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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 1996
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 small business issuer as specified in its charter)
DELAWARE 95-4078884
(State of incorporation or organization) (I.R.S. Employer Identification No.)
214 CARNEGIE CENTER - SUITE 100
PRINCETON, NEW JERSEY 08540
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609) 520-1911
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, PAR VALUE $.01 PER SHARE
Check whether the Registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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. |X|
As of February 14, 1997, 11,740,154 shares of the Registrant's common stock,
par value $.01 per share, were outstanding.
Documents incorporated by reference: None.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE>
PALATIN TECHNOLOGIES, INC.
Table of Contents
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BALANCE SHEETS -- As of December 31, 1996 (unaudited)
and June 30, 1996 (audited). . . . . . . . . . . . . . Page 3
STATEMENT OF OPERATIONS (unaudited) -- For the Three and Six
Months Ended December 31, 1995 and December 31, 1996
and the Period from January 28, 1986 (Commencement of
Operations) through December 31, 1996 . . . . . . . . Page 4
STATEMENT OF CASH FLOWS (unaudited) -- For the
Six Months Ended December 31, 1995 and December 31,
1996 and the Period From January 28, 1986 (Commencement
of Operations) through December 31,1996. . . . . . . . Page 5
Notes to Financial Statements. . . . . . . . . . . . . . Page 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. . . . . . . . . . Page 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . Page 12
Item 2. Change in Securities.. . . . . . . . . . . . . . . . Page 12
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . Page 12
Item 4. Submission of Matters to a Vote of Security Holders. Page 12
Item 5. Other Information. . . . . . . . . . . . . . . . . . Page 12
Item 6. Exhibits and Reports on Form 8-K.. . . . . . . . . . Page 12
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 13
Page 2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
PALATIN TECHNOLOGIES, INC.
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, 1996 June 30, 1996
--------------------- -----------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 2,928,212 $ 6,791,300
Accounts receivable 272 4,574
Prepaid expenses and other 95,828 66,430
-------------- --------------
Total current assets 3,024,312 6,862,304
Equipment, net of accumulated depreciation of $208,826 and $183,535
as of December 31, 1996 and June 30, 1996, respectively 131,475 96,354
Intangibles, net of accumulated amortization of $97,851 and
$91,366 as of December 31, 1996 and June 30, 1996, respectively 172,712 82,547
-------------- --------------
$ 3,328,499 $ 7,041,205
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 208,566 $ 214,424
Accrued compensation owed to employees -- 78,084
Accrued expenses 310,285 655,197
Current portion of long-term financing, including accrued interest
of $255,715 and $38,912 as of December 31, 1996 and June 30, 1996,
respectively 741,865 311,695
Senior bridge notes, including related party transaction of $110,000
as of June 30, 1996 -- 1,100,000
------------ ------------
Total current liabilities 1,220,716 2,359,400
Long-term financing, including accrued interest of $73,830 and $273,339
as of December 31, 1996 and June 30, 1996, respectively 1,214,743 1,727,619
Notes payable to stockholders, including accrued interest of
$39,979 and $35,979 as of December 31, 1996 and June 30, 1996,
respectively 119,979 115,979
------------ ------------
2,595,438 4,202,998
------------ ------------
Stockholders' equity:
Preferred stock, $.01 and 2,000,000 shares authorized, as of
December 31, 1996 and June 30, 1996, no shares issued -- --
Common stock, $.01 and 25,000,000 shares authorized, as of December
31, 1996 and June 30, 1996; and 11,726,330 and 11,538,777 issued as
of December 31, 1996 and June 30, 1996, respectively 117,263 115,388
Treasury stock, 1,229 shares (1,667) (1,667)
Additional paid-in capital 10,812,518 10,804,394
Common stock earned but not issued 206,112 53,030
Deficit accumulated during development stage (10,401,165) (8,132,938)
------------ ------------
733,061 2,838,207
------------ ------------
$ 3,328,499 $ 7,041,205
============ ============
The accompanying notes to consolidated financial statements are an integral part of these balance sheets.
</TABLE>
Page 3
<PAGE> PALATIN TECHNOLOGIES, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Inception
Three Months Ended Six Months Ended (January 28, 1996)
December 31, December 31, through
1996 1995 1996 1995 December 31, 1996
------------- ------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Grants and contracts $ -- $ -- $ -- $ -- $ 2,860,512
License fees and royalties -- -- -- -- 334,296
Sales -- 3,838 22,184 8,731 318,917
------------- ------------- --------------- ---------------- ---------------
Total revenues -- 3,838 22,184 8,731 3,513,725
------------- ------------- --------------- ---------------- ---------------
EXPENSES:
Research and development 562,315 187,006 1,250,267 315,743 5,646,675
General and administrative 492,103 281,544 946,568 611,950 5,849,529
------------- ------------- --------------- ---------------- ---------------
Total expenses 1,054,418 468,550 2,196,835 927,693 11,496,204
------------- ------------- --------------- ---------------- ---------------
OTHER INCOME (EXPENSES):
Other income 50,571 -- 122,695 -- 194,075
Interest expense (87,001) (128,557) (216,272) (204,656) (1,259,458)
Placement agent commissions and
fees on debt offering -- (33,800) -- (33,800) (168,970)
Merger costs -- -- -- -- (475,000)
Restructuring charge -- (90,000) -- (90,000) (450,000)
Net intangibles write down -- -- -- -- (259,334)
------------- ------------- --------------- ---------------- ---------------
Total other income (expenses) (36,430) (252,357) (93,577) (328,456) (2,418,686)
------------- ------------- --------------- ---------------- ---------------
NET LOSS $ (1,090,848) $ (717,069) $ (2,268,228) $ (1,247,418) $ (10,401,165)
============= ============= =============== ================ ===============
Weighted average number of common
shares outstanding 11,574,122 1,276,786 11,555,875 1,276,232 1,692,779
============= ============= =============== ================ ===============
Net loss per common share $ (0.09) $ (0.56) $ (.20) $ (0.98) $ (6.14)
============= ============= =============== ================ ===============
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
Page 4
<PAGE>
<TABLE>
<CAPTION>
PALATIN TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows
(unaudited)
Inception
Six Months Ended December 31, (January 28,1986)
------------------------------- through
1996 1995 December 31, 1996
------------- --------------- -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,268,227) $ (1,247,418) $ (10,401,165)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization 32,673 52,870 341,246
Interest expense on related-party debt 4,000 4,000 57,387
Accrued interest on long-term financing 153,082 166,927 949,120
Accrued interest on short-term financing (100,000) 41,297 7,936
Intangibles and equipment write down -- -- 278,318
Equity and notes payable issued for expenses -- -- 296,047
Settlement with consultant -- -- (28,731)
Changes in certain operating assets and liabilities:
Accounts receivable 4,303 3,991 (271)
Prepaid expenses and other (29,398) (11,072) (95,828)
Intangibles (97,546) (9,847) (524,883)
Accounts payable (5,858) 40,445 207,666
Accrued compensation owed to employees (78,084) 3,450 16,548
Accrued expenses (344,912) 23,253 339,016
------------- ------------- ------------
Net cash used for operating activities (2,729,967) (932,104) (8,557,594)
------------- ------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (60,413) (9,513) (395,642)
------------- ------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable, related party -- -- 302,000
Payments on notes payable, related party -- (302,000) (309,936)
Proceeds from senior bridge notes payable -- 1,260,000 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 (82,706) (30,000) (272,767)
Proceeds from paid-in capital from common
stock warrants 9,999 -- 109,999
Proceeds from common stock, stock option
issuances and preferred stock, net -- 7,600 10,102,242
Purchase of treasury stock and fractional shares -- -- (1,667)
------------- ------------- ------------
Net cash provided by financing activities (1,072,707) 935,600 11,881,448
------------- ------------- ------------
NET INCREASE (DECREASE) IN CASH (3,863,088) (6,017) 2,928,212
CASH and cash equivalents, beginning of period 6,791,300 46,768 --
------------- ------------- ------------
CASH and cash equivalents, end of period $ 2,928,212 $ 40,751 $ 2,928,212
============= ============= ============
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
Page 5
<PAGE>
PALATIN TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (Unaudited)
For the Six Months Ended December 31, 1996 and 1995
(1) Nature of Business
Through its wholly-owned subsidiary RhoMed Incorporated ("RhoMed"),
Palatin Technologies, Inc. (the "Company") is a development-stage biopharma-
ceutical company dedicated to developing and commercializing products and
technologies for diagnostic imaging, cancer therapy and ethical drug
development utilizing peptide, monoclonal antibody and radiopharmaceutical
technologies. The Company was incorporated under the laws of the State of
Delaware on November 21, 1986. Since June 25, 1996, the effective date of the
merger (the "Merger") of a wholly-owned subsidiary of the Company with and
into RhoMed, all outstanding shares of RhoMed equity securities were exchanged
for the Company's common stock, $.01 par value per share (the "Common Stock").
The business of RhoMed represents the on-going business of the Company.
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 Derivative 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 Derivative Securities"),
including without limitation, any rights underlying RhoMed's qualified or
nonqualified 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 Technologies, Inc.), the Merger was accounted for as a
reverse merger. The historical financial statements prior to June 25, 1996,
are those of RhoMed, except that the net loss per common share has been stated
on an as if converted basis.
Since its inception, RhoMed has devoted substantially all of its efforts
and resources to the research and development of its technology. RhoMed has
experienced operating losses in each year since its inception and, as of
December 31, 1996, the Company, including its wholly-owned subsidiary RhoMed,
had a deficit accumulated during the development stage of $10,401,165. The
Company expects to incur additional operating losses over the next several
years and expects cumulative losses to increase as the Company's 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, successfully commercializing its products and achieving
profitable operations.
Page 6
<PAGE>
(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 December 31, 1996
and June 30, 1996, and the results of operations for the three and six month
periods ended December 31, 1996 and 1995 and cash flows for the six months
ended December 31, 1996 and 1995, and for the period from inception (January
28, 1986) to December 31, 1996. 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, 1997.
The accompanying financial statements and the related notes should be
read in conjunction with the Company's audited financial statements for the
ten months ended June 30, 1996 and the fiscal years ended August 31, 1995 and
1994 filed with the Company's Form 10-KSB for the transition period from
September 1, 1995 to June 30, 1996.
(3) Summary of Significant Accounting Policies:
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.
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.
(4) Senior Bridge Notes:
Class A Offering -- On July 28, 1995, the Board of Directors of RhoMed
authorized an offering of up to 40 units at $25,000 per unit, with each unit
consisting of a $25,000 face amount Senior Bridge Note and a Class A Warrant
to purchase 75,000 shares of RhoMed common stock (equivalent to 13,285 shares
of Common Stock) at an exercise price of $.01 per share (the "Class A
Offering"). The Senior Bridge Notes sold in the Class A Offering (the
"Senior Bridge Notes") bore interest at 1% per month, and were payable, with
accrued interest, one year from the date of issuance. All of the 40
Page 7
<PAGE>
Class A Offering units were purchased with proceeds prior to commissions and
expenses of $1,000,000. In August and September of 1996, the Senior Bridge
Notes sold in the Class A Offering were repaid in full, totaling $1,000,000 of
principal and $120,000 of accrued interest.
(5) Equipment:
Equipment consists of the following at December 31, 1996 and June 30,
1996:
December 31, 1996 June 30, 1996
----------------- -------------
Office equipment $ 257,016 $ 202,960
Laboratory equipment 83,285 76,929
---------- ----------
Equipment at cost 340,301 279,889
Less: Accumulated depreciation 208,826 183,535
---------- ----------
$ 131,475 $ 96,354
========== ==========
(6) Commitments and Contingencies:
Leases -- The Company leases certain of its facilities and equipment
under noncancellable operating leases. In October 1996, the lease on the
facility in Albuquerque, New Mexico was extended from December 31, 1996 until
August 31, 1997. Minimum future lease payments at December 31, 1996, are
approximately $ 46,000 for the remaining six months of fiscal year 1997, and
approximately $12,000 to $21,000 per year thereafter until fiscal year 2001.
Certain leases have been personally guaranteed by one or more former officers
of RhoMed.
Merger Costs -- In conjunction with the Merger, costs of $475,000 have
been charged to operations for the ten months ended June 30, 1996, and accrued
expenses include $17,419 of this amount as of December 31, 1996.
Restructuring Charge -- In conjunction with the Company's decision to
consolidate and relocate its research and development facilities and executive
offices in the New Jersey area, the Company established a restructuring charge
of $450,000. The restructuring charge represents mainly severance costs,
facility closing expenses and recruiting fees. Included in accrued expenses
at December 31, 1996, is $142,736 of this restructuring charge.
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
Page 8
<PAGE>
include Palatin Technologies, Inc. and its wholly owned subsidiary, RhoMed.
Certain statements in the Company's 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
transition period from September 1, 1995 to June 30, 1996. 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 expenses incurred.
Results of Operations
Three and Six Month Periods Ended December 31, 1996 Compared to Three
and Six Month Periods Ended December 31, 1995. During the three month period
ended December 31, 1996, the Company discontinued the manufacture and sale of
RhoChek, the sole product sold by the Company, due to insufficient sales.
There were no revenues in the three month period ended December 31, 1996,
compared to $3,838 in the three month period ended December 31, 1995.
Revenues in the six month period ended December 31, 1996 were $22,184 compared
to $8,731 in the six month period ended December 31, 1995. The Company
anticipates no additional revenues from the sale of products in the current
fiscal year.
Research and development expenses increased to $562,315 for the
three month period ended December 31, 1996 from $187,006 for the three month
period ended December 31, 1995, with expenses of $1,250,267 for the six month
period ended December 31, 1996 compared to $315,743 for the six month period
ended December 31, 1995. The increase in expenses for both the current three
and six month periods is attributable to expansion in the scale of the
Company's research and development operations, primarily relating to
development of the Company's Leu-Tech product for diagnostic imaging of
infections, including increased expenses for manufacturing scale-up,
consulting and clinical trials, and also relating to increased research
expenses on the Company's MIDAS metallopeptide 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 Leu-Tech product and significantly expands its efforts to
develop the MIDAS metallopeptide technology.
General and administrative expenses increased to $492,103 for the three
month period ended December 31, 1996 from $281,544 for the three month period
Page 9
<PAGE>
ended December 31, 1995, and increased to $946,568 for the six month period
ended December 31, 1996 from $611,950 for the six month period ended December
31, 1995. The increase is attributable primarily to the hiring of certain key
executives, the leasing of executive offices in New Jersey, and increased
travel and consulting expenses. General and administrative expenses are
expected to remain approximately at current levels through the remainder of
fiscal year 1997.
Interest income was $50,571 and $122,695 for the three and six month
periods ended December 31, 1996, compared with no interest income for the
three and six month periods ended December 31, 1995. The interest income is
primarily the result of interest on net proceeds from Common Stock offerings
of approximately $9,000,000 completed in June 1996. Interest expenses
decreased to $87,001 for the three month period ended December 31, 1996
compared with $128,557 for the three month period ended December 31, 1995, and
increased to $216,272 from $204,656 for the six month periods ended December
31, 1996 and 1995, respectively. Interest expense as of December 31, 1996, is
comprised of (i) interest on long-term financing provided by Aberlyn Holding
Company, the principal and accrued interest of which totaled $1,956,608, (ii)
interest on notes payable to stockholders, the principal amount of which is
$80,000, and (iii) interest on Senior Bridge Notes which were repaid in full
in the first quarter of the current fiscal year. As a result of repayment by
the Company of the Senior Bridge Notes, the principal amount of which was
$1,000,000, interest expense is expected to remain at current levels for the
balance of the current fiscal year, and substantially below the levels for the
prior fiscal year.
Net loss increased from $717,069 for the three month period ended
December 31, 1995 to $1,090,848 for the three month period ended December 31,
1996, and increased from $1,247,418 for the six month period ended December
31, 1995 to $2,268,228 for the six month period ended December 31, 1996. The
net loss per share decreased in both the three and six month period ended
December 31, 1996 compared to the prior year, a result related to the
substantial increase in the weighted average shares outstanding. There were
11,574,122 shares outstanding in the three month period ended December 31,
1996 compared to 1,276,786 shares outstanding in the three month period ended
December 31, 1995, and 11,555,875 shares outstanding in the six month period
ended December 31, 1996 compared to 1,276,232 shares outstanding in the six
month period ended December 31, 1995. The increase in the shares outstanding
is primarily the result of issuance of 7,664,844 shares of Common Stock in
connection with the sale of Common Stock completed in June 1996.
Liquidity and Capital Resources
Since its inception, the Company has incurred net operating losses and,
as of December 31, 1996, had an accumulated deficit of $10,401,165. The
Company has financed its net operating losses through December 31, 1996 by a
series of debt and equity financings. At December 31, 1996, the Company's
cash position amounted to $2,928,212.
For the six months ended December 31, 1996, the net decrease in cash
amounted to $3,863,088. Cash used for operating activities was $2,729,967,
net cash used for investing activities was $60,413, and cash used by financing
activities was $1,072,707, mainly comprised of the $1,000,000 principal
repayment of the Senior Bridge Notes. The current portion of long-term debt
maturing in fiscal year 1997 is $191,695.
Page 10
<PAGE>
The Company intends to relocate its research and development facility
from Albuquerque, New Mexico to New Jersey during the last quarter of fiscal
year 1997 or the first quarter of fiscal year 1998. The Company is currently
in negotiations to lease facilities, and anticipates that the cost of tenant
improvements and acquisition of laboratory equipment will exceed $1,500,000.
In December 1996, the Company entered into a License Option
Agreement (the "Agreement") with a foreign developer and manufacturer of
radiopharmaceutical drugs ("Licensee"). Pursuant to the Agreement, Licensee
has the option to exclusively license certain jointly developed
radiopharmaceutical diagnostic products based on the Company's MIDAS
metallopeptide technology. In January 1997, the Company received an initial
payment pursuant to the Agreement of $1,000,000. There can be no assurance
that the Company and Licensee will ever enter into a definitive license
agreement, that additional payments provided for in the Agreement will be
made, or that the strategic alliance between the Company and Licensee will
result in the development or commercialization of any product.
The Company's future capital requirements depend on numerous factors
which cannot be quantified, including continued progress in its research and
development activities, progress with pre-clinical studies and clinical
trials, prosecuting and enforcing patent claims, technological and market
developments, the ability of the Company to establish product development
arrangements, the cost of manufacturing scale-up, effective marketing
activities and arrangements, and licensing or acquisition activity.
The Company is seeking to obtain additional funds through equity
financings and collaborative or other arrangements with corporate partners and
others. There can be no assurance that the Company will consummate any equity
financing or additional collaborative or other arrangements with corporate
partners or others on acceptable terms, if at all, and if the Company does not
consummate an equity financing or additional collaborative or other
arrangements with corporate partners, then the Company's current cash position
may not be sufficient to meet its debt obligations and fund operations through
fiscal year 1997. If adequate additional funds are not available, the Company
may be required to delay, scale back or eliminate certain of its research,
drug discovery or development activities or certain other aspects of its
business, which would have a material and adverse affect on the Company.
The Company has been seeking and expects to continue to seek to license
or acquire certain products and technologies. If the Company is successful in
acquiring a product or technology, 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
metallopeptide technology and its radiolabeling technology. To achieve
profitability, the Company, alone or with others, must successfully develop
and commercialize its technologies and products, conduct pre-clinical studies
and clinical trials, obtain required regulatory approvals and successfully
manufacture, introduce and market such technologies and 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.
Page 11
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Change in Securities.
During the three months ended December 31, 1996 the Company sold the
following shares of Common Stock which were not registered under the
Securities Act of 1933, as amended ( the "Securities Act"):
Date Number of Shares Sold To Total Offering Price
- - ----------------- ---------------- ------------- --------------------
November 11, 1996 119,796 Option Holder $6,499
October 28, 1996 27,649 Warrant Holders $1,500
November 21, 1996 27,649 Warrant Holder $1,500
December 9, 1996 13,824 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 was the sale of restricted stock to
the exercising holder of a restricted option or warrant, not involving any
public offering.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
3.2 Bylaws of the Company.
27.1 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 12
<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)
Date: February 14, 1997 /s/ Edward J. Quilty
--------------------
Edward J. Quilty
Chairman of the Board,
President, and Chief
Executive Officer
Date: February 14, 1997 /s/ John J. McDonough
---------------------
John J. McDonough
Vice President and Chief
Financial Officer (Principal
Financial and Accounting Officer)
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BY-LAWS
OF
PALATIN TECHNOLOGIES, INC.
ARTICLE I
OFFICES
SECTION 1.01. Registered Office. The registered office of
PALATIN TECHNOLOGIES, INC. (the "Corporation) in the State of Delaware shall
be at the principal office of The Corporation Trust Company in the City of
Wilmington, County of New Castle, and the registered agent in charge thereof
shall be The Corporation Trust Company.
SECTION 1.02. Other Offices. The Corporation may also have an
office or offices at any other place or places within or without the State of
Delaware as the Board of Directors of the Corporation (the "Board" may from
time to time determine or the business of the Corporation may from time to
time require
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 2.01. Annual Meetings. The annual meeting of
stockholders of the Corporation for the election of directors of the
Corporation ("Directors), and for the transaction of such other business as
may properly come before such meeting, shall be held at such place, date and
time as shall be fixed by the Board and designated in the notice or waiver of
notice of such annual meeting; provided, however, that no annual meeting of
stockholders need be held if all actions, including the election of Directors,
required by the General Corporation Law of the State of Delaware (the "General
Corporation Law") to be taken at such annual meeting are taken by written
consent in lieu of meeting pursuant to Section 2.09 hereof.
SECTION 2.02. Special Meetings. Special meetings of stockholders
for any purpose or purposes may be called by the Board or the Chairman of the
Board, the President or the Secretary of the Corporation or by the
recordholders of at least ten percent of the shares of common stock of the
Corporation issued and outstanding ("Shares") and entitled to vote thereat, to
be held at such place, date and time as shall be designated in the notice or
waiver of notice thereof.
SECTION 2.03. Notice of Meetings. (a) Except as otherwise
provided by law, written notice of each annual or special meeting of
stockholders stating the place, date and time of such meeting and, in the case
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of a special meeting, the purpose or purposes for which such meeting is to be
held, shall be given personally or by first-class mail (airmail in the case of
international communications) to each recordholder of Shares (a "Stockholder")
entitled to vote thereat, not less than 10 nor more than 60 days before the
date of such meeting. If mailed, such notice shall be deemed to be given when
deposited in the United States mail, postage prepaid, directed to the
Stockholder at such Stockholder's address as it appears on the records of the
Corporation. If, prior to the time of mailing, the Secretary of the
Corporation (the "Secretary") shall have received from any Stockholder a
written request that notices intended for such Stockholder are to be mailed to
some address other than the address that appears on the records of the
Corporation, notices intended for such Stockholder shall be mailed to the
address designated in such request.
(b) Notice of a special meeting of Stockholders may be given by
the person or persons calling the meeting, or, upon the written request of
such person or persons, such notice shall be given by the Secretary on behalf
of such person or persons. If the person or persons calling a special meeting
of Stockholders give notice thereof, such person or persons shall deliver a
copy of such notice to the Secretary. Each request to the Secretary for the
giving of notice of a special meeting of Stockholders shall state the purpose
or purposes of such meeting.
SECTION 2.04. Waiver of Notice. Notice of any annual or special
meeting of Stockholders need not be given to any Stockholder who files a
written waiver of notice with the Secretary, signed by the person entitled to
notice, whether before or after such meeting. Neither the business to be
transacted at, nor the purpose of, any meeting of Stockholders need be
specified in any written waiver of notice thereof. Attendance of a
Stockholder at a meeting, in person or by proxy, shall constitute a waiver of
notice of such meeting, except when such Stockholder attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business on the grounds that the notice of such meeting was
inadequate or improperly given.
SECTION 2.05. Adjournments. Whenever a meeting of Stockholders,
annual or special, is adjourned to another date, time or place, notice need
not be given of the adjourned meeting if the date, time and place thereof are
announced at the meeting at which the adjournment is taken. If the
adjournment is for more than 30 days, or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting
shall be given to each Stockholder entitled to vote thereat. At the adjourned
meeting, any business may be transacted which might have been transacted at
the original meeting.
SECTION 2.06. Quorum. Except as otherwise provided by law or the
Amended and Restated Certificate of Incorporation of the Corporation (the
"Certificate of Incorporation"), the recordholders of a majority of the Shares
entitled to vote thereat, present in person or by proxy, shall constitute a
quorum for the transaction of business at all meetings of Stockholders,
whether annual or special. If, however, such quorum shall not be present in
person or by proxy at any meeting of Stockholders, the Stockholders entitled
to vote thereat may adjourn the meeting from time to time in accordance with
Section 2.05 hereof until a quorum shall be present in person or by proxy.
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SECTION 2.07. Voting. Each Stockholder shall be entitled to one
vote for each Share held of record by such Stockholder. Except as otherwise
provided by law or the Certificate of Incorporation, when a quorum is present
at any meeting of Stockholders, the vote of the recordholders of a majority of
the Shares constituting such quorum shall decide any question brought before
such meeting.
SECTION 2.08. Proxies. Each Stockholder entitled to vote at a
meeting of Stockholders or to express, in writing, consent to or dissent from
any action of Stockholders without a meeting may authorize another person or
persons to act for such Stockholder by proxy. Such proxy shall be filed with
the Secretary before such meeting of Stockholders or such action of
Stockholders without a meeting, at such time as the Board may require. No
proxy shall be voted or acted upon more than three years from its date, unless
the proxy provides for a longer period.
SECTION 2.09. Stockholders' Consent in Lieu of Meeting. Any
action required by the General Corporation Law to be taken at any annual or
special meeting of Stockholders, and any action which may be taken at any
annual or special meeting of Stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting
forth the action so taken, shall be signed by the recordholders of Shares
having not less than the minimum number of votes necessary to authorize or
take such action at a meeting at which the recordholders of all Shares
entitled to vote thereon were present and voted.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.01. General Powers. The business and affairs of the
Corporation shall be managed by the Board, which may exercise all such powers
of the Corporation and do all such lawful acts and things as are not by law,
the Certificate of Incorporation or these By-laws directed or required to be
exercised or done by Stockholders.
SECTION 3.02. Number and Term of Office. The number of Directors
shall be five or such other number as shall be fixed from time to time by the
Board. Directors need not be Stockholders. Directors shall be elected at the
annual meeting of Stockholders or, if, in accordance with Section 2.01 hereof,
no such annual meeting is held, by written consent in lieu of meeting pursuant
to Section 2.09 hereof, and each Director shall hold office until his
successor is elected and qualified, or until his earlier death or resignation
or removal in the manner hereinafter provided.
SECTION 3.03. Resignation. Any Director may resign at any time
by giving written notice to the Board, the Chairman of the Board of the
Corporation (the "Chairman") or the Secretary. Such resignation shall take
effect at the time specified in such notice or, if the time be not specified,
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upon receipt thereof by the Board, the Chairman or the Secretary, as the case
may be. Unless otherwise specified therein, acceptance of such resignation
shall not be necessary to make it effective.
SECTION 3.04. Removal. Any or all of the Directors may be
removed, with or without cause, at any time by vote of the recordholders of a
majority of the Shares then entitled to vote at an election of Directors, or
by written consent of the recordholders of Shares pursuant to Section 2.09
hereof.
SECTION 3.05. Vacancies. Vacancies occurring on the Board as a
result of the removal of Directors without cause may be filled only by vote of
the recordholders of a majority of the Shares then entitled to vote at an
election of Directors, or by written consent of such recordholders pursuant to
Section 2.09 hereof. Vacancies occurring on the Board for any other reason,
including, without limitation, vacancies occurring as a result of the creation
of new directorships that increase the number of Directors, may be filled by
such vote or written consent or by vote of the Board or by written consent of
the Directors pursuant to Section 3.08 hereof. If the number of Directors
then in office is less than a quorum, such other vacancies may be filled by
vote of a majority of the Directors then in office or by written consent of
all such Directors pursuant to Section 3.08 hereof. Unless earlier removed
pursuant to Section 3.04 hereof, each Director chosen in accordance with this
Section 3.05 shall hold office until the next annual election of Directors by
the Stockholders and until his successor shall be elected and qualified.
SECTION 3.06. Meetings. (a) Annual Meetings. As soon as
practicable after each annual election of Directors by the Stockholders, the
Board shall meet for the purpose of organization and the transaction of other
business, unless it I shall have transacted all such business by written
consent pursuant to Section 3.08 hereof.
(b) Other Meetings. Other meetings of the Board shall be held at
such times as the Chairman, the President of the Corporation (the
"President"), the Secretary or a majority of the Board shall from time to time
determine.
(c) Notice of Meetings. The Secretary shall give written notice
to each Director of each meeting of the Board, which notice shall state the
place, date, time and purpose of such meeting. Notice of each such meeting
shall be given to each Director, if by mail, addressed to him at his residence
or usual place of business, at least two days before the day on which such
meeting is to be held, or shall be sent to him at such place by telecopy,
telegraph, cable, or other form of recorded communication, or be delivered
personally or by telephone not later than the day before the day on which such
meeting is to be held. A written waiver of notice, signed by the Director
entitled to notice, whether before or after the time of the meeting referred
to in such waiver, shall be deemed equivalent to notice. Neither the business
to be transacted at, nor the purpose any meeting of the Board need be
specified in any written waiver of notice thereof. Attendance of a Director at
a meeting of the Board shall constitute a waiver of notice of such meeting,
except as provided by law.
(d) Place of Meetings. The Board may hold its meetings at such
place or places within or without the State of Delaware as the Board or the
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Chairman may from time to time determine, or as shall be designated in the
respective notices or waivers of notice of such meetings.
(e) Quorum and Manner of Acting. One-third of the total number
of Directors then in office (but in no event less than two if the total number
of directorships, including vacancies, is greater than one and in no event a
number less than one-third of the total number of directorships, including
vacancies) shall be present in person at any meeting of the Board in order to
constitute a quorum for the transaction of business at such meeting, and the
vote of a majority of those Directors present at any such meeting at which a
quorum is present shall be necessary for the passage of any resolution or act
of the Board, except as otherwise expressly required by law, the Certificate
of Incorporation or these By-laws. In the absence of a quorum for any such
meeting, a majority of the Directors present thereat may adjourn such meeting
from time to time until a quorum shall be present.
(f) Organization. At each meeting of the Board, one of the
following shall act as chairman of the meeting and preside, in the following
order of precedence:
(i) the Chairman;
(ii) the President;
(iii) any Director chosen by a majority of the
Directors present.
The Secretary or, in the case of his absence, any person (who shall be an
Assistant Secretary, if an Assistant Secretary is present) whom the chairman
of the meeting shall appoint shall act as secretary of such meeting and keep
the minutes thereof.
SECTION 3.07. Committees of the Board. The Board may, by
resolution passed by a majority of the whole Board, designate one or more
committees, each committee to consist of one or more Directors. The Board may
designate one or more Directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of such committee.
In the absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
Director to act at the meeting in the place of any such absent or disqualified
member. Any committee of the Board, to the extent provided in the resolution
of the Board designating such committee, shall have and may exercise all the
powers and authority of the Board in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to
be affixed to all papers which may require it; provided, however, that no such
committee shall have such power or authority in reference to amending the
Certificate of Incorporation (except that such a committee may, to the extent
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authorized in the resolution or resolutions providing for the issuance of
shares of stock adopted by the Board as provided in Section 151(a) of the
General Corporation Law, fix the designations and any of the preferences or
rights of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the Corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes of stock, of
the Corporation or fix the number of shares of any series of stock or
authorize the increase or decrease of the shares of any series), adopting an
agreement of merger or consolidation under Section 251 or 252 of the General
Corporation Law, recommending to the Stockholders the sale, lease or exchange
of all or substantially all the Corporation's property and assets,
recommending to the Stockholders a dissolution of the Corporation or the
revocation of a dissolution, or amending these By-laws; provided further,
however, that, unless expressly so provided in the resolution of the Board
designating such committee, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to
adopt a certificate of ownership and merger pursuant to Section 253 of the
General Corporation Law. Each committee of the Board shall keep regular
minutes of its proceedings and report the same to the Board when so requested
by the Board.
SECTION 3.08. Directors' Consent in Lieu of Meeting. Any action
required or permitted to be taken at any meeting of the Board or of any
committee thereof may be taken without a meeting, without prior notice and
without a vote, if a consent in writing setting forth the action so taken,
shall be signed by all the members of the Board or such committee and
such consent is filed with the minutes of the proceedings of the Board or such
committee.
SECTION 3.09. Action by Means of Telephone or Similar
Communications Equipment. Any one or more members of the Board, or of any
committee thereof, may participate in a meeting of the Board or such committee
by means of conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each other, and
participation in a meeting by such means shall constitute presence in person
at such meeting.
SECTION 3.10. Compensation. Unless otherwise restricted by the
Certificate of Incorporation, the Board may determine the compensation of
Directors. In addition, as determined by the Board, Directors may be
reimbursed by the Corporation for their expenses, if any, in the performance
of their duties as Directors. No such compensation or reimbursement shall
preclude any Director from serving the Corporation in any other capacity and
receiving compensation therefor.
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ARTICLE IV
OFFICERS
SECTION 4.01. Officers. The officers of the Corporation shall be
the Chairman, the President, the Secretary and a Treasurer and may include one
or more Vice Presidents and one or more Assistant Secretaries and an Assistant
Treasurer. Any two or more offices may be held by the same person.
SECTION 4.02. Authority and Duties. All officers shall have such
authority and perform such duties in the management of the Corporation as may
be provided in these By-laws or, to the extent not so provided, by resolution
of the Board.
SECTION 4.03. Term of Office. Resignation and Removal. (a) Each
officer shall be appointed by the Board and shall hold office for such term as
may be determined by the Board. Each officer shall hold office until his
successor has been appointed and qualified or his earlier death or resignation
or removal in the manner hereinafter provided. The Board may require any
officer to give security for the faithful performance of his duties.
(b) Any officer may resign at any time by giving written notice to
the Board, the Chairman, the President or the Secretary. Such resignation
shall take effect at the time specified in such notice or, if the time be not
specified, upon receipt thereof by the Board, the Chairman, the President or
the Secretary, as the case may be. Unless, otherwise specified therein,
acceptance of such resignation shall not be necessary to make it effective.
(c) All officers and agents appointed by the Board shall be subject
to removal, with or without cause, at any time by the Board or by the action
of the recordholders of a majority of the Shares entitled to vote thereon.
SECTION 4.04. Vacancies. Any vacancy occurring in any office of
the Corporation, for any reason, shall be filled by action of the Board.
Unless earlier removed pursuant to Section 4.03 hereof, any officer appointed
by the Board to fill any such vacancy shall serve only until such time as the
unexpired term of his predecessor expires unless reappointed by the Board.
SECTION 4.05. The Chairman. The Chairman shall have the power to
call special meetings of Stockholders, to call special meetings of the Board
and, if present, to preside at all meetings of Stockholders and all meetings
of the Board. The Chairman shall perform all duties incident to the office of
Chairman of the Board and all such other duties as may from time to time be
assigned to him by the Board or these By-laws. The office of Chairman of the
Board may be filled by two individuals serving simultaneously and who shall be
referred to collectively as Co-Chairmen and who shall each individually be
referred to as a Co-Chairman.
SECTION 4.06. The President. The President shall be the chief
executive officer of the Corporation and shall have general and active
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management and control of the business and affairs of the Corporation, subject
to the control of the Board, and shall see that all orders and resolutions of
the Board are carried into effect. The President shall perform all duties
incident to the office of President and all such other duties as may from time
to time be assigned to him by the Board or these By-laws.
SECTION 4.07. Vice Presidents. Vice Presidents, if any, in order
of their seniority or in any other order determined by the Board, shall
generally assist the President and perform such other duties as the Board or
the President shall prescribe, and in the absence or disability of the
President, shall perform the duties and exercise the powers of the President.
SECTION 4.08. The Secretary. The Secretary shall, to the extent
practicable, attend all meetings of the Board and all meetings of Stockholders
and shall record all votes and the minutes of all proceedings in a book to be
kept for that purpose, and shall perform the same duties for any committee of
the Board when so requested by such committee. He shall give or cause to be
given notice of all meetings of Stockholders and of the Board, shall perform
such other duties as may be prescribed by the Board, the Chairman or the
President and shall act under the supervision of the Chairman. He shall keep
in safe custody the seal of the Corporation and affix the same to any
instrument that requires that the seal be affixed to it and which shall have
been duly authorized for signature in the name of the Corporation and, when so
affixed, the seal shall be attested by his signature or by the signature of
the Treasurer of the Corporation (the "Treasurer") or an Assistant Secretary
or the Assistant Treasurer of the Corporation (the Assistant Treasurer") of
the Corporation. He shall keep in safe custody the certificate books and
stockholder records and such other books and records of the Corporation as the
Board, the Chairman or the President may direct and shall perform all other
duties incident to the office of Secretary and such other duties as from time
to time may be assigned to him by the Board, the Chairman or the President.
SECTION 4.09. Assistant Secretaries. Assistant Secretaries of
the Corporation ("Assistant Secretaries"), if any, in order of their seniority
or in any other order determined by the Board, shall generally assist the
Secretary and perform such other duties as the Board or the Secretary shall
prescribe, and, in the absence or disability of the Secretary, shall perform
the duties and exercise the powers of the Secretary.
SECTION 4.10. Treasurer. The Treasurer shall have the care
and custody of a the funds of the Corporation and shall deposit such funds in
such banks or other depositories as the Board, or any officer or officers, or
any officer and agent jointly, duly authorized by the Board, shall, from time
to time, direct or approve. He shall disburse the funds of the Corporation
under the direction of the Board and the President. He shall keep a full and
accurate account of all moneys received and paid on account of the Corporation
and shall render a statement of his accounts whenever the Board, the Chairman
or the President shall so request. He shall perform all other necessary
actions and duties in connection with the administration of the financial
affairs of the Corporation and shall generally perform all the duties usually
appertaining to the office of treasurer of a corporation. When required by
the Board, he shall give bonds for the faithful discharge of his duties in
such sums and with such sureties as the Board shall approve.
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SECTION 4.11. Assistant Treasurer. The Assistant Treasurer of
the Corporation shall generally assist the Treasurer and perform such other
duties as the Board or the Treasurer shall prescribe, and, in the absence or
disability of the Treasurer, shall perform the duties and exercise the powers
of the Treasurer.
ARTICLE V
CHECKS, DRAFTS, NOTES, AND PROXIES
SECTION 5.01. Checks, Drafts and Notes. All checks, drafts and
other orders for the payment of money, notes and other evidences of
indebtedness issued in the name of the Corporation shall be signed by such
officer or officers, agent or agents of the Corporation and in such manner as
shall be determined, from time to time, by resolution of the Board.
SECTION 5.02. Execution of Proxies. The Chairman or the
President, or, in the absence or disability of both of them, any Vice
President, may authorize, from time to time, the execution and issuance of
proxies to vote shares of stock or other securities of other corporations held
of record by the Corporation and the execution of consents to action taken or
to be taken by any such corporation. All such proxies and consents, unless
otherwise authorized by the Board, shall be signed in the name of the
Corporation by the Chairman, the President or any Vice President.
ARTICLE V
SHARES AND TRANSFERS OF SHARES
SECTION 6.01. Certificates Evidencing Shares. Shares shall be
evidenced by certificates in such form or forms as shall be approved by the
Board. Certificates shall be issued in consecutive order and shall be
numbered in the order of their issue, and shall be signed by the Chairman, the
President or any Vice President and by the Secretary, any Assistant Secretary,
the Treasurer or the Assistant Treasurer. If such a certificate is manually
signed by one such officer, any other signature on the certificate may be a
facsimile. In the event any such officer who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to hold such
office or to be employed by the Corporation before such certificate is issued,
such certificate may be issued by the Corporation with the same effect as if
such officer had held such office on the date of issue.
SECTION 6.02. Stock Ledger. A stock ledger in one or more
counterparts shall be kept by the Secretary, in which shall be recorded the
name and address of each person, firm or corporation owning the Shares
evidenced by each certificate evidencing Shares issued by the Corporation, the
number of Shares evidenced by each such certificate, the date of issuance
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thereof and, in the case of cancellation, the date of cancellation. Except as
otherwise expressly required by law, the person in whose name Shares stand on
the stock ledger of the Corporation shall be deemed the owner and recordholder
thereof for all purposes.
SECTION 6.03. Transfers of Shares. Registration of transfers of
Shares shall be made only in the stock ledger of the Corporation upon request
of the registered holder of such shares, or of his attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary,
and upon the surrender of the certificate or certificates evidencing such
Shares properly endorsed or accompanied by a stock power duly executed,
together with such proof of the authenticity of signatures as the Corporation
may reasonably require.
SECTION 6.04. Addresses of Stockholders. Each Stockholder shall
designate to the Secretary an address at which notices of meetings and all
other corporate notices may be served or mailed to such Stockholder, and, if
any Stockholder shall fail to so designate such an address, corporate notices
may be served upon such Stockholder by mail directed to the mailing address,
if any, as the same appears in the stock ledger of the Corporation or at the
last known mailing address of such Stockholder.
SECTION 6.05. Lost, Destroyed and Mutilated Certificates. Each
recordholder of Shares shall promptly notify the Corporation of any loss,
destruction or mutilation of any certificate or certificates evidencing any
Share or Shares of which he is the recordholder. The Board may, in its
discretion, cause the Corporation to issue a new certificate in place of any
certificate theretofore issued by it and alleged to have been mutilated, lost,
stolen or destroyed, upon the surrender of the mutilated certificate or, in
the case of loss, theft or destruction of the certificate, upon satisfactory
proof of such loss, theft or destruction, and the Board may, in its
discretion, require the recordholder of the Shares evidenced by the lost,
stolen or destroyed certificate or his legal representative to give the
Corporation a bond sufficient to indemnify the Corporation against any claim
made against it on account of the alleged loss, theft or destruction of any
such certificate or the issuance of such new certificate.
SECTION 6.06. Regulations. The Board may make such other rules
and regulations as it may deem expedient, not inconsistent with these By-laws,
concerning the issue, transfer and registration of certificates evidencing
Shares.
SECTION 6.07. Fixing Date for Determination of Stockholders of
Record. In order that the Corporation may determine the Stockholders entitled
to notice of or to vote at any meeting of Stockholders or any adjournment
thereof, or to express consent to, or to dissent from, corporate action in
writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board may fix, in advance, a record
date, which shall not be more than 60 nor less than 10 days before the date of
such meeting, nor more than 60 days prior to any other such action. A
determination of the Stockholders entitled to notice of or to vote at a
meeting of Stockholders shall apply to any adjournment of such meeting;
provided, however, that the Board may fix a new record date for the adjourned
meeting.
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ARTICLE VII
SEAL I
SECTION 7.01. Seal. The Board may approve and adopt a
corporate seal, which shall be in the form of a circle and shall bear the full
name of the Corporation, the year of its incorporation and the words
"Corporate Seal Delaware".
ARTICLE VIII
FISCAL YEAR
SECTION 8.01. Fiscal Year. The fiscal year of the Corporation
shall end on the thirty-first day of December of each year unless changed by
resolution of the Board.
ARTICLE IX
INDEMNIFICATION AND INSURANCE
SECTION 9.01. Indemnification. (a) The Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or
in the right of the Corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(b) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred
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by him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of
all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of
the Corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in Section 9.01(a) and (b) of these
By-laws, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under Section 9.01(a) and (b) of these
By-laws (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in Section
9.01(a) and (b) of these By-laws. Such determination shall be made (i) by the
Board by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (ii) if such a quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (iii) by the
stockholders of the Corporation.
(e) Expenses (including attorneys' fees) incurred by an officer
or director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount
if it shall ultimately be determined that he is not entitled to be indemnified
by the Corporation pursuant to this Article IX. Such expenses (including
attorneys' fees) incurred by other employees and agents may be so paid upon
such terms and conditions, if any, as the Board deems appropriate.
(f) The indemnification and advancement of expenses provided by,
or granted pursuant to, other Sections of this Article IX shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any law, by-law, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action in
an official capacity and as to action in another capacity while holding such
office.
(g) For purposes of this Article IX, references to "the
Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed
in a consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
employees or agents so that any person who is or was a director, officer,
Page 12
<PAGE>
employee or agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Article IX with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence
had continued.
(h) For purposes of this Article IX, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves service by, such director,
officer, employee or agent with respect to any employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to
in this Article IX.
(i) The indemnification and advancement of expenses provided by,
or granted pursuant to, this Article IX shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
SECTION 9.02. Insurance for Indemnification. The Corporation may
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of Section 145 of the General Corporation Law.
ARTICLE X
AMENDMENTS
SECTION 10.01. Amendments. Any By-law(including these By-laws)
may be adopted, amended or repealed by the vote of the recordholders of a
majority of the Shares then entitled to vote at an election of Directors or by
written consent of Stockholders pursuant to Section 2.09 hereof, or by vote of
the Board or by a written consent of Directors pursuant to Section 3.08
hereof.
Page 13
<PAGE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from financial
statements for the six month period ended December 31, 1996 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-1-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,928,212
<SECURITIES> 0
<RECEIVABLES> 272
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,024,312
<PP&E> 340,301
<DEPRECIATION> 208,826
<TOTAL-ASSETS> 3,328,499
<CURRENT-LIABILITIES> 1,220,716
<BONDS> 1,334,722
0
0
<COMMON> 117,263
<OTHER-SE> 615,798
<TOTAL-LIABILITY-AND-EQUITY> 3,328,499
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 2,196,835
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 216,272
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,268,228)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,268,228)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
