THIS DOCUMENT IS A COPY OF THE FORM 10-K FILED ON SEPTEMBER 29, 2000
              PURSUANT TO A RULE 201 TEMPORARY HARDHSIP EXEMPTION.

                     U.S. Securities and Exchange Commission

                             Washington, D.C. 20549

                                    FORM 10-K

(Mark One)

     [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                     For the fiscal year ended June 30, 2000

                                       or

     [ ] 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 0-22686


                           PALATIN TECHNOLOGIES, INC.
             (Exact name of registrant as specified in its charter)


         Delaware                                            95-4078884
  (State or other jurisdiction                            (I.R.S. Employer
of incorporation or organization)                        Identification No.)


         103 Carnegie Center, Suite 200
         Princeton, New Jersey                                   08540
         (Address of principal executive offices)             (Zip Code)

Registrant's telephone number, including area code: (609) 520-1911

Securities registered pursuant to Section 12(b) of the Exchange Act:  None

Securities registered pursuant to Section 12(g) of the Exchange Act:

                     Common Stock, par value $.01 per share
                                (Title of class)

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

The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant, computed by reference to the price at which
the common equity was sold, as of September 25, 2000, was $47,782,831.

<PAGE>

As of September 25, 2000, 8,199,136 shares of the registrant's common stock, par
value $.01 per share, were outstanding.

Documents incorporated by reference: the registrant's definitive proxy statement
relating to the annual meeting of stockholders currently scheduled for November
2000, incorporated by reference in Part III of this Form 10-K.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]


<PAGE>

                                TABLE OF CONTENTS



                                     PART I

                                                                         Page

Item  1.    Business .........................................................1

Item  2.    Properties ......................................................12

Item  3.    Legal Proceedings ...............................................12

Item  4.    Submission of Matters to a Vote of Security Holders .............13



                                     PART II

Item 5.     Market for Registrant's Common Equity and Related Stockholder
                  Matters ...................................................13

Item  6.    Selected Financial Data .........................................14

Item  7.    Management's Discussion and Analysis of Financial Condition
                  and Results of Operations .................................16

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk ......25

Item  8.    Financial Statements and Supplementary Data .....................26

Item  9.    Changes In and Disagreements With Accountants on Accounting
                  and Financial Disclosure ..................................58


                                    PART III

Item 10.   Directors, Executive Officers, Promoters and Control Persons;
                  Compliance with Section 16(a) of the Exchange Act .........59*

Item 11.   Executive Compensation ...........................................59*

Item 12.   Security Ownership of Certain Beneficial Owners and Management ...59*

Item 13.   Certain Relationships and Related Transactions ...................59*

*Incorporated by reference from our definitive proxy statement relating to the
annual meeting of stockholders scheduled for November 15, 2000, which we will
file with the Securities and Exchange Commission within 120 days after our June
30, 2000 fiscal year end.



                                     PART IV

Item 14.   Exhibits, Financial Statement Schedules and Reports on Form 8-K ..59

<PAGE>

Signatures ..................................................................63

Exhibit Index................................................................65



<PAGE>

                                     PART I

ITEM 1.  BUSINESS.

FORWARD-LOOKING STATEMENTS

     We make forward-looking statements in this report and the documents we
incorporate by reference. Sometimes these statements contain words such as
"anticipates," "plans," "intends," "expects" and similar expressions to identify
forward-looking statements. These statements are not guarantees of our future
performance. Our business involves known and unknown risks, uncertainties and
other factors which may cause our actual results, performance or achievements to
be materially different from what we say in this report and in the documents we
incorporate by reference. Given these uncertainties, you should not place undue
reliance on these forward-looking statements, which speak only as of the date of
this report. We will not revise these forward-looking statements to reflect
events or circumstances after the date of this report or to reflect the
occurrence of unanticipated events.

OVERVIEW

     We are in the early stages of developing pharmaceutical products and
technologies. We are concentrating our efforts on the following:

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

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

     o    LeuTech(R), a diagnostic imaging product used to image and locate the
          site of infection or inflammation within the body. We have completed
          clinical trials with LeuTech for the diagnosis of equivocal
          appendicitis and filed an application with the United States Food and
          Drug Administration for approval to market LeuTech for that
          indication. FDA review of our clinical efficacy and safety data is
          complete and the FDA has not requested any further data on efficacy or
          safety. However, the FDA has requested additional manufacturing and
          process validation data. We are currently working on responding to the
          FDA's request for additional data. We are conducting additional
          clinical trials with LeuTech to diagnose other infections such as bone
          infections, infections of prostheses, or artificial body parts, and
          abscesses. We believe that LeuTech can be used to diagnose a wide
          range of other infections, including infections of the intra-abdominal
          area, such as intestinal, spleen, liver or urinary tract infections.

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PRODUCTS AND TECHNOLOGIES IN RESEARCH AND DEVELOPMENT

     MIDAS. MIDAS is a novel peptide chemistry that may have broad applications
in the pharmaceutical and radiopharmaceutical industries. The MIDAS technology
combines a metal ion with a specially designed peptide, resulting in a
biologically active molecule. Peptides, which are short chains of amino acids,
play important roles in regulating a variety of biological functions. Natural
peptides function by conforming or bending to fit specific molecules on cell
surfaces, called receptors, thereby signaling the cell to initiate a biological
activity. Some important biological functions that are affected in this manner
include overall growth and behavior, inflammatory responses, immune responses
and wound healing.

     In order to effectively regulate cell signaling, a peptide must bind to its
target receptor with high affinity. The affinity of a peptide for its target
receptor is highly dependent on its three-dimensional shape or conformation.
Many naturally occurring peptides are flexible and can take on multiple
conformations, allowing them to interact with more than one type of cell
receptor, and to control multiple functions within the body. However, when such
peptides are used as drugs, this multiple reactivity is a disadvantage as it may
potentially lead to side effects. The ability to construct high-affinity,
receptor-specific peptides offers a significant opportunity to develop potent
receptor-specific drugs.

     We believe that our patented MIDAS technology can be used for rational
design and production of receptor-specific drugs. Using MIDAS, highly stable
complexes of a peptide and a metal ion are formed, which mimic the
three-dimensional structure that fits a particular receptor ("conformation"). We
hope that by designing MIDAS peptides to mimic the conformation required for a
specific receptor, we can make a stable, receptor-specific drug, with enhanced
biological activity and fewer side effects. We may be able to develop
radiopharmaceutical products, which may be diagnostic or therapeutic, using
radioactive metal ions in MIDAS peptides. Non-radioactive metal ions may be used
in the development of biopharmaceutical MIDAS peptides.

     We are engaged in research and development on a number of product
opportunities for our MIDAS technology, including use of peptide molecules for
the treatment of obesity and eating disorders with a melanocortin receptor-based
therapeutic agent, and for neural regeneration. We believe that MIDAS technology
may have medical applications in a variety of areas, including immune disorders,
cancers and cardiology. We intend to seek to enter into strategic alliances or
collaborative arrangements to provide additional financial and technical
resources for MIDAS development.

     AGREEMENT WITH NIHON MEDI-PHYSICS. In 1996, we entered into a license
option agreement with Nihon Medi-Physics Co. Ltd., a large Japanese
pharmaceutical company. We received an initial payment of $1,000,000, before
Japanese withholding taxes of $100,000. On December 29, 1998, we terminated the
existing license option agreement with Nihon by mutual agreement, and signed a
letter of intent relating to development of diagnostic and therapeutic

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<PAGE>

radiopharmaceutical products based on our MIDAS peptide technology. We have
decided not to pursue any opportunities with Nihon Medi-Physics at the present
time.


     PT-14 AND PT141. PT-14 is a stabilized peptide based on the natural hormone
alpha-MSH. We are developing it for the treatment of male erectile dysfunction.
We believe that PT-14 will be different from currently available treatments for
male erectile dysfunction because its mechanism of action is through receptors
found in the brain, as compared to a direct effect on blood flow to the penis.
PT-14 may be useful in treating patients who do not respond well to current
therapies.

     In a preliminary double-blind clinical study using PT-14 conducted under a
physician-sponsored FDA investigational new drug application prior to our
licensing of PT-14, eight out of 10 men achieved clinically significant erectile
response.

     Studies during the last ten years indicate that as many as 20 million to 30
million men in the United States may be afflicted with some form of male
erectile dysfunction. Because of the large number of men believed to be
afflicted with male erectile dysfunction, we believe the total market for
treatment will be several billion dollars per year. There is tremendous
competition to develop and market drugs for treatment of male erectile
dysfunction.

     In March 1998, we entered into a license and development agreement with
Watson Laboratories, Inc., formerly TheraTech, Inc., which included a license to
some patents owned by TheraTech, to collaboratively develop an oral transmucosal
delivery system for PT-14. On March 15, 2000 we entered into an agreement with
Watson Laboratories to terminate this license and development agreement.

     PT-141. PT-141 is a safer, more potent derivative of PT-14. We have
initiated development efforts on a nasal delivery formulation of PT-141. We
intend to further evaluate PT-141 for male erectile dysfunction. We expect to
file an investigational new drug application with the FDA later this year, after
which we expect to begin our initial clinical trials with the enrollment of test
subjects.

     LEUTECH. The LeuTech kit system contains a modified mouse monoclonal
antibody and our proprietary chemistry for radiolabeling the antibody. Prior to
use in patients, the antibody contained in the LeuTech kit is radiolabeled with
technetium-99m, a radioactive isotope, by a radiopharmacy (a pharmacy
specializing in radioactive materials) or by a hospital's nuclear medicine
department. After radiolabeling, LeuTech is administered to the patient by
intravenous injection, and rapidly binds to white blood cells present at the
site of the infection or circulating in the blood stream. Using LeuTech,
physicians can take a definitive image within 45 minutes of administration,
permitting rapid imaging and detection of the site of infection.

     LeuTech has been used to image a variety of infections within the
intra-abdominal area, such as intestine, spleen, liver or urinary tract
abscesses, as well bone, prosthetic and other abscesses. As part of the body's
immune response to an infection, large numbers of white blood cells migrate to
and collect at the site of the infection. The concentration of white blood cells
at

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the site of the infection can be used as the basis of detection. By using an
agent such as LeuTech, which "tags" or labels the white blood cells with
temporary radioactivity, the site of the infection can be readily detected using
a camera that records radioactivity.

     The most accurate procedure currently available for the nuclear medicine
imaging of infection sites involves white blood cells labeled with radioactivity
outside of the patient's body. This white blood cell labeling procedure begins
with the removal of blood cells from the patient, isolating white blood cells
from the patient's blood, radiolabeling the white blood cells and injecting the
radiolabeled white blood cells back into the patient. The radiolabeled white
blood cells then localize at the site of infection, and can be detected using
the appropriate camera. This procedure is expensive, involves risks to patients
and technicians associated with blood handling, and generally takes between
eight and twelve hours to generate a diagnostically useful image.

     In order to understand the process of drug testing and approval, it is
helpful to be familiar with the following terminology of clinical trial phases
and FDA applications:

          Preclinical testing: animal trials to evaluate toxicity.

          Phase I: In Phase I clinical trials, researchers test a new drug or
          treatment in a small group of people for the first time to evaluate
          its safety, determine a safe dosage range, and identify side effects.

          Phase II: In Phase II clinical trials, the study drug or treatment is
          given to a larger group of people to see if it is effective and to
          further evaluate its safety.

          Phase III: In Phase III studies, the study drug or treatment is given
          to large groups of people to confirm its effectiveness, monitor side
          effects, compare it to commonly used treatments, and collect
          information that will allow the drug or treatment to be used safely.

          Phase IV: Phase IV studies are done after the drug or treatment has
          been marketed. These studies continue testing the study drug or
          treatment to collect information about their effect in various
          populations and any side effects associated with long-term use.
          Investigational new drug application: report on preclinical and
          clinical testing through Phase III, with manufacturing and labeling
          information.

          Biologics license application, or BLA: application for FDA approval
          for sale of a product classified as a biologic.

          New drug application: application for FDA approval for sale of a
          product classified as a drug.

          MIDAC: Medical Imaging Drug Advisory Committee.

     We submitted an investigational new drug application to the FDA on LeuTech
for diagnosis of appendicitis. We completed Phase I, II and III clinical trials
of LeuTech and submitted a biologics license application to the FDA for approval
to market LeuTech for the diagnosis of equivocal appendicitis.

     The Phase I clinical trial tested the safety of LeuTech, and investigated
the sites where it can be found after administration. In that study, LeuTech was
administered to 10 healthy

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<PAGE>

volunteers who were monitored for adverse events. The results showed that there
were no significant safety concerns associated with LeuTech administration.

     In the Phase II clinical trial, we evaluated LeuTech for its ability to
diagnose equivocal appendicitis. The Phase II clinical trial enrolled 56
patients with a preliminary diagnosis of equivocal appendicitis at two medical
centers. In the study, the commercial preparation of LeuTech demonstrated 88%
accuracy and 100% sensitivity in the diagnosis of equivocal appendicitis.

     In July 1998, we met with representatives of the FDA to discuss the LeuTech
Phase II clinical results and to discuss the LeuTech Phase III clinical trials
protocol. Following the meeting, we submitted a Phase III protocol and began
Phase III clinical trials for the diagnosis of equivocal appendicitis in
September 1998. Palatin completed Phase III trials in the spring of 1999.

     In May 1999, we met with representatives of the FDA to discuss the LeuTech
Phase III clinical results and to discuss filing a biologics license application
for approval to market LeuTech for diagnosis of equivocal appendicitis. We filed
the biologics license application on November 23, 1999.

     In July 2000, we met with the FDA MIDAC, which determined in two unanimous
(9-0) votes that LeuTech is safe and effective for use in the diagnosis of
appendicitis in patients with equivocal signs and symptoms, and that the it has
demonstrated clinical utility managing these patients.

     In September 2000, as part of the normal review process, we received a
complete review letter containing the FDA's comments. FDA review of the clinical
efficacy and safety data is complete, and the FDA did not request further data
on efficacy or safety. The letter advises us that the manufacturing process
validation data which we previously submitted were not adequate for final
approval. The FDA listed its issues and concerns regarding our application and
provided specific details on how we must supplement our application to remedy
the issues. Resolving the outstanding manufacturing issues will impact the
timing of FDA approval. Although we cannot know for certain whether we can
address these issues to the FDA's satisfaction, we are confident that we will be
able to resovle them.

     We have conducted small-scale LeuTech trials for indications involving
other infections. We have obtained images in indications such as osteomyelitis,
abdominal abscesses, and pulmonary infections. In many cases, researchers were
able to obtain LeuTech diagnostic images in under one hour. We are currently
conducting Phase II clinical trials to evaluate potential LeuTech indications as
well as safety studies on the risks of repeat doses causing a human anti-mouse
antigen response in the presence of human anti-mouse antigens.

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


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     o    received an exclusive worldwide license (excluding Europe) for sales,
          marketing and distribution of LeuTech and paid a licensing fee of
          $500,000;

     o    agreed to make milestone payments of $5,000,000 on FDA approval of the
          first LeuTech indication and $5,000,000 on attainment of sales goals
          following product launch;

     o    agreed to reimburse us for 50% of all ongoing LeuTech development
          costs, subject to a cap, which can be amended;

     o    agreed to pay us a transfer price on each LeuTech product unit
          delivered to Mallinckrodt and a quarterly royalty on Mallinckrodt's
          future net sales of LeuTech;

     o    purchased 700,000 restricted shares of our non-voting Series C
          convertible preferred stock for $13,000,000;

     o    agreed that the Series C convertible preferred stock would be
          convertible after five years, or earlier upon the occurrence of a
          change in control (as defined in the agreement), into 700,000 shares
          of our common stock with certain registration and anti-dilution
          rights;

     o    agreed to the oversight of LeuTech development and marketing
          activities by a joint steering committee, comprised of equal numbers
          of representatives to be appointed;

     o    agreed to the potential termination of the agreement by either party
          in the event of material breach or nonpayment by the other party and
          the expiration of the agreement after the commercial sale of LeuTech
          ceases;

     o    agreed that if the agreement was validly terminated by us before its
          expiration due to material breach or nonpayment by Mallinckrodt, then,
          among other things, all licenses granted to Mallinckrodt will be
          terminated, Mallinckrodt will assign to us any interest they may have
          in any trademarks used to market LeuTech as well as any regulatory
          filings Mallinckrodt may have made in connection with LeuTech and
          Mallinckrodt will continue to pay us royalty on the sale of any
          inventory they may have the right to dispose of; and

     o    agreed that if the agreement was validly terminated by Mallinckrodt
          before its expiration due to a material breach or nonpayment by us,
          then, among other things, all licenses granted to Mallinckrodt under
          the terms of the agreement will be considered exclusive and
          irrevocable, we shall transfer to Mallinckrodt all contractual and
          intellectual property rights necessary for the production of LeuTech
          in quantities sufficient to meet Mallinckrodt's needs, and
          Mallinckrodt shall continue to pay us royalty on all sales of LeuTech.



     RESEARCH AND DEVELOPMENT. Our research and development efforts primarily
focus on two areas: diagnostic imaging and peptide-based therapeutics. Taken
collectively, we believe our technologies will facilitate the development of a
portfolio of potential products. A summary

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of our research and development program appears below. "Research" includes the
identification of novel molecular targets, development of assay systems,
discovery and evaluation of prototype compounds in vitro and in vivo with animal
testing. "Development" includes product formulation, toxicology and additional
animal testing of a compound, followed by clinical testing and manufacturing
methods development.



<PAGE>


Program       Indication                       Status         Commercial Rights
-------       ----------                       ------         -----------------

LeuTech       appendicitis                     BLA            Mallinckrodt

              osteomyelitis                    Phase II       Mallinckrodt

              post-surgical abscess            Phase II       Mallinckrodt

PT-141        erectile dysfunction             development

MIDAS         obesity and eating disorders     research

              neural regeneration              research


     Over the last three fiscal years, we have spent approximately the following
amounts on research and development activities:

     o    year ended June 30, 2000: $9,110,000

     o    year ended June 30, 1999: $8,720,000

     o    year ended June 30, 1998: $7,110,000



PATENTS AND PROPRIETARY INFORMATION

     PATENT PROTECTION. Our success will depend in substantial part on our
ability to obtain, defend and enforce patents, maintain trade secrets and
operate without infringing upon the proprietary rights of others, both in the
United States and abroad. We aggressively seek patent protection for its
technology in the United States and, selectively, in those foreign countries
where protection is important to the development of our business.

     We own or have rights to patents and pending applications directed to
radiolabeling of antibodies, antibody fragments, and peptides; MIDAS peptides;
peptide pharmaceuticals; and to methods for making and using the foregoing in
diagnostic and therapeutic applications. We own or have rights to over 25 United
States patents, several pending United States patent applications, and foreign
patents and applications in selected foreign countries corresponding to certain
United States patents and applications.

     Although we have filed patent applications covering the LeuTech products,
and those applications are pending, we may not be able to obtain a patent, and
the claims of the patent may not provide meaningful protection for the LeuTech
product. In addition, even if the patent

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issues, it may not be valid. We do not know for certain that the use or sale of
LeuTech will not infringe upon patents of third parties.

     In the event that a third party has also filed a patent application
relating to an invention we claimed in a patent application, we may be required
to participate in an interference proceeding adjudicated by the United States
Patent and Trademark Office ("PTO") to determine priority of invention. The
possibility of an interference proceeding could result in substantial
uncertainties and cost, even if the eventual outcome is favorable to us. An
adverse outcome could result in losing patent protection for the subject of the
interference, subjecting us to significant liabilities to third parties and
requiring us to obtain licenses from third parties at undetermined cost or to
cease using the technology.

     FUTURE PATENT INFRINGEMENT. We do not know for certain that our commercial
activities will not infringe upon patents or patent applications of third
parties, some of which may not even have been issued yet. Although we are not
aware of any valid U.S. patents which are infringed by LeuTech or by our method
of making LeuTech, such patents might arise in the future. We may be unable to
avoid infringement of any such patents and may have to seek a license, defend an
infringement action, or challenge the validity of such patents in court. Patent
litigation is costly and time consuming. If we do not obtain a license under any
such patents, are found liable for infringement, or if such patents are not
found to be invalid, we may be liable for significant money damages, may
encounter significant delays in bringing products to market, or may be precluded
from participating in the manufacture, use or sale of products or methods of
treatment covered by such patents.

     GOVERNMENT RIGHTS. Some of our patents relating to LeuTech are directed to
inventions developed internally or within academic institutions from which we
previously acquired rights to such patents with funds from United States
government agencies. As a result of these arrangements, the United States
government may have rights in certain inventions developed during the course of
the performance of federally funded projects, as required by law or agreements
with the funding agency.

     PROPRIETARY INFORMATION. We rely on proprietary information, such as trade
secrets and know-how, which is not patented. We have taken steps to protect our
unpatented trade secrets and know-how, in part through the use of
confidentiality agreements with our employees, consultants and certain
contractors. If our employees, scientific consultants or collaborators or
licensees develop inventions or processes independently that may be applicable
to our product candidates, disputes may arise about ownership of proprietary
rights to those inventions and processes. Such inventions and processes will not
necessarily become our property, but may remain the property of those persons or
their employers. Protracted and costly litigation could be necessary to enforce
and determine the scope of our proprietary rights.

     If trade secrets are breached, our recourse will be solely against the
person who caused the secrecy breach. This might not be an adequate remedy to
us, because third parties other than

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the person who causes the breach will be free to use the information without
accountability to us. This is an inherent limitation of the law of trade secret
protection.

GOVERNMENTAL REGULATION

     The FDA, comparable agencies in foreign countries and state regulatory
authorities have established regulations and guidelines which apply, among other
things, to the clinical testing, manufacturing, safety, efficacy, labeling,
storage, record keeping, advertising, promotion and marketing of our proposed
products. Noncompliance with applicable requirements can result in fines,
recalls or seizures of products, total or partial suspension of production,
refusal of the regulatory authorities to approve marketing applications, and
criminal prosecution.

     After approving a product for marketing, the FDA may require post-marketing
testing, including extensive Phase IV studies, and surveillance to monitor the
effects of the product in general use. The FDA may withdraw product approvals if
compliance with regulatory standards is not maintained or if problems occur
following initial marketing. In addition, the FDA may impose restrictions on the
use of a drug that may limit its marketing potential.

     GOOD MANUFACTURING PRACTICES. In addition to obtaining either a
biologics license application or new drug application approval from the FDA for
any of our proposed products, if the proposed product is manufactured in the
United States, the drug manufacturing establishment must be registered with, and
inspected by, the FDA. Such drug manufacturing establishments are subject to
biennial inspections by the FDA, and must comply with current good manufacturing
practices regulations enforced by the FDA. To supply products for use in the
United States, foreign manufacturing establishments must comply with current
good manufacturing practices and are subject to periodic inspection by the FDA
or by corresponding regulatory agencies in such other countries under reciprocal
agreements with the FDA. In complying with standards established by the FDA,
manufacturing establishments must continue to expend time, money and effort in
the areas of production and quality control to ensure full technical compliance.
We depend on contract manufacturing establishments, both in the United States
and in foreign countries, to manufacture components of LeuTech. We anticipate
that contract manufacturing establishments will manufacture PT-141 and proposed
products resulting from our MIDAS technology.

THIRD-PARTY REIMBURSEMENTS

         Successful sales of our proposed products in the United States and
other countries will depend on the availability of adequate reimbursement from
third-party payors such as governmental entities, managed care organizations and
private insurance plans. Reimbursement by a third-party payor may depend on a
number of factors, including the payor's determination that use of a product is
safe and efficacious, neither experimental nor investigational, medically
necessary, appropriate for the specific patient and cost effective. Since
reimbursement approval is required from each payor individually, seeking such
approvals is a time-consuming and costly process. Third-party payors routinely
limit reimbursement coverage and in many instances are exerting significant
pressure on medical suppliers to lower their prices. There is significant
uncertainty concerning third-party reimbursement for the use of any
pharmaceutical product

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incorporating new technology, and we are not sure whether third-party
reimbursement will be available for our proposed products, or that the
reimbursement, if obtained, will be adequate. Less than full reimbursement by
governmental and other third-party payors for our products would adversely
affect the market acceptance of these products. Further, health care
reimbursement systems vary from country to country, and we are not sure whether
third-party reimbursement will be made available for our proposed products under
any other reimbursement system.

MANUFACTURING AND MARKETING

     To be successful, our products must be manufactured in commercial
quantities under current good manufacturing practices requirements prescribed by
the FDA and at acceptable costs. We do not have the facilities to manufacture
any products in commercial quantities under good manufacturing practices. We
intend to rely on collaborators, licensees or contract manufacturers for the
commercial manufacture of our products.

     We are dependent on Dutch State Mines of the Netherlands for the
manufacture of the antibody used in LeuTech, and on Ben Venue Laboratories of
Cleveland, Ohio for the manufacture of LeuTech kits. The failure of either of
these manufacturers to comply with FDA current good manufacturing practices or
to supply these key components of LeuTech on a timely basis or at all, could
force us to seek alternative sources of supply and could interfere with our
ability to deliver product on a timely basis or at basis. Establishing
relationships with new suppliers, any of whom must be FDA-approved, is a
time-consuming and costly process.

     If LeuTech is approved for marketing by the FDA, we will rely on our
arrangement with Mallinckrodt to market, sell and distribute LeuTech. We will
have limited control over these activities.

     Proposed products resulting from MIDAS technology and PT-141 are synthetic
peptides. The peptides are synthesized from readily available amino acids, and
the production process involves well-established technology. We currently
contract with third-party manufacturers for the production of peptides and
anticipate doing so in the future.

     We intend to package and ship our radiopharmaceutical products in the form
of non-radioactive kits. Prior to patient administration, the product would be
radiolabeled with the specified radioisotope, generally by a specialized
radiopharmacy. We do not intend to sell or distribute any radioactive substance.

PRODUCT LIABILITY AND INSURANCE

     Our business may be affected by potential product liability risks which are
inherent in the testing, manufacturing and marketing of our proposed products.
We have liability insurance providing up to $5,000,000 coverage per occurrence
and in the aggregate as to certain clinical

                                       10

<PAGE>


trial risks, and we will seek to obtain additional product liability insurance
before the commercialization of our products.

EMPLOYEES

     As of September 25, 2000, we employed 27 persons full time, of whom 20 were
engaged in research and development activities and seven were engaged in
administration and management. Seven of our employees hold Ph.D. degrees. We
have been successful in attracting skilled and experienced scientific personnel,
however, competition for personnel in our industry is intense.

     None of our employees are covered by a collective bargaining agreement. Our
employees have executed confidentiality agreements. We consider relations with
our employees to be good.

     From time to time, we hire scientific consultants to work on specific
research and development programs. We also rely on independent organizations,
advisors and consultants to provide services, including most aspects of
manufacturing and some aspects of regulatory approval and clinical management.
Our independent advisors and consultants generally sign agreements that provide
for confidentiality of our proprietary information.


HISTORY AND MERGER

     Interfilm, Inc. Palatin was incorporated as a Delaware corporation on
November 21, 1986 under the name of Cinedco, Inc., which it later changed to
Interfilm, Inc. From 1993 to 1995, Interfilm was primarily engaged in the
interactive motion picture business. Interfilm suspended its business activities
in May 1995.

     RhoMed merger. On June 25, 1996, Interfilm merged with RhoMed Incorporated,
a New Mexico corporation engaged in biotechnology research and development. All
of RhoMed's outstanding equity securities were exchanged for equity securities
of Palatin. The business of RhoMed became the ongoing business of Palatin.
RhoMed remains as a wholly-owned, inactive subsidiary of Palatin.

     New name and capital restructuring. On July 19, 1996, we amended our
certificate of incorporation to:

     o    change our name from Interfilm, Inc. to Palatin Technologies, Inc.,

     o    increase our authorized common stock from 10,000,000 to 25,000,000
          shares, and

     o    effect a 1-for-10 reverse split of the common stock.

On September 5, 1997, we again amended our certificate of incorporation, to:

     o    increase our authorized common stock from 25,000,000 to 75,000,000
          shares,

     o    increase our authorized preferred stock from 2,000,000 to 10,000,000
          shares, and

                                       11

<PAGE>


     o    effect a 1-for-4 reverse split of the common stock.



ITEM 2.  PROPERTIES.

     Our executive offices are located at 103 Carnegie Center, Suite 200,
Princeton, New Jersey, where we lease approximately 7,300 square feet under a
lease which expires December 15, 2004. Our research and development facility is
located in Edison, New Jersey, where we lease approximately 16,000 square feet
under a lease which expires July 31, 2007. The leased properties are in good
condition.



ITEM 3.  LEGAL PROCEEDINGS.

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

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

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

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

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

                                       12

<PAGE>


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     We did not submit any matters to a vote of security holders during the
fourth quarter of the fiscal year ended June 30, 2000.



                                     PART II


ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     Our common stock has been quoted on The American Stock Exchange under the
symbol PTN, since December 21, 1999. It had previously traded on the Nasdaq
SmallCap Market under the symbol PLTN.

     The table below provides, for the fiscal quarters indicated, the reported
high and low closing sales prices for the common stock on AMEX since December
21, 1999, and the reported high and low bid prices for the common stock on
Nasdaq before December 21, 1999.

                      YEAR ENDED JUNE 30, 2000          HIGH        LOW
Fourth Quarter...................................... $ 7-5/16     $ 3-5/8

Third Quarter....................................... $ 9-1/4      $ 2-3/4

Second Quarter...................................... $ 4          $ 2-3/8

First Quarter....................................... $ 5-3/16     $ 2-31/32

                      YEAR ENDED JUNE 30, 1999         HIGH         LOW
Fourth Quarter...................................... $ 7          $ 3-3/8

Third Quarter....................................... $ 6-3/8      $ 3-3/4

Second Quarter...................................... $ 5-13/16    $ 1-3/8

First Quarter....................................... $ 5-1/2      $ 1-29/32

     HOLDERS OF COMMON STOCK. On September 25, 2000, we had approximately 335
holders of record of common stock. About half of our outstanding common stock is
registered in the name of depositories and brokers, which represent a much
larger number of individual share accounts. On September 25, 2000 the closing
sales price of our common stock as reported on the AMEX was $6.25 per share.

     DIVIDENDS AND DIVIDEND POLICY. We have never declared or paid any
dividends. We currently intend to retain earnings, if any, for use in our
business. We do not anticipate paying dividends in the foreseeable future.

                                       13

<PAGE>


     DIVIDEND RESTRICTIONS. Our two outstanding series of preferred stock,
Series A and C, contain the following restrictions on our ability to pay
dividends or make distributions to stockholders.

     o    Series A: We may not pay a dividend or make any distribution to
          holders of any class of stock unless we first pay a special dividend
          or distribution of $100 per share to the holders of Series A preferred
          stock.

     o    Series C: We may not pay a dividend or make any distribution to
          holders of any class of stock while any Series C preferred stock
          remains outstanding.

     RECENT SALES OF UNREGISTERED SECURITIES. In April 2000, we issued warrants
to eight accredited investors to purchase a total of 50,000 shares of our common
stock at an exercise price of $.01 per share. We issued the warrants in
connection our termination of a license and development agreement with Watson
Laboratories and the investors' privately negotiated purchase from Watson of a
total of 363,636 shares of our common stock, for a total price of $2 million.
Watson had purchased the shares from us in July 1998.

     The warrants are exercisable in whole or in part at any time before March
15, 2005. We will proportionately adjust the number of shares issuable on
exercise of the warrants if we effect a division, recombination or
reclassification of our common stock, or if we make a distribution of securities
on the basis of all outstanding common stock.

     We relied on the exemption under Section 4(2) of the Securities Act of 1933
in that the issuance did not involve any public offering of the warrants. The
warrants are not transferable absent registration or an exemption from
registration, and the warrant certificates bear a restrictive legend to that
effect. The warrant holders have piggy-back registration rights for five years,
or until the common stock underlying the warrants is registered or can be sold
without volume limitations under SEC Rule 144.

ITEM  6.  SELECTED FINANCIAL DATA.

     The following selected consolidated financial data has been derived from
the consolidated financial statements of Palatin Technologies, Inc. as of and
for each of the five years in the period ended June 30, 2000 which have been
audited by Arthur Andersen LLP, independent public accountants. This data should
be read in conjunction with our consolidated financial statements, including the
notes to the financial statements, and the "Management's Discussion and Analysis
of Financial Condition and Results of Operations" in Item 7 of this report.

                                       14

<PAGE>

                                       (In thousands, except per share data)
                                               Year Ended June 30,
                                               -------------------
                                  1996(1)    1997     1998     1999      2000
                             ---------------------------------------------------
Statement of Operations Data:
REVENUES:
 Grants and contracts       $    --   $    350  $     34    $     60    $ 4,617
 License fees and royalties      --        350        --         550        500
 Other                           24         22        --          --        --
                            -------   --------  ---------   ---------   --------
  Total revenues                 24        722        34         610      5,117
                            -------   --------  ---------   ---------   --------

                                       (In thousands, except per share data)
                                               Year Ended June 30,
                                               -------------------
                                  1996(1)    1997     1998     1999      2000
                             ---------------------------------------------------

OPERATING EXPENSES:
 Research and development       870     3,410      7,111       8,720      9,110
 General and administrative   1,701     2,533      2,991       3,957      4,567
 Net intangibles write down     259        --         --          --         --
                            -------   --------  ---------   ---------   --------
   Total operating expenses   2,830     5,943     10,102      12,677     13,677


OTHER INCOME (EXPENSES)
 Interest income                 11       296       409          172        405
 Interest expense              (628)     (375)     (227)        (107)       (29)
 Merger costs                  (475)       --        --           --         --
                            --------  --------  ---------   ---------   --------
   Total other income
     (expense)               (1,092)      (79)      182           65        376
                            --------  --------  ---------   ---------   --------

NET LOSS                    $(3,898)  $(5,300)   $(9,886)   $(12,002)   $(8,184)

PREFERRED STOCK
  DIVIDEND                       --    (2,889)      (233)         --         --
                            --------  --------  ---------   ---------   --------

NET LOSS ATTRIBUTABLE
  TO COMMON
  STOCKHOLDERS              $(3,898)  $(8,189)  $(10,119)   $(12,002)   $(8,184)
                            ========  ========  =========   =========   ========

Net loss per common
   share (2)                $ (1.82)  $ (2.80)  $  (3.15)   $  (2.02)   $ (1.10)


Weighted avg. common shares
Outstanding                   2,144     2,924      3,211       5,936      7,441
                            ========  ========  =========   =========   ========

                                       15

<PAGE>

                                                   June 30,
                            ----------------------------------------------------
                               1996      1997       1998        1999       2000
                            ----------------------------------------------------
Balance Sheet Data:
Cash, cash equivalents
   and Investments          $ 6,791   $12,622   $  4,326    $  2,789    $ 5,842
Property, plant &
   equipment, net                96       922      1,610       1,458      1,573
Working capital               4,503    10,142      2,069         554      4,995
Total assets                  7,041    14,063      6,475       4,723      8,885
Long term debt, net of
    current portion           1,844       940          -       2,000          -
Common stock                    115        30         41          71         79
Net stockholders' equity      2,838     9,835      3,390         341      6,905

------------------------------------
(1)  Ten Months Ended June 30, 1996.
(2)  Basic and diluted.



ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

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

RESULTS OF OPERATIONS

YEAR ENDED JUNE 30, 2000 COMPARED TO THE YEAR ENDED JUNE 30, 1999

     CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS - Cash, cash equivalents
and short-term investments increased to $5,375,210 at June 30, 2000 from
$2,788,628 at June 30, 1999. The increase was due to the receipt of funds,
approximately $11,450,000 net, from the collaboration agreement signed with
Mallinckrodt, Inc. on August 17, 1999. Pursuant to the agreement we:

     o    Received $500,000 from a one-time, non-refundable exclusive worldwide
          license (excluding Europe) for sales, marketing and distribution of
          LeuTech.

     o    Received $13,000,000 from the sale of 700,000 restricted shares of our
          non-voting Series C convertible preferred stock.

     o    Paid $2,000,000 in principal as repayment of a subordinated
          non-negotiable promissory note from Mallinckrodt, plus $46,489 in
          interest.

                                       16

<PAGE>


     ACCOUNTS RECEIVABLE - Accounts receivable increased to $953,163 at June 30,
2000 from zero at June 30, 1999. The increase was due to the recognition of
contract revenue pursuant to our strategic collaboration agreement with
Mallinckrodt, see below.

     GRANT AND CONTRACTS - We recorded $4,141,480 as contract revenue during the
year ended June 30, 2000 related to the shared development costs and product
direct costs of LeuTech, pursuant to our strategic collaboration agreement with
Mallinckrodt. We also recorded $475,631 as grant revenue for the year ended June
30, 2000. We completed Phase I grants and a Phase II grant, previously awarded,
under the Small Business Innovative Research program with the National
Institutes of Health of the Department of Health and Human Services. We had no
revenues from contracts and recorded $59,977 as grant revenue for the year ended
June 30, 1999.

     LICENSE FEES AND ROYALTIES - We recorded $500,000 in license fees as
revenue for the year ended June 30, 2000. We received these fees as a one-time,
non-refundable payment pursuant to our strategic collaboration agreement with
Mallinckrodt. We recognized $550,000 in license fees as revenue during the year
ended June 30, 1999 related to our license option agreement with Nihon
Medi-Physics ("Nihon"). We recognized this $550,000, previously recorded as
"deferred revenue," because we and Nihon changed the development emphasis and
termination provisions of the original agreement. We are not required to perform
any future services under this agreement.

     RESEARCH AND DEVELOPMENT - Research and development expenses increased to
$9,109,619 for the year ended June 30, 2000 compared to $8,719,562 for the year
ended June 30, 1999. The increase in R&D is primarily related to development of
our LeuTech product, including increased expenses for manufacturing scale-up,
consulting and clinical trials. We expect research and development expenses to
continue to increase in future quarters as we expand clinical trials and
manufacturing efforts on the LeuTech product and expand efforts to develop
PT-141 and the MIDAS technology.

     GENERAL AND ADMINISTRATIVE - General and administrative expenses increased
to $4,567,273 for the year ended June 30, 2000 compared to $3,957,401 for the
year ended June 30, 1999. The increase in general and administrative expenses
was mainly attributable to the payment of approximately $625,000 of costs
pursuant to the proposed merger with Molecular Biosystems.

     INTEREST INCOME - Interest income increased to $405,590 for the year ended
June 30, 2000 compared to $172,241 for the year ended June 30, 1999. The
increase in interest income is the result of the receipt of funds pursuant to
our strategic collaboration agreement with Mallinckrodt, which enabled an
increase in funds available for investment purposes.

     INTEREST EXPENSE - Interest expense decreased to $29,247 for the year ended
June 30, 2000 compared to $107,639 for the year ended June 30, 1999. The
decrease in interest expense is due to the repayment of debt due to
Mallinckrodt.

     NET LOSS - Net loss decreased to $8,183,438 for the year ended June 30,
2000 compared to $12,002,384 for the year ended June 30, 1999. The decrease is
attributable to revenues earned related to cost sharing provisions pursuant to
the collaboration agreement with Mallinckrodt.

                                       17

<PAGE>


YEAR ENDED JUNE 30, 1999 COMPARED TO THE YEAR ENDED JUNE 30, 1998

     GRANTS AND CONTRACTS - During the year ended June 30, 1999 we recognized
$59,977 as revenue under the Small Business Technology Transfer program of the
Department of Health and Human Services. Grant revenue under the Small Business
Innovative Research program of the Department of Health and Human Services was
$33,967 for the year ended June 30, 1998. During the year ended June 30, 1999,
we were awarded two new grants under the National Institutes of Health Small
Business Innovative Research program totaling $850,000.

     LICENSE FEES AND ROYALTIES - We recognized $550,000 in license fees as
revenue during the year ended June 30, 1999 related to its termination of a
license option agreement with Nihon. This $550,000 was previously reported as
deferred license revenue. We had no revenues from license fees or royalties
during the year ended June 30, 1998.

     RESEARCH AND DEVELOPMENT EXPENSES - Research and development expenses
increased to $8,719,562 for the year ended June 30, 1999 from $7,111,716 for the
year ended June 30, 1998. We substantially increased research and development
spending, primarily relating to development of LeuTech, including increased
expenses for manufacturing scale-up, consulting and clinical trials, and also
relating to research expenses on PT-14 and the MIDAS technology. The increase is
also attributable to the amortization of deferred compensation totaling
$313,202. We expect research and development expenses to continue to increase in
future quarters as we expand research and manufacturing efforts on LeuTech and
expand efforts to develop PT-14 and MIDAS technology.

     GENERAL AND ADMINISTRATIVE EXPENSES - General and administrative expenses
increased to $3,957,401 for the year ended June 30, 1999 from $2,990,756 for the
year ended June 30, 1998. The increase in general and administrative expenses
was mainly attributable to the amortization of deferred compensation and the
value of options granted at exercise prices below the then current market price
of our common stock totaling $995,473.

     INTEREST INCOME - Interest income decreased to $172,241 for the year ended
June 30, 1999 from $408,770 for the year ended June 30, 1998. The decrease in
interest income is primarily the result of the depletion of funds available for
investment purposes and used to fund operations.

     INTEREST EXPENSE - Interest expense decreased to $107,639 for the year
ended June 30, 1999 from $227,143 for the year ended June 30, 1998. The decrease
in interest expense is due to repayment of a portion of outstanding principal on
long-term debt.

     NET LOSS - Net loss increased to $12,002,384 for the year ended June 30,
1999 from $9,886,878 for the year ended June 30, 1998.

YEAR ENDED JUNE 30, 1998 COMPARED TO THE YEAR ENDED JUNE 30, 1997

     GRANTS AND CONTRACTS - During the year ended June 30, 1998, we completed
four Phase I grants with the National Institutes of Health under the Small
Business Innovative Research program. Grant revenue from these research grants
was $33,967, compared to $350,173 during the year ended June 30, 1997.

     LICENSE FEES AND ROYALTIES - We had no revenues from license fees or
royalties during the

                                       18

<PAGE>


year ended June 30, 1998. In the year ended June 30, 1997, we entered into an
option agreement with Nihon, pursuant to which we received an initial payment of
$1,000,000 before Japanese withholding taxes of $100,000. We accounted for the
initial payment by recognizing license fee revenue of $350,000 and deferred
license fee revenue of $550,000.

     OTHER - We had no revenues from sales during the year ended June 30, 1998.
During the year ended June 30, 1997, we discontinued sales of our RhoChek
product due to insufficient sales. Total revenues from sales during the year
ended June 30, 1997, were $22,184.

     RESEARCH AND DEVELOPMENT EXPENSES - Research and development expenses
increased to $7,111,716 for the year ended June 30, 1998 from $3,409,983 for the
year ended June 30, 1997. We substantially increased research and development
spending, primarily relating to development of LeuTech, including increased
expenses for manufacturing scale-up, consulting and initiation of
Palatin-sponsored clinical trials, and also relating to research expenses on
MIDAS. The increase is also attributable to the amortization of deferred
compensation, and to the value of options granted at exercise prices below the
then current market price of our common stock, totaling $797,570 for the year
ended June 30, 1998.

     GENERAL AND ADMINISTRATIVE EXPENSES - General and administrative expenses
increased to $2,990,756 for the year ended June 30, 1998 from $2,533,883 for the
year ended June 30, 1997. The increase in general and administrative expenses
was mainly attributable to the amortization of deferred compensation, totaling
$925,740 for the year ended June 30, 1998, and the value of options granted at
exercise prices below the then current market price of our common stock.

     INTEREST INCOME - Interest income increased to $408,770 for the year ended
June 30, 1998 from $296,009 for the year ended June 30, 1997. The interest
income was primarily the result of interest on the net proceeds from our
offering of Series A preferred stock.

     INTEREST EXPENSE - Interest expense decreased to $227,143 for the year
ended June 30, 1998 from $374,664 for the year ended June 30, 1997. The decrease
is due to our repayment of outstanding principal on long-term debt provided by
Aberlyn Capital Management Limited Partnership.

LIQUIDITY AND CAPITAL RESOURCES

     Since inception, we have incurred net operating losses. As of June 30,
2000, we had a deficit accumulated during the development stage of $43,505,802.
We have financed our net operating losses through June 30, 2000 by a series of
debt and equity financings. At June 30, 2000, we had cash, cash equivalents and
investments of $5,842,044 and accounts receivable of $953,163.

     For the year ended June 30, 2000, the net increase in cash and cash
equivalents amounted to $885,792. Net cash used for operating activities was
$8,540,107, net cash used for investing activities was $2,054,809, and net cash
provided by financing activities was $11,480,708.

     In September 2000, we received $10.8 million from a private offering
consisting of common stock and warrants. Investors, consisting of financial
institutions based in Europe, purchased 1.8 million shares at a per share price
of $6.00, which represented the closing market price of Palatin shares on the
American Stock Exchange on September 7, 2000. For every five shares purchased,
the investors also received a five-year warrant to purchase one share of

                                       19

<PAGE>


common stock at a 25 percent premium to the closing price. The net proceeds will
be used primarily for general corporate purposes, especially for the development
and clinical trials of new products based on our proprietary technologies.

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

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

     o    received an exclusive worldwide license (excluding Europe) for sales,
          marketing and distributions of LeuTech and paid a licensing fee of
          $500,000;

     o    agreed to make milestone payments of $5,000,000 upon FDA
          approval of the first LeuTech indication and $5,000,000 on the
          attainment of sales goals following product launch;

     o    agreed to reimburse us for 50% of all ongoing LeuTech development
          costs, subject to a cap, which can be amended;

     o    agreed to pay to us a transfer price for each LeuTech product unit
          delivered to Mallinckrodt and a quarterly royalty on Mallinckrodt's
          future net sales of LeuTech;

     o    purchased 700,000 restricted shares of our non-voting Series C
          convertible preferred stock for $13,000,000; and

     o    agreed that the Series C convertible preferred stock would be
          convertible after five years, or earlier upon the occurrence of a
          change in control (as defined in the agreement), into 700,000 shares
          of our common stock with certain registration rights and anti-dilution
          rights.

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

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

     As of April 2000, we entered into an amendment to our research facility
lease, which increased our rentable space from approximately 10,500 square feet
to approximately 15,800.

                                       20

<PAGE>


Our aggregate future annual minimum lease payments escalate from approximately
$203,000 until July 13, 2002 to $300,000 from July 14, 2002 through July 13,
2007.

     We have three license agreements that require minimum yearly payments.
Future annual minimum payments under the license agreements are: 2001 -
$150,000, 2002 - $200,000, 2003 - $200,000, 2004 - $200,000 and 2005 - $200,000.

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

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

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

FACTORS AFFECTING OUR BUSINESS CONDITION

     In addition to the other information included in this report, the following
factors should be considered in evaluating our business and future prospects:

DEVELOPMENT AND COMMERCIALIZATION OF OUR PROPOSED PRODUCTS AND TECHNOLOGIES
INVOLVES A LENGTHY, COMPLEX AND COSTLY PROCESS AND WE MAY NEVER DEVELOP OR
COMMERCIALIZE ANY PRODUCTS.

     Our proposed products are at various stages of research and development and
may never be successfully developed or commercialized. LeuTech will require
regulatory approval to market it for diagnosis of appendicitis, as well as
additional clinical trials for other indications. PT-141 and our MIDAS
technology will require significant further research, development and testing.
You should evaluate Palatin in light of the uncertainties, delays, difficulties
and expenses commonly experienced by early stage pharmaceutical companies, which
generally include unanticipated problems and additional costs relating to:

                                       21

<PAGE>


     o    the development and testing of products in animals and humans

     o    product approval or clearance

     o    regulatory compliance

     o    good manufacturing practices

     o    product introduction

     o    marketing and competition.

WE EXPECT TO CONTINUE TO INCUR SUBSTANTIAL LOSSES OVER THE NEXT SEVERAL YEARS
AND WE MAY NEVER BECOME PROFITABLE.

     We have never been profitable and we may never become profitable. As of
June 30, 2000, we had an accumulated deficit of $43,505,802 and a loss for the
year then ended of $8,183,438. We anticipate substantial losses over the next
few years as we begin to manufacture and market LeuTech, expand clinical trials
for LeuTech's other indications and for PT-141, and to continue research and
development of PT-141 and our MIDAS technology.

WE MAY SELL ADDITIONAL EQUITY SECURITIES, WHICH WOULD CAUSE DILUTION.

     We may sell more equity securities in the future to obtain operating funds.
We may sell these securities at a discount to the market price. Any future sales
of equity securities will dilute the holdings of existing stockholders, possibly
reducing the value of their investment.

WE COULD LOSE OUR RIGHTS TO LEUTECH AND PT-141, WHICH WOULD ADVERSELY AFFECT OUR
POTENTIAL REVENUES.

     Our rights to a key antibody used in LeuTech are dependent upon an
exclusive license agreement with The Wistar Institute of Biology and Anatomy.
Our rights to PT-141 are dependent upon an exclusive license agreement with
Competitive Technologies, Inc. These agreements contain specific performance
criteria and require us to pay royalties and make milestone payments. Failure to
meet these requirements, or any other event of default under the license
agreements, could lead to termination of the license agreements. If a license
agreement is terminated we may be unable to make or market the covered product,
in which case we may lose the value of our substantial investment in developing
the product, as well as any future revenues from selling the product. If we were
to lose rights to LeuTech, our first product to reach the stage of an FDA
license application, the negative impact would be especially severe.

THE FDA MAY NOT APPROVE THE MARKETING OF LEUTECH, WHICH WOULD ADVERSELY AFFECT
OUR POTENTIAL REVENUES.

     We completed clinical trials of LeuTech for the diagnosis of equivocal
appendicitis in the spring of 1999. In November 1999, we filed an application
with the FDA for approval to market

                                       22

<PAGE>


LeuTech for that indication. FDA review of the application can be a long,
expensive and uncertain process. The application must demonstrate that LeuTech
has met rigorous standards of safety, efficacy and manufacturing before it can
be approved by the FDA for commercial use. The FDA has requested additional data
on LeuTech manufacturing and process validation. We cannot know for certain
whether we can remedy these matters to the FDA's satisfaction. Failure to obtain
regulatory approval of LeuTech, or delays in obtaining regulatory approval of
LeuTech, would eliminate or delay our potential revenues from sales of LeuTech.
This could make it more difficult to attract investment capital for funding our
other research and development projects.

WE DEPEND ON TWO CONTRACT MANUFACTURERS, DUTCH STATE MINES AND BEN VENUE
LABORATORIES, SO PRODUCTION AND SUPPLY OF LEUTECH DEPENDS ON PERFORMANCE OF
CONTRACTS BY THIRD PARTIES OVER WHOM WE HAVE NO CONTROL.

     We have no ability or capacity to manufacture LeuTech. We are dependent on
Dutch State Mines of the Netherlands for the manufacture of the antibody used in
LeuTech, and on Ben Venue Laboratories of Cleveland, Ohio for the manufacture of
LeuTech kits. The failure of either of these manufacturers to supply these key
components of LeuTech on a timely basis or at all, could force us to seek
alternative sources of supply and could interfere with our ability to deliver
product on a timely basis. Establishing relationships with new suppliers, any of
whom must be FDA-approved, is a time-consuming and costly process.

WE HAVE LIMITED EXPERIENCE IN MARKETING, DISTRIBUTING AND SELLING DIAGNOSTIC
IMAGING PRODUCTS AND MAY BE UNABLE TO ESTABLISH SUCCESSFUL MARKETING,
DISTRIBUTION AND SELLING CAPABILITIES FOR LEUTECH.

     If the FDA approves LeuTech for marketing, we expect to rely on
arrangements with other companies, such as Mallinckrodt, to market, sell and
distribute LeuTech. If such arrangements fail, we may have difficulty
establishing the necessary marketing relationships, and in any event, we will
have limited control over these activities. If we do not establish sufficient
marketing capability with other companies, our potential revenues from the sale
of LeuTech will be adversely affected.

IF LEUTECH DOES NOT ACHIEVE MARKET ACCEPTANCE, OUR BUSINESS WILL SUFFER.

     Approval of LeuTech for marketing and sale does not assure the product's
commercial success. LeuTech, if successfully developed, will compete with drugs
manufactured and marketed by major pharmaceutical and other biotechnology
companies. Physicians, patients or the medical community in general may not
accept and utilize LeuTech. Imaging agents such as LeuTech generally take longer
to achieve market acceptance following marketing approval than other drugs. The
degree of market acceptance of LeuTech will depend on a number of factors,
including:

     o    the establishment and demonstration of the clinical efficacy and
          safety;

     o    potential advantage over alternative treatment methods; and

     o    reimbursement policies of government and third-party payors.

                                       23

<PAGE>


     If LeuTech does not achieve adequate market acceptance, our business,
financial condition and results of operations will be adversely affected.

COMPETING PRODUCTS AND TECHNOLOGIES MAY MAKE LEUTECH AND OUR OTHER POTENTIAL
PRODUCTS NONCOMPETITIVE.

     We are aware of one company developing an antibody-based product which may
compete with LeuTech as to certain indications. The competing product is
marketed in some European countries and regulatory approval is pending in the
United States. Palatin is also aware of at least one other company developing a
peptide-based product which may also compete with LeuTech as to certain
indications. In addition, other technologies may also be used to diagnose
appendicitis, including computerized tomography or CT scan, and ultrasound
technologies.

     The pharmaceutical industry, and in particular the diagnostics industry, is
highly competitive. We are likely to encounter significant competition with
respect to LeuTech and our other potential products. The intellectual property
issues discussed above may affect the extent of competition that we may face.
(See "Business of Palatin--Patents and Proprietary Information.") Many of our
competitors have substantially greater financial and technological resources
than us. Many of them also have significantly greater experience in research and
development, marketing, distribution and sales than us. Accordingly, our
competitors may succeed in developing, marketing, distributing and selling
products and underlying technologies more rapidly than us. These competitive
products or technologies may be more effective and useful and less costly than
LeuTech or our other potential products. Academic institutions, hospitals,
governmental agencies and other public and private research organizations are
also conducting research and may develop competing products or technologies on
their own or through strategic alliances or collaborative arrangements.

CONTAMINATION OR INJURY FROM HAZARDOUS MATERIALS USED IN THE DEVELOPMENT OF
LEUTECH, PT-141 AND MIDAS COULD RESULT IN LIABILITY EXCEEDING OUR FINANCIAL
RESOURCES.

     Our research and development of LeuTech, PT-141 and MIDAS involves the use
of hazardous materials and chemicals, including radioactive compounds. We cannot
completely eliminate the risk of contamination or injury from these materials.
In the event of contamination or injury, we may be responsible for any resulting
damages. Damages could be significant and could exceed our financial resources,
including the limits of its insurance.

OUR STOCK PRICE HAS RANGED FROM $9.25 TO $2.37 OVER THE LAST 12 MONTHS, AND WE
EXPECT IT TO REMAIN VOLATILE, WHICH COULD LIMIT INVESTORS' ABILITY TO SELL STOCK
AT A PROFIT.

     The volatile price of our stock makes it difficult for investors to predict
the value of their investment, to sell shares at a profit at any given time, or
to plan purchases and sales in advance. A variety of factors may affect the
market price of our common stock. These include, but are not limited to:

     o    continued operating losses

     o    announcements of technological innovations or new therapeutic products

                                       24

<PAGE>


     o    announcement or termination of collaborative relationships by us or
          our competitors

     o    announcements of mergers and acquisitions involving our suppliers and
          collaborators

     o    FDA approval or disapproval for marketing LeuTech

     o    governmental regulation

     o    clinical trial results

     o    developments in patent or other proprietary rights

     o    public concern as to the safety of our products

TRADING IN OUR STOCK OVER THE LAST 12 MONTHS HAS BEEN LIMITED, SO INVESTORS MAY
NOT BE ABLE TO SELL AS MUCH STOCK AS THEY WANT AT PREVAILING PRICES.

     The average daily trading volume in our common stock was approximately
59,000 shares and the average daily number of transactions was approximately 50
over the last twelve months. If limited trading in our stock continues, it may
be difficult for investors to sell their shares in the public market at any
given time at prevailing prices.

OUR MANAGEMENT AND PRINCIPAL STOCKHOLDERS TOGETHER CONTROL APPROXIMATELY 37% OF
OUR VOTING SECURITIES, WHICH CONCENTRATION OF OWNERSHIP COULD DELAY OR PREVENT A
CHANGE IN CONTROL.

     After giving effect to the sale of 1,800,000 shares of common stock in
September 2000, our executive officers and directors beneficially own
approximately 13% of our voting securities and our 5% or greater stockholders
beneficially own approximately 24% of our voting securities. These stockholders,
acting together, will be able to influence and possibly control most matters
submitted for approval by our stockholders, including the election of directors,
delaying or preventing a change of control, and the consideration of
transactions in which stockholders might otherwise receive a premium for their
shares over then current market prices.

ITEM  7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     INTEREST RATE RISK. Our exposure to market risk related to changes in
interest rates relates primarily to our investment portfolio. We invest in
instruments that meet high credit quality standards, and we limit the amount of
credit exposure as to any one issue, issuer and type of investments. As of June
30, 2000, our cash and cash equivalents and investments consisted of $5,842,044,
most of which were short term investments having a maturity of less than one
year. Due to the average maturity and conservative nature of our investment
portfolio, we do not believe that short term fluctuations in interest rates
would materially affect the value of our securities.

                                       25

<PAGE>


ITEM  8.
                           PALATIN TECHNOLOGIES, INC.
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

The following consolidated financial statements of the Company are filed as part
of this Report:

                                                                          Page

      Report of Independent Public Accountants.............................27

      Consolidated Balance Sheets..........................................28

      Consolidated Statements of Operations................................30

      Consolidated Statements of Stockholders' Equity (Deficit)............32

      Consolidated Statements of Cash Flows................................37

      Notes to Consolidated Financial Statements...........................40



                                       26

<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders and Board of Directors of
Palatin Technologies, Inc.:

     We have audited the accompanying consolidated balance sheets of Palatin
Technologies, Inc. (a Delaware corporation in the development stage) and
subsidiaries as of June 30, 2000 and 1999, and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for each
of the three years in the period ended June 30, 2000 and the period from January
28, 1986 (inception) to June 30, 2000. These financial statements are the
responsibility of Palatin's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Palatin Technologies, Inc.
and subsidiaries as of June 30, 2000 and 1999 and the results of their
operations and their cash flows for each of the periods indicated above, in
conformity with accounting principles generally accepted in the United States.

                                                     ARTHUR ANDERSEN LLP
Philadelphia, PA
September 27, 2000



                                       27
<PAGE>

<TABLE>
<CAPTION>


                                                 PALATIN TECHNOLOGIES, INC.
                                              (A Development Stage Enterprise)
                                                 Consolidated Balance Sheets
                                                                                  June 30, 2000           June 30, 1999
                                                                              ----------------------  ----------------------
                             ASSETS
<S>                                                                           <C>                      <C>
Current assets:
  Cash and cash equivalents                                                         $     3,219,593         $     2,333,801
  Accounts receivable                                                                       953,163                       -
  Short-term investments                                                                  2,155,617                 454,827
  Prepaid expenses and other
                                                                                            179,792                 147,780
                                                                              ----------------------  ----------------------
      Total current assets                                                                6,508,165               2,936,408


Fixed assets, net of accumulated depreciation and amortization
  of $914,846 and $676,362 respectively                                                   1,573,140               1,457,605
Restricted cash                                                                             263,075                 185,000
Other                                                                                       541,017                 144,032
                                                                              ----------------------  ----------------------
                                                                                    $     8,885,397         $     4,723,045
                                                                              ======================  ======================

                   LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                                                  $     1,012,070         $     1,116,894
  Accrued expenses                                                                          968,166               1,264,893
                                                                              ----------------------  ----------------------
      Total current liabilities                                                           1,980,236               2,381,787
                                                                              ----------------------  ----------------------
Long-term liabilities, net of current portion                                                     -               2,000,000
                                                                              ----------------------  ----------------------

Commitments and contingencies (Note 8)

Stockholders' equity:
  Preferred stock of $.01 par value - authorized 10,000,000 shares;
    Series A Convertible; 31,561 and 42,484 shares issued and outstanding
      as of June 30, 2000 and 1999, respectively;                                               316                     425
    Series B Convertible; 2,000 and 13,575 shares issued and outstanding as of
      June 30, 2000 and 1999, respectively;                                                      20                     136
    Series C Convertible;  700,000 shares issued and outstanding as of
         June 30, 2000;                                                                       7,000                       -
  Common stock of $.01 par value - authorized 75,000,000 shares;
    Issued and outstanding 7,902,372 and 7,137,595 shares as of June 30, 2000
      and 1999 respectively;                                                                 79,024                  71,376
  Additional paid-in capital                                                             50,324,603              35,610,243
  Unamortized deferred compensation                                                               -                 (18,558)
  Deficit accumulated during development stage                                          (43,505,802)            (35,322,364)
                                                                              ----------------------  ----------------------
Total stockholders' equity                                                                 6,905,161                 341,258
                                                                              ----------------------  ----------------------
                                                                                    $     8,885,397         $     4,723,045
                                                                              ======================  ======================

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

</TABLE>

                                       28

<PAGE>




                       THIS PAGE INTENTIONALLY LEFT BLANK




                                       29

<PAGE>

<TABLE>
<CAPTION>


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

                                            Inception
                                       (January 28, 1986)           Year                    Year                    Year
                                            through                Ended                    Ended                   Ended
                                         June 30, 2000         June 30, 2000            June 30, 1999           June 30, 1998
                                       ------------------  -----------------------  ---------------------- ------------------------
<S>                                        <C>                    <C>                        <C>                      <C>
REVENUES:
     Grants and contracts                  $   7,921,740          $     4,617,111            $     59,977             $     33,967
     License fees and royalties                1,734,296                  500,000                 550,000                        -
     Other                                       318,917                        -                       -                        -
                                       ------------------  -----------------------  ---------------------- ------------------------
        Total revenues                         9,974,953                5,117,111                 609,977                   33,967
                                       ------------------  -----------------------  ---------------------- ------------------------

OPERATING EXPENSES:
     Research and development                 32,747,288                9,109,619               8,719,562                7,111,716
     General and administrative               19,352,274                4,567,273               3,957,401                2,990,756
     Net intangibles write down                  259,334                        -                       -                        -
                                       ------------------  -----------------------  ---------------------- ------------------------
        Total operating expenses              52,358,896               13,676,892              12,676,963               10,102,472
                                       ------------------  -----------------------  ---------------------- ------------------------

OTHER INCOME (EXPENSES):
     Interest income                           1,353,990                  405,590                 172,241                  408,770
     Interest expense                         (1,950,849)                 (29,247)               (107,639)                (227,143)
     Merger costs                               (525,000)                       -                       -                        -
                                       ------------------  -----------------------  ---------------------- ------------------------
        Total other income/(expenses)         (1,121,859)                 376,343                  64,602                  181,627

                                       ------------------  -----------------------  ---------------------- ------------------------

NET LOSS                                     (43,505,802)              (8,183,438)            (12,002,384)              (9,886,878)

PREFERRED STOCK DIVIDEND                      (3,121,525)                       -                       -                 (232,590)
                                       ------------------  -----------------------  ---------------------- ------------------------


                                       30

<PAGE>


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

                                           Inception
                                       (January 28, 1986)           Year                    Year                    Year
                                            through                Ended                    Ended                   Ended
                                         June 30, 2000         June 30, 2000            June 30, 1999           June 30, 1998
                                       ------------------  -----------------------  ---------------------- ------------------------
NET LOSS ATTRIBUTABLE TO COMMON
       STOCKHOLDERS                       $  (46,627,327)         $    (8,183,438)         $  (12,002,384)          $  (10,119,468)
                                       ==================  =======================  ====================== ========================
Basic and diluted net loss per Common
     share                                  $     (27.35)           $       (1.10)           $      (2.02)            $      (3.15)
                                       ==================  =======================  ====================== ========================
Weighted average number of Common
     shares outstanding used in
     computing basic and diluted net
     loss per Common share                     1,704,685                7,441,082               5,936,498                3,210,684
                                       ==================  =======================  ====================== ========================


  The accompanying notes to consolidated financial statements are an integral part of these financial statements.
</TABLE>

                                       31

<PAGE>

<TABLE>
<CAPTION>


                                                        PALATIN TECHNOLOGIES, INC.
                                                     (A Development Stage Enterprise)
                                        Consolidated Statements of Stockholders' Equity (Deficit)

                                                                                          Preferred Stock
                                                 ----------------------------------------------------------------------------------
                                                       Shares               Amount           Subscriptions          Receivable
                                                 -------------------  -------------------  -------------------  -------------------
<S>                                              <C>                  <C>                  <C>                  <C>
Balance at inception                                              -           $        -           $        -           $        -
   Preferred stock subscriptions                                  -                    -                4,000               (4,000)
   Net loss from inception                                        -                    -                    -                    -
                                                 -------------------  -------------------  -------------------  -------------------
Balance, August 31, 1995                                          -                    -                4,000               (4,000)
   Preferred stock subscriptions                                  -                    -               (4,000)               4,000
   Issuance of Preferred shares                           4,000,000                4,000                    -                    -
   Issuance of Common shares on
      $10,395,400 private placement                               -                    -                    -                    -
   Shares earned but not issued                                   -                    -                    -                    -
   Net loss                                                       -                    -                    -                    -
                                                 -------------------  -------------------  -------------------  -------------------

Balance, June 25, 1996                                    4,000,000                4,000                    -                    -
  Conversion to Palatin Technologies, Inc.               (4,000,000)              (4,000)                   -                    -
Adjusted balance, June 25, 1996                                   -                    -                    -                    -
  Shares outstanding of Palatin
    Technologies, Inc.                                            -                    -                    -                    -
  Purchase of treasury stock                                      -                    -                    -                    -
   Net loss                                                       -                    -                    -                    -
                                                 -------------------  -------------------  -------------------  -------------------

Balance, June 30, 1996                                            -                    -                    -                    -
   Issuance of Preferred shares, net of expenses            137,780                1,378                    -                    -
   Net loss                                                       -                    -                    -                    -
                                                 -------------------  -------------------  -------------------  -------------------

                                       32


<PAGE>



                                                        PALATIN TECHNOLOGIES, INC.
                                                     (A Development Stage Enterprise)
                                        Consolidated Statements of Stockholders' Equity (Deficit)

                                                                                          Preferred Stock
                                                  ----------------------------------------------------------------------------------
                                                        Shares               Amount           Subscriptions          Receivable
                                                  -------------------  -------------------  -------------------  -------------------
Balance, June 30, 1997                                      137,780                1,378                    -                    -
   Issuance of Preferred shares, net of expenses             18,875                  189                    -                    -
   Conversion of Preferred shares into Common shares        (49,451)                (495)                   -                    -
   Net loss                                                       -                    -                    -                    -
                                                 -------------------  -------------------  -------------------  -------------------
Balance, June 30, 1998                                      107,204                1,072                    -                    -
   Conversion of Preferred shares into Common shares        (51,145)                (511)                   -                    -
   Net loss                                                       -                    -                    -                    -
                                                 -------------------  -------------------  -------------------  -------------------

Balance, June 30, 1999                                       56,059                          561             -                    -
   Issuance of Preferred shares, net of expenses            700,000                        7,000             -                    -
   Conversion of Preferred shares into Common shares        (22,498)                        (225)            -                    -
   Net loss                                                       -                            -             -                    -
                                                 -------------------  -------------------  -------------------  -------------------
Balance, June 30, 2000                                      733,561         $      7,336           $        -           $        -
                                                 ===================  ===================  ===================  ===================



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

</TABLE>

                                       33

<PAGE>


<TABLE>
<CAPTION>


                                                              PALATIN TECHNOLOGIES, INC.
                                                           (A Development Stage Enterprise)
                                              Consolidated Statements of Stockholders' Equity (Deficit)
                                                                    - Continued -

                                                                         Common Stock
                                  --------------------------------------------------------------------------------------------------
                                                                                                              Deficit
                                                                                                Unamortized  Accumulated
                                                              Additional   Earned               Deferred       During
                                    Shares         Amount      Paid-in     but not   Treasury Compensation    Development    Total
                                                               Capital      Issue    Stock                      Stage
                                  ----------  ------------  -----------  ---------  --------   -----------  ------------  ----------
<S>                             <C>           <C>           <C>          <C>        <C>        <C>          <C>           <C>
Balance at inception                      -      $      -   $        -   $      -   $     -    $       -    $         -   $       -
  Issuance of shares from
    inception                     6,922,069     1,177,786      100,000    110,833         -            -                  1,388,619
  Net loss from inception                 -             -            -          -              -             (4,235,059) (4,235,059)
                                  ----------  ------------  -----------  ---------  --------   -----------  ------------  ----------
Balance, August 31, 1995          6,922,069     1,177,786      100,000    110,833         -             -    (4,235,059) (2,846,440)
  Issuance of Preferred shares            -             -            -          -         -             -             -       4,000
  Issuance of Common shares on
   $10,395,400 private placement 41,581,600     9,139,303            -          -         -             -             -   9,139,303
  Shares earned but not issued            -             -            -    266,743         -             -             -     266,743
  Issuance of Common shares       1,054,548       458,977      (100,000) (324,546)        -             -             -      34,431
  Net loss                                -             -            -          -         -             -    (3,897,879) (3,897,879)
                                  ----------  ------------  -----------  ---------  --------   -----------  ------------  ----------
Balance, June 25, 1996           49,558,217    10,776,066            -     53,030         -             -    (8,132,938)  2,700,158
  Conversion to Palatin
    Technologies Inc.           (46,807,465)  (10,748,558)  10,752,558          -         -             -            -            -

Adjusted balance, June 25, 1996   2,750,752        27,508   10,752,558     53,030         -             -    (8,132,938)  2,700,158
  Shares outstanding of Palatin
    Technologies, Inc.              108,188         1,082       (1,082)         -         -             -            -            -
  Issuance of Common shares          25,754           257      139,459          -         -             -            -      139,716
  Purchase of treasury stock
                                          -             -            -          -    (1,667)            -            -       (1,667)
                                  ----------  ------------  -----------  ---------  --------   -----------  ------------  ----------
Balance, June 30, 1996            2,884,694        28,847   10,890,935     53,030    (1,667)             -   (8,132,938)  2,838,207
  Issuance of Preferred shares,
     net of expenses                      -             -   11,635,653          -         -              -           -   11,637,031
  Shares earned but not issued            -             -            -    250,141         -              -                  250,141
  Issuance of Common shares         135,987          1,360      316,761  (303,171)        -              -           -       14,950



                                       34

<PAGE>
                                                              PALATIN TECHNOLOGIES, INC.
                                                           (A Development Stage Enterprise)
                                              Consolidated Statements of Stockholders' Equity (Deficit)
                                                                    - Continued -



  Retirement treasury shares           (308)            (3)      (1,664)        -     1,667              -           -            -
  Issuance of stock options below
     fair market value                    -             -     1,472,716         -        -     (1,472,716)           -            -
  Amortization of deferred
        compensation                      -             -             -         -        -        394,383            -      394,383
  Net loss                                -             -             -         -         -             -    (5,300,164) (5,300,164)
                                  ----------  ------------  -----------  ---------  --------   -----------  ------------  ----------
Balance, June 30, 1997            3,020,373        30,204   24,314,401          -         -    (1,078,333)  (13,433,102)  9,834,548

  Issuance of Preferred shares,
   net of expenses                        -             -    1,573,295          -         -             -             -   1,573,295
  Issuance of Preferred shares
   expense recapture                      -             -       49,733          -         -             -             -      49,733
  Issuance of Common shares          66,696           666       94,873          -         -             -             -      95,539
  Issuance of Common shares upon
   conversion of Preferred shares 1,012,554        10,126       (9,820)         -         -             -             -           -
  Issuance of stock options below
   fair market value                      -             -    1,161,156          -         -    (1,161,156)            -           -
  Amortization of deferred
   compensation                           -             -            -          -         -     1,723,310                 1,723,310
  Net loss                                -             -            -          -         -             -    (9,886,878) (9,886,878)
                                  ----------  ------------  -----------  ---------  --------   -----------  ------------  ----------
Balance, June 30, 1998            4,099,623       40,995   27,183,638          -         -      (516,179)  (23,319,980)  3,389,547
  Issuance of Common shares       1,842,101        18,421    7,594,182          -         -             -             -   7,612,603
  Issuance of Common shares upon
   conversion of Preferred shares 1,115,740        11,158      (10,655)         -         -             -             -          (9)
  Issuance of Common shares upon
     exercise of warrants             9,874            99       18,676          -         -             -             -      18,775
  Issuance of Common shares upon
     exercise of options             70,257           703       13,348          -         -             -             -      14,051


                                       35

<PAGE>
                                                              PALATIN TECHNOLOGIES, INC.
                                                           (A Development Stage Enterprise)
                                              Consolidated Statements of Stockholders' Equity (Deficit)
                                                                    - Continued -


  Issuance of stock options below
     fair market value                    -             -      811,054          -         -      (811,054)            -           -
  Amortization of deferred
        compensation                      -             -            -          -         -     1,308,675                 1,308,675
  Net loss                                -             -            -          -         -             -   (12,002,384)(12,002,384)
                                  ----------  ------------  -----------  ---------  --------   -----------  ------------  ----------
Balance, June 30, 1999            7,137,595        71,376   35,610,243                            (18,558)  (35,322,364)    341,258
                                                                     -
  Issuance of Preferred shares,
     net of expenses                      -             -   12,999,058          -         -             -                12,999,058
  Issuance of Preferred shares            -             -            -          -         -             -               -     7,000
  Issuance of Common shares upon
     conversion of Preferred                                                                                                     37
     shares                         572,374         5,724       (5,462)         -         -             -               -
  Issuance of Common shares upon
     exercise of warrants           111,551         1,115      451,097          -         -             -               -   452,212
  Issuance of Common shares upon
     exercise of options             80,852           809       99,667          -         -             -               -   100,476
  Acceleration of options
        previously granted                -             -    1,170,000          -         -             -                 1,170,000
  Amortization of stock based                                                                      18,558               -    18,558
        compensation                      -             -            -          -         -
  Net loss                                -             -            -          -         -             -    (8,183,438) (8,183,438)
                                  ----------  ------------  -----------  ---------  --------   -----------  ------------  ----------
Balance, June 30, 2000            7,902,372     $  79,024  $50,324,603     $    -   $     -    $        -  $(43,505,802) $6,905,161
                                  ==========  ============  ===========  =========  ========   ===========  ============  ==========

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

</TABLE>

                                       36


<PAGE>

<TABLE>
<CAPTION>

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


                                                        Inception
                                                       (January 28,          Year                Year             Year
                                                          1986)
                                                        through             Ended               Ended           Ended
                                                      June 30, 2000      June 30, 2000      June 30, 1999   June 30, 1998
                                                    ------------------  ---------------- ------------------ ---------------
<S>                                                 <C>                 <C>              <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss
                                                       (43,505,802)       (8,183,438)      (12,002,384)       (9,886,878)
  Adjustments to reconcile net loss to net
   cash used for operating activities:
      Depreciation and amortization                      1,085,770           248,491           232,625           230,160
      License fee                                          500,000                 -                 -           500,000
      Interest expense on note payable                      72,691                 -                 -                 -
      Accrued interest on long-term financing              796,038                 -                 -                 -
      Accrued interest on short-term financing               7,936                 -                 -                 -
      Intangibles and equipment write down                 278,318                 -                 -                 -
      Common stock and notes payable issued for            751,038                 -           127,350
         expenses                                                                                                 77,500
      Settlement with consultant                           (28,731)                -                 -                 -
      Deferred revenue                                           -                            (550,000)                -

      Acceleration of options
         previously granted                              1,170,000         1,170,000                 -                 -
      Amortization of stock based compensation           3,444,926            18,558         1,308,675         1,723,310

      Changes in certain operating assets and liabilities:
        Accounts receivable                               (953,163)
                                                                            (953,163)                -            84,562
        Prepaid expenses and other                      (1,296,485)         (439,004)           50,985          (301,780)
        Accounts payable                                 1,012,070          (104,824)          655,348           145,273
        Accrued expenses and other                         506,999          (296,727)          130,505          (189,229)
                                                   ----------------    --------------     --------------  ---------------

            Net cash used for operating
         activities                                    (36,158,395)       (8,540,107)       (10,046,896)      (7,617,082)
                                                   ----------------    --------------     --------------  ---------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of short-term investments                   (2,155,617)       (1,700,790)          (454,827)                -
  Purchases of property and equipment
                                                        (2,543,327)         (354,019)          (69,145)        (1,505,229)
                                                   ----------------    --------------     --------------  ---------------

         Net cash used for investing
         activities                                     (4,698,944)         (2,054,809)        (523,972)       (1,505,229)
                                                   ----------------    --------------     --------------  ---------------


                                       37


<PAGE>


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


                                                        Inception
                                                    (January 28,          Year                Year             Year
                                                        1986)
                                                      through             Ended               Ended           Ended
                                                    June 30, 2000      June 30, 2000      June 30, 1999   June 30, 1998
                                                  ------------------  ---------------- ------------------ ---------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from notes payable, related party               302,000                 -                  -                -
  Payments on notes payable, related party                (302,000)                -                  -          (80,000)
  Proceeds from senior bridge notes payable              1,850,000                 -                  -                -
  Payments on senior bridge notes payable               (1,850,000)                -                  -                -
  Proceeds from notes payable and
    long-term debt                                       3,951,327                 -          2,000,000                -
  Payments on notes payable and
    long-term debt                                      (1,951,327)                -           (939,588)        (869,551)
  Proceeds from common stock, stock option
    and warrant issuances, net                          17,868,273           480,708          7,518,070           18,037
  Proceeds from preferred stock, net                    24,210,326        11,000,000                  -        1,573,295
  Purchase of treasury stock                                (1,667)                -                  -                -
                                                   ----------------    --------------     --------------  ---------------
    Net cash provided by financing
         activities                                     44,076,932       11,480,708           8,578,482          641,781
                                                   ----------------    --------------     --------------  ---------------

NET INCREASE (DECREASE) IN CASH
    AND CASH EQUIVALENTS
                                                         3,219,593           885,792         (1,992,386)      (8,480,530)

CASH AND CASH EQUIVALENTS, beginning of period                   -          2,333,801           4,326,187      12,806,717
                                                   ----------------    --------------     --------------  ---------------

CASH AND CASH EQUIVALENTS, end of period              $  3,219,593      $  3,219,593       $   2,333,801   $   4,326,187
                                                   ================    ==============     ==============  ===============

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

</TABLE>

                                       38


<PAGE>

<TABLE>
<CAPTION>


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




                                                     Inception
                                                    (January 28,
                                                        1986)             Year                   Year        Year
                                                      through             Ended                 Ended        Ended
                                                    June 30, 2000     June 30, 2000    June 30, 1999     June 30, 1998
                                                  ------------------ ---------------- ----------------- ----------------
<S>                                               <C>                <C>                <C>               <C>

SUPPLEMENTAL CASH FLOW INFORMATION:
   Cash paid for interest                          $      627,590     $       29,247     $       87,536    $      281,285
                                                  ================   ================   ================  ================

NON-CASH TRANSACTION:
   Settlement of accounts payable with
      equipment                                    $          900     $       -         $        -        $             -
                                                  ================   ================   ================  ================

NON-CASH STOCK ACTIVITY:
   Conversion of loans from employees to
      Common stock                                 $       74,187     $      -           $      -          $            -
                                                  ================   ================   ================  ================
   Conversion of note payable to Common stock      $       16,000     $      -           $      -          $            -
                                                  ================   ================   ================  ================
   Common stock issued for equipment               $       2,327      $      -           $      -          $            -
                                                  ================   ================   ================  ================
   Common stock issued for expenses                $      884,565    $       -           $      127,350    $       77,500
                                                  ================   ================   ================  ================
   Common stock issued for accrued salaries
      and bonuses                                  $       16,548     $      -           $      -          $            -
                                                  ================   ================   ================  ================
   Accrued interest payable in Common stock        $       679,097    $      -           $      -          $            -
                                                  ================   ================   ================  ================

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

</TABLE>

                                       39


<PAGE>


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

(1)  ORGANIZATION ACTIVITIES:

     NATURE OF BUSINESS -- Palatin Technologies, Inc. ("Palatin" or the
"Company") is a development-stage, pharmaceutical company headquartered in
Princeton, NJ with its research facility in Edison, NJ. The Company is dedicated
to developing and commercializing products and technologies for diagnostic
imaging and ethical drug development utilizing peptide, monoclonal antibody, and
radiopharmaceutical technologies. The Company is concentrating on the following
products and technologies:

     (i)  Metal Ion-induced Distinctive Array of Structures ("MIDAS(TM)")
          metallopeptide technology ("MIDAS technology"),

     (ii) PT-141, a peptide hormone product for the treatment of sexual
          dysfunction ("PT-141"), and

     (iii) LeuTech(R), an infection and inflammation imaging product
           ("LeuTech").

     CORPORATE HISTORY -- Palatin, formerly Interfilm, Inc., was incorporated
under the laws of the State of Delaware on November 21, 1986. From November 4,
1993 until May 10, 1995, the date on which the Board of Directors substantially
curtailed the operations of the Company, the Company had been primarily engaged
in the business of exploiting rights related to its interactive motion picture
process, including the production and distribution of interactive motion
pictures for initial exhibition in theaters and subsequently in enhanced
versions for distribution to the home market. On June 25, 1996, a newly formed,
wholly-owned subsidiary of the Company, Interfilm Acquisition Corporation
("InSub"), a New Mexico corporation, merged with and into RhoMed Incorporated
("RhoMed"), a New Mexico corporation, with all outstanding shares of RhoMed
equity securities ultimately being exchanged for the Company's common stock (the
"Merger"). As a result of the Merger, RhoMed became a wholly-owned subsidiary of
the Company, with the holders of RhoMed preferred stock and RhoMed common stock
(including the holders of "RhoMed Securities" as hereafter defined) receiving an
aggregate of approximately 96% interest in the equity securities of the Company
on a fully-diluted basis. Additionally, all warrants and options to purchase
common stock of RhoMed outstanding immediately prior to the Merger (the "RhoMed
Securities"), including without limitation, any rights underlying RhoMed's
qualified or non-qualified stock option plans, were automatically converted into
rights upon exercise to receive the Company's common stock in the same manner in
which the shares of RhoMed common stock were converted. Since the former
stockholders of RhoMed retained more than a 50% controlling interest in the
surviving company (Palatin), the Merger was accounted for as a reverse merger,
with RhoMed deemed as the acquiror for accounting purposes. The business of
RhoMed, conducted by Palatin since June 25, 1996, represents the on-going
business of Palatin. Certain assets and liabilities of the Company and a
subsidiary existing prior to the Merger, consisting principally of certain
intellectual property and litigation claims against Sony Corporation of America
and related entities, were transferred to an unaffiliated limited liability
partnership for the benefit of the Company's stockholders of record as of June
21, 1996 (pre-Merger stockholders). The historical

                                       40

<PAGE>

financial statements prior to June 25, 1996, are those of RhoMed, except that
the stock transactions have been presented in the notes on an as if converted
basis. References to the Company's activities, results of operations and
financial condition prior to June 25, 1996 are to RhoMed unless otherwise
specified.


     CHARTER AMENDMENT - On September 5, 1997, an amendment to the
Restated Certificate of Incorporation of the Company (the "Amendment") was
filed, which:

     (i)  increased the total number of authorized shares of Common Stock from
          25,000,000 to 75,000,000.

     (ii) Increased the total number of authorized shares of Preferred Stock
          from 2,000,000 to 10,000,000.

     (iii) Effected a 1-for-4 reverse split of Common Stock.

     (iv) The consolidated financial statements have been retroactively restated
          to reflect the Amendment.


(2)  BUSINESS RISK AND LIQUIDITY:

     As shown in the accompanying financial statements, the Company incurred
substantial net losses of $8,183,438 for the year ended June 30, 2000 and has a
deficit accumulated in the development stage of $43,505,802 as of June 30, 2000.
The Company anticipates incurring additional losses in the future, as it begins
to manufacture and market LeuTech, expand clinical trials for LeuTech's other
indications and for PT-141, and to continue research and development of PT-141
and MIDAS technology. To achieve profitability, the Company, alone or with
others, must successfully develop and commercialize its technologies and
proposed products, conduct pre-clinical studies and clinical trials, obtain
required regulatory approvals and successfully manufacture and market such
technologies and proposed products. The time required to reach profitability is
highly uncertain, and there can be no assurance that the Company will be able to
achieve profitability on a sustained basis, if at all.

         In September 2000, the Company received $10.8 million from a private
offering consisting of common stock and warrants. Investors, consisting of
financial institutions based in Europe, purchased 1.8 million shares at a per
share price of $6.00, which represented the closing market price of Palatin
shares on the American Stock Exchange on September 7, 2000. For every five
shares purchased, the investors also received a five-year warrant to purchase
one share of common stock at a 25 percent premium to the closing price.

         Management plans to continue to refine its operations, control
expenses, evaluate alternative methods to conduct its business, and seek
available and attractive sources of financing and sharing of development costs
through strategic collaboration agreements or other resources. Management
believes that through one or a combination of such factors that it will be able
to obtain adequate financing to fund the Company's operations through fiscal
year 2001, based on current expenditure levels. There can be no assurance that
the Company's efforts will be successful.

                                       41

<PAGE>



(3)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

     PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements
include the accounts of Palatin and its wholly owned inactive subsidiaries,
RhoMed, Inc., Interfilm Technologies, Inc. and Evergreen Merger Corporation. All
significant intercompany accounts and transactions have been eliminated in
consolidation.

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

     FISCAL YEAR -- Effective June 30, 1996, Palatin and RhoMed each changed its
fiscal year end to June 30. The fiscal year ends of Palatin and RhoMed prior to
the Merger were December 31 and August 31, respectively.

     SHORT-TERM INVESTMENTS -- The Company accounts for its investments in
accordance with Statement of Financial Accounting Standards No. 115 "Accounting
For Certain Investments in Debt and Equity Securities." The Company classifies
such investments as available for sale investments and as such all investments
are recorded at fair value. The investments consist of certificates of deposit.
Unrealized gains and losses are classified as a separate component of
stockholders' equity. As of June 30, 2000 the unrealized gain on investments was
immaterial. Realized gains and losses are recorded in the statement of
operations in the period that the transaction occurs.

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

     IMPAIRMENT OF LONG-LIVED ASSETS -- The Company complies with Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The Company
reviews its long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be fully
recoverable. To determine recoverability of its long-lived assets, the Company
evaluates the probability that future undiscounted net cash flows, without
interest charges, will be less than the carrying amount of the assets.
Impairment is measured at fair value. Fair value is determined by an evaluation
of available price information at which assets could be bought or sold including
quoted market prices, if available, or the present value of the estimated future
discounted cash flows based on reasonable and supportable assumptions.

     REVENUE RECOGNITION -- Grant and contract revenues are recognized as the
Company provides the services stipulated in the underlying grants and/or
contracts based on the time and materials incurred. License revenues are
recognized when the license fee is received and the Company has no future
obligations.

     In December 1999, the Securities and Exchange Commission issued the Staff
Accounting Bulletin No. 101-Revenue Recognition in Financial Statements (SAB
101). The bulletin draws on existing accounting rules and provides specific
guidance on how those accounting rules should be

                                       42

<PAGE>

applied and specifically addresses revenue recognition for non-refundable
technology access fees in the biotechnology industry. SAB 101 is effective for
fiscal years beginning after December 15, 1999.

     In August 1999, the Company entered into a strategic collaboration with
Mallinckrodt, Inc. to jointly develop and market one of the Company's products.
Under the terms of the agreement, the Company granted a worldwide license for
sales, marketing and distribution and received a nonrefundable licensing fee of
$500,000. The licensing fee was recognized as revenue in the period that such
nonrefundable fees were received, as consistent with industry practice.

     In connection with the issuance of SAB 101, the Company is required to
defer such amounts and recognize revenue over the term of the agreement or the
expected period of performance. Management estimates that the expected period of
performance is two years. The Company will report a change in accounting
principle and will record the impact of this change as a cumulative effect in
its statement of operations in its fourth quarter of fiscal 2001.

     RESEARCH AND DEVELOPMENT COSTS -- The costs of research and development
activities are charged to expense as incurred.

     STOCK OPTIONS AND WARRANTS -- Warrants and the majority of common stock
options issued to employees and non-employee directors have been issued at
exercise prices greater than, or equal to, their fair market value at the date
granted. Accordingly, no value has been assigned to these instruments. However,
certain stock options were issued under non-plan option agreements and a
non-qualified stock option plan at exercise prices below market value. The
difference between the exercise price and the market value of these securities
has been recorded as deferred compensation and is being charged to expense over
the vesting period of the option. In addition, during the fiscal year stock
options were granted to non-employees for past services. The deemed value
pursuant to SFAS No. 123, as calculated by the Black-Scholes option pricing
model was charged to the statement of operations.

     INCOME TAXES -- The Company and its subsidiaries file consolidated federal
and combined state income tax returns. The Company accounts for income taxes in
accordance with Statement of Financial Accounting Standards No. 109 ("SFAS
109"), "Accounting for Income Taxes." SFAS 109 requires, among other things, the
use of the liability method in computing deferred income taxes.

     The Company provides for deferred income taxes relating to timing
differences in the recognition of income and expense items (primarily relating
to depreciation, amortization and certain leases) for financial and tax
reporting purposes. Such amounts are measured using current tax laws and
regulations in accordance with the provisions of SFAS 109.

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

     NET LOSS PER COMMON SHARE -- The Company applies SFAS No. 128, "Earnings
per Share" ("SFAS 128"). SFAS 128 requires dual presentation of basic and
diluted earnings per share ("EPS") for complex capital structures on the face of
the statement of operations. Basic EPS is computed by dividing the income (loss)
by the weighted average number of common shares outstanding for the period.
Diluted EPS reflects the potential dilution from the exercise or conversion

                                       43

<PAGE>

of securities into common stock, such as stock options. For the years ended June
30, 2000, 1999 and 1998 and for the period from inception (January 28, 1986)
through June 30, 2000, there were no dilutive effects of stock options or
warrants as the Company incurred a net loss in each period. Options and warrants
to purchase 5,508,067 shares of common stock at prices ranging from $0.20 to
$306.00 per share were outstanding at June 30, 2000.

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

     The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments: the carrying
amount reported on the balance sheet approximates the fair value for cash,
short-term borrowings and current maturities of long-term debt; and the fair
value for the Company's fixed rate long-term debt is estimated based on the
current rates offered to the Company for debt of the same remaining maturities.
Based on the above, the amount reported on the balance sheet approximates the
fair value.

     RECLASSIFICATIONS -- Certain reclassifications have been made to the prior
year financial statements to conform to the current year presentation.



(4)  RELATED PARTY TRANSACTIONS:

     During the fiscal year ended August 31, 1995, the Company encountered
serious liquidity and working capital deficiencies. As a result, effective April
1995, the Company entered into a letter of intent with The Castle Group Ltd.
("Castle"), a company controlled by Lindsay A. Rosenwald, M.D. ("Dr.
Rosenwald"), under which Castle agreed to arrange for a line of credit of up to
$300,000 to finance ongoing operations; agreed to arrange for future financings;
and the Company agreed to sell to Castle or its designees, for $4,000
consideration paid, 4,000,000 shares of preferred stock which converted into
466,952 shares of Common Stock. At the time the letter of intent was entered
into with Castle, the Company was insolvent and its equity had nominal value;
accordingly, the sale of preferred stock to Castle or its designees was recorded
at the nominal $4,000 consideration paid. The issuance of the preferred stock to
designees of Castle was consummated on October 25, 1995 and resulted in Dr.
Rosenwald and his designees obtaining majority ownership and control of the
Company on that date.

     On July 28, 1995, the Board of Directors approved an offering of senior
bridge notes and warrants (the "Class A Offering"), for which Paramount Capital,
Inc. ("Paramount"), of which Dr. Rosenwald is the Chairman, served as placement
agent. Two of the then three members of the Board of Directors of RhoMed were
employees of entities controlled by Dr. Rosenwald. The transaction and selection
of the placement agent was ratified by disinterested stockholders on August 15,
1995.

                                       44

<PAGE>

Paramount received (i) a cash commission equal to 6% of the gross proceeds
from the sale of the units or $60,000, (ii) a non-accountable expense allowance
equal to 3% of gross proceeds or $30,000 and (iii) placement agent's warrants,
on the same terms as the warrants, equal to 15% of the Common Stock underlying
the warrants issued in the Class A Offering. Additionally, investment funds
managed by a company of which Dr. Rosenwald is president purchased senior bridge
notes with a face value of $100,000 and warrants to purchase 13,824 shares of
Common Stock at $.22 per share.

     On November 27, 1995, the Company's Board of Directors approved an offering
of senior bridge notes and warrants (the "Class B Offering"), for which
Paramount served as placement agent, which was approved by the two disinterested
directors. Paramount received (i) a cash commission equal to 9% of the gross
proceeds from the sale of the units or $76,500, (ii) a non-accountable expense
allowance equal to 4% of gross proceeds or $34,000 and (iii) placement agent's
warrants at an exercise price of $6.52 per share but otherwise on the same terms
as the warrants, equal to 5% of the Common Stock underlying the warrants issued
in the Class B Offering. Additionally, investment funds managed by a company of
which Dr. Rosenwald is president purchased senior bridge notes with a face value
of $100,000 and warrants to purchase 4,608 shares of Common Stock at $2.72 per
share.

     On March 4, 1996, the Board of Directors approved an offering of common
stock (the "Common Stock Offering") and authorized an offering committee of the
Board of Directors, consisting of the two disinterested directors, to determine
the placement agent for the Common Stock Offering. The selection of Paramount as
placement agent was approved by the disinterested directors, who concluded that
alternative means of financings were not available to the Company on terms more
favorable than the Common Stock Offering. The price per share of common stock in
the Common Stock Offering of $5.44 was determined through negotiations between
the Company and Paramount. On May 14, 1996, the disinterested directors approved
an increase in the Common Stock Offering. Paramount received (i) a cash
commission equal to 9% of the gross proceeds from the sale of the units or
$868,000, (ii) a non-accountable expense allowance equal to 4% of gross proceeds
or $386,000 and (iii) placement agent's warrants, equal to 10% of the common
stock issued in the Common Stock Offering, at an exercise price of $6.52 per
common stock share, which are freely exercisable, terminate ten years from the
date of issuance and have certain registration rights. Additionally investment
funds managed by a company of which Dr. Rosenwald is president purchased 322,674
shares of Common Stock at $5.44 per share.

     On December 2, 1996, the Board of Directors approved an offering of Series
A Preferred Convertible Stock (the "Series A Preferred Offering"), which was
approved by the four disinterested directors. The selection of Paramount as
placement agent was approved by the disinterested directors, who concluded that
alternative means of financings were not available to the Company on terms more
favorable than the Series A Preferred Offering. The Series A Preferred
Convertible Stock was initially convertible into Common Stock at a 15% discount
to the average closing bid price of the Company's Common Stock for the twenty
(20) consecutive trading days immediately preceding the final closing. The 15%
discount on conversion of the Series A Preferred Convertible Stock to Common
Stock was determined through negotiations between the Company and the placement
agent. The 15% discount has been reflected in the Company's consolidated
statement of operations as a dividend to the Series A Preferred Convertible
Stock of $2,888,935. The Series A Preferred Convertible Stock is currently
convertible into Common Stock at a price per share of Common Stock of $4.67.
Paramount received (i) a cash commission equal to 9% of the gross proceeds

                                       45

<PAGE>

from the sale of the units or $1,240,020, (ii) a non-accountable expense
allowance equal to 4% of gross proceeds or $551,120 and (iii) placement agent's
warrants, equal to 10% of the Series A Preferred Convertible Stock issued in the
Series A Preferred Offering at an exercise price of $110.00 per share of Series
A Preferred Convertible Stock, which terminate ten years from the date of
issuance and have certain registration rights. The Company has valued those
warrants at $573,537. In the Series A Preferred Offering, investment funds
managed by a company of which Dr. Rosenwald is president purchased 10,000 shares
of Series A Preferred Convertible Stock at $100 per share.

     Pursuant to the placement agency agreement for the Series A Preferred
Offering, the Company entered into an introduction agreement with Paramount (the
"Introduction Agreement"), under which Paramount acted as the Company's
non-exclusive financial advisor for a minimum period of 18 months commencing
January 1, 1997, and received (i) out-of-pocket expenses incurred in connection
with services performed under the Introduction Agreement, (ii) a retainer of
$72,000, (iii) a warrant to purchase 6,250 shares of Common Stock at $8.75 per
share issued to a designee of Paramount and (iv) a percentage or lump sum
success fees in the event that Paramount assists the Company in connection with
certain financing and strategic transactions. The Introduction Agreement
replaced a similar agreement in effect from September 1, 1996 through December
31, 1996, pursuant to which Paramount Capital received a retainer of $5,000 per
month and a warrant to purchase 6,250 shares of Common Stock at $9.00 per share
issued to a designee of Paramount.

     On April 28, 1998, the Board of Directors approved an offering of Series B
Preferred Convertible Stock (the "Series B Preferred Offering"), which was
approved by the four disinterested directors. The selection of Paramount as
finder pursuant to a finder's fee agreement was approved by the disinterested
directors, who concluded that alternative means of financings were not available
to the Company on terms more favorable than the Series B Preferred Offering. The
Series B Preferred Convertible Stock was initially convertible into Common Stock
at a conversion price per share of Common Stock of $5.50. A 12.3% discount to
the average closing bid price of the Company's Common Stock as of the closing,
which conversion price was determined through negotiations between the Company
and the investors. The 12.3% discount has been reflected in the Company's
consolidated statement of operations as a dividend to the Series B Preferred
Convertible Stock of $232,590. The Series B Preferred Convertible Stock is
currently convertible into Common Stock at a price per share of Common Stock of
$3.52. Paramount received a finder's fee equal to 10% of the gross proceeds from
the sale of the units or $188,750.

     Upon the closing of the equity investments sold during the fiscal year
ended June 30, 1999, the Company issued to Paramount, or its designees, pursuant
to the Introduction Agreement referenced above; (i) warrants to purchase a total
of 186,923 shares of the Company's Common Stock at prices ranging from $4.70 to
$5.57, (ii) paid commissions of $295,020 in cash and (iii) paid non accountable
expenses of $30,000 in cash.

     Management of the Company believes that the terms of the transactions and
the agreements described above are on terms at least as favorable as those which
it could otherwise have obtained from unrelated parties.

                                       46

<PAGE>


(5)  PROPERTY AND EQUIPMENT:

     Property and equipment consists of the following:


                                         June 30,            June 30,
                                           2000                1999
                                           ----                ----

Office equipment                           $ 544,265           $ 374,147

Laboratory equipment                         449,857             428,162

Leasehold improvements                     1,493,864           1,331,658
                                    ------------------   ----------------

                                           2,487,986           2,133,967

Less: Accumulated depreciation and
         amortization                       (914,846)           (676,362)
                                    ------------------   ----------------

                                          $1,573,140          $1,457,605
                                    ==================   ================


(6)  LONG-TERM FINANCING:

     On May 13, 1999, the Company received $2,000,000 pursuant to a Subordinated
Non-negotiable Promissory Note from Mallinckrodt, Inc. Principal and interest
accrued at 9% per annum was due by December 31, 2000. The Note was secured by
the assets of the Company. This note and accrued interest of $46,489 was
satisfied pursuant to the execution of a Strategic Collaboration Agreement
signed with Mallinckrodt, Inc. on August 16, 1999. (See Note 11). The $2,000,000
in principal along with interest of $46,489 was netted against the $13,500,000
that the Company was due under this agreement. On August 17, 1999 the Company
received the net funds of $11,453,511 from Mallinckrodt.



(7)  SENIOR BRIDGE NOTES:

     CLASS A OFFERING -- On July 28, 1995, the Company initiated the Class A
Offering of 40 units, with each unit consisting of a $25,000 face amount senior
bridge note and a warrant to purchase 3,456 shares of Common Stock at an
exercise price of $.22 per share. All units were purchased, with net proceeds to
the Company of approximately $907,000 after payment of the placement agent's
commissions and expenses ($90,000) and offering expenses (approximately $3,000).
The nominal exercise price for the warrants reflected the seriously troubled
financial condition of the Company on the date of the transaction, and
accordingly, no value was assigned to the warrants upon issuance. The senior
bridge notes sold in the Class A Offering accrued interest at 1% per month, and
were payable, with interest, one year from the date of issuance. In August and
September of 1996, the Class A Offering notes with accrued interest were repaid
in full. The warrants are exercisable at any time, terminate ten years from the
date of issuance, and have certain registration rights.

     CLASS B OFFERING -- On November 27, 1995, the Company initiated the Class B
Offering of

                                       47

<PAGE>

up to 7.5 units at $100,000 per unit, subsequently increased to 8.5 units, with
each unit consisting of a $100,000 face amount senior bridge note and a warrant
to purchase an equivalent of 4,608 shares of common stock at an exercise price
of $2.72. Net proceeds to the Company were $739,500 after payment of the
placement agent's commissions and expenses ($110,500). Due to the seriously
troubled financial condition of the Company on the date of the transaction, no
value was assigned to the warrants upon issuance. The senior bridge notes sold
in the Class B Offering accrued interest at 1% per month, and were payable, with
interest 12 months from the date of issuance, unless accelerated under certain
circumstances. On June 28, 1996, the Class B Offering notes with accrued
interest were paid in full. The warrants are exercisable at any time, terminate
five years from the date of issuance, have certain registration rights, and
contain a call provision.



(8)  COMMITMENTS AND CONTINGENCIES:

     LEASES -- The Company leases two facilities in New Jersey under
non-cancelable operating leases. Future minimum lease payments under those two
leases are as follows:


                Fiscal Year

                2000                        $   421,613

                2001                            425,287

                2002                            494,751

                2003                            498,425

                2004 and thereafter           1,102,157
                                            -----------
                                             $2,942,233



     EMPLOYMENT AGREEMENTS -- On June 13, 2000, the Company entered into a
separation agreement with Edward J. Quilty, who resigned as president, chairman
and chief executive officer on that date. Pursuant to the agreement, Mr.
Quilty's previously granted options became fully vested with an expiration date
of June 13, 2004. The agreement further provides for benefits as follows:

     1.   $400,000 payable in 24 equal monthly installments of $16,666.66 less
          benefit deductions, tax withholding and other deductions required by
          law.

     2.   Payment by the Company of premiums necessary for the continuation of
          current group health insurance coverage under the Federal Law called
          "COBRA" for 18 months.

     3.   Continuation of life and disability insurance substantially similar to
          that which Mr. Quilty was receiving immediately prior to such
          resignation for 24 months.

The June 30, 2000 statement of operations reflects $1,073,500 relating to the
option acceleration and the above separation agreement.

                                       48

<PAGE>



     On June 13, 2000, the Board of Directors of the Company appointed Carl
Spana, Ph.D. as president and chief executive officer of the Company. The Board
of Directors also named John K.A. Prendergast to serve as chairman of the Board
of Directors, at a compensation of $116,000 per year.

     On October 12, 1998, the Board of Directors ratified employment agreements
with three officers of the Company, Carl Spana, Ph.D., Stephen T. Wills and
Charles Putnam effective September 11, 1998. Pursuant to the agreements, each is
serving as an executive vice president of the Company. The agreements expire in
September 2001. Pursuant to the agreements, each officer was granted options to
purchase 50,000 shares of the Company's Common Stock at an exercise price of
$2.50, the closing price of the Company's Common Stock on September 11, 1998.
These options vested over a two year period with the first 33% vested
immediately, the next 33% vested on the first anniversary of the date of grant
and the remaining 34% vested on the second anniversary of the date of grant. The
agreements include specified termination pay and vesting of stock options under
certain termination events.

     LICENSE AGREEMENTS -- The Company has three license agreements that require
minimum yearly payments. Future minimum payments under the license agreements
are: 2001 - $150,000, 2002 - $200,000, 2003 - $200,000, 2004 - $200,000 and 2005
- $200,000.

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

     LEGAL PROCEEDINGS -- The Company is subject to various claims and
litigation in the ordinary course of its business. Management believes that the
outcome of such legal proceedings will not have a material adverse effect on the
Company. On March 14, 2000, the Company announced that it would not be extending
the merger consummation date of March 31, 2000 for its previously announced
proposed merger with San Diego-based Molecular Biosystems, Inc. and would not be
proceeding with the merger. The Company's decision not to proceed with the
merger was based on management's view that the merger was not in the best
interests of the Company's stockholders.

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

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

                                       49

<PAGE>

addition, Molecular Biosystems seeks consequential damages in an unstated amount
plus interest and Molecular Biosystems' costs and expenses of the action.

     In the Company's response filed in June of 2000, the Company has denied the
material allegations. Management believes that the Company has good and
meritorious defenses to the action and the Company intends vigorously to defend
the action.



(9)  STOCKHOLDERS' EQUITY (DEFICIT):

     SERIES C PREFERRED OFFERING -- As of August 16, 1999, pursuant to the
strategic collaboration agreement with Mallinckrodt, the Company sold 700,000
restricted shares of Series C Convertible Preferred Stock for $13,000,000. The
Series C stock is convertible into 700,000 shares of common stock with certain
registration and anti-dilution rights, upon the occurrence of the earlier of
five years or earlier upon the occurrence of a change in control of the Company
(as defined in the agreement).

     SERIES B PREFERRED OFFERING -- As of April 28, 1998, the Company completed
a private placement of 18,875 shares of Series B Convertible Preferred Stock at
a price per share of $100. The net proceeds to the Company were approximately
$1,600,000, after deducting the finder's fee and other expenses of the Series B
Preferred Offering. As of June 30, 2000, Series B Convertible Preferred Stock
convertible into 56,818 shares of common stock remained outstanding, all of
which has since been converted.

     SERIES A PREFERRED OFFERING -- On December 2, 1996, the Company commenced
the Series A Preferred Offering of units at a price of $100,000 per unit, each
unit consisting of 1,000 shares of Series A Convertible Preferred Stock. The
final closing on the Series A Preferred Offering was effective as of May 9,
1997, with the Company having sold an aggregate total of 137.78 units,
representing 137,780 shares of Series A Convertible Preferred Stock, for net
proceeds to the Company of approximately $11,637,000, after deducting commission
and other expenses of the Series A Preferred Offering.

     Each share of Series A Convertible Preferred Stock is convertible at any
time, at the option of the holder, into the number of shares of Common Stock
equal to $100 divided by the "Series A Conversion Price". The current Series A
Conversion Price is $4.67, so each share of Series A Convertible Preferred Stock
is currently convertible into approximately 21.4 shares of Common Stock. The
Series A Conversion Price is subject to adjustment, under certain circumstances,
upon the sale or issuance of Common Stock for consideration per share less than
either (i) the Conversion Price in effect on the date of such sale or issuance,
or (ii) the market price of the Common Stock as of the date of such sale or
issuance. The Conversion Price is also subject to adjustment upon the occurrence
of a merger, reorganization, consolidation, reclassification, stock dividend or
stock split which will result in an increase or decrease in the number of shares
of Common Stock outstanding.

     COMMON STOCK TRANSACTIONS -- At various times in March 1999, the Company
sold in a private placement, an aggregate of 514,215 shares of its $.01 par
value Common stock and 565,629 detachable five-year non-redeemable warrants.
Each Warrant is exercisable for one share of Common stock at an exercise price
equal to the per share Common stock purchase price. The Common stock purchase
price, which was based on the average closing bid price for the five business
days immediately prior to the

                                       50

<PAGE>

respective closing dates, ranged from $4.48 per share to $5.06 per share. The
Company received net proceeds of approximately $2,175,000, which is being used
for working capital and research and development programs.

     In connection with the private placement, the Company paid compensation to
third parties consisting of an aggregate of $222,370 in cash and agreed to issue
five-year warrants to purchase an aggregate of 114,073 shares of Common stock at
not less than the exercise prices of the warrants sold in the private placement.

     In February 1999, the Company sold in a private placement 651,750 shares of
its $.01 par value Common stock, at $4.00 per share and 651,750 detachable
five-year non-redeemable warrants. Each Warrant is exercisable for one share of
Common stock at an exercise price of $4.70. The Company received net proceeds of
approximately $2,350,000, which is being used for working capital and research
and development programs.

     In connection with the private placement, the Company paid compensation to
third parties consisting of an aggregate of $248,130 in cash and agreed to issue
five-year warrants to purchase an aggregate of 194,600 shares of Common stock at
$4.70.

     On December 31, 1998, the Company sold in a private placement 287,500
shares of its $.01 par value Common stock, at $4.00 per share and 287,500
detachable five-year non-redeemable warrants. Each Warrant is exercisable for
one share of Common stock at an exercise price of $4.375 per share. The Company
received net proceeds of approximately $1,000,000, which was used for working
capital and research and development programs.

     In connection with the private placement, the Company paid compensation to
third parties consisting of an aggregate of $92,000 in cash and agreed to issue
five-year warrants to purchase an aggregate of 60,000 shares of Common stock at
prices ranging from $3.75 to $4.375.

     On July 8, 1998, the Company sold TheraTech 363,636 shares of Common stock
at a sale price of $5.50 per share or $2,000,000. The net proceeds of the
offering, approximately $1,964,000, were used for research and development of
the dosage form of PT-14, the Company's peptide hormone product for the
treatment of male erectile dysfunction.

     In the fiscal year ended June 30, 1999, the Company issued 25,000 shares of
Common Stock in exchange for services and recorded compensation expense for the
fair market value of $5.094 per share.

     In the fiscal year ended June 30, 1998, the Company issued 10,000 shares of
Common Stock in exchange for services and recorded compensation expense for the
fair market value of $7.75 per share.

     On March 4, 1996, the Company initiated the Common Stock Offering of units
at $100,000 per unit, with each unit consisting of 18,433 shares of Common Stock
at a purchase price of $5.44 per share. The Common Stock Offering was terminated
on June 24, 1996, with 96.454 units having been sold, realizing net proceeds of
approximately $8,391,000, and resulting in the issuance of 1,777,961 shares of
Common Stock.

     On June 24, 1996, and pursuant to the Merger, certain stockholders of
Interfilm, Inc. prior to the Merger and third parties purchased 138,249 shares
of Common Stock at a purchase price of $5.44 per share, with net proceeds of
approximately $748,000. In addition, and pursuant to the

                                       51

<PAGE>

Merger, warrants to purchase 69,124 shares of Common Stock at an exercise price
of $8.68 were issued to certain stockholders of Interfilm prior to the Merger
and third parties. These warrants are exercisable at any time, terminate four
years from the date of issuance, have certain registration rights, contain a
call provision and are subject to adjustment in certain circumstances.

     In the ten months ended June 30, 1996, the Company issued 31,492 shares of
Common Stock in exchange for services and recorded compensation expense for the
fair market value of the shares.

     The Company commenced a private offering of preferred stock in fiscal 1994,
and a private offering of units consisting of common stock and common stock
warrants in fiscal 1995, both of which were terminated without having raised the
minimum required for closing. Stock issuance costs incurred in connection with
both offerings were expensed to operations in the fiscal year in which such
costs were incurred.

     In February 1993, the Company sold 26,912 shares of Common Stock for net
proceeds of approximately $577,000.

     In September 1992, the Company sold 12,288 shares of Common Stock for net
proceeds of approximately $191,000.

     In December 1991, the Company issued a private offering memorandum for the
sale of units consisting of 1,211 shares of Common Stock and a $20,000 note (see
Note 8). Four units were sold for $25,000 per unit.

     All pre-Merger common stock issuances were for RhoMed common stock,
subsequently converted into the Company's Common Stock as a result of the
Merger, and were at issuance prices representing market value of the RhoMed
common stock on the date of issuance.

     OUTSTANDING STOCK PURCHASE WARRANTS -- At June 30, 2000, the Company had
the following warrants outstanding:






                            [table on following page]


                                       52

<PAGE>


<TABLE>
<CAPTION>


                                                   Common          Exercise Price            Latest
             Warrant                            Stock Shares          per Share         Termination Date
<S>                                             <C>                <C>                  <C>

    Class A Offering                                      55,300          $     .22           9/13/05
    Class A Placement Agent                               20,737                .22           9/13/05
    Class B Offering                                      29,119               2.64           2/15/06
    Class B Placement Agent                                2,334               5.43           2/15/06
    Common Stock Offering Placement Agent                212,329               5.43           6/25/06
    Merger Warrants                                       69,124               8.68           6/24/02
    Series A Preferred Offering Placement Agent          278,958              5.137           11/9/02
    Palatin Offering #1                                  864,250       4.375 - 4.70          12/31/03
    Offering #1 Placement Agent                          254,600        3.75 - 4.70          12/31/03
    Palatin Offering #2                                  540,629        4.48 - 5.06            3/9/04
    Offering #2 Placement Agent                          114,073        4.48 - 5.57            3/9/04
    Watson termination agreement                          41,062                .01           3/15/05
    Other Warrants                                        17,052        6.45 - 6.56            5/9/02
                                                 ----------------    ----------------     -----------
      Total                                            2,499,567       $.22 - $8.68           6/25/06
                                                 ================    ================     ===========
</TABLE>


The Class B Offering and Merger Warrants contain provisions providing for
termination of the warrant if not exercised following notice of specified per
share trading prices.



     STOCK OPTION PLANS -- The Company has one stock option plan currently in
effect under which future grants may be issued, the 1996 Stock Option Plan, as
amended, approved by the Company's stockholders on June 17,1999, for which
2,500,000 shares of common stock are reserved. The Company has also granted
options under agreements with individuals, and not under any plan. On March 24,
1998 the Company's stockholders approved options to two executive officers to
purchase a total of 148,392 shares of common stock at an exercise price of $1.00
per share, which options replaced previously granted options to purchase the
same number of shares at an exercise price of $5.42 per share.

     Prior to the Merger, the Company had adopted a 1993 Equity Incentive Plan,
pursuant to which options for 750 shares of common stock, giving effect to the
Merger and Amendment, were granted and outstanding at June 30, 2000. No new
shares can be issued under this plan.

     Pursuant to the Merger, options which had been granted under RhoMed's four
stock option plans constituted RhoMed Securities which were automatically
converted into rights upon

                                       53

<PAGE>

exercise to receive Common Stock in the same manner in which the shares of
RhoMed common stock were converted.

     The Company applies disclosures required by Statement of Financial
Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation." Effective July 1, 1996, the Company has elected to adopt the
disclosures of this pronouncement. Had compensation cost for the Company's stock
option plans been determined based upon the fair value at the grant date for
awards under SFAS 123, the Company's net loss and basic and diluted net loss
attributable to common stockholders per share for the year ended June 30, 2000
would have been $10,438,724 and $1.40 respectively. Net loss and basic and
diluted net loss attributable to common stockholders per share for the year
ended June 30, 1999 would have been $12,883,151 and $2.17, respectively, while
net loss and basic and diluted net loss attributable to common stockholders per
share for the year ended June 30, 1998 would have been $9,533,412 and $3.04,
respectively. Because the SFAS 123 method of accounting has not been applied to
options granted prior to September 1, 1995, the resulting pro forma compensation
cost, and thus pro forma net loss, may not be representative of that to be
expected in future years. The weighted average fair market value at the date of
grant for options granted during 2000, 1999 and 1998 is estimated as $2.41,
$1.29 and $2.55 per share, respectively, using the Black-Scholes option-pricing
model. The assumptions used in the Black-Scholes model are as follows: dividend
yield of 0%, expected volatility of 60%, weighted average risk-free interest
rate of 6.47% in 2000, 4.66% in 1999 and 5.83% in 1998, and an expected option
life of 7 years.

     The status of the plans and individual agreements, including predecessor
and replacement plans under which options remain outstanding, giving effect to
the Merger and the Amendment, during the three years ended June 30, 2000, was as
follows:




                            [table on following page]

                                       54

<PAGE>


<TABLE>
<CAPTION>

                                                  Number of shares          Range of prices    Weighted average
                                                 subject to options            per share       Prices per share
                                                 ------------------        --------------      ----------------
<S>                                              <C>                       <C>                 <C>
Outstanding at June 30, 1997                              838,122          $.20 - $360.00             $8.02
                                                          513,542            $.20 - $7.75
   Granted
   Expired or canceled                                  (201,584)          $ .20 - $10.85
   Exercised                                              (5,944)                    $.22
                                                        ----------        ----------------           ------
Outstanding at June 30, 1998                            1,144,136          $.20 - $360.00            $ 6.92
   Granted                                                940,088          $2.50 - $5.813
   Expired or canceled                                   (38,559)          $.22 - $360.00
   Exercised                                             (70,257)                    $.22
                                                        ----------        ----------------           ------
Outstanding at June 30, 1999                            1,975,408          $.20 - $306.00             $4.26
   Granted                                              1,238,210           $.20 - $6.625
   Expired or canceled                                  (124,264)          $2.50 - $10.85
   Exercised                                             (80,854)            $.22 - $6.25
                                                        ----------        ----------------           ------
Outstanding at June 30, 2000                            3,008,500          $.20 - $306.00             $3.92
                                                        =========          ==============             =====
Exercisable at June 30, 2000                            2,292,978          $.20 - $306.00              4.65
                                                        =========          ==============              ====
</TABLE>


(10) INCOME TAXES:

     Palatin has had no income tax expense or benefit since inception because of
operating losses. Deferred tax assets and liabilities are determined based on
the estimated future tax effect of differences between the financial statements
and tax reporting basis of assets and liabilities, given the provisions of the
tax laws. A valuation allowance for the net deferred tax assets has been
recorded at June 30, 1999, based on the weight of evidence that the deferred tax
assets exceed the likely reversal of deferred tax liabilities and likely taxable
income.

     The Tax Reform Act of 1986 imposes limitations on the use of net operating
loss carryforwards if certain stock ownership changes occur. As a result of the
change in majority ownership relating to the Castle preferred stock transaction,
the Common Stock Offering, the Merger, and the Series A Preferred Stock
Offering, Palatin most likely will not be able to fully realize the benefit of
its net operating loss carryforwards.

                                       55

<PAGE>



     Significant components of the Palatin's deferred tax asset for federal and
state purposes is as follows:

<TABLE>
<CAPTION>
                                                                               June 30
                                                          ---------------------------------------------------
                                                                    2000                      1999
                                                          ------------------------- -------------------------
<S>                                                             <C>                       <C>
Net operating loss carryforwards......................          $14,855,424               $13,015,397

Research and development tax credits..................              550,591                   245,958

Non-deductible expenses...............................              276,232                   204,721

Other.................................................                    -                  (32,577)
                                                          ------------------------- -------------------------
                                                                 15,682,247                13,433,499

Valuation Allowances..................................          (15,682,247)              (13,433,499)

                                                          ------------------------- -------------------------
Net deferred tax assets...............................              $     -                   $     -
                                                          ========================= =========================
</TABLE>

     A valuation allowance was established for 100% of the deferred tax assets
as realization of such benefits is not assured.


(11) GRANTS AND CONTRACTS:

     The Company applies for and has received grants and contracts under the
Small Business Innovative Research ("SBIR") program and other federally funded
grant and contract programs. Since inception, approximately $3,446,000 of the
Company's revenues have been derived from federally or state funded grants and
contracts. Under federal grants and contracts, there are no royalties or other
forms of repayment; however, in certain limited circumstances the government can
acquire rights to technology which is not being commercially exploited.

     On August 16, 1999, the Company entered into a Strategic Collaboration
Agreement with Mallinckrodt, Inc., a large international healthcare products
company, to jointly develop and market LeuTech. Under the terms of the
agreement, Mallinckrodt paid a $500,000 license fee, which the Company
recognized as revenue in the year ended June 30, 2000 and purchased 700,000
restricted shares of Series C Convertible Preferred Stock for $13,000,000. The
stock is convertible into 700,000 shares of common stock with certain
registration rights and anti-dilution rights upon the occurrence of the earlier
of 5 years or a change of control in Palatin (as defined in the agreement). In
addition, Mallinckrodt agreed to make milestone payments totaling $10,000,000
upon FDA approval of the first LeuTech indication and attainment of sales goals
following product launch, reimburse the Company for 50% of all ongoing LeuTech
development costs and pay the Company a transfer price on each LeuTech product
unit and a royalty on Mallinckrodt's future net sales of LeuTech. After
offsetting the $2,000,000 subordinated note to Mallinckrodt including interest
of $46,849, the Company received net proceeds of $11,453,151 on August 17, 1999.
During the year ended June 30, 2000, the

                                       56

<PAGE>

Company recognized approximately $4,150,000 as contract revenue related to the
shared development costs of LeuTech.

(12) LICENSING FEES AND ROYALTIES:

     In December 1996, the Company entered into an Option Agreement with Nihon
Medi-Physics ("Nihon"), pursuant to which the Company received, in January 1997,
an initial payment of $1,000,000 before Japanese withholding taxes of $100,000
(the "Initial Payment"). The Company has accounted for the Initial Payment by
recognizing license fee revenue of $350,000, which represents the non-refundable
portion of the Initial Payment, and deferred license fee revenue of $550,000.
The Company recognized $550,000 in license fees as revenue during the quarter
ended December 31, 1998 related to its license option agreement with Nihon
Medi-Physics Ltd. ("Nihon"). This $550,000 was recognized pursuant to a
determination by both Nihon and the Company to change the development emphasis
and terminate the original agreement. The Company is not required to perform any
future services under this agreement.

     In May 1997, the Company entered into a License Agreement with The Wistar
Institute of Anatomy and Biology ("Wistar") related to the antibody and cell
line used for LeuTech for a defined field of use. The agreement includes future
payments to Wistar based on milestones. The Company paid $50,000 in license fees
during the year ended June 30, 1999, such fee was accounted for as an expense in
the statement of operations during the year ended June 30, 1999.

     On March 18, 1998, the Company entered into a License and Development
Agreement with TheraTech, Inc. ("TheraTech") pursuant to which the Company paid,
in July 1998, $500,000 to TheraTech as a license fee. Such license fee was
accounted for as an expense in the statement of operations during the year ended
June 30, 1998. The development agreement includes additional payments to
TheraTech related to the joint effort under the product development program.

     On March 31, 1998, the Company entered into a License Agreement with
Competitive Technologies, Inc. ("CTI") pursuant to which the Company paid, in
July 1998, $50,000 to CTI as a license fee. Such license fee was accounted for
as an expense in the statement of operations during the year ended June 30,
1998. The agreement includes future payments to CTI in subsequent years based on
certain factors. The Company paid $50,000 in license fees during the year ended
June 30, 1999, such fee was accounted for as an expense in the statement of
operations during the year ended June 30, 1999.

     On August 16, 1999, the Company received an exclusive worldwide license fee
of $500,000 (excluding Europe) for sales, marketing and distribution of LeuTech
from Mallinckrodt, Inc. (See Note 11)

                                       57

<PAGE>


(13) SUBSEQUENT EVENT:

     In September of 2000, the Company received $10.8 million from a private
offering consisting of common stock and warrants. Investors, consisting of
financial institutions based in Europe, purchased 1.8 million shares at a per
share price of $6.00, which represented the closing market price of Palatin
shares on the American Stock Exchange on September 7, 2000. For every five
shares purchased, the investors also received a five-year warrant to purchase
one share of common stock at a 25 percent premium to the closing price. The net
proceeds will be used primarily for general corporate purposes, especially for
the development and clinical trials of new products based on the Company's
proprietary technologies.


Item 9. Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosure.

None.



                                       58

<PAGE>


                                    PART III

The information required by Part III of Form 10-K (Item 10 -- Directors and
Executive Officers of the Registrant, Item 11 -- Executive Compensation, Item 12
-- Security Ownership of Certain Beneficial Owners and Management and Item 13 --
Certain Relationships and Transactions) is incorporated by reference from our
definitive proxy statement relating to the annual meeting of stockholders
scheduled for November 15, 2000, which we will file with the SEC within 120 days
after our June 30, 2000 fiscal year end.


                                     PART IV



ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a) DOCUMENTS FILED AS PART OF THE REPORT:

     1.   Financial statements: the following financial statements are filed as
          a part of this report under Item 8 -- Financial Statements and
          Supplementary Data:

          -    Report of Independent Public Accountants

          -    Consolidated Balance Sheets

          -    Consolidated Statements of Operations

          -    Consolidated Statements of Stockholders' Equity (Deficit)

          -    Consolidated Statements of Cash Flows

          -    Notes to Consolidated Financial Statements

     2.   Financial statement schedules: none.

     3.   Exhibits: The following exhibits are filed with this report, or
          incorporated by reference as noted. Exhibits filed with this report
          are marked with an asterisk (*). Exhibits which consist of or include
          a management contract or compensatory plan or arrangement are marked
          with an obelisk (+).

Number          Description

2.01 Agreement and Plan of Merger dated as of November 11, 1999, between
     Palatin, Molecular Biosystems, Inc. and Evergreen Merger Corporation.
     Incorporated by reference to Exhibit 99.2 of our current report on Form 8-K
     dated November 12, 1999, filed with the SEC on November 30, 1999. We agree
     to furnish supplementally to the SEC upon request a copy of any omitted
     schedule.

3.01 Certificate of incorporation. *

                                       59

<PAGE>



3.02 Bylaws. Incorporated by reference to Exhibit 3.2 of our Form 10-QSB for the
     quarter ended December 31, 1997, filed with the SEC on February 13, 1998.

10.01 RhoMed Incorporated 1995 Employee Incentive Stock Option Plan.
     Incorporated by reference to Exhibit 10.04 of our annual report on Form
     10-KSB for the period ended June 30, 1996, filed with the SEC on September
     27, 1996.

10.02 1996 Stock Option Plan, as amended effective July 1, 1999. Incorporated by
     reference to Exhibit 10.02 of our amended annual report on Form 10-KSB/A
     for the period ended June 30, 1999, filed with the SEC on December 28,
     1999.

10.03 Carl Spana Stock Option Agreement. Incorporated by reference to Exhibit
     4.15 of our Form S-8 filed with the SEC on June 17, 1998. +

10.04 Charles L. Putnam Stock Option Agreement. Incorporated by reference to
     Exhibit 4.16 of our Form S-8 filed with the SEC on June 17, 1998. +

10.05 Executive Officers Stock Option Agreement. Incorporated by reference to
     Exhibit 4.18 of our Form S-8 filed with the SEC on June 17, 1998. +

10.06 Employment Agreement dated as of October 9, 1998, between Palatin
     Technologies, Inc. and Charles Putnam. Incorporated by reference to Exhibit
     10.37 of our quarterly report on Form 10-QSB for the period ended September
     30, 1998, filed with the SEC on November 16, 1998. +

10.07 Employment Agreement dated as of October 9, 1998, between Palatin
     Technologies, Inc. and Carl Spana. Incorporated by reference to Exhibit
     10.38 of our quarterly report on Form 10-QSB for the period ended September
     30, 1998, filed with the SEC on November 16, 1998. +

10.08 Employment Agreement dated as of October 9, 1998, between Palatin
     Technologies, Inc. and Stephen T. Wills. Incorporated by reference to
     Exhibit 10.39 of our quarterly report on Form 10-QSB for the period ended
     September 30, 1998, filed with the SEC on November 16, 1998. +

10.09 Employment Agreement dated July 9, 1999 between Palatin Technologies, Inc.
     and Edward J. Quilty. Incorporated by reference to Exhibit 10.09 of our
     annual report on Form 10-KSB for the period ended June 30, 1999, filed with
     the SEC on September 28, 1999.+

10.10 Form of RhoMed Class A Warrant. Incorporated by reference to Exhibit 10.16
     of our annual report on Form 10-KSB for the period ended June 30, 1996,
     filed with the SEC on September 27, 1996.

                                       60

<PAGE>



10.11 Form of Placement Agent Warrant for the RhoMed Class A Offering.
     Incorporated by reference to Exhibit 10.17 of our annual report on Form
     10-KSB for the period ended June 30, 1996, filed with the SEC on September
     27, 1996.

10.12 Form of RhoMed Class B Warrant. Incorporated by reference to Exhibit 10.19
     of our annual report on Form 10-KSB for the period ended June 30, 1996,
     filed with the SEC on September 27, 1996.

10.13 Form of Placement Agent Warrant for the RhoMed Class B Offering.
     Incorporated by reference to Exhibit 10.20 of our annual report on Form
     10-KSB for the period ended June 30, 1996, filed with the SEC on September
     27, 1996.

10.14 Form of Placement Agent Warrant for the RhoMed common stock offering.
     Incorporated by reference to Exhibit 10.22 of our annual report on Form
     10-KSB for the period ended June 30, 1996, filed with the SEC on September
     27, 1996.

10.15 Form of Placement Agent Warrant for the Series A Convertible Preferred
     Stock Offering. Incorporated by reference to Exhibit 10.29 of our
     registration statement on Form S-3, filed with the SEC on November 25,
     1997.

10.16 Convertible Preferred Stock Purchase Agreement dated as of April 28, 1998,
     between Palatin and the named purchasers, relating to Series B convertible
     preferred stock. Incorporated by reference to Exhibit 99.1 of our current
     report on Form 8-K dated April 28, 1998, filed with the SEC May 8, 1998.

10.17 Stock Purchase Agreement dated as of July 6, 1998, between Palatin and
     TheraTech, Inc. Incorporated by reference to Exhibit 99.1 of our current
     report on Form 8-K dated July 8, 1998, filed with the SEC on July 9, 1998.

10.18 Lease between Carnegie 214 Associates Limited Partnership and Palatin
     Technologies, Inc. dated May 6, 1997. Incorporated by reference to Exhibit
     10.26 of our annual report on Form 10-KSB for the year ended June 30, 1997,
     filed with the SEC on September 26, 1997.

10.19 Lease between WHC-Six Real Estate, L.P. and Palatin Technologies, Inc.
     dated March 13, 1997. Incorporated by reference to Exhibit 10.27 of our
     Form 10-KSB for the year ended June 30, 1997, filed with the SEC on
     September 26, 1997.

                                       61

<PAGE>



10.20 Consulting Agreement between Palatin and Summercloud Bay, Inc.
     Incorporated by reference to Exhibit 10.36 of our annual report on Form
     10-KSB/A, Amendment No. 1, dated June 30, 1998, filed with the SEC on
     October 2, 1998. +

10.21 Strategic Collaboration Agreement dated as of August 17, 1999, between
     Palatin and Mallinckrodt, Inc. Incorporated by reference to Exhibit 10.21
     of our amended annual report on Form 10-KSB/A for the period ended June 30,
     1999, filed with the SEC on December 28, 1999.

10.22 Form of warrant and registration rights for the warrant issued in April
     2000 with an expiration date of March 15, 2005. *

10.23 Separation Agreement dated as of June 13, 2000 between Palatin
     Technologies, Inc. and Edward J. Quilty. * +

10.24 Letter agreement dated as of July 31, 2000 between Palatin Technologies,
     Inc. and Robert G. Moussa. * +

10.25 Letter agreement dated as of July 31, 2000 between Palatin Technologies,
     Inc. and James T. O'Brien. * +

21   Subsidiaries of the registrant. *

23.01 Consent of Arthur Andersen LLP, Independent Auditors, with respect to the
     financial statements of Palatin. *

27   Financial data schedule. *
--------------------------------------
*    Exhibit filed with this report.

+    Management contract



b) REPORTS ON FORM 8-K

During the last quarter of the fiscal year ended June 30, 2000, we filed one
report on Form 8-K dated June 14, 2000, relating to the appointment of Carl
Spana, Ph.D. (formerly an executive vice president and chief technology officer)
as our new chief executive officer, and the appointment of director John K. A.
Prendergast as our new chairman, following the resignation of our former
president, chairman and chief executive officer, Edward J. Quilty. We reported
Item 5, Other Events, consisting of a brief description of the appointments, and
Item 7, Exhibits, consisting of our press release concerning the appointments.

                                       62

<PAGE>


                                   SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

PALATIN TECHNOLOGIES, INC.



By: s/Carl Spana
    ------------------------------------
Carl Spana, Ph.D.
President and Chief Executive Officer

Date:  September 28, 2000

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

Signature                               Title                       Date
---------                               -----                       ----


/s/ Carl Spana
---------------------      President                          September 28, 2000
Carl Spana                 and Chief Executive Officer
                           (principal executive officer)

/s/ Stephen T. Wills
---------------------      Executive Vice President and       September 28, 2000
Stephen T. Wills           Chief Financial Officer (principal
                           financial and accounting officer)

/s/ Charles L. Putnam
---------------------      Executive Vice President and       September 28, 2000
Charles L. Putnam          Director


s/ John K.A. Prendergast
---------------------      Chairman and Director              September 28, 2000
John K.A. Prendergast



                                       63

<PAGE>




s/ Robert K. deVeer, Jr.
---------------------      Director                           September 28, 2000
Robert K. deVeer, Jr.


/s Kevin S. Flannery
---------------------      Director                           September 28, 2000
Kevin S. Flannery



                                       64

<PAGE>



                                  EXHIBIT INDEX

Number          Description

2.01 Agreement and Plan of Merger dated as of November 11, 1999, between
     Palatin, Molecular Biosystems, Inc. and Evergreen Merger Corporation.
     Incorporated by reference to Exhibit 99.2 of our current report on Form 8-K
     dated November 12, 1999, filed with the SEC on November 30, 1999. We agree
     to furnish supplementally to the SEC upon request a copy of any omitted
     schedule.

3.01 Certificate of incorporation. *

3.02 Bylaws. Incorporated by reference to Exhibit 3.2 of our Form 10-QSB for the
     quarter ended December 31, 1997, filed with the SEC on February 13, 1998.

10.01 RhoMed Incorporated 1995 Employee Incentive Stock Option Plan.
     Incorporated by reference to Exhibit 10.04 of our annual report on Form
     10-KSB for the period ended June 30, 1996, filed with the SEC on September
     27, 1996.

10.02 1996 Stock Option Plan, as amended effective July 1, 1999. Incorporated by
     reference to Exhibit 10.02 of our amended annual report on Form 10-KSB/A
     for the period ended June 30, 1999, filed with the SEC on December 28,
     1999.

10.03 Carl Spana Stock Option Agreement. Incorporated by reference to Exhibit
     4.15 of our Form S-8 filed with the SEC on June 17, 1998. +

10.04 Charles L. Putnam Stock Option Agreement. Incorporated by reference to
     Exhibit 4.16 of our Form S-8 filed with the SEC on June 17, 1998. +

10.05 Executive Officers Stock Option Agreement. Incorporated by reference to
     Exhibit 4.18 of our Form S-8 filed with the SEC on June 17, 1998. +

10.06 Employment Agreement dated as of October 9, 1998, between Palatin
     Technologies, Inc. and Charles Putnam. Incorporated by reference to Exhibit
     10.37 of our quarterly report on Form 10-QSB for the period ended September
     30, 1998, filed with the SEC on November 16, 1998. +

10.07 Employment Agreement dated as of October 9, 1998, between Palatin
     Technologies, Inc. and Carl Spana. Incorporated by reference to Exhibit
     10.38 of our quarterly report on Form 10-QSB for the period ended September
     30, 1998, filed with the SEC on November 16, 1998. +

10.08 Employment Agreement dated as of October 9, 1998, between Palatin
     Technologies, Inc. and Stephen T. Wills. Incorporated by reference to
     Exhibit 10.39 of our quarterly report on Form 10-QSB for the period ended
     September 30, 1998, filed with the SEC on November 16, 1998. +

                                       65

<PAGE>



10.09 Employment Agreement dated July 9, 1999 between Palatin Technologies, Inc.
     and Edward J. Quilty. Incorporated by reference to Exhibit 10.09 of our
     annual report on Form 10-KSB for the period ended June 30, 1999, filed with
     the SEC on September 28, 1999.+

10.10 Form of RhoMed Class A Warrant. Incorporated by reference to Exhibit 10.16
     of our annual report on Form 10-KSB for the period ended June 30, 1996,
     filed with the SEC on September 27, 1996.

10.11 Form of Placement Agent Warrant for the RhoMed Class A Offering.
     Incorporated by reference to Exhibit 10.17 of our annual report on Form
     10-KSB for the period ended June 30, 1996, filed with the SEC on September
     27, 1996.

10.12 Form of RhoMed Class B Warrant. Incorporated by reference to Exhibit 10.19
     of our annual report on Form 10-KSB for the period ended June 30, 1996,
     filed with the SEC on September 27, 1996.

10.13 Form of Placement Agent Warrant for the RhoMed Class B Offering.
     Incorporated by reference to Exhibit 10.20 of our annual report on Form
     10-KSB for the period ended June 30, 1996, filed with the SEC on September
     27, 1996.

10.14 Form of Placement Agent Warrant for the RhoMed common stock offering.
     Incorporated by reference to Exhibit 10.22 of our annual report on Form
     10-KSB for the period ended June 30, 1996, filed with the SEC on September
     27, 1996.

10.15 Form of Placement Agent Warrant for the Series A Convertible Preferred
     Stock Offering. Incorporated by reference to Exhibit 10.29 of our
     registration statement on Form S-3, filed with the SEC on November 25,
     1997.

10.16 Convertible Preferred Stock Purchase Agreement dated as of April 28, 1998,
     between Palatin and the named purchasers, relating to Series B convertible
     preferred stock. Incorporated by reference to Exhibit 99.1 of our current
     report on Form 8-K dated April 28, 1998, filed with the SEC May 8, 1998.

10.17 Stock Purchase Agreement dated as of July 6, 1998, between Palatin and
     TheraTech, Inc. Incorporated by reference to Exhibit 99.1 of our current
     report on Form 8-K dated July 8, 1998, filed with the SEC on July 9, 1998.

10.18 Lease between Carnegie 214 Associates Limited Partnership and Palatin
     Technologies, Inc. dated May 6, 1997. Incorporated by reference to Exhibit
     10.26 of our annual report on Form 10-KSB for the year ended June 30, 1997,
     filed with the SEC on September 26, 1997.

                                       66

<PAGE>



10.19 Lease between WHC-Six Real Estate, L.P. and Palatin Technologies, Inc.
     dated March 13, 1997. Incorporated by reference to Exhibit 10.27 of our
     Form 10-KSB for the year ended June 30, 1997, filed with the SEC on
     September 26, 1997.

10.20 Consulting Agreement between Palatin and Summercloud Bay, Inc.
     Incorporated by reference to Exhibit 10.36 of our annual report on Form
     10-KSB/A, Amendment No. 1, dated June 30, 1998, filed with the SEC on
     October 2, 1998. +

10.21 Strategic Collaboration Agreement dated as of August 17, 1999, between
     Palatin and Mallinckrodt, Inc. Incorporated by reference to Exhibit 10.21
     of our amended annual report on Form 10-KSB/A for the period ended June 30,
     1999, filed with the SEC on December 28, 1999.

10.22 Form of warrant and registration rights for the warrant issued in April
     2000 with an expiration date of March 15, 2005. *

10.23 Separation Agreement dated as of June 13, 2000 between Palatin
     Technologies, Inc. and Edward J. Quilty. * +

10.24 Letter agreement dated as of July 31, 2000 between Palatin Technologies,
     Inc. and Robert G. Moussa. * +

10.25 Letter agreement dated as of July 31, 2000 between Palatin Technologies,
     Inc. and James T. O'Brien. * +

21   Subsidiaries of the registrant. *

23.01 Consent of Arthur Andersen LLP, Independent Auditors, with respect to the
     financial statements of Palatin. *

27   Financial data schedule. *
--------------------------------------
*    Exhibit filed with this report.

+    Management contract


                                       67