (2) has been subject to such filing requirements for thepast 90 days.

 

YES    ý    NO   o

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer.  See definition of“accelerated filer and large accelerated filer” in Rule 12b-2 of theExchange Act.

          Large accelerated filer  o                       Acceleratedfiler  o             Non-acceleratedfiler  ý

 

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act).

 

YES  ý      NO  o

 

Thenumber of shares outstanding of each of the issuer’s classes of common stock,as of the latest practicable date.

 
| **Class**                     | ** ** | **Outstanding as of May 5, 2006** |
|-------------------------------|------------|----------------------------------------|
| Common Stock, $0.01 par value |       | 32,490,948                             |

 

 

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**PALIGENT INC.**

 

**INDEX**

 
| **PART I.**       | **FINANCIAL  INFORMATION**                                                                                   |   |
|------------------------|--------------------------------------------------------------------------------------------------------------|--------|
|                   |                                                                                                         |   |
| **Item  1.**           | Financial  Statements                                                                                        |   |
|                   |                                                                                                         |   |
|                   | Condensed Consolidated Balance Sheets  March 31, 2006 (unaudited) and December 31, 2005            |   |
|                   |                                                                                                         |   |
|                   | Condensed Consolidated Statements of Operations  (unaudited) Three months ended March 31, 2006 and 2005 |   |
|                   |                                                                                                         |   |
|                   | Condensed Consolidated Statements of Cash Flows  (unaudited) Three months ended March 31, 2006 and 2005 |   |
|                   |                                                                                                         |   |
|                   | Notes to Condensed Consolidated Financial Statements  (unaudited)                                            |   |
|                   |                                                                                                         |   |
| **Item 2.**            | Management’s Discussion and Analysis of Financial  Condition and Results of Operations                  |   |
|                   |                                                                                                         |   |
| **Item 3.**            | Quantitative and Qualitative  Disclosure About Market Risk                                                   |   |
|                   |                                                                                                         |   |
| **Item 4.**            | Controls and Procedures                                                                                      |   |
|                   |                                                                                                         |   |
| **PART II.**      | **OTHER INFORMATION**                                                                                        |   |
|                   |                                                                                                         |   |
| **Item 6.**            | Exhibits                                                                                                     |   |
|                   |                                                                                                         |   |
| **SIGNATURES**         |                                                                                                         |
|                   |                                                                                                         |   |
| **EXHIBIT INDEX** |                                                                                                         |

 

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**PALIGENT INC.**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

 
| ** **                                                                                                                                                             | ** ** | **March 31, 2006** | ** ** | **December 31, 2005** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|----------------------------|------------|
| ** **                                                                                                                                                             | ** ** | **(unaudited)**         | ** ** | ** **                 | ** ** |
| ASSETS                                                                                                                                                                 |       |                    |       |                       |       |
| Current assets:                                                                                                                                                        |       |                    |       |                       |       |
| Cash and cash  equivalents                                                                                                                                             |       | $                       | 8,921      |                       | $          | 51,681 |   |
| Prepaid expenses  and other current assets                                                                                                                             |       | 11,267                  |       | —                     |       |
| Total current  assets                                                                                                                                                  |       | $                       | 20,188     |                       | $          | 51,681 |   |
|                                                                                                                                                                   |       |                    |       |                       |       |
| LIABILITIES AND STOCKHOLDERS’ DEFICIT                                                                                                                             |       |                    |       |                       |       |
| Current liabilities:                                                                                                                                                   |       |                    |       |                       |       |
| Accounts payable  and accrued expenses                                                                                                                                 |       | $                       | 27,786     |                       | $          | 9,703 |   |
| Accrued  professional services                                                                                                                                         |       | 15,600                  |       | 27,000                     |       |
| Due to related  party                                                                                                                                                  |       | 622,159                 |       | 546,362                    |       |
| Total current  liabilities                                                                                                                                             |       | 665,545                 |       | 583,065                    |       |
|                                                                                                                                                                   |       |                    |       |                       |       |
| Stockholders’ deficit:                                                                                                                                            |       |                    |       |                       |       |
| Common stock,  $.01 par value; 75,000,000 shares authorized; 32,490,948 shares issued and  outstanding at March 31, 2006 and December 31, 2005, respectively |       | 324,910                 |       | 324,910                    |       |
| Additional  paid-in capital                                                                                                                                            |       | 154,634,974             |       | 154,634,974                |       |
| Accumulated  deficit                                                                                                                                                   |       | (155,605,241            | )          | (155,491,268               | )          |
| Total stockholders’  deficit                                                                                                                                      |       | (645,357                | )          | (531,384                   | )          |
| Total  liabilities and stockholders’ deficit                                                                                                                      |       | $                       | 20,188     |                       | $          | 51,681 |   |

 

The accompanying notes are an integral part of the condensedconsolidated financial statements.

 

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**PALIGENT INC.**

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

**(unaudited)**

 
| ** **                                                                     | ** ** | **Three months ended March 31,** | ** ** |
|--------------------------------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                                                     | ** ** | **2006**                              | ** ** | **2005** | ** ** |
| General and administrative expenses                                            |       | $                                     | 113,973    |   | $ | 101,094 |   |
|                                                                           |       |                                  |       |   |   |
| Loss from operations                                                           |       | (113,973                              | )          | (101,094 | ) |
|                                                                           |       |                                  |       |   |   |
| Other income, net                                                              |       | —                                |       | 141,250 |   |
|                                                                           |       |                                  |       |   |   |
| Net (loss) income                                                              |       | $                                     | (113,973   | ) | $ | 40,156 |   |
|                                                                           |       |                                  |       |   |   |
| Net (loss) earnings per common share – basic and  diluted                 |       | $                                     | (0.00      | ) | $ | 0.00 |   |
|                                                                           |       |                                  |       |   |   |
| Weighted average number of common shares outstanding  – basic and diluted |       | 32,490,948                            |       | 32,490,948 |   |

 

The accompanying notes are an integral part ofthe condensed consolidated financial statements.

 

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**PALIGENT INC.**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(unaudited)**

 
| ** **                                                                            | ** ** | **Three months ended March 31,** | ** ** |
|---------------------------------------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                                                            | ** ** | **2006**                              | ** ** | **2005** | ** ** |
| ** **                                                                            | ** ** | ** **                            | ** ** | ** ** | ** ** |
| Cash flows from operating activities:                                                 |       |                                  |       |   |   |
| Net (loss)  income                                                                    |       | $                                     | (113,973   | ) | $ | 40,156 |   |
| Adjustments to  reconcile net (loss) income to net cash used in operating activities: |       |                                  |       |   |   |
| Depreciation and  amortization                                                        |       | —                                |       | 468 |   |
| Changes in  operating assets and liabilities:                                         |       |                                  |       |   |   |
| Note receivable                                                                       |       | —                                |       | (75,000 | ) |
| Prepaid expenses  and other current assets                                            |       | (11,267                               | )          | (12,573 | ) |
| Subtenant  receivable                                                                 |       | —                                |       | 30,000 |   |
| Accounts payable  and accrued expenses                                                |       | 6,683                                 |       | (11,520 | ) |
| Interest payable  to related party                                                    |       | 10,797                                |       | 5,067 |   |
| Net cash used in  operating activities                                                |       | (107,760                              | )          | (23,402 | ) |
|                                                                                  |       |                                  |       |   |   |
| Cash flows from financing activities:                                                 |       |                                  |       |   |   |
| Proceeds from  related party loan                                                     |       | 65,000                                |       | 80,000 |   |
| Net cash  provided by financing activities                                            |       | 65,000                                |       | 80,000 |   |
|                                                                                  |       |                                  |       |   |   |
| Net (decrease) increase in cash and cash equivalents                                  |       | (42,760                               | )          | 56,598 |   |
|                                                                                  |       |                                  |       |   |   |
| Cash and cash equivalents at beginning of period                                      |       | 51,681                                |       | 21,388 |   |
|                                                                                  |       |                                  |       |   |   |
| Cash and cash equivalents at end of period                                            |       | $                                     | 8,921      |   | $ | 77,986 |   |

 

The accompanying notes are an integral part of the condensedconsolidated financial statements.

 

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**PALIGENT INC.**

**NOTES TOCONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(unaudited)**

 

**NOTE 1 – BASIS OF PRESENTATION**

 

**Interim Financial Statements**

 

The unaudited condensedconsolidated financial statements included herein have been prepared byPaligent Inc. (“Paligent” or the “Company”) pursuant to the rules andregulations of the United States Securities and Exchange Commission.  Certain information and footnote disclosures normally included infinancial statements prepared in accordance with generally accepted accountingprinciples have been condensed or omitted pursuant to such rules andregulations.  In the opinion of management, the accompanyingunaudited condensed consolidated financial statements reflect all adjustments(consisting only of normal recurring accruals) necessary for a fairpresentation of the financial position of the Company at March 31, 2006and the results of its operations and its cash flows for the interim periodsended March 31, 2006 and 2005. The condensed consolidated balance sheet asof December 31, 2005 was derived from audited financial statements butdoes not include all disclosures required by generally accepted accountingprinciples.  The accompanying condensedconsolidated financial statements have been prepared in accordance withaccounting standards for interim financial statements and should be read in conjunctionwith the audited consolidated financial statements and the notes theretoincluded in the Company’s Form 10-K for the year ended December 31,2005.  The results of operations for the interim periods are not necessarilyindicative of the results of operations to be expected for the fiscal year orany other interim period.

 

The accompanying unauditedcondensed consolidated financial statements have been prepared on a goingconcern basis which contemplates the realization of assets and the satisfactionof liabilities in the ordinary course of business.  The Company has incurred losses fromoperations since inception, has working capital and stockholders’ deficits andhas limited cash to fund operations in 2006. The Company is presently relying on borrowings from its principalstockholder to fund continuing operations. The principal stockholder has made no commitment to continue to makeloans to the Company.

 

While the Company evaluatesstrategic alternatives, including potential business investments and relatedfinancing, the Company’s rate of spending could vary from its currentestimate.  No assurance can be given thatthe Company will be able to complete a business investment or that suchfinancing will be available to the Company. If the Company is unable to generate significant revenue from acquiredoperations, obtain financing from its principal stockholder or securesufficient financing for operations resulting from acquisition or merger, theCompany will experience a cash shortage in 2006, the effect of which couldresult in the discontinuance of operations. If additional funds are raised by issuing equity securities, furtherdilution to existing stockholders will result and future investors may begranted rights superior to those of existing stockholders.

 

Thesecircumstances raise substantial doubt about the Company’s ability to continueas a going concern.  The financialstatements do not include any adjustments that might result from the outcome ofthis uncertainty.

 

**Reclassification**

 

Certain prior periodamounts have been reclassified to conform to the current period presentation.

 

**NOTE 2 – EARNINGS(LOSS) PER SHARE**

 

The Company complies withthe accounting and reporting requirements of Statement of Financial AccountingStandard No. (“FAS”) 128, “Earnings Per Share.”  Basic earnings per share (“EPS”) 

 

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excludes dilution and iscomputed by dividing income (loss) applicable to common stockholders by theweighted average number of common shares outstanding for the period.  Diluted EPS is based upon the weightedaverage number of common shares outstanding during the period plus theadditional weighted average common equivalent shares during the period.  Common equivalent shares result from the assumedexercises of outstanding stock options and warrants, the proceeds of which arethen assumed to have been used to repurchase outstanding shares of common stock(the “treasury stock method”).  Commonequivalent shares are not included in the per share calculations where theeffect of their inclusion would be anti-dilutive.  Inherently, stock options and warrants aredeemed to be anti-dilutive when the average market price of the common stockduring the period exceeds the exercise price of the stock options or warrants.

 

For the three months endedMarch 31, 2006 and 2005, the Company had stock options and warrantsoutstanding that were anti-dilutive. These securities could potentially dilute basic EPS in the future butwere not included in the computation of diluted EPS for the periods presentedbecause to do so would have been anti-dilutive. Consequently, there were no differences between basic and diluted EPSfor these periods.

 

**NOTE 3 –RELATED PARTY TRANSACTIONS**

 

OnOctober 8, 2003, in anticipation of completing a business combination withDigital Products of Delaware, Inc. (“Digital”) or another entity, theCompany executed a promissory note (the “Promissory Note”) with Richard J.Kurtz, the principal stockholder of the Company and then the principalstockholder of Digital.  Under the PromissoryNote, the Company received, and expects to continue to receive, loans that willenable it to meet its anticipated cash operating needs.  The Promissory Note bears interest at 8% perannum and was repayable upon the first anniversary of the making of the firstloan.  As the first anniversary of thePromissory Note has occurred, the amount due under the Promissory Note ispayable on demand.  As of March 31,2006, the principal balance and accrued interest due under the Promissory Noteare $580,000 and $42,159, respectively (see Note 5 — “Subsequent Event”).

 

**NOTE 4 –STOCK-BASED COMPENSATION**

 

InDecember 2004, the Financial Accounting Standards Board issued FAS 123R, “Share-BasedPayment.”  FAS 123R is a revision of FAS123, “Accounting for Stock-Based Compensation,” and supersedes Accounting PrinciplesBoard Opinion No. (“APB”) 25, “Accounting for Stock Issued to Employees.”  Among other items, FAS 123R eliminates theuse of APB 25 and the intrinsic value method of accounting, and requirescompanies to recognize the cost of employee services received in exchange forawards of equity instruments in the financial statements, based on the grantdate fair value of those awards.  Theeffective date of FAS 123R for the Company is January 1, 2006.  FAS 123R permits companies to adopt itsrequirements using either a “modified prospective” method, or a “modifiedretrospective” method.  Under the “modifiedprospective” method, compensation cost is recognized in the financialstatements beginning with the effective date, based on the requirements of FAS123R for all share-based payments granted after that date, and based on therequirements of FAS 123 for all unvested awards granted prior to the effectivedate of FAS 123R. Under the “modified retrospective” method, the requirementsare the same as under the “modified prospective” method, but also permitsentities to restate financial statements of previous periods, either for allprior periods presented or to the beginning of the fiscal year in which thestatement is adopted, based on previous pro forma disclosures made inaccordance with FAS 123. The Company has adopted the modified prospectivemethod of recognition, and has recognized the cost, if any, in its financialstatements for the quarter ended March 31, 2006.

 

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Prior to the adoption of FAS123R, the Company had applied APB 25 and related interpretations in accountingfor its stock-based compensation plans. Accordingly, no compensation cost had been recognized for its stockoption plan.  Rather, the Companycomplied with FAS 148, “Accounting for Stock-Based Compensation - Transitionand Disclosure, an Amendment of FAS 123,” which provided alternative methods oftransition for a voluntary change to the fair value based method of accountingfor stock-based employee compensation. FAS 148 also amended the disclosure requirements of FAS 123 to requiremore prominent and more frequent disclosures in financial statements about theeffects of stock-based compensation.  Sincethere were no unvested awards during the three months ended March 31, 2006and 2005, the Company’s net (loss) income would not have been adjusted forthese periods for awards granted under the Company’s stock-based compensationplans in accordance with FAS 123.

 

The Company had utilized theBlack-Scholes option pricing model to measure the fair value of stock optionsgranted to employees. While FAS 123R permits entities to continue to use such amodel, it also permits the use of a “lattice” model.  The Company expects to continue using theBlack-Scholes option pricing model with its adoption of FAS 123R to measure thefair value of stock options.

 

**NOTE 5 –SUBSEQUENT EVENT**

 

On April 25, 2006, the Company enteredinto a Letter Agreement (the “Agreement”) with International Fight League, Inc.(“IFL”) and Richard J. Kurtz, the Company’s principal stockholder.  The Agreement sets forth the proposed termsof a transaction in which the Company would acquire 100% of the issued andoutstanding common and preferred stock of IFL in exchange for shares of commonstock of the Company which, upon their issuance, would be equal to 95% of theissued and outstanding shares of common stock of the Company.  The Agreement further provides that Mr. Kurtzshall immediately purchase certain equity interests in IFL which would beconverted into interests in the Company if the acquisition of IFL wereconsummated.  If the proposed transactionis not consummated, Mr. Kurtz would receive additional equity interests inIFL.  The Agreement also provides that,upon consummation of the transaction, Mr. Kurtz will convert the promissorynote issued by the Company to him, under which principal and interest of$651,000 was outstanding at the time of the Agreement, into shares of commonstock of the Company (see Note 3 — “Related Party Transactions”).  IFL has agreed not to solicit, initiate,discuss or negotiate any other acquisition proposal or offer during the periodin which the Agreement is in effect.  TheCompany may terminate the Agreement at any time in its sole discretion.

 

The transaction is characterized as a reversemerger for accounting purposes. Application of reverse merger accounting would result in IFL beingdeemed to be the acquirer and the continuing entity for accounting purposes.

 

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**Item2.  Management’s Discussion and Analysisof Financial Condition and Results of Operations.**

 

***Note Regarding Forward-Looking Statements***

 

*Statementsin this Form 10-Q that are not statements or descriptions of historicalfacts are “forward-looking” statements under Section 21E of the SecuritiesExchange Act of 1934, as amended, and the Private Securities Litigation ReformAct of 1995 and are subject to numerous risks and uncertainties.  These forward-looking statements cangenerally be identified by the use of such terms as “anticipate,” “believe,” “continue,”“expect,” “may,” “should,” or similar variations or the negative thereof.  These forward looking statements involverisks and uncertainties, many of which are out of the Company’s control andwhich may affect its future business plans. Factors that may affect the Company’s future business plans include: (i) itsability to identify, complete and integrate an acquisition of an operating business,including the IFL acquisition; (ii) the viability of the Company’sbusiness strategy in connection with an acquisition and its ability toimplement such strategy; and (iii) its ability to secure financing for itscurrent costs and potential future operations. Such statements reflect the current view of the Company with respect tofuture events and are subject to certain risks, uncertainties andassumptions.  In addition, the Company’sbusiness, operations and financial condition are subject to the risks,uncertainties and assumptions that are described in the Company’s reports andstatements filed from time to time with the Securities and ExchangeCommission.  Should one or more of thoserisks or uncertainties materialize, or should underlying assumptions proveincorrect, actual results may vary materially from those discussed herein.  The descriptions of the risks, uncertaintiesand assumptions to which the Company’s business, operations and financialcondition are subject are as of the date of this report.  The Company assumes no obligation to updateany such forward-looking statements.*

 

**Overview**

 

Since 2001, Paligent Inc., together with its subsidiaries(collectively, the “Company”), has been engaged in seeking businessopportunities to maximize value for its stockholders.  The Company has evaluated various strategicalternatives, including acquisitions of new operating businesses andtechnologies as well as potential merger opportunities.

 

From its inception in 1985 through 1999, the Company operated as abiotechnology company engaged in the development and commercialization of noveldrugs with a product portfolio focused on infectious diseases andoncology.  During 1999, the Company’sprincipal efforts were devoted to drug development and human clinical trialsfocusing on two biotechnology compounds, PRO 2000 Gel and O6-Benzylguanine (“O6-BG”).  During fiscal 2000, the Company closed itsresearch facilities and out-licensed PRO 2000 Gel and O6-BG.  In September 2004, the Companytransferred all of its rights, title and interest in PRO 2000 Gel pursuant toan option duly exercised by its sublicense and in March 2005, the Companyassigned all of its rights, interests and obligations in O6-BG to an affiliateof its sublicensee.

 

On April 25, 2006, the Company enteredinto a Letter Agreement (the “Agreement”) with International Fight League, Inc.(“IFL”) and Richard J. Kurtz, the Company’s principal stockholder.  The Agreement sets forth the proposed termsof a transaction in which the Company would acquire 100% of the issued andoutstanding common and preferred stock of IFL in exchange for shares of commonstock of the Company which, upon their issuance, would be equal to 95% of theissued and outstanding shares of common stock of the Company.  The Agreement further provides that Mr. Kurtzshall immediately purchase certain equity interests in IFL which would beconverted into interests in the Company if the acquisition of IFL wereconsummated.  If the proposed transactionis not consummated, Mr. Kurtz would receive additional equity interests inIFL.  The Agreement also provides that,upon consummation of the transaction, Mr. Kurtz will convert thepromissory note issued by the Company to him, under which 

 

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principal and interest of $651,000 wasoutstanding at the time of the Agreement, into shares of common stock of theCompany.  IFL has agreed not to solicit,initiate, discuss or negotiate any other acquisition proposal or offer duringthe period in which the Agreement is in effect. The Company may terminate the Agreement at any time in its solediscretion.

 

**Results of Operations**

 

From inception through March 31,2006, the Company has generated no revenues from product sales or services andhas not been profitable.  As the Companyevaluates various strategic alternatives in its quest for new growth areas thatwill maximize value to existing stockholders, the Company expects to incuradditional losses.

 

## ***Three months ended March 31,2006 as compared to the three months ended March 31, 2005***

## ** **

The Company’s total operating expenses, consisting ofgeneral and administrative costs, were $114,000 for the quarter ended March 31,2006 as compared to $101,000 for the comparable quarter in 2004, an increase of$13,000.  This rise in costs isattributable to increased charges for professional fees and interest expense infiscal 2006.

 

During the three months ended March 31, 2005, theCompany assigned all of its rights, interest and obligations in O6-BG to itssublicensee for the contract amount of $158,750.  In connection with the assignment, theCompany paid a royalty in the amount of $17,500 to the United States PublicHealth Service.  The net amount of thistransaction is reflected as other income in the first quarter 2005.  There were no comparable transactions in thefirst quarter of 2006.

 

### **Liquidity and CapitalResources**

### ** **

At March 31, 2006,the Company’s aggregate cash and cash equivalents were $9,000, a decrease of $43,000from the end of the prior year.  Thisreduction in available cash, together with loan proceeds of $65,000 receivedfrom the Company’s principal stockholder during the first quarter of 2006, isattributable to cash payments aggregating $108,000 for operating activities.

 

The Company has incurredlosses since inception, has working capital and stockholders’ deficits and haslimited cash to fund its operations.  TheCompany is presently relying on borrowings from its principal stockholder tofund continuing operations.  While the Companypursues strategic alternatives, including potential business combinations andrelated financing, the Company expects to finance its continuing operationsthrough further borrowings from its principal stockholder.  The stockholder has made no commitment tocontinue to make loans to the Company. No assurance can be given that the Company will be able to complete abusiness combination, including the IFL acquisition, or that such financingfrom its principal stockholder will continue to be available to theCompany.  If the Company is unable togenerate significant revenue from acquired operations, obtain financing fromits principal stockholder or secure sufficient financing for operationsresulting from acquisition or merger, the Company will experience a cashshortage, the effect of which could result in the discontinuance ofoperations.  If additional funds areraised by issuing equity securities, further dilution to existing stockholderswill result and future investors may be granted rights superior to those ofexisting stockholders.

 

These circumstances raisesubstantial doubt about the Company’s ability to continue as a going concern.

 

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**Item 3.  Quantitative andQualitative Disclosure About Market Risk.**

 

In January 1997, the Securities andExchange Commission issued Financial Reporting Release 48 (“FRR 48”), “Disclosureof Accounting Policies for Derivative Financial Instruments and DerivativeCommodity Instruments, and Disclosure of Quantitative and QualitativeInformation About Market Risk Inherent in Derivative Financial Instruments,Other Financial Instruments and Derivative Commodity Instruments.”  FRR 48 required disclosure of qualitative andquantitative information about market risk inherent in derivative financial instruments,other financial instruments, and derivative commodity instruments beyond thosealready required under generally accepted accounting principles.  The Company is not a party to any of theinstruments discussed in FRR 48 and considers its market risk to be minimal.

 

**Item 4.  Controls and Procedures**

 

As of the end of the period covered by this QuarterlyReport on Form 10-Q, an evaluation was performed under the supervision ofthe Company’s Chief Executive Officer and Principal Financial Officer, of theeffectiveness of the Company’s disclosure controls and procedures.  Based on that evaluation, the Company’s ChiefExecutive Officer and Principal Financial Officer concluded that the Company’sdisclosure controls and procedures were effective as of the end of the periodcovered by this report.  In addition,there were no changes in the Company’s internal control over financialreporting during the quarter ended March 31, 2006 that have materiallyaffected, or are reasonably likely to materially affect, the Company’s internalcontrol over financial reporting.

 

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**PART II.  OTHER INFORMATION**

 

**Item 6.****    Exhibits.**

 

31.1      Certification of Chief Executive Officer andPrincipal Financial Officer Required by Rule 13a-14(a) or Rule 15d-14(a) ofthe Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 ofthe Sarbanes-Oxley Act of 2002.  Filedherewith.

 

32.1      Certification of Chief Executive Officer andPrincipal Financial Officer Pursuant to 18 U.S.C. Section 1350, as AdoptedPursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  Filed herewith.

 

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**SIGNATURES**

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.

 
|                     | PALIGENT INC. |                                  |
|--------------------------|---------------|---------------------------------------|
|                     | (Registrant)  |                                  |
|                     |          |                                  |
|                     |          |
| Date:  May 12, 2006 | by:           | /s/ Salvatore A.  Bucci               |   |
|                     |          | Salvatore A.  Bucci                   |
|                     |          | President and Chief Executive Officer |
|                          |               |                                       |  |  |

 

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**EXHIBIT INDEX**

 

31.1                           Certification of Chief Executive Officer andPrincipal Financial Officer Required by Rule 13a-14(a) or Rule 15d-14(a) ofthe Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 ofthe Sarbanes-Oxley Act of 2002.

 

32.1                           Certification of Chief Executive Officer and PrincipalFinancial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuantto Section 906 of the Sarbanes-Oxley Act of 2002.

 

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