PALATIN TECHNOLOGIES INC Fair Value Disclosure
(6) FAIR VALUE MEASUREMENTS
The fair value of cash equivalents is classified using a hierarchy prioritized based on inputs. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on management’s own assumptions used to measure assets and liabilities at fair value. A financial asset’s or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
The following table provides the assets carried at fair value:
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| Carrying Value |
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| Quoted prices in markets |
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| Other quoted/ observable inputs (Level 2) |
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| Significant unobservable inputs |
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| June 30, 2025: |
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Cash equivalents - Money market funds |
| $ | 2,286,603 |
|
| $ | 2,286,603 |
|
| $ | - |
|
| $ | - |
|
| June 30, 2024: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Cash equivalents - Money market funds |
| $ | 9,089,113 |
|
| $ | 9,089,113 |
|
| $ | - |
|
| $ | - |
|
The fair value of the May 2022, October 2022, and October 2023 warrants was determined using the Black-Scholes option-pricing model and are classified as a Level 2 financial instrument. The key assumptions used to determine the fair value was the term of the warrants, the risk-free rate and volatility. The weighted average assumptions used in the Black-Scholes model in estimating the fair value of the warrants issued for the following non-recurring measurement dates presented were as follows.
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| October 24, 2023 (Issuance date October 2023 warrants) |
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| January 24, 2024 (Final measurement date) |
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| Expected term |
|
| 5.5 |
|
|
| 4.82 |
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| Volitility |
|
| 82 | % |
|
| 88 | % |
| Risk free rate |
|
| 5 | % |
|
| 4 | % |
The warrant liabilities were initially measured at fair value at the day of issuance and on a recurring basis. The change in fair value of warrant liabilities is recognized in the consolidated statement of operations. A summary of warrant liability activity for the period ended June 30, 2024 is as follows.
| Balance June 30, 2023 |
| $ | 1,850,544 |
|
| October 2023 issuance |
|
| 4,976,415 |
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| Change in fair value |
|
| 6,962,562 |
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| Reclassification of warrants to equity |
|
| (11,423,203 | ) |
| Conversion of liability classified warrants upon exercise |
|
| (2,366,318 | ) |
| Balance June 30, 2024 |
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| - |
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About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.