**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

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**FORM 10-Q**
| **x**      | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE SECURITIES EXCHANGE ACT OF 1934**                                       |
|------------|------------------------------------------------------------------------------------------------------------------------------------|
| ** ** | ** **                                                                                                                         |
| ** ** | **For the quarterly period ended September 30,  2006**                                                                             |
| ** ** | ** **                                                                                                                         |
| **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 as specified in its charter)

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

 

**(212)755-5461**

(Registrant’s telephonenumber, including area code)

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.

YES  x     NO  o

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer,or a non-accelerated filer.  Seedefinition of “accelerated filer and large accelerated filer” in Rule 12b-2 ofthe Exchange Act.
| Large accelerated  filer  o | Accelerated filer  o | Non-accelerated filer  x |
|---------------------------------------|--------------------------------|------------------------------------|

 

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

YES  x     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 November 3, 2006** | ** ** |
|--------------------------------|------------|-----------------------------------------------------------------|------------|
| Common Stock,  $0.01 par value |       | 32,490,948                                                      |       |

 

 

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**PALIGENT INC.**

**INDEX**
| **PART I.**       | **FINANCIAL INFORMATION**                                         |   |
|-------------------|-------------------------------------------------------------------|--------|
| ** **        | ** **                                                        |   |
| **Item 1.**       | Interim Financial Statements                                      |   |
| ** **        |                                                              |   |
|              | Condensed  Consolidated Balance Sheets                            |   |
|              | September 30, 2006  (unaudited) and December 31, 2005             |   |
|              |                                                              |   |
|              | Condensed  Consolidated Statements of Operations (unaudited)      |   |
|              | Three and nine months ended  September 30, 2006 and 2005          |   |
|              |                                                              |   |
|              | Condensed  Consolidated Statements of Cash Flows (unaudited)      |   |
|              | Nine months ended September  30, 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 1A.**      | Risk  Factors                                                     |   |
| ** **        |                                                              |   |
| **Item  6.**      | Exhibits                                                          |   |
| ** **        |                                                              |   |
| **SIGNATURES**    |                                                              |
| ** **        |                                                              |
| **EXHIBIT INDEX** |                                                              |

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**PALIGENTINC.**

**CONDENSED CONSOLIDATED BALANCE SHEETS**
| ** **                                                                                                                                                       | ** ** | **September 30, 2006** | ** ** | **December 31, 2005** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                                                                                                                                       | ** ** | **(unaudited)**                  | ** ** | ** **                      | ** ** |
| ASSETS                                                                                                                                                           |       |                             |       |                            |       |
| Current assets:                                                                                                                                                  |       |                             |       |                            |       |
| Cash and cash  equivalents                                                                                                                                       |       | $                                | 2,618      |                            | $          | 51,681 |   |
| Prepaid expenses  and other current assets                                                                                                                       |       | 9,262                            |       | —                          |       |
| Total current  assets                                                                                                                                            |       | $                                | 11,880     |                            | $          | 51,681 |   |
|                                                                                                                                                             |       |                             |       |                            |       |
| LIABILITIES AND  STOCKHOLDERS’ DEFICIT                                                                                                                      |       |                             |       |                            |       |
| Current liabilities:                                                                                                                                             |       |                             |       |                            |       |
| Accounts payable  and accrued expenses                                                                                                                           |       | $                                | 90,791     |                            | $          | 9,703 |   |
| Accrued  professional services                                                                                                                                   |       | 43,100                           |       | 27,000                          |       |
| Due to related  party                                                                                                                                            |       | 834,224                          |       | 546,362                         |       |
| Total current  liabilities                                                                                                                                       |       | 968,115                          |       | 583,065                         |       |
|                                                                                                                                                             |       |                             |       |                            |       |
| Stockholders’ deficit:                                                                                                                                      |       |                             |       |                            |       |
| Common stock,  $.01 par value; 75,000,000 shares authorized; 32,490,948 shares issued and  outstanding at September 30, 2006 and December 31, 2005, respectively |       | 324,910                          |       | 324,910                         |       |
| Additional  paid-in capital                                                                                                                                      |       | 154,634,974                      |       | 154,634,974                     |       |
| Accumulated  deficit                                                                                                                                             |       | (155,916,119                     | )          | (155,491,268                    | )          |
| Total  stockholders’ deficit                                                                                                                                |       | (956,235                         | )          | (531,384                        | )          |
| Total liabilities and  stockholders’ deficit                                                                                                                |       | $                                | 11,880     |                            | $          | 51,681 |   |

 

The accompanying notesare an integral part of the condensed consolidated financial statements.

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**PALIGENTINC.**

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

**(unaudited)**
| ** **                                           | ** ** | **Three months ended September 30,** | ** ** | **Nine months ended September 30,** | ** ** |
|------------------------------------------------------|------------|----------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                           | ** ** | **2006**                                                 | ** ** | **2005**                                                | ** ** | **2006** | ** ** | **2005** | ** ** |
|                                                 |       |                                                     |       |                                                    |       |   |   |   |   |
| General and  administrative expenses                 |       | $                                                        | 163,633    |                                                    | $          | 122,667 |   | $ | 424,851 |   | $ | 340,133 |   |
|                                                 |       |                                                     |       |                                                    |       |   |   |   |   |
| Loss from operations                                 |       | (163,633                                                 | )          | (122,667                                                | )          | (424,851 | ) | (340,133 | ) |
|                                                 |       |                                                     |       |                                                    |       |   |   |   |   |
| Other income                                         |       | —                                                   |       | —                                                  |       | — |   | 141,250 |   |
|                                                 |       |                                                     |       |                                                    |       |   |   |   |   |
| Net loss                                             |       | $                                                        | (163,633   | )                                                       | $          | (122,667 | ) | $ | (424,851 | ) | $ | (198,883 | ) |
|                                                 |       |                                                     |       |                                                    |       |   |   |   |   |
| Basic and diluted net  loss per common share         |       | $                                                        | (0.01      | )                                                       | $          | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) |
|                                                 |       |                                                     |       |                                                    |       |   |   |   |   |
| Weighted average number of common shares outstanding |       |                                                     |       |                                                    |       |   |   |   |   |
| Basic and diluted                                    |       | 32,490,948                                               |       | 32,490,948                                              |       | 32,490,948 |   | 32,490,948 |   |

 

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

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**PALIGENTINC.**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(unaudited)**
| ** **                                                                   | ** ** | **Nine months ended September 30,** | ** ** |
|------------------------------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                                                   | ** ** | **2006**                                                | ** ** | **2005** | ** ** |
| Cash flows from  operating activities:                                       |       |                                                    |       |   |   |
| Net loss                                                                     |       | $                                                       | (424,851   | ) | $ | (198,883 | ) |
| Adjustments to  reconcile net loss to net cash used in operating activities: |       |                                                    |       |   |   |
| Depreciation and  amortization                                               |       | —                                                  |       | 941 |   |
| Changes in  operating assets and liabilities:                                |       |                                                    |       |   |   |
| Note receivable                                                              |       | —                                                  |       | (75,000 | ) |
| Prepaid expenses  and other current assets                                   |       | (9,262                                                  | )          | (10,882 | ) |
| Subtenant  receivable                                                        |       | —                                                  |       | 30,000 |   |
| Accounts payable  and accrued expenses                                       |       | 97,188                                                  |       | 9,100 |   |
| Interest payable  to related party                                           |       | 37,862                                                  |       | 18,423 |   |
| Net cash used in  operating activities                                       |       | (299,063                                                | )          | (226,301 | ) |
|                                                                         |       |                                                    |       |   |   |
| Cash provided by  financing activities:                                      |       |                                                    |       |   |   |
| Proceeds from  related party loan                                            |       | 250,000                                                 |       | 220,000 |   |
|                                                                         |       |                                                    |       |   |   |
| Net decrease in cash  and cash equivalents                                   |       | (49,063                                                 | )          | (6,301 | ) |
|                                                                         |       |                                                    |       |   |   |
| Cash and cash  equivalents at beginning of period                            |       | 51,681                                                  |       | 21,388 |   |
|                                                                         |       |                                                    |       |   |   |
| Cash and cash equivalents at end of period                                   |       | $                                                       | 2,618      |   | $ | 15,087 |   |

 

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

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**PALIGENT INC.**

**NOTES TOCONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(unaudited)**

**NOTE 1 –BASIS OF PRESENTATION**

# **InterimFinancial Statements**

The unauditedcondensed consolidated interim financial statements included herein have beenprepared by Paligent Inc. (“Paligent” or the “Company”) pursuant to accountingprinciples generally accepted in the United States of America and 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 September 30, 2006 andthe results of its operations and its cash flows for the interim periods endedSeptember 30, 2006 and 2005. The condensed consolidated balance sheet as ofDecember 31, 2005 was derived from audited financial statements but does notinclude all disclosures 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, 2005.  Theresults 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.

Theaccompanying unaudited condensed consolidated financial statements have beenprepared on a going concern basis which contemplates the realization of assetsand the satisfaction of 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 Richard J. Kurtz, adirector and the principal stockholder of the Company, to fund continuingoperations.  Mr. Kurtz has made nocommitment to continue to make loans to the Company.

OnAugust 25, 2006, the Company entered into an Agreement and Plan of Merger withInternational Fight League, Inc. (“IFL”), which will be considered for approvalat a stockholders meeting on November 27, 2006 (see Note 5 – “Proposed Merger”).  No assurance can be given that the Companywill be able to complete the proposed business combination.  Further, if the proposed merger isconsummated, no assurance can be given that sufficient capital resources willbe available to the combined entity.  Ifthe Company is unable to generate significant revenue from merged operations,or secure sufficient financing for operations resulting from the proposed merger,including additional financing from Mr. Kurtz, the Company will experience acash shortage in 2006, the effect of which could result in the discontinuanceof operations.  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 raise substantial doubt aboutthe Company’s ability to continue as a going concern.  The financial statements do not include anyadjustments that might result from the outcome of this uncertainty.

# **Reclassification**

Certain prior period amounts have been reclassified toconform to the current period presentation.

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**NOTE 2 –EARNINGS (LOSS) PER SHARE**

The Company complies with the accounting and reportingrequirements of Statement of Financial Accounting Standard No. (“FAS”) 128, “EarningsPer Share.”  Basic earnings per share (“EPS”)excludes dilution and is computed by dividing income (loss) applicable tocommon stockholders by the weighted average number of common shares outstandingfor the period.  Diluted EPS is basedupon the weighted average number of common shares outstanding during the periodplus the additional weighted average common equivalent shares during theperiod.  Common equivalent shares resultfrom the assumed exercises of outstanding stock options and warrants, theproceeds of which are then assumed to have been used to repurchase outstandingshares of common stock (the “treasury stock method”).  Common equivalent shares are not included inthe per share calculations where the effect of their inclusion would beanti-dilutive.  Inherently, stock optionsand warrants are deemed to be anti-dilutive when the average market price ofthe common stock during the period exceeds the exercise price of the stockoptions or warrants.

For the three and nine months ended September 30, 2006and 2005, the Company had stock options and warrants outstanding that wereanti-dilutive.  These securities couldpotentially dilute basic EPS in the future but were not included in thecomputation of diluted EPS for the periods presented because to do so wouldhave been anti-dilutive.  Consequently,there were no differences between basic and diluted EPS for these periods.

**NOTE 3 – RELATED PARTY TRANSACTIONS**

On October 8, 2003, in anticipation of completing a businesscombination with Digital Products of Delaware, Inc. (“Digital”) or anotherentity, the Company executed a promissory note (the “Promissory Note”) withRichard J. Kurtz, the principal stockholder of the Company and then theprincipal stockholder of Digital.  Underthe Promissory Note, the Company received, and expects to continue to receive,loans that will enable 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 September 30,2006, the principal balance and accrued interest due under the Promissory Noteare $765,000 and $69,224, respectively (see Note 5 for additional information).

**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 AccountingPrinciples Board Opinion No. (“APB”) 25, “Accounting for Stock Issued toEmployees.”  Among other items, FAS 123Reliminates the use of APB 25 and the intrinsic value method of accounting, andrequires companies to recognize the cost of employee services received inexchange for awards of equity instruments in the financial statements, based onthe grant date fair value of those awards. The effective date of FAS 123R for the Company was 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 in 

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accordancewith FAS 123. The Company has adopted the modified prospective method of recognition,and has recognized the cost, if any, in its financial statements for theinterim periods ended September 30, 2006.

Prior tothe adoption of FAS 123R, the Company had applied APB 25 and relatedinterpretations in accounting for its stock-based compensation plans.  Accordingly, no compensation cost had beenrecognized for its stock option plan. Rather, the Company complied with FAS 148, “Accounting for Stock-BasedCompensation - Transition and Disclosure, an Amendment of FAS 123,” whichprovided alternative methods of transition for a voluntary change to the fairvalue based method of accounting for stock-based employee compensation.  FAS 148 also amended the disclosurerequirements of FAS 123 to require more prominent and more frequent disclosuresin financial statements about the effects of stock-based compensation.  Since there were no unvested awards duringthe three and nine months ended September 30, 2006 and 2005, the Company’s net(loss) income would not have been adjusted for these periods for awards grantedunder the Company’s stock-based compensation plans in accordance with FAS 123.

The Companyhad utilized the Black-Scholes option pricing model to measure the fair valueof stock options granted to employees. While FAS 123R permits entities tocontinue to use such a model, it also permits the use of a “lattice”model.  The Company expects to continueusing the Black-Scholes option pricing model with its adoption of FAS 123R tomeasure the fair value of stock options.

**NOTE 5 – PROPOSED MERGER**

On August 25, 2006, the Company entered into an Agreement andPlan of Merger, as amended (the “MergerAgreement”) with IFL Corp. (“Merger Sub”) and IFL.  Pursuant to the terms of the MergerAgreement, upon satisfaction or waiver of the conditions contained therein,Merger Sub will be merged with and into IFL (the “Merger”).  As a result, the Company will acquire100% of the issued and outstanding common and preferred stock of IFL, and theholders of IFL common and preferred stock will receive shares of common stockof the Company which, upon their issuance, would be equal to approximately 95%of the issued and outstanding shares of common stock of the Company.  In addition, in connection with the Merger,options to purchase shares of common stock of IFL outstanding prior to theMerger will be converted into options to purchase shares of common stock of theCompany on the same terms and conditions applicable to such options prior tothe Merger, under a new equity incentive plan submitted for the approval of theCompany’s stockholders together with the Merger (the “Incentive Plan”).

In connection with the Merger, the Companyhas also agreed, subject to stockholder approval, to effect, immediately priorto the Merger, a 1-for-20 reverse stock split of the Company’s common stock(the “Reverse Stock Split”), such that the number of shares of common stock ofthe Company outstanding following the Merger shall be approximately the numberof shares of common stock of the Company currently outstanding.  Furthermore, following consummation of theMerger, the Company has agreed to change its name to International FightLeague, Inc. (the “Name Change”).

On October 30, 2006, the Company filed aproxy statement in connection with the solicitation by the board of directorsof the Company of proxies to be voted at a special meeting of the Company’sstockholders to be held on November 27, 2006. The proxy statement, accompanying proxy and notice of special meetingwere mailed on or about November 1, 2006 to all stockholders of record of theCompany as of the close of business on October 24, 2006.  The only matters to be considered at thespecial meeting are proposals relating to the proposed merger of the Companyand IFL, pursuant to the Merger Agreement. The closing of the Merger is contingent upon the approval of the Mergerby the Company’s 

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stockholders, approval of the Reverse StockSplit, approval of the Incentive Plan, approval of the Name Change and theelection of five directors to the Company’s Board of Directors (the “Election”).  The Election is effective only upon theconsummation of the Merger.

The transaction is characterized as a reverse acquisition under thepurchase method of accounting for business combinations in accordance withaccounting principles generally accepted in the United States of America,pursuant to which IFL would be deemed to be the acquirer and the continuingentity for accounting purposes. Accordingly, reported results of operations of the combined group issuedafter completion of the transaction will reflect IFL’s operations.

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

***NoteRegarding Forward-Looking Statements***

*Statementsin this Form 10-Q that are not statements or descriptions of historical factsare “forward-looking” statements under Section 21E of the Securities ExchangeAct of 1934, as amended, and the Private Securities Litigation Reform Act of1995 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)its ability to identify, complete and integrate an acquisition of an operatingbusiness, 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, PaligentInc., together with its subsidiaries (collectively, the “Company”), has beenengaged in seeking business opportunities to maximize value for itsstockholders.  The Company has evaluatedvarious strategic alternatives, including acquisitions of new operatingbusinesses and technologies as well as potential merger opportunities.

From its inception in1985 through 1999, the Company operated as a biotechnology company engaged inthe development 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 and human clinical trials focusing on two biotechnology compounds,PRO 2000 Gel and O6-Benzylguanine (“O6-BG”). During fiscal 2000, the Company closed its research facilities andout-licensed PRO 2000 Gel and O6-BG.  InSeptember 2004, the Company transferred all of its rights, title and interestin PRO 2000 Gel pursuant to an option duly exercised by its sublicense and inMarch 2005, the Company assigned all of its rights, interests and obligationsin O6-BG to an affiliate of its sublicensee.

On April 25, 2006, the Company entered into a Letter Agreement (the “Agreement”)with International Fight League, Inc. (“IFL”) and Richard J. Kurtz, a directorof the Company and the Company’s principal stockholder.  The Agreement set forth the proposed terms ofa 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 provided that Mr. Kurtzwould then immediately purchase preferred stock of IFL, which would beconverted into common stock of the Company if the merger was consummated.  The Agreement also provided that, uponconsummation of the transaction, Mr. Kurtz would convert the then outstandingbalance of principal and 

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interest owing under the promissory note issued to him by the Company,the aggregate amount of which was $651,000, into shares of common stock of theCompany (see Note 3 – “Related Party Transactions”).

On August25, 2006, the Company entered into an Agreement and Plan of Merger, as amended (the “Merger Agreement”) with IFL Corp. (“MergerSub”) and IFL.  Pursuant to the terms ofthe Merger Agreement, upon satisfaction or waiver of the conditions containedtherein, Merger Sub will be merged with and into IFL (the “Merger”).  As a result, the Company will acquire100% of the issued and outstanding common and preferred stock of IFL, and theholders of IFL common and preferred stock will receive shares of common stockof the Company which, upon their issuance, would be equal to approximately 95%of the issued and outstanding shares of common stock of the Company.  In addition, in connection with the Merger,options to purchase shares of common stock of IFL outstanding prior to the Mergerwill be converted into options to purchase shares of common stock of theCompany on the same terms and conditions applicable to such options prior tothe Merger, under a new equity incentive plan submitted for the approval of theCompany’s stockholders together with the Merger (the “Incentive Plan”).

In connection with the Merger, the Companyhas also agreed, subject to stockholder approval, to effect, immediately priorto the Merger, a 1-for-20 reverse stock split of the Company’s common stock(the “Reverse Stock Split”), such that the number of shares of common stock ofthe Company outstanding following the Merger shall be approximately the numberof shares of common stock of the Company currently outstanding.  Furthermore, following consummation of theMerger, the Company has agreed to change its name to International FightLeague, Inc. (the “Name Change”).

In order to induce IFL to enter into the Merger Agreement, and inconnection with the Merger Agreement, Mr. Kurtz and members of his family (the “PrincipalStockholders”), who own collectively approximately 54.5% of the Company’soutstanding common stock, entered into a voting agreement with the Company andIFL, dated as of August 25, 2006 (the “Kurtz Voting Agreement”), pursuant towhich the Principal Stockholders have agreed, among other things, to vote infavor of the approval of the Merger and the other matters to be approved inconnection with the Merger, upon the terms set forth in the Kurtz VotingAgreement.  The Kurtz Voting Agreementotherwise terminates upon the termination of the Merger Agreement.

In connection with and as required by the Merger Agreement, the Companyand Mr. Kurtz have entered into a contribution agreement, dated as of August25, 2006 (the “Kurtz Contribution Agreement”). The Kurtz Contribution Agreement provides that, immediately followingconsummation of the Merger, Mr. Kurtz will contribute to the Company allor a portion of the amounts owed to him by the Company pursuant to thepromissory note issued to him by the Company, but not less than $651,000, inexchange for shares of common stock of the Company.  Pursuant to the Contribution Agreement, Mr.Kurtz will receive a number of shares of common stock of the Company equal tothe aggregate amount of obligations contributed divided by the greater of (x)$0.40 and (y) the closing price of a share of common stock of Company on thedate which is set as the record date for purposes of determination ofstockholders entitled to vote with respect to the Merger.

On October 30, 2006, the Company filed aproxy statement in connection with the solicitation by the board of directorsof the Company of proxies to be voted at a special meeting of the Company’sstockholders to be held on November 27, 2006. The proxy statement, accompanying proxy and notice of special meetingwere mailed on or about November 1, 2006 to all stockholders of record of theCompany as of the close of business on October 24, 2006.  The only matters to be considered at the specialmeeting are proposals relating to the proposed merger of the Company and IFL,pursuant to the Merger Agreement.  Theclosing of the Merger is contingent upon the approval of the Merger by theCompany’s stockholders, approval of the Reverse Stock Split, approval of theIncentive Plan, approval of the Name 

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Change and the election of five directors tothe Company’s Board of Directors (the “Election”).  The Election is effective only upon theconsummation of the Merger.

Each of the Company and IFL has madecustomary representations and warranties in the Merger Agreement, includingamong others, representations and warranties relating to the Company’scapitalization, compliance with laws, litigation, taxes, employee benefits andownership of assets.  The Company hasalso made representations and warranties with respect to the fact that it hasno current operations.  The Company hasalso agreed to customary covenants in the Merger Agreement, including amongothers, not to solicit, initiate, knowingly encourage or facilitate proposalsrelating to alternative acquisition proposals.

The Merger Agreement contains certain termination rights for both IFL andthe Company, including a provision which would allow the Board of Directors ofeach of the Company and IFL to terminate the Merger Agreement in order tocomply with its fiduciary duties.  Noassurance can be given that the conditions to closing the transactionscontemplated by the Merger Agreement will be satisfied, or that thetransactions contemplated by the Merger Agreement ultimately will be consummated.

The foregoing descriptions of the MergerAgreement, the Kurtz Voting Agreement and the Kurtz Contribution Agreement donot purport to be complete and are qualified in their entirety by reference tothe Merger Agreement, the Kurtz Voting Agreement and the Kurtz ContributionAgreement, which were filed as Exhibits 2.1, 10.14 and 10.15 to the CurrentReport on Form 8-K on August 31, 2006. The Merger Agreement contains representations and warranties that theparties to the Merger Agreement made to and solely for the benefit of eachother.  Accordingly, investors andsecurity holders should not rely on such representations and warranties ascharacterizations of the actual state of facts or circumstances, since theywere only made as of the date of the Merger Agreement.  Moreover, information concerning the subjectmatter of such representations and warranties may change after the date of theMerger Agreement, which subsequent information may or may not be fully reflectedin the Company’s public disclosures.

**Resultsof Operations**

From inceptionthrough September 30, 2006, the Company has generated no revenues from productsales or services and has not been profitable.

## *Three andnine months ended September 30, 2006 as compared to the three and nine months endedSeptember 30, 2005*

The Company’s totaloperating costs, consisting of general and administrative expenses, were$164,000 and $425,000, respectively, for the three and nine month periods endedSeptember 30, 2006 as compared to $123,000 and $340,000 for the comparableperiods in 2005, reflecting increases of $41,000 and $85,000, respectively, forthe three and nine month periods.  Theseincreases are primarily attributable to supplemental costs incurred for professionalfees in connection with the Company’s contemplated business combination withIFL.

During the nine monthsended September 30, 2005, the Company assigned all of its rights, interest andobligations in O6-BG to its sublicensee for the contract amount of$158,750.  In connection with the assignment,the Company paid a royalty in the amount of $17,500 to the United States PublicHealth Service.  The net amount of thesetransactions is reflected as other income in the first quarter of 2005.  There were no comparable transactions in2006.

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### **Liquidity and Capital Resources**

At September 30,2006, the Company’s aggregate cash and cash equivalents were $3,000, a decreaseof $49,000 from the end of the prior year. The combination of cash available at the beginning of the year and loanproceeds of $250,000 received from the Company’s principal stockholder duringthe nine month period ended September 30, 2006, was used for cash paymentsaggregating $299,000 for operating activities.

The Company hasincurred losses since inception, has working capital and stockholders’ deficitsand has limited cash to fund its operations. The Company is presently relying on borrowings from its principalstockholder to fund continuing operations. The stockholder has made no commitment to continue to make loans to theCompany.  No assurance can be given thatthe Company will be able to complete a business combination, including the IFLacquisition, or that such financing from its principal stockholder willcontinue to 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, the effect of which could result inthe discontinuance of operations.  Ifadditional funds are raised by issuing equity securities, further dilution toexisting stockholders will resultand future investors may be granted rights superior to those of existingstockholders.

These circumstances raise substantial doubt about the Company’s abilityto continue as a going concern.

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

InJanuary 1997, the Securities and Exchange Commission issued Financial ReportingRelease 48 (“FRR 48”), “Disclosure of Accounting Policies for DerivativeFinancial Instruments and Derivative Commodity Instruments, and Disclosure ofQuantitative and Qualitative Information About Market Risk Inherent inDerivative Financial Instruments, Other Financial Instruments and DerivativeCommodity Instruments.”  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.  TheCompany is not a party to any of the instruments discussed in FRR 48 andconsiders its market risk to be minimal.

**Item4.  Controls and Procedures**

As of the end of the period covered by thisQuarterly Report on Form 10-Q, an evaluation was performed under thesupervision of the Company’s Chief Executive Officer and Principal FinancialOfficer, of the effectiveness of the Company’s disclosure controls andprocedures.  Based on that evaluation,the Company’s Chief Executive Officer and Principal Financial Officer concludedthat the Company’s disclosure controls and procedures were effective as of theend of the period covered by this report. In addition, there were no changes in the Company’s internal controlover financial reporting during the quarter ended September 30, 2006 that havematerially affected, or are reasonably likely to materially affect, the Company’sinternal control over financial reporting.

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**PART II.  OTHERINFORMATION**

###### **Item 1A. Risk Factors**

As reported in the Company’s Annual Report in Form 10-K, the Companyhas been seeking a merger or sale to acquire other operating businesses whichperceive value in becoming a publicly traded corporation. Certain factors mayaffect the Company’s opportunities to merge or sell itself to other operatingbusinesses. In addition to the other information in this Quarterly Report onForm 10-Q, the Risk Factors includedin the Company’s Annual Report on Form 10-K for the year ended December 31,2005 have not materially changed except as set forth below.

*Future Mergers or Sales Will Cause Dilution or Adversely Affect Result*s

On October 30, 2006, the Company filed aproxy statement in connection with the solicitation by the board of directorsof the Company of proxies to be voted at a special meeting of the Company’sstockholders to be held on November 27, 2006. At the special meeting, proposals relating to the Merger of the Companyand IFL, pursuant to the Merger Agreement, will be considered.  Upon the consummation of the proposed transaction, the Company will (i)issue equity securities that will substantially dilute current stockholders’percentage ownership in the Company; (ii) possibly incur substantial debt; or(iii) possibly assume contingent liabilities. Such actions could adversely affect the Company’s operating results andcause the price of the Company’s common stock to decline.

**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 of theSarbanes-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:  November 14, 2006 | by:           | /s/ Salvatore A. Bucci |   |
|                          |          | Salvatore A.  Bucci |
|                          |          | President and  Chief Executive Officer |

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**EXHIBITINDEX**

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

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.

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