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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1997
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
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PALATIN TECHNOLOGIES, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 95-4078884
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
214 CARNEGIE CENTER - SUITE 100
PRINCETON, NEW JERSEY 08540
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (609) 520-1911
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. |X| Yes |_| No
As of November 12, 1997, 3,051,466 shares of the Issuer's common stock, par
value $.01 per share, were outstanding.
Transitional Small Business Disclosure Format: |_| Yes |X| No
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<PAGE>
PALATIN TECHNOLOGIES, INC.
TABLE OF CONTENTS
PAGE
-------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS -- As of September
30, 1997 and June 30,1997....................................... Page 3
CONSOLIDATED STATEMENTS OF OPERATIONS -- For the Three
Months Ended September 30, 1997 and September 30,
1996 and the Period from January 28, 1986
(Commencement of Operations) through September 30, 1997......... Page 4
CONSOLIDATED STATEMENTS OF CASH FLOWS -- For the Three
Months Ended September 30, 1997 and September 30, 1996
and the Period From January 28, 1986 (Commencement
of Operations) through September 30, 1997....................... Page 5
Notes to Consolidated Financial Statements...................... Page 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... Page 7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings............................................ Page 10
Item 2. Changes in Securities........................................ Page 10
Item 3. Defaults Upon Senior Securities.............................. Page 11
Item 4. Submission of Matters to a Vote of Security Holders.......... Page 11
Item 5. Other Information............................................ Page 11
Item 6. Exhibits and Reports on Form 8-K............................. Page 11
Signatures............................................................ Page 12
Page 2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PALATIN TECHNOLOGIES, INC.
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 1997 June 30, 1997
-------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents, including restricted cash of
$185,000 and $201,211, respectively .................................................... $ 9,552,896 $ 12,806,717
Accounts receivable ...................................................................... 485,529 84,562
Prepaid expenses and other ............................................................... 150,841 174,996
--------------- ---------------
Total current assets ................................................................. 10,189,266 13,066,275
Property and equipment, net ................................................................ 1,411,297 922,096
Intangibles, net of accumulated amortization of $107,017 and
$103,743, respectively ................................................................... 79,181 74,494
--------------- ---------------
$ 11,679,744 $ 14,062,865
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ......................................................................... $ 227,183 $ 316,273
Accrued expenses ......................................................................... 1,126,319 1,472,905
Current portion of long-term financing ................................................... 907,608 869,549
Notes payable ............................................................................ 80,000 80,000
--------------- ---------------
Total current liabilities ............................................................ 2,341,110 2,738,727
Deferred license revenue ................................................................... 550,000 550,000
Long-term financing ........................................................................ 697,881 939,590
--------------- ---------------
3,588,991 4,228,317
--------------- ---------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000
shares authorized and 137,780 shares issued as of
September 30, 1997 and June 30, 1997, respectively ..................................... 1,378 1,378
Common stock, $.01 par value, 75,000,000 shares authorized
and 3,051,478 and 3,020,373 issued as of September 30, 1997
and June 30, 1997, respectively ........................................................ 30,515 30,204
Additional paid-in capital ................................................................ 23,811,737 23,740,864
Warrants .................................................................................. 573,537 573,537
Deferred Compensation ..................................................................... (927,619) (1,078,333)
Deficit accumulated during development stage .............................................. (15,398,795) (13,433,102)
--------------- ---------------
8,090,753 9,834,548
--------------- ---------------
$ 11,679,744 $ 14,062,865
=============== ===============
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
Page 3
<PAGE>
PALATIN TECHNOLOGIES, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
INCEPTION
(JANUARY 28, 1986)
THREE MONTHS ENDED SEPTEMBER 30, THROUGH
1997 1996 SEPTEMBER 30, 1997
------------- ------------- ------------------
<S> <C> <C> <C>
REVENUES:
Grants and contracts ................. $ 33,967 $ -- $ 3,244,652
License fees and royalties ........... -- -- 684,296
Product Sales ........................ -- 22,184 318,917
------------- ------------- -------------
Total revenues ................ 33,967 22,184 4,247,865
------------- ------------- -------------
OPERATING EXPENSES:
Research and development ............ 1,389,782 645,972 9,196,173
General and administrative .......... 680,234 496,445 8,233,078
Restructuring charge ................ -- -- 284,000
Net intangibles write down .......... -- -- 259,334
------------- ------------- -------------
Total operating expenses ...... 2,070,016 1,142,417 17,972,585
------------- ------------- -------------
OTHER INCOME (EXPENSES):
Interest income .................... 145,879 72,124 513,268
Interest expense ................... (75,523) (129,271) (1,493,373)
Placement agent commissions and
fees on debt offering ........ -- -- (168,970)
Merger costs ....................... -- -- (525,000)
------------- ------------- -------------
Total other income (expenses) 70,356 (57,147) (1,674,075)
------------- ------------- -------------
NET LOSS .................................... (1,965,693) (1,177,380) (15,398,795)
PREFERRED STOCK DIVIDEND .................... -- -- (2,888,935)
------------- ------------- -------------
NET LOSS ATTRIBUTABLE TO
COMMON STOCKHOLDERS .................... $ (1,965,693) $ (1,177,380) $(18,287,730)
============= ============= =============
Weighted average number of common
shares outstanding .................... 3,038,406 2,884,407 613,552
Net loss per common share ................... (0.65) (0.41) (29.81)
============= ============= =============
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
Page 4
<PAGE>
PALATIN TECHNOLOGIES, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
INCEPTION
(JANUARY 28, 1986)
THREE MONTHS ENDED SEPTEMBER 30, THROUGH
1997 1996 SEPTEMBER 30, 1997
-------------- -------------- ------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................... $ (1,965,693) $ (1,177,380) $(15,398,795)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization ...................... 29,975 15,218 404,469
Interest expense on note payable ................... 3,382 2,000 76,073
Accrued interest on long-term financing ............ -- 86,242 796,038
Accrued interest on short-term financing ........... -- (100,000) 7,936
Intangibles and equipment write down ............... -- -- 278,318
Equity and notes payable issued for expenses ....... -- -- 546,188
Settlement with consultant ......................... -- -- (28,731)
Deferred license revenue ........................... -- -- 550,000
Amortization of deferred compensation .............. 215,714 -- 610,097
Changes in certain operating assets and liabilities:
Accounts receivable .............................. (400,967) (14,714) (485,529)
Prepaid expenses and other ....................... 24,154 (22,214) (150,842)
Intangibles ...................................... (7,961) (11,736) (439,651)
Accounts payable ................................. (89,090) 30,124 226,283
Accrued expenses ................................. 249,583 (171,744) 1,112,933
-------------- ------------- -------------
Net cash used for operating activities ....... (1,940,903) (1,364,204) (11,895,213)
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment .................... (1,115,452) (53,610) (1,730,386)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable, related party ............. -- -- 302,000
Payments on notes payable, related party ............... -- -- (309,936)
Proceeds from senior bridge notes payable .............. -- -- 1,850,000
Payments on senior bridge notes ........................ -- (1,000,000) (1,850,000)
Proceeds from notes payable and long term financing .... -- -- 1,951,327
Payments on notes payable and
long-term financing .................................. (203,650) (60,000) (623,886)
Proceeds from common stock, stock option
issuance's, net ...................................... 6,184 -- 10,223,626
Proceeds from preferred stock .......................... -- -- 11,637,031
Purchase of treasury stock ............................. -- (250) (1,667)
------------- ------------- -------------
Net cash used for financing activities ....... (197,466) (1,060,250) 23,178,495
------------- ------------- -------------
NET DECREASE IN CASH ..................................... (3,253,821) (2,478,064) 9,552,896
CASH AND CASH EQUIVALENTS, beginning of period ........... 12,806,717 6,791,300 --
------------- ------------- -------------
CASH AND CASH EQUIVALENTS, end of period ................. $ 9,552,896 $ 4,313,236 $ 9,552,896
============= ============= =============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
Page 5
<PAGE>
PALATIN TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (Unaudited)
(1) ORGANIZATION ACTIVITIES:
Nature of Business -- Palatin Technologies, Inc. ("Palatin" or the
"Company") is a development stage enterprise dedicated to developing and
commercializing products and technologies for diagnostic imaging, cancer therapy
and ethical drug development utilizing peptide, monoclonal antibody and
radiopharmaceutical technologies.
Business Risk -- Since its inception, the Company has devoted substantially
all of its efforts and resources to the research and development of its
technologies. The Company has experienced operating losses in each year since
its inception and, as of September 30, 1997, the Company had a deficit
accumulated during the development stage of $15,398,795. The Company expects to
incur additional operating losses over the next several years and expects
cumulative losses to increase as research and development and clinical testing
efforts continue and expand. The ultimate completion of the Company's
development projects is contingent upon a number of factors, including the
successful completion of technology and product development, obtaining required
regulatory approvals and additional financing and, ultimately, achieving
profitable operations.
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 (the "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 and (iii)
effected a 1-for-4 reverse split of Common Stock. The consolidated financial
statements have been retroactively restated to reflect the Amendment.
(2) BASIS OF PRESENTATION:
The accompanying financial statements have been prepared by the Company
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission (the "Commission"). Certain information and footnote
disclosure normally included in the Company's audited annual financial
statements has been condensed or omitted in the Company's interim financial
statements. In the opinion of the Company, these financial statements contain
all adjustments (consisting of only normal recurring adjustments) necessary to
present fairly the financial position of the Company as of September 30, 1997
and June 30, 1997, and the results of operations for the three month period
ended September 30, 1997 and 1996 and cash flows for the three months ended
September 30, 1997 and 1996, and for the period from inception (January 28,
1986) to September 30, 1997. The results of operations for the interim period
may not necessarily be indicative of the results of operations expected for the
full year, except that the Company expects to incur a significant loss for the
fiscal year ended June 30, 1998.
The accompanying financial statements and the related notes should be read
in conjunction with the Company's audited financial statements for the fiscal
year ended June 30, 1997, the ten months ended June 30, 1996 and the fiscal year
ended August 31, 1995 filed with the Company's report on Form 10-KSB for the
fiscal year ended June 30, 1997.
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation - The consolidated financial statements include
the accounts of Palatin and its wholly owned subsidiary, RhoMed Incorporated
("RhoMed"). The remaining subsidiaries of Palatin - Interfilm Technologies,
Inc., Ediflex Digital Systems, Inc. and Production Equipment Leasing Corp. LP -
are inactive. 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.
Page 6
<PAGE>
Cash and Cash Equivalents - For purposes of presenting cash flows, the
Company considers cash and cash equivalents as amounts on hand, on deposit in
financial institutions and highly liquid investments purchased with an original
maturity of three months or less.
Revenue Recognition -- The Company recognizes revenue on grants and
contracts at the time such related expenses are incurred in compliance with
contractual terms, license fees and royalties ratably over the term of the
license or royalty agreement, and sales upon shipment.
Research and Development Costs -- The costs of research and development
activities are expensed as incurred.
Net Loss per Common Share -- Net loss per common share is calculated based
upon the weighted average number of shares of Common Stock, on an as if
converted basis, outstanding during each period. All options and warrants were
excluded in the calculation of weighted average shares outstanding since their
inclusion would have had, in the aggregate, an anti-dilutive effect.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 128 ("SFAS 128"), "Earnings per Share." The
statement is effective for financial statements for periods ending after
December 15, 1997, and changes the method in which earnings per share will be
determined. Adoption of this statement by the Company will not have a material
impact on earnings per share.
(4) PROPERTY AND EQUIPMENT:
Property and equipment consists of the following at:
September 30, June 30,
1997 1997
------------ ------------
Office equipment $ 332,069 $ 263,827
Laboratory equipment 211,867 145,310
Leasehold improvements 1,131,112 750,008
------------ ------------
1,675,048 1,159,145
Less: Accumulated depreciation 263,751 237,049
------------ ------------
$ 1,411,297 $ 922,096
============ ============
(5) COMMITMENTS AND CONTINGENCIES:
Construction -- The Company has constructed a research and development
facility in Edison, New Jersey. The Company is committed to a construction
contract for approximately $55,580 as of September 30, 1997. The remaining
services under such contract are expected to be completed in fiscal 1998.
Leases -- The Company leases two facilities in New Jersey under
noncancellable operating leases. Future minimum lease payments under those two
leases are as follows:
Fiscal Year
-----------
1998 $ 212,000
1999 216,000
2000 223,000
2001 253,000
2002 255,330
2003 and therafter 1,022,388
Page 7
<PAGE>
Employment Agreements -- On November 27, 1996, the Board of Directors of
the Company ratified an employment agreement (the "Employment Agreement") with
Edward J. Quilty ("Mr. Quilty") to serve as President and Chief Executive
Officer, originally entered into with RhoMed prior to the Merger. Pursuant to
the Employment Agreement, RhoMed agreed to grant Mr. Quilty an option to acquire
such number of shares of common stock as equal a 10% fully diluted equity
interest in the Company at an exercise price of $.22 per share, which option
vests in 36 equal increments on each of the first 36 monthly anniversaries of
the commencement of Mr. Quilty's employment with the Company, and may be
accelerated or terminated in part on the happening of certain events (the
"Initial Option"). The Employment Agreement further provides for anti-dilution
options, pursuant to which Mr. Quilty will be issued options to acquire the
number of shares that, when aggregated with the shares issuable pursuant to the
Initial Option, equal not less than 3.75% of the shares of common stock of the
Company. The Employment Agreement is for an initial period of one year, with
automatic one year extensions, and provides that, on certain termination events,
the portion of the options that would otherwise have terminated without vesting,
vest and are exercisable upon termination, and also provides for specified
termination pay.
On September 27, 1996, the Board of Directors ratified two employment
agreements with two of the officers of the Company. The agreements expire in
June 1999 and provide for current annual salaries of $160,500. The agreements
include specified termination pay and accelerated vesting of stock options under
certain termination events.
Consulting Agreements -- The Company is obligated under two consulting
agreements to make payments totaling $76,500 in fiscal 1998.
License Agreements -- The Company has two license agreements which require
minium yearly payments. Future minium payments under the license agreements are
as follows: 1998 - $100,000, 1999 - $100,000, 2000- $125,000, 2001 - $50,000 and
2002 - $50,000.
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's financial position or future results of operation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
GENERAL
The following discussion and analysis should be read in conjunction with
the consolidated financial statements and notes thereto filed as part of this
Form 10-QSB. Unless otherwise indicated herein, all references to the Company
include Palatin Technologies, Inc. and its wholly owned subsidiary, RhoMed.
Certain statements in this Form 10-QSB contain "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from any future
results, performance, or achievements express or implied by such forward looking
statement.
The Company's business is subject to significant risks, including the
uncertainties associated with product development of pharmaceutical products,
problems or delays with clinical trials, failure to receive or delays in
receiving regulatory approval, lack of enforceability of patents and proprietary
rights, industry capacity, industry trends, competition, material costs and
availability, changes in business strategy or development plans, quality of
management, availability of capital, availability of qualified personnel, the
effect of government regulation and other risks detailed in the Company's
Commission filings, including the Company's Form 10-KSB for the year ended June
30, 1997. The Company expects to incur substantial operating losses over the
next several years due to continuing expenses associated with its research and
development programs, including pre-clinical testing, clinical trials and
manufacturing. Operating losses may also fluctuate from quarter to quarter as a
result of differences in the timing of when expenses are incurred.
Page 8
<PAGE>
RESULTS OF OPERATIONS
Three Month Period Ended September 30, 1997 Compared to Three Month Period
Ended September 30, 1996.
Grants and contracts - During the three month period ended September 30,
1997, the Company completed its four Phase I grants under the Small Business
Innovative Research program with the National Institutes of Health of the
Department of Health and Human Services. Grant revenue from these grants was
$33,967 in the three month period ended September 30, 1997, compared to no
revenues in the three month period ended September 30, 1996.
Sales - There was no revenue from the sale of products in the three month
period ended September 30, 1997, compared to $22,184 in the three month period
ended September 30,1996. During the fiscal year ended June 30, 1997 the Company
discontinued the manufacture and sale of RhoChek, the sole product sold by the
Company, due to insufficient sales.
Research and development expenses increased to $1,389,782 for the three
month period ended September 30, 1997 compared to $645,972 for the three month
period ended September 30, 1996. The Company substantially increased research
and development spending, primarily relating to development of the LeuTech
product for diagnostic imaging of infections, including increased expenses for
manufacturing scale-up, consulting and clinical trials, and also relating to
research expenses on the Company's MIDAS technology. The Company expects
research and development expenses to continue to increase in future quarters as
the Company expands manufacturing efforts and initiates clinical trials on the
LeuTech product and significantly expands its efforts to develop the MIDAS
technology, including the hiring of scientists and the acquisition of equipment
and supplies.
General and administrative expenses increased to $680,234 for the three
month period ended September 30, 1997 compared to $496,445 for the three month
period ended September 30, 1996. The increase in general and administrative
expenses were mainly attributable to the amortization, totaling $216,000, of the
value of options issued to consultants and the value of options granted at
exercise prices below the then current market price of the Company's Common
Stock. General and administrative expenses are expected to remain consistent
with the current levels through the remainder of fiscal year 1998.
Interest income increased to $145,879 for the three month period ended
September 30, 1997 compared to $72,124 for the three month period ended
September 30, 1996. The increase in interest income is primarily the result of
interest on net proceeds from the Company's Series A Convertible Preferred Stock
Offering.
Interest expense decreased to $75,523 for the three month period ended
September 30,1997 compared to $129,271 for the three month period ended
September 30, 1996. The decrease is mainly due to the repayment by the Company
of certain notes, the principal amount of which was $1,000,000, in August and
September of 1996. Interest expense is expected to remain at current levels
through the remainder of fiscal year 1998.
Net loss increased to $1,965,693 for the three month period ended September
30, 1997 compared to $1,177,380 for the three month period ended September 30,
1996.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has incurred net operating losses and, as
of September 30, 1997, had an accumulated deficit of $15,398,795. The Company
has financed its net operating losses through September 30, 1997 by a series of
debt and equity financings. At September 30, 1997, the Company had cash and cash
equivalents of $9,552,896.
For the three months ended September 30, 1997, the net decrease in cash
amounted to $3,253,821. Cash used for operating activities was $1,940,903, net
cash used for investing activities was $1,115,452, and cash used for financing
activities was $197,466.
Pursuant to the License Option Agreement with Nihon Medi-Physics Ltd.
("Nihon"), Nihon can maintain its option to license certain products based on
the Company's MIDAS technology provided Nihon makes certain milestone payments
based on progress in product development. Nihon may exercise its right to
Page 9
<PAGE>
negotiate a license at any time upon notice and payment of additional monies to
the Company. In the event that the parties cannot agree on terms of a license
agreement, then the Company may be required to repay $550,000 to Nihon. There
can be no assurance that the Company and Nihon will ever enter into a definitive
license agreement, that additional payments provided for in the License Option
Agreement will be made, or that a strategic alliance between the Company and
Nihon will result in the development or commercialization of any product.
Pursuant to the terms of certain notes payable to stockholders, the
principal of which aggregates $80,000, repayment of principal and interest is
required in the second quarter of the fiscal year ending June 30, 1998.
The Company's monthly payments on long-term financing provided by Aberlyn
Holding Company are $91,695, representing payment of current interest and
principal. The final monthly payment is scheduled to be made in May 1999.
In March 1997, the Company entered into a ten-year lease on research and
development facilities in Edison, New Jersey, with the lease term expected to
commence August 1, 1997. Minimum 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.
Effective August 1, 1997, the Company entered into a five-year lease on
administrative offices in Princeton, New Jersey. Minimum future lease payments
are approximately $97,000 per year.
The Company has entered into two license agreements, which require minimum
yearly payments. Future minimum payments under the license agreements are as
follows: 1998 - $100,000, 1999 - $100,000, 2000 - $125,000, 2001 - $50,000 and
2002 - $50,000.
The Company believes that is has sufficient cash and cash equivalents to
fund the Company's projected debt obligations and fund projected operations for
fiscal year 1998.
The Company expects to continue actively searching for certain products and
technologies to license or acquire in the future. If the Company is successful
in identifying a product or technology for acquisition, substantial funds may be
required for such acquisition and subsequent development or commercialization.
To date, the Company has not completed an acquisition and there can be no
assurance that any acquisition will be consummated in the future.
The Company anticipates incurring additional losses over at least the next
several years, and such losses are expected to increase as the Company expands
its research and development activities relating to its MIDAS technology and its
direct radiolabeling 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.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
During the three months ended September 30, 1997 the Company sold the
following shares of Common Stock which were not registered under the Securities
Act:
Page 10
<PAGE>
TOTAL
DATE NUMBER OF SHARES SOLD TO OFFERING PRICE
---- ---------------- ------- --------------
July 9, 1997 6,912 Warrant Holder $1,500
September 22, 1997 3,456 Warrant Holder $750
None of the shares of Common Stock were publicly offered or sold through
underwriters, and no underwriting discounts or commissions were paid. The
Company claimed exemption from registration pursuant to Section 4(2) of the
Securities Act because each transaction involved the sale of restricted stock to
the exercising holder of a restricted warrant, not involving any public
offering.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On August 21, 1997, and as adjourned to August 25, 1997, at a special
meeting of stockholders, the following matters were adopted: (i) the Company's
1996 Stock Option Plan, (ii) an amendment to the Company's Certificate of
Incorporation increasing the authorized shares of capital stock from 27,000,000
to 85,000,000 shares, of which 75,000,000 are Common Stock and 10,000,000 are
preferred stock, and (iii) amendments to the Certificate of Incorporation
authorizing a reverse stock split, which reverse split was subsequently set by
the Board of Directors of the Company at 1-for-4. The vote and related matters
were reported in Item 4 of the Company's report on Form 10-KSB for the fiscal
year ended June 30, 1997.
ITEM 5. OTHER INFORMATION.
On October 14, 1997, the Company's Common Stock began trading on The Nasdaq
SmallCap Market(sm) under the symbol "PLTN."
On October 15, 1997, the Company announced it had submitted an
Investigational New Drug application to the U.S. Food and Drug Administration
for company sponsored clinical trials of LeuTech (tm), the Company's kit
packaged radiolabeled infection imaging system.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS
27 Financial Data Schedule.
(B) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter for which this report
is filed.
Page 11
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Palatin Technologies, Inc.
(Registrant)
/s/ Edward J. Quilty
Date: November 14, 1997 -------------------------
Edward J. Quilty
Chairman of the Board, President
and Chief Executive Officer
/s/ Stephen T. Wills
Date: November 14, 1997 -------------------------
Stephen T. Wills
Vice President and Chief Financial
Officer (principal financial and
accounting officer)
Page 12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from financial
statements for the three month period ended September 30, 1997 and is qualified
in its entirety be reference to such financial statements.
</LEGEND>
<CIK> 0000911216
<NAME> Palatin Technologies, Inc.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-1-1997
<PERIOD-END> SEP-30-1997
<CASH> 9,552,896
<SECURITIES> 0
<RECEIVABLES> 485,529
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,189,266
<PP&E> 1,675,048
<DEPRECIATION> 263,751
<TOTAL-ASSETS> 11,679,744
<CURRENT-LIABILITIES> 2,341,110
<BONDS> 697,881
0
1,378
<COMMON> 30,515
<OTHER-SE> 8,058,860
<TOTAL-LIABILITY-AND-EQUITY> 11,679,744
<SALES> 0
<TOTAL-REVENUES> 33,967
<CGS> 0
<TOTAL-COSTS> 2,070,016
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 75,523
<INCOME-PRETAX> (1,965,693)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,965,693)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,965,693)
<EPS-PRIMARY> (.65)
<EPS-DILUTED> (.65)
</TABLE>
