** **

**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

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## **FORM 10-Q**

 
| **ý** | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|------------|----------------------------------------------------------------------------------------------|
|       |                                                                                         |
|       | **For the quarterly period ended June  30, 2002**                                            |

 
| **o**  | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                        |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                 |
|   | **For the transition period from                      to** |
|   |                                                                                                                                                 |
|   | **Commission  File Number:  0-21134**                                                                                                           |

 

 

 

**Paligent Inc.**

*(Exact name of registrant asspecified in its charter)*

 

| **Delaware**                                                      |   | **04-2893483**                              |
|-------------------------------------------------------------------|--------|---------------------------------------------|
| *(State or other jurisdiction of  incorporation or organization)* |   | *(I.R.S.  EmployerIdentification No.)* |
|                                                              |   |                                        |
| **369  Lexington Avenue, New York, New York**                     |   | **10017**                                   |
| *(Address of principal executive  offices)*                       |   | *(zip code)*                                |
|                                                              |   |                                        |
| **(212)  453-3111**                                               |
| *(Registrant’s  telephone number, including area code)*      |

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.

 

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 August 14, 2002** |
|-------------------------------|--------|----------------------------------------|
| 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 June 30, 2002 (unaudited) and December 31, 2001                          |
|           |                                                                                                            |
|           | Condensed  Consolidated Statements of Operations (unaudited) Three and six months ended  June 30, 2002 and 2001 |
|           |                                                                                                            |
|           | Condensed  Consolidated Statements of Cash Flows (unaudited) Six months ended June 30,  2002 and 2001           |
|           |                                                                                                            |
|           | 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                                                      |
|           |                                                                                                            |
|           |                                                                                                            |
| **PART II.**   | **OTHER INFORMATION**                                                                                           |
|           |                                                                                                            |
| **Item 6.**    | Exhibits and  Reports on Form 8-K                                                                               |
|           |                                                                                                            |
| **SIGNATURES** |

 

2

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**PALIGENT INC.**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

 

 
|                                                                                                                                                 |   | **June 30,  2002** |    | **December  31, 2001** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|---------|------------------------|--------|
|                                                                                                                                                 |   | **(unaudited)**    |    |                   |   |
| ASSETS                                                                                                                                               |   |               |    |                   |   |
| Current assets:                                                                                                                                      |   |               |    |                   |   |
| Cash and cash  equivalents                                                                                                                           |   | $                  | 560,495 |                   | $      | 1,298,266 |   |
| Due from related  party                                                                                                                              |   | —             |    | 137,091                |   |
| Prepaid expenses  and other current assets                                                                                                           |   | 30,795             |    | 9,147                  |   |
| Total current  assets                                                                                                                                |   | 591,290            |    | 1,444,504              |   |
|                                                                                                                                                 |   |               |    |                   |   |
| Property and  equipment, net                                                                                                                         |   | 95,565             |    | 110,954                |   |
| Other assets                                                                                                                                         |   | 91,118             |    | 94,809                 |   |
| Total assets                                                                                                                                         |   | $                  | 777,973 |                   | $      | 1,650,267 |   |
|                                                                                                                                                 |   |               |    |                   |   |
| LIABILITIES AND  STOCKHOLDERS’ EQUITY                                                                                                           |   |               |    |                   |   |
| Current  liabilities:                                                                                                                                |   |               |    |                   |   |
| Accounts payable                                                                                                                                     |   | $                  | 51,165  |                   | $      | 33,069 |   |
| Accrued  compensation                                                                                                                                |   | 8,598              |    | 7,549                  |   |
| Accrued  professional services                                                                                                                       |   | 91,477             |    | 139,000                |   |
| Accrued patent  and research costs                                                                                                                   |   | —             |    | 285,859                |   |
| Current portion  of capital lease obligations                                                                                                        |   | 22,301             |    | 22,365                 |   |
| Current portion  of deferred rent                                                                                                                    |   | 7,089              |    | 4,155                  |   |
| Total current  liabilities                                                                                                                           |   | 180,630            |    | 491,997                |   |
|                                                                                                                                                 |   |               |    |                   |   |
| Deferred rent  and other liabilities                                                                                                                 |   | 48,298             |    | 52,341                 |   |
| Capital lease  obligations                                                                                                                           |   | 32,791             |    | 43,511                 |   |
|                                                                                                                                                 |   |               |    |                   |   |
| Stockholders’  equity:                                                                                                                          |   |               |    |                   |   |
| Common stock,  $.01 par value; 75,000,000 shares authorized; 32,490,948 shares issued and  outstanding at  June 30, 2002 and  December 31, 2001 |   | 324,910            |    | 324,910                |   |
| Additional  paid-in capital                                                                                                                          |   | 154,634,974        |    | 154,634,974            |   |
| Accumulated  deficit                                                                                                                                 |   | (154,443,630       | )       | (153,897,466           | )      |
| Total  stockholders’ equity                                                                                                                     |   | 516,254            |    | 1,062,418              |   |
| Total  liabilities and stockholders’ equity                                                                                                     |   | $                  | 777,973 |                   | $      | 1,650,267 |   |

 

The accompanyingnotes are an integral part of the condensed consolidated financial statements.

 

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**PALIGENT INC.**

**CONDENSED CONSOLIDATED STATEMENTS OFOPERATIONS**

**(unaudited)**

 
|                                                                           |   | **Three  Months Ended June 30,** |     | **Six Months  Ended June 30,** |   |
|--------------------------------------------------------------------------------|--------|----------------------------------|----------|--------------------------------|--------|
|                                                                           |   | **2002**                         |     | **2001**                       |   | **2002** |   | **2001** |   |
|                                                                           |   |                             |     |                           |   |   |   |   |   |
| Revenue:                                                                       |   |                             |     |                           |   |   |   |   |   |
| Interest income                                                                |   | $                                | 2,359    |                           | $      | 20,091 |   | $ | 6,170 |   | $ | 53,170 |   |
|                                                                           |   |                             |     |                           |   |   |   |   |   |
| Costs and expenses:                                                            |   |                             |     |                           |   |   |   |   |   |
| General and administrative                                                     |   | 279,359                          |     | 412,229                        |   | 552,334 |   | 777,532 |   |
|                                                                           |   |                             |     |                           |   |   |   |   |   |
| Loss from operations                                                           |   | (277,000                         | )        | (392,138                       | )      | (546,164 | ) | (724,362 | ) |
|                                                                           |   |                             |     |                           |   |   |   |   |   |
| Other expense                                                                  |   | —                           |     | 124                            |   | — |   | 13,125 |   |
|                                                                           |   |                             |     |                           |   |   |   |   |   |
| Net loss                                                                       |   | $                                | (277,000 | )                              | $      | (392,262 | ) | $ | (546,164 | ) | $ | (737,487 | ) |
|                                                                           |   |                             |     |                           |   |   |   |   |   |
| Basic and diluted net loss per common share                                    |   | $                                | (0.01    | )                              | $      | (0.01 | ) | $ | (0.02 | ) | $ | (0.02 | ) |
|                                                                           |   |                             |     |                           |   |   |   |   |   |
| Weighted-average number of common shares outstanding  – basic and diluted |   | 32,490,948                       |     | 32,490,948                     |   | 32,490,948 |   | 32,490,948 |   |

 

The accompanyingnotes are an integral part of the condensed consolidated financial statements.

 

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**PALIGENT INC.**

**CONDENSED CONSOLIDATED STATEMENTS OFCASH FLOWS**

**(unaudited)**

 
|                                                                         |   | **Six months  ended June 30,** |     |
|------------------------------------------------------------------------------|--------|--------------------------------|----------|
|                                                                         |   | **2002**                       |     | **2001** |   |
| Cash flows from operating activities:                                        |   |                           |     |   |   |
| Net loss                                                                     |   | $                              | (546,164 | ) | $ | (737,487 | ) |
| Adjustments to  reconcile net loss to net cash used in operating activities: |   |                           |     |   |   |
| Depreciation and  amortization                                               |   | 21,007                         |     | 43,274 |   |
| Loss on sale of  property and equipment                                      |   | —                         |     | 13,125 |   |
| Deferred rent                                                                |   | (1,109                         | )        | 5,811 |   |
| Changes in  operating assets and liabilities:                                |   |                           |     |   |   |
| Due from related party                                                       |   | 137,091                        |     | (81,147 | ) |
| Prepaid expenses and other current assets                                    |   | (21,648                        | )        | 77,786 |   |
| Other assets                                                                 |   | 3,691                          |     | — |   |
| Accounts payable                                                             |   | 18,095                         |     | (90,735 | ) |
| Accrued patent  and research costs                                           |   | (285,859                       | )        | — |   |
| Accrued expenses  and other current liabilities                              |   | (46,474                        | )        | (373,532 | ) |
| Other  liabilities                                                           |   | —                         |     | 20,000 |   |
| Net cash used in  operating activities                                       |   | (721,369                       | )        | (1,122,905 | ) |
|                                                                         |   |                           |     |   |   |
| Cash flows from  investing activities:                                       |   |                           |     |   |   |
| Capital  expenditures                                                        |   | (5,618                         | )        | — |   |
| Proceeds from  sales of assets                                               |   | —                         |     | 97,100 |   |
| Net cash (used  in) provided by investing activities                         |   | (5,618                         | )        | 97,100 |   |
|                                                                         |   |                           |     |   |   |
| Cash flows from  financing activities:                                       |   |                           |     |   |   |
| Principal  payments on capital lease obligations                             |   | (10,784                        | )        | (50,442 | ) |
| Net cash used in  financing activities                                       |   | (10,784                        | )        | (50,442 | ) |
|                                                                         |   |                           |     |   |   |
| Net change in  cash and cash equivalents                                     |   | (737,771                       | )        | (1,076,247 | ) |
|                                                                         |   |                           |     |   |   |
| Cash and cash  equivalents at beginning of period                            |   | 1,298,266                      |     | 2,971,690 |   |
|                                                                         |   |                           |     |   |   |
| Cash and cash  equivalents at end of period                                  |   | $                              | 560,495  |   | $ | 1,895,443 |   |
|                                                                         |   |                           |     |   |   |
|                                                                         |   |                           |     |   |   |
| Supplemental disclosure of cash flow information:                            |   |                           |     |   |   |
| Interest paid                                                                |   | $                              | 8,065    |   | $ | 10,063 |   |

 

The accompanying notes are an integral part of thecondensed consolidated financial statements

 

5

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**PALIGENT INC.**

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS**

**(unaudited)**

 

**NOTE 1 – BASIS OF PRESENTATION**

 

**Interim Financial Statements**

 

The condensed consolidated financial statements included herein havebeen prepared by Paligent Inc. (“Paligent” or the “Company”) pursuant to therules and regulations 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 June 30, 2002 and theresults of its operations and its cash flows for the interim periods ended June30, 2002 and 2001. The condensed consolidated balance sheet as of December 31,2001 was derived from audited financial statements but does not include alldisclosures required by generally accepted accounting principles.  The accompanying condensed consolidatedfinancial statements have been prepared in accordance with accounting standardsfor interim financial statements and should be read in conjunction with theaudited consolidated financial statements and the notes thereto includedin the Company’s Form 10-K for the year ended December 31, 2001.  Theresults of operations for the interim periods are not necessarily indicative ofthe results of operations to be expected for the fiscal year or any otherinterim period.

 

The Company has sustained net losses and negative cash flows fromoperations since its inception. The Company is currently evaluating strategicalternatives, including potential business investments and related financing.If the Company is unable to generate significant revenue from acquiredoperations, obtain additional revenue from its out-licensing arrangements inconnection with the existing licenses of the Company's biotechnology assets,secure additional financing for its present operations or secure sufficientfinancing for operations resulting from acquisition or merger, the Company willexperience a cash shortage in the first quarter of 2003, the effect of whichcould result in the discontinuance of operations.

 

**Reclassification**

 

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

 

**NOTE 2 – BASIC AND DILUTED NET LOSSPER SHARE**

 

Basic earnings per share(“EPS”) excludes dilution and is computed by dividing (loss) income applicableto common stockholders by the weighted average number of common sharesoutstanding for the period.  Diluted EPSis based upon the weighted average number of common shares outstanding duringthe period plus the additional weighted average common equivalent shares duringthe period.  Common equivalent sharesare not included in the per share calculations where the effect of theirinclusion would be anti-dilutive. Common equivalent shares result from the assumed exercises ofoutstanding stock options and warrants, the proceeds of which are then assumedto have been used to repurchase outstanding shares of common stock (the“treasury stock method”).

 

For the three and sixmonths ended June 30, 2002 and 2001, the Company had stock options and warrantsoutstanding that were anti-dilutive. These securities could potentially dilute basic EPS in the future andwere not included in the computation of diluted EPS because to do so would havebeen anti-dilutive for the periods presented. Consequently, there were no differences between basic and diluted EPSfor these periods.

 

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**NOTE 3 – RELATED PARTIES**

 

On February 28,2002, the Company’s subsidiary, Procept, Inc. (“Procept”), and the UnitedStates Public Health Service (“PHS”) executed an exclusive Patent LicenseAgreement (the “New License Agreement”), which superceded the license agreementdated February 6, 1998 between Procept and The Penn State Research Foundation(“PSRF”) (the “Original License Agreement”). The New License Agreement affirms Procept’s worldwide patent rights toO6-Benzylguanine (“O6-BG”) and related compounds, and acknowledges Procept’ssublicense agreement with AOI Pharmaceuticals, Inc. (“AOI”) dated October 13,2000 (the “Sublicense Agreement”), as of the date executed by Procept andAOI.  At the time of executing the NewLicense Agreement, Procept paid to PHS a one-time license issue royalty fee of$86,000 for outstanding patent prosecution costs accrued at December 31, 2001.  In connection with the execution of the NewLicense Agreement, Procept, together with the National Cancer Institute (“NCI”)and AOI, also executed an amendment to the Cooperative Research and DevelopmentAgreement (“CRADA”), originally executed with the NCI in August 1998 (the“Amended CRADA”), pursuant to which AOI replaced Procept as Collaborator *(i.e.,* the research and developmentpartner).  Under terms of the AmendedCRADA, AOI assumed direct responsibility for all remaining research and paymentobligations, effective as of February 28, 2002.  As part of the Amended CRADA, Procept made a final payment of$200,000 to NCI for production and clinical distribution costs relating toO6-BG, which costs were accrued at December 31, 2001.  Prior to executing the Amended CRADA, AOI was obligated toreimburse Procept for costs that Procept paid, pursuant to, and subsequent tothe effective date of, the Sublicense Agreement.  Shortly thereafter, Procept and AOI agreed that AOI would deferits reimbursement to Procept for costs that Procept had paid relating to itsmaintenance of patent rights and CRADA obligations until the execution of theNew License Agreement and the Amended CRADA. As of December 31, 2001, such reimbursable costs amounted to$137,000.  On February 28, 2002, AOIpaid to the Company the total balance of deferred reimbursable costs.  Mr. Michael S. Weiss, Chairman of the Boardof the Company from July 1997 to May 7, 2002, is the Chairman of the Board ofAOI.  In addition, the principalstockholder of the Company is a stockholder of an affiliate of AOI.

 

In May 2002, Procept executed an amendment to the New License Agreement(the “Amendment”).  The Amendmentclarified language in the New License Agreement pertaining to futuresublicensing agreements, in the event that such agreements were to beexecuted.  In addition, the Company,together with PHS, PHRF, AOI and the University of Chicago (“UC”), alsoexecuted, in May 2002, a Comprehensive Release Agreement (the “ReleaseAgreement”).  The Release Agreementprovides for the irrevocable and absolute release of the Company by PHS, PSRFand UC from any and all claims or obligations arising out of, or related to theOriginal License Agreement.  The ReleaseAgreement was made part of the New License Agreement.

 

7

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**Item 2.  Management’sDiscussion and Analysis of Financial Condition and Results of Operations.**

 

**Note Regarding Forward-LookingStatements**

 

Statements in this Form 10-Q that are not statements or descriptions ofhistorical facts are “forward-looking” statements under Section 21E of theSecurities Exchange Act of 1934, as amended, and the Private SecuritiesLitigation Reform Act of 1995 and are subject to numerous risks anduncertainties.  These forward-lookingstatements can generally be identified by the use of such terms as“anticipate,” “believe,” “continue,” “expect,” “may,” “should,” or similarvariations or the negative thereof. These forward looking statements involve risks and uncertainties, manyof which are out of the Company’s control and which may affect its futurebusiness plans.  Factors that may affectthe Company’s future business plans include: (i) its ability to identify,complete and integrate an acquisition of an operating business; (ii) theviability of the Company’s business strategy in connection with an acquisitionand its ability to implement such strategy; (iii) its ability to securefinancing for its operations; and (iv) its ability to generate revenuessufficient to meet its operating costs. 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 financial conditionare subject are as of the date of this report. The Company assumes no obligation to update any such forward-lookingstatements.

 

**Overview**

 

Paligent Inc., togetherwith its subsidiaries (collectively, “Paligent” or the “Company”), is presentlyseeking business opportunities to maximize value for its shareholders.  In 2001, the Company significantly reducedits operating costs following the disposition of its Internet business and theout-licensing of its remaining biotechnology assets in 2000. All employees werereleased, except for the Company’s chief executive officer and an executiveassistant, and the Company subleased a substantial portion of its officefacility and related equipment.  TheCompany is continuing to evaluate various strategic alternatives, includingacquisitions of new operating businesses and technologies as well as potentialmerger opportunities.

 

From its inception in1985 through 1999, Paligent operated as a biotechnology company engaged in thedevelopment and commercialization of novel drugs with a product portfoliofocused on infectious diseases and oncology. During 1999, the Company’s principal efforts were devoted to drugdevelopment, human clinical trials and partnership commercialization focusingon two biotechnology compounds, PRO 2000 Gel and O6-Benzylguanine(“O6-BG”).  Beginning in fiscal 2000,the Company pursued an Internet strategy that focused on promoting andfacilitating transactions between consumers, funeral industry service providersand financing institutions.  Duringfiscal 2000, the Company also closed its research facilities and out-licensedPRO 2000 Gel and O6-BG.  Under the termsof the out-licensing agreements, the Company retains certain future rights,including the receipt of payments based on the achievement of certainmilestones as well as royalties from commercial sales, if any.  After a sustained period of deterioration inthe Internet and technology sectors and related capital markets, the Companydecided, in the fourth quarter of 2000, to discontinue the pursuit of itsInternet strategy.  Shortly thereafter,the Company entered into an agreement to sell all of its Web-based assets andInternet operations and ceased its Internet activities.

 

8

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**Resultsof Operations**

 

From inception through June 30, 2002, the Company has generated norevenues from product sales or services and has not been profitable.  As the Company evaluates various strategicalternatives in its quest for new growth areas that will maximize value toexisting stockholders, the Company expects to incur additional losses.

 

## ***Three and six months ended June 30, 2002 as compared to thethree and six months ended June 30, 2001***

 

During the three months ended June 30, 2002, the Company reported a netloss of $277,000, or $0.01 per share, as compared to a net loss of $392,000, or$0.01 per share, in the comparable period in 2001.  For the six months ended June 30, 2002, the Company reported anet loss of $546,000, or $0.02 per share, as compared to a net loss of 737,000,or $0.02 per share, for the similar period in 2001.

 

The Company’s total revenue, which is derived from interest income, was$2,000 and $6,000, respectively, for the three and six months ended June 30,2002, as compared to $20,000 and $53,000, respectively, for the comparablethree and six month periods in 2001. The reduction in interest income is attributable to decreases ininterest rates and average cash balances available for investment during therespective periods.

 

Total operating expenseswere $279,000 for the quarter ended June 30, 2002 as compared to $412,000 forthe comparable quarter in 2001, a decrease of $133,000.  The Company’s total operating expensesdecreased by $225,000, to $552,000, for the six months ended June 30, 2002,from $777,000 for the comparable period of 2001.  The decrease in general and administrative costs in the three andsix month periods ended June 30, 2002 is primarily related to the Company’ssubleasing of a substantial portion of its office space on July 1, 2001.

 

During the six monthsended June 30, 2001, the Company recorded a loss of $13,000 from the sale ofoffice equipment.  This loss wasrecorded to other expense.  There wereno comparable items of gain or loss in the current period.

 

**Liquidity and Capital Resources**

 

At June 30, 2002,the Company’s aggregate cash and cash equivalents were $560,000, a net decreaseof $738,000 from the end of the prior year. This decrease is primarily attributable to the $721,000 of cash used tofund operations, including $149,000 of net patent and research costsoutstanding as of December 31, 2001 (*i.e.,* total expenditures of $286,000 lessthe receipt of $137,000 from the collection of the related party receivable).

 

Since disposing of its Internet assets and related operations inDecember 2000, the Company has significantly reduced its operating costs.  At its present rate of spending, the Companyexpects that its existing funds and interest income will be sufficient to fundthe Company’s current operations into the first quarter of 2003.  While the Company evaluates strategicalternatives, including potential business investments and related financing,the Company's rate of spending could vary from its current estimate.  No assurance can be given that the Companywill be able to complete a business investment or that such financing will beavailable to the Company.  If theCompany is unable to generate significant revenue from acquired operations,obtain additional revenue from its out-licensing arrangements in connectionwith the existing licenses of the Company’s biotechnology assets, secureadditional financing for its present operations or secure sufficient financingfor operations resulting from acquisition or merger, the Company willexperience a cash shortage in the first quarter 2003, 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.

 

The Company’sexpectations regarding its rate of spending and the sufficiency of its cashresources over future periods are forward-looking statements. The rate ofspending and sufficiency of such resources will be affected by numerous factorsincluding the rate of planned and unplanned expenditures by the Company and thetiming of payments received, if any, under the sublicenses of the biotechnologyassets.

 

9

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**Item3.  Quantitative and QualitativeDisclosure About Market Risk.**

 

In January 1997, theSecurities and Exchange Commission issued Financial Reporting Release 48 (“FRR48”), “Disclosure of Accounting Policies for Derivative Financial Instrumentsand Derivative Commodity Instruments, and Disclosure of Quantitative andQualitative Information About Market Risk Inherent in Derivative FinancialInstruments, Other Financial Instruments and Derivative CommodityInstruments.”  FRR 48 requireddisclosure of qualitative and quantitative information about market riskinherent in derivative financial instruments, other financial instruments, andderivative commodity instruments beyond those already required under generallyaccepted accounting principles.  The Companyis not a party to any of the instruments discussed in FRR 48 and considers itsmarket risk to be minimal.

 

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**PARTII.  OTHER INFORMATION**

 

**Item6.    Exhibits and Reports on Form 8-K.**

 

(a)       Exhibits.

 

10.16                     FirstAmendment to Exclusive License Agreement dated May 17, 2002 between Procept,Inc. and the United States Public Health Service.  Filed herewith.

 

10.17                     ComprehensiveRelease Agreement dated May 29, 2002 between Procept, Inc., the United StatesPublic Health Service, The Penn State Research Foundation, the University ofChicago and AOI Pharmaceuticals, Inc. Filed herewith.

 

99.1                           Certificationof CEO and principal financial officer Pursuant to 18 U.S.C. Section 1350, asAdopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filedherewith.

 

(b)       Reports on Form 8-K.

 

None.

 

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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:  August  14, 2002 | by:           | /s/ Salvatore A. Bucci |   |
|                         |          | Salvatore A. Bucci |
|                         |          | President and Chief Executive Officer |

 

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