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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 December 31, 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 (I.R.S. Employer Identification No.)
of 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. Yes [X] No [ ]
As of February 12, 1997, 3,161,612 shares of the Issuer's common stock, par
value $.01 per share, were outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
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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 December 31, 1997
and June 30,1997....................................................Page 3
CONSOLIDATED STATEMENTS OF OPERATIONS --For the Three and Six
Months Ended December 31, 1997 and December 31, 1996 and
the Period from January 28, 1986 (Commencement of
Operations) through December 31, 1997..............................Page 4
CONSOLIDATED STATEMENTS OF CASH FLOWS --
For the Three and Six Months Ended December 31, 1997 and
December 31, 1996 and the Period From January 28, 1986
(Commencement of Operations) through December 31, 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 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.............................................Page 11
Item 2. Changes in Securities and Use of Proceeds.....................Page 11
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 12
2
<PAGE>
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
PALATIN TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, 1997 June 30, 1997
(unaudited) (audited)
------------------- -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents, including restricted cash of $185,000 $ 7,144,772 $ 12,806,717
Accounts receivable - 84,562
Prepaid expenses and other 241,426 174,996
---------------- ----------------
Total current assets 7,386,198 13,066,275
Property and equipment, net 1,661,974 922,096
Intangibles, net of accumulated amortization of $110,199 and
$103,743, respectively 79,288 74,494
---------------- ----------------
$ 9,127,460 $ 14,062,865
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 1,126,294 $ 1,789,178
Current portion of long-term debt 947,414 869,549
Notes payable - 80,000
---------------- ----------------
Total current liabilities 2,073,708 2,738,727
Deferred license revenue 550,000 550,000
Long-term debt, net of current portion 445,541 939,590
---------------- ----------------
3,069,249 4,228,317
---------------- ----------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000 and 2,000,000 shares
authorized and 137,780 shares issued as of December 31, 1997
and June 30, 1997, respectively 1,378 1,378
Common stock, $.01 par value, 75,000,000 and 25,000,000 shares
authorized and 3,061,846 and 3,020,373 issued as of
December 31, 1997 and June 30, 1997, respectively 30,619 30,204
Additional paid-in capital 23,813,883 23,740,864
Warrants 573,537 573,537
Deferred Compensation (763,186) (1,078,333)
Deficit accumulated during development stage (17,598,020) (13,433,102)
---------------- ----------------
6,058,211 9,834,548
---------------- ----------------
$ 9,127,460 $ 14,062,865
================ ================
</TABLE>
The accompanying notes to consolidated financial statements are
an integral part of these statements.
3
<PAGE>
PALATIN TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Inception
(January 28, 1986)
Three Months Ended December 31, Six Months Ended December 31, through
1997 1996 1997 1996 December 31, 1997
------------- ------------- ------------ ----------- ---------------
<S> <C> <C> <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 1,474,070 562,315 2,863,848 1,250,267 10,670,239
General and administrative 799,379 492,103 1,479,616 946,568 9,032,460
Restructuring charge - - - - 284,000
Net intangibles write down - - - - 259,334
------------- ------------- ------------- ------------- -------------
Total operating expenses 2,273,449 1,054,418 4,343,464 2,196,835 20,246,033
------------- ------------- ------------- ------------- -------------
OTHER INCOME (EXPENSES):
Interest income 122,879 50,571 268,758 122,695 636,147
Interest expense (48,656) (87,001) (124,179) (216,272) (1,542,029)
Placement agent commissions and
fees on debt offering - - - - (168,970)
Merger costs - - - - (525,000)
------------- ------------- ------------- ------------- -------------
Total other income (expenses) 74,223 (36,430) 144,579 (93,577) (1,599,852)
------------- ------------- ------------- ------------- -------------
NET LOSS (2,199,226) (1,090,848) (4,164,918) (2,268,228) (17,598,020)
PREFERRED STOCK DIVIDEND - - - - (2,888,935)
------------- ------------- ------------- ------------- -------------
NET LOSS ATTRIBUTABLE TO
COMMON STOCKHOLDERS $ (2,199,226) $ (1,090,848) $ (4,164,918) $ (2,268,228) $(20,486,955)
============= ============= ============= ============= =============
Weighted average number of common
shares outstanding 3,044,695 11,574,122 3,038,695 11,555,875 673,135
Net loss per common share (0.72) (0.09) (1.37) (0.20) (30.44)
============= ============= ============= ============= =============
</TABLE>
The accompanying notes to consolidated financial statements are
an integral part of these statements.
4
<PAGE>
PALATIN TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Inception
Six Months Ended December 31, (January 28, 1986)
through
1997 1996 December 31, 1997
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (4,164,918) $ (2,268,228) $(17,598,020)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization 87,918 32,673 462,412
Interest expense on note payable - 4,000 72,691
Accrued interest on long-term financing - 153,082 796,038
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 380,147 - 774,530
Changes in certain operating assets and liabilities:
Accounts receivable 84,562 4,303 -
Prepaid expenses and other (66,430) (29,398) (241,426)
Intangibles (11,250) (97,546) (442,940)
Accounts payable and accrued expenses (662,884) (428,854) 518,839
------------ ------------- -------------
Net cash used for operating activities (4,352,855) (2,729,968) (14,304,165)
------------ ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (821,341) (60,413) (1,436,275)
------------ ------------- -------------
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 (496,184) (82,706) (916,420)
Proceeds from common stock, stock option
issuance's and warrants, net 8,435 9,999 10,225,877
Proceeds from preferred stock - - 11,637,031
Purchase of treasury stock - - (1,667)
------------ ------------- -------------
Net cash (used for) provided by financing activities (487,749) (1,072,707) 22,888,212
------------ ------------- -------------
NET (DECREASE) INCREASE IN CASH (5,661,945) (3,863,088) 7,147,772
CASH AND CASH EQUIVALENTS, beginning of period 12,806,717 6,791,300 -
------------ ------------- -------------
CASH AND CASH EQUIVALENTS, end of period $ 7,144,772 $ 2,928,212 $ 7,147,772
============= ============= =============
</TABLE>
The accompanying notes to consolidated financial statements are
an integral part of these statements.
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 December 31, 1997, the Company had a deficit
accumulated during the development stage of $17,598,020. 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 December 31, 1997 and
June 30, 1997, and the results of operations for the three and six month periods
ended December 31, 1997 and 1996 and cash flows for the six months ended
December 31, 1997 and 1996, and for the period from inception (January 28, 1986)
to December 31, 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.
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, "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 are
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:
December 31, June 30,
1997 1997
--------------- ---------------
Office equipment $ 344,692 $ 263,827
Laboratory equipment 361,455 145,310
Leasehold improvements 1,274,338 750,008
------------- -------------
1,980,485 1,159,145
Less: Accumulated depreciation 318,511 237,049
------------- -------------
$ 1,661,974 $ 922,096
============= =============
(5) LONG - TERM DEBT:
The Company has a long-term financing agreement with Aberlyn Holding
Co., Inc., and its affiliates (collectively "Aberlyn"). Aberlyn has, in a series
of transactions, loaned to the Company approximately $1,800,000, secured by
certain of the Company's patents, intellectual property and equipment. Certain
fees and costs related to the borrowings have been deferred as intangible assets
and are being amortized over the remaining terms of the arrangement using the
effective interest method.
The Company is obligated to make monthly principal and interest
payments of $91,695 from June 1, 1997 through May 1, 1999. Payments of $20,000
per month through May 1, 1997 were applied to principal only; with interest
accruing during this period at an annual effective rate of 15% and payable in
the Company's Common Stock. Accrued interest of $324,546 through April 30, 1996
was paid by issuance of 42,858 shares of Common Stock. Accrued interest of
$303,171 through April 30, 1997 was paid by issuance of 63,910 shares of Common
Stock issued in payment of at an immaterial discount of approximately $1.00 per
share under the then fair market value of Common Stock.
Scheduled principal payments on the long-term debt at December 31,
1997, are as follows:
1998 $947,414
1999 445,541
7
<PAGE>
(6) 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 $30,000 as of December 31, 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 thereafter 1,022,388
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 on June 25,
1996 of RhoMed with and into a subsidiary of the Company (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 to 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 four consulting
agreements to make payments totaling $166,900 in fiscal 1998.
License Agreements -- The Company has two license agreements that
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.
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. See Part II, Item
1, Legal Proceedings, as to the IT Litigation (as hereinafter defined).
8
<PAGE>
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 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 statements.
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, manufacturing 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, the possible effect of Year 2000 issues 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.
RESULTS OF OPERATIONS
THREE AND SIX MONTH PERIODS ENDED DECEMBER 31, 1997 COMPARED TO THREE
AND SIX MONTH PERIODS ENDED DECEMBER 31, 1996.
Grants and contracts - During the six month period ended December 31,
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 six month period ended December 31, 1997, compared to no grant
revenues in the three month period ended December 31, 1997 and the three and six
month periods ended December 31, 1996.
Sales - There was no revenue from the sale of products in the three and
six month periods ended December 31, 1997, and the three month period ended
December 31, 1996, compared to $22,184 in the six month period ended December
31,1996. 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 $1,474,070 for the three
month period ended December 31, 1997 compared to $562,315 for the three month
period ended December 31, 1996, and increased to $2,863,848 for the six month
period ended December 31, 1997 compared to $1,250,267 for the six month period
ended December 31, 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 clinical trials on the LeuTech
product, significantly expands its efforts to develop the MIDAS technology and
initiates development on the PT-14 peptide therapeutic product. See Part II,
Item 5.
General and administrative expenses increased to $799,379 for the three
month period ended December 31, 1997 compared to $492,103 for the three month
period ended December 31, 1996 and expenses increased to $1,479,616 for the six
month period ended December 31, 1997 compared to $946,568 for the six month
period ended December 31, 1996. The increase in general and administrative
9
<PAGE>
expenses were mainly attributable to the amortization of deferred compensation,
totaling $164,000 for the three month period ended December 31, 1997 and
$380,000 for the six month period ended December 31, 1997, 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 $122,879 and $268,758 for the three and
six month periods ended December 31, 1997 compared to $50,571 and $122,695 for
the three and six month periods ended December 31, 1996. The increase in
interest income is primarily the result of interest on net proceeds from the
Company's offering of Series A Convertible Preferred Stock.
Interest expense decreased to $48,656 and $124,179 for the three and
six month periods ended December 31, 1997 compared to $87,001 and $216,272 for
the three and six month periods ended December 31, 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.
Net loss increased to $2,199,226 and $4,164,918 for the three and six
month periods ended December 31, 1997 compared to $1,090,848 and 2,268,228 for
the three and six month periods ended December 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has incurred net operating losses and,
as of December 31, 1997, had an accumulated deficit of $17,598,020. The Company
has financed its net operating losses through December 31, 1997 by a series of
debt and equity financings. At December 31, 1997, the Company had cash and cash
equivalents of $7,144,772.
For the six months ended December 31, 1997, the net decrease in cash
amounted to $5,661,945. Cash used for operating activities was $4,352,855, net
cash used for investing activities was $821,341 and cash used for financing
activities was $487,749.
Pursuant to a 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
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 aggregated $80,000, repayment of principal and interest was
made during the three months ended December 31, 1997.
The Company's monthly payments on long-term debt provided by Aberlyn
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 which commenced 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 it has sufficient cash and cash equivalents
to fund the Company's projected debt obligations and operations through the
fiscal year ending June 30, 1998.
10
<PAGE>
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, its direct radiolabeling technology and other product areas. 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.
As set forth in the Company's annual report on Form 10-KSB for the
fiscal year ended June 30, 1997, the Company and one of its subsidiaries,
Interfilm Technologies, Inc., are the plaintiffs in a lawsuit against Sony
Corporation of America and certain of its affiliates and subsidiaries
(collectively, "Sony") for breach of contract and breach of duty of good faith
and fair dealing (the "IT Litigation"). In November 1996, Sony asserted two
counterclaims in the IT Litigation. The complaint and counterclaims relate
solely to the business activities of the Company prior to the Merger. The IT
Litigation is under the control of and at the expense of an unaffiliated limited
liability partnership (the "Partnership"), and is solely for the benefit of the
Company's pre-Merger stockholders as of June 21, 1996. On December 9, 1997, the
parties entered into a stipulated judgment awarding the plaintiffs $250,000 and
dismissing the counterclaims. The judgment is conditioned upon the affirmance by
the appellate division of a ruling adverse to the plaintiffs by the trial court.
In the event of a reversal of that ruling the case will proceed to trial on both
the claims and counterclaims. Based upon the opinion of the Company's counsel of
record in the IT Litigation, the Company believes that the counterclaims are
without merit. However, the Company may be liable in the event that a judgment
is rendered against the Company on the counterclaims, and the assets of the
Partnership may not be sufficient to provide full indemnification.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
On November 6, 1997, the Company sold 17,280 shares of Common Stock to
exercising warrant holders for an aggregate consideration of $3,750. 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. On December
12, 1997 the Commission declared a registration statement registering for resale
these shares of Common Stock, among others, effective.
On November 20, 1997, the Company issued warrants to the designee of
Paramount Capital, Inc. ("Paramount Capital") to purchase 6,250 shares of Common
Stock at $8.75 per share and 6,250 shares of Common Stock at $9.00 per share, as
part of the compensation of Paramount Capital pursuant to certain introduction
agreements with Paramount Capital under which Paramount Capital acts as the
Company's non-exclusive financial advisor. The warrants are immediately
exercisable, terminate May 9, 2002, and include cashless exercise, redemption
and anti-dilution provisions. The Company claimed exemption from registration
pursuant to Section 4(2) of the Securities Act, issued the warrant to the
designee of Paramount Capital as compensation and made no general solicitation.
The warrants bear a restrictive legend generally restricting transfer.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
PT-14 Erectile Dysfunction Product. The Company has exercised a license
option agreement with Competitive Technologies, Inc., a publicly traded company
involved in the acquisition and licensing of inventions from universities,
relating to PT-14, a product for treatment of male erectile dysfunction, and is
negotiating a definitive license agreement. There can be no assurance that the
Company will be able to successfully enter into a definitive license agreement
for PT-14. In addition, there can also be no assurance that the Company's
efforts to develop PT-14 will be successful, that PT-14 will exhibit the
expected biological results in humans, that PT-14 will prove to be safe and
efficacious in clinical trials, that the Company will obtain the required
regulatory approvals to market PT-14, that the Company or its collaborators will
be successful in obtaining market acceptance of PT-14 or that PT-14 will ever be
commercialized.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS
3.2 Bylaws of the Company, as amended
10.26 1996 Stock Option Plan, as amended
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.
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 13, 1998 /s/ Edward J. Quilty
---------------------------
Edward J. Quilty
Chairman of the Board
and Chief Executive Officer
Date: February 13, 1998 /s/ Stephen T. Wills
----------------------------
Stephen T. Wills
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 votes attributable to voting stock of the
Corporation issued and outstanding ("Shares") and entitled to vote generally in
the election of directors, 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
of a special meeting, the purpose or purposes for which such
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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 votes
attributable to 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
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quorum shall be present in person or by proxy. Where a separate vote by a class
or classes or series is required, a majority of the outstanding shares of such
class or classes or series, present in person or represented by proxy, shall
constitute a quorum entitled to take action with respect to that vote on that
matter and the affirmative vote of the majority of shares of such class or
classes or series, present in person or represented by proxy at the meeting
shall be the act of such class or series.
SECTION 2.07. Voting. Except as otherwise provided by law or the
Certificate of Incorporation, each Stockholder shall be entitled to one vote for
each Share held of record by such Stockholder. Except as otherwise provided by
law, the Certificate of Incorporation or these By-laws, when a quorum is present
at any meeting of Stockholders, any question brought before the meeting shall be
decided by the affirmative vote of a majority of votes attributable to the
Shares present and voting on the question in either the affirmative or the
negative.
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, Term of Office and Election. 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
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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. Directors shall be
elected by a plurality of the votes of the Shares present in person or
represented by proxy at the meeting and entitled to vote on the election of
directors.
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, 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 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
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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
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
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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
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
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shall preclude any Director from serving the Corporation in any other capacity
and receiving compensation therefor.
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
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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
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
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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.
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 VI
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
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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 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.
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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.
ARTICLE VII
SEAL
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
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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 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 a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (ii) if there are no such directors, or if such directors
so direct, 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
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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, 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
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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.
14
PALATIN TECHNOLOGIES, INC.
1996 STOCK OPTION PLAN
1. PURPOSE.
The purposes of the 1996 Stock Option Plan (the "Plan") are to induce
certain employees, consultants and directors to remain in the employ or service,
or to continue to serve as directors, of Palatin Technologies, Inc. (the
"Company") and its present and future subsidiary corporations (each a
"Subsidiary"), as defined in Section 424(f) of the Internal Revenue Code of
1986, as amended (the "Code"), to attract new individuals to enter into such
employment or service and to encourage such individuals to secure or increase on
reasonable terms their stock ownership in the Company. The Board of Directors of
the Company (the "Board") believes that the granting of stock options (the
"Options") under the Plan will promote continuity of management and increased
incentive and personal interest in the welfare of the Company by those who are
or may become primarily responsible for shaping and carrying out the long range
plans of the Company and securing its continued growth and financial success.
Options granted hereunder are intended to be either (a) "incentive stock
options" (which term, when used herein, shall have the meaning ascribed thereto
by the provisions of Section 422(b) of the Code) or (b) options which are not
incentive stock options ("non-incentive stock options") or (c) a combination
thereof, as determined by the Committee (the "Committee") referred to in Section
4 hereof at the time of the grant thereof.
2. EFFECTIVE DATE OF THE PLAN.
The Plan became effective on August 28, 1996, by action of the Board,
subject to ratification by stockholders of the Company.
3. STOCK SUBJECT TO PLAN.
2,500,000 of the authorized but unissued shares of the Common Stock,
$0.01 par value, of the Company (the "Common Stock") are hereby reserved for
issue upon the exercise of Options granted under the Plan; provided, however,
that the number of shares so reserved may from time to time be reduced to the
extent that a corresponding number of issued and outstanding shares of the
Common Stock are purchased by the Company and set aside for issue upon the
exercise of Options. If any Options expire or terminate for any reason without
having been exercised in full, the unpurchased shares subject thereto shall
again be available for the purposes of the Plan.
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4. COMMITTEE.
The Committee shall consist of two or more members of the Board both or
all of whom shall be "non-employee directors" within the meaning of Rule
16b-3(b)(3)(i) promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and "outside directors" within the contemplation of Section
162(m)(4)(C)(i) of the Code. The President of the Company shall also be a member
of the Committee, ex-officio, whether or not he or she is otherwise eligible to
be a member of the Committee. The Committee shall be appointed annually by the
Board, which may at any time and from time to time remove any members of the
Committee, with or without cause, appoint additional members to the Committee
and fill vacancies, however caused, in the Committee. In the event that no
Committee shall have been appointed, the Board shall serve as the Committee. A
majority of the members of the Committee shall constitute a quorum. All
determinations of the Committee shall be made by a majority of its members
present at a meeting duly called and held. Any decision or determination of the
Committee reduced to writing and signed by all of the members of the Committee
shall be fully as effective as if it had been made at a meeting duly called and
held.
5. ADMINISTRATION.
Subject to the express provisions of the Plan, the Committee shall have
complete authority, in its discretion, to interpret the Plan, to prescribe,
amend and rescind rules and regulations relating to it, to determine the terms
and provisions of the respective option agreements or certificates (which need
not be identical), to determine the individuals (each a "Participant") to whom
and the times and the prices at which Options shall be granted, the periods
during which each Option shall be exercisable, the number of shares of the
Common Stock to be subject to each Option and whether such Option shall be an
incentive stock option or a non-incentive stock option and to make all other
determinations necessary or advisable for the administration of the Plan. In
making such determinations, the Committee may take into account the nature of
the services rendered by the respective employees and consultants, their present
and potential contributions to the success of the Company and the Subsidiaries
and such other factors as the Committee in its discretion shall deem relevant.
The Committee's determination on the matters referred to in this Section 5 shall
be conclusive. Any dispute or disagreement which may arise under or as a result
of or with respect to any Option shall be determined by the Committee, in its
sole discretion, and any interpretations by the Committee of the terms of any
Option shall be final, binding and conclusive.
6. ELIGIBILITY.
A. An Option may be granted only to (i) an employee or consultant of the
Company or a Subsidiary, (ii) a director of the Company who is not employed by
the Company or any of the Subsidiaries (a "Non-Employee Director") and (iii)
employees of a corporation or other business enterprise which has been acquired
by the Company or a Subsidiary, whether by exchange or purchase of stock,
purchase of assets, merger or reverse merger or otherwise, who hold options
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with respect to the stock of such corporation which the Company has agreed to
assume or for which the Company has agreed to provide substitute options.
B. (i) On August 28, 1996, each Non-Employee Director shall be granted
an Option (a "Non-Employee Director's Formula Option") to purchase 20,000 shares
of the Common Stock at the initial per share option price of $1.36 per share.
(ii) At the first meeting of the Board immediately following the annual
meeting of the Stockholders of the Company held following the effective date of
the Plan, and at the first meeting of the Board immediately following each
subsequent annual meeting of the Stockholders of the Company, each Non-Employee
Director shall be granted an Option (a "Non-Employee Director's Formula Option")
to purchase 10,000 shares (after giving effect to the reverse stock split
effected on September 5, 1997) of the Common Stock at the initial per share
option price equal to the fair market value of a share of the Common Stock on
the date of grant.
(iii) Each Non-Employee Director who becomes a director subsequent to
the adoption date of the Plan, and prior to the date of any annual meeting of
the Stockholders of the Company, shall be granted, on the date he or she becomes
a director, an Option (a "Non-Employee Director's Formula Option") to purchase
the number of shares (after giving effect to the reverse stock split effected on
September 5, 1997) of the Common Stock equal to the product of (i) 10,000 and
(ii) a fraction, the numerator of which is the number of full calendar months
prior to the next scheduled annual meeting of Stockholders and the denominator
of which is 12, at the initial per share option price equal to the fair market
value of a share of the Common Stock on the date of grant.
(iv) A Non-Employee Director may not exercise a Non-Employee Director's
Formula Option during the period commencing on the date of the granting of such
Option to him or her and ending on the day next preceding the first anniversary
of such date. A Non-Employee Director may (i) during the period commencing on
the first anniversary of the date of the granting of a Non-Employee Director's
Formula Option to him or her and ending on the day next preceding the second
anniversary of such date, exercise such Option with respect to one-fourth of the
shares granted thereby, (ii) during the period commencing on such second
anniversary and ending on the day next preceding the third anniversary of the
date of the granting of such Option, exercise such Option with respect to
one-half of the shares granted thereby, (iii) during the period commencing on
such third anniversary and ending on the date next preceding the fourth
anniversary of the date of the granting of such Option, exercise such Option
with respect to three-fourths of the shares granted thereby and (iv) during the
period commencing on such fourth anniversary and ending on the date of the
expiration of such Option, exercise such Option with respect to all of the
shares granted thereby.
7. OPTION PRICES.
A. Except as otherwise provided in Sections 6 and 17, the initial per
share option price of any Option shall be the price determined by the Committee,
but not less than the fair market value of a share of the Common Stock on the
date of grant; provided, however, that, in the case of a Participant who owns
(within the meaning of Section 424(d) of the Code) more than 10% of the
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total combined voting power of the Common Stock at the time an Option which is
an incentive stock option is granted to him or her, the initial per share option
price shall not be less than 110% of the fair market value of a share of the
Common Stock on the date of grant.
B. For all purposes of the Plan, the fair market value of a share of the
Common Stock on any date shall be determined by the Committee as follows:
(i) If the Common Stock is listed on the OTC Electronic Bulletin Board,
its fair market value shall be the closing selling price on such date for the
Common Stock as reported on the OTC Electronic Bulletin Board. If there are no
sales of the Common Stock on that date, then the reported closing selling price
for the Common Stock on the next preceding date for which such closing selling
price is quoted shall be determinative of fair market value; or,
(ii) If the Common Stock is listed on any established stock exchange or
a national market system, including without limitation, the Nasdaq National
Market System or the Nasdaq SmallCap Market System, its fair market value shall
be the reported closing selling price for the Common Stock on the principal
securities exchange or national market system on which the Common Stock is at
such date listed for trading. If there are no sales of Common Stock on that
date, then the reported closing selling price for the Common Stock on the next
preceding day for which such closing selling price is quoted shall be
determinative of fair market value; or,
(iii) If the Common Stock is not traded on the OTC Electronic Bulletin
Board, an exchange, or a national market system, its fair market value shall be
determined in good faith by the Committee, and such determination shall be
conclusive and binding on all persons.
8. OPTION TERM.
Participants shall be granted Options for such term as the Committee
shall determine, not in excess of ten years from the date of the granting
thereof; provided, however, that, except as otherwise provided in Section 17, in
the case of a Participant who owns (within the meaning of Section 424(d) of the
Code) more than 10% of the total combined voting power of the Common Stock of
the Company at the time an Option which is an incentive stock option is granted
to him or her, the term with respect to such Option shall not be in excess of
five years from the date of the granting thereof; provided, further, however,
that the term of each Non-Employee Director's Formula Option shall be ten years
from the date of the granting thereof.
9. LIMITATIONS ON AMOUNT OF OPTIONS GRANTED.
A. Except as otherwise provided in Section 17, the aggregate fair market
value of the shares of the Common Stock for which any Participant may be granted
incentive stock options which are exercisable for the first time in any calendar
year (whether under the terms of the Plan or any other stock option plan of the
Company) shall not exceed $100,000.
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B. Except as otherwise provided in Section 17, no Participant shall,
during any fiscal year of the Company, be granted Options to purchase more than
500,000 shares of the Common Stock.
10. EXERCISE OF OPTIONS.
A. Except as otherwise provided in Section 17 and except as otherwise
determined by the Committee at the time of the grant of an Option other than a
Non-Employee Director's Formula Option, a Participant may not exercise an Option
during the period commencing on the date of the granting of such Option to him
or her and ending on the day next preceding the first anniversary of such date.
Except as otherwise set forth in Sections 9A and 17 and in the preceding
sentence, a Participant may (i) during the period commencing on the first
anniversary of the date of the granting of an Option to him or her and ending on
the day next preceding the second anniversary of such date, exercise such Option
with respect to one-fourth of the shares granted thereby, (ii) during the period
commencing on such second anniversary and ending on the day next preceding the
third anniversary of the date of the granting of such Option, exercise such
Option with respect to one-half of the shares granted thereby, (iii) during the
period commencing on such third anniversary and ending on the date next
preceding the fourth anniversary of the date of the granting of such Option,
exercise such Option with respect to three-fourths of the shares granted thereby
and (iv) during the period commencing on such fourth anniversary and ending on
the date of the expiration of such Option, exercise such Option with respect to
all of the shares granted thereby.
B. Except as hereinbefore otherwise set forth, an Option may be
exercised either in whole at any time or in part from time to time.
C. An Option may be exercised only by a written notice of intent to
exercise such Option with respect to a specific number of shares of the Common
Stock and payment to the Company of the amount of the option price for the
number of shares of the Common Stock so specified.
D. Except in the case of a Non-Employee Director's Formula Option, the
Board may, in its discretion, permit any Option to be exercised, in whole or in
part, prior to the time when it would otherwise be exercisable.
E. Notwithstanding any other provision of the Plan to the contrary,
including, but not limited to, the provisions of Section 10D, if any Participant
shall have effected a "Hardship Withdrawal" from a "401(k) Plan" maintained by
the Company and/or one or more of the Subsidiaries, then, during the period of
one year commencing on the date of such Hardship Withdrawal, such Participant
may not exercise any Option. For the purpose of this paragraph E, a Hardship
Withdrawal shall mean a distribution to a Participant provided for in Reg. ss.
1.401(k)- 1(d)(1)(ii) promulgated under Section 401(k)(2)(B)(i)(iv) of the Code
and a 401(k) Plan shall mean a plan which is a "qualified plan" within the
contemplation of section 401(a) of the Code which contains a "qualified cash or
deferred arrangement" within the contemplation of section 401(k)(2) of the Code.
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11. TRANSFERABILITY.
No Option shall be assignable or transferable except by will and/or by
the laws of descent and distribution and, during the life of any Participant,
each Option granted to him or her may be exercised only by him or her.
12. TERMINATION OF EMPLOYMENT.
A. In the event a Participant leaves the employ of the Company and the
Subsidiaries or ceases to serve as a consultant to the Company and/or as a
Non-Employee Director of the Company, whether voluntarily or otherwise, each
Option theretofore granted to him or her which shall not have theretofore
expired or otherwise been cancelled shall, to the extent not theretofore
exercised, terminate upon the earlier to occur of the expiration of 90 days
after the date of such Participant's termination of employment or service and
the date of termination specified in such Option. Notwithstanding the foregoing,
if a Participant's employment by the Company and the Subsidiaries or service as
a consultant and/or as a Non-Employee Director of the Company is terminated for
"cause" (as defined herein), each Option theretofore granted to him or her which
shall not have theretofore expired or otherwise been cancelled shall, to the
extent not theretofore exercised, terminate forthwith.
B. For purposes of the foregoing, the term "cause" shall mean: (i) the
commission by a Participant of any act or omission that would constitute a crime
under federal, state or equivalent foreign law, (ii) the commission by a
Participant of any act of moral turpitude, (iii) fraud, dishonesty or other acts
or omissions that result in a breach of any fiduciary or other material duty to
the Company and/or the Subsidiaries or (iv) continued alcohol or other substance
abuse that renders a Participant incapable of performing his or her material
duties to the satisfaction of the Company and/or the Subsidiaries.
13. ADJUSTMENT OF NUMBER OF SHARES.
A. In the event that a dividend shall be declared upon the Common Stock
payable in shares of the Common Stock, the number of shares of the Common Stock
then subject to any Option and the number of shares of the Common Stock reserved
for issuance in accordance with the provisions of the Plan but not yet covered
by an Option and the number of shares set forth in Sections 6B and 9B shall be
adjusted by adding to each share the number of shares which would be
distributable thereon if such shares had been outstanding on the date fixed for
determining the stockholders entitled to receive such stock dividend. In the
event that the outstanding shares of the Common Stock shall be changed into or
exchanged for a different number or kind of shares of stock or other securities
of the Company or of another corporation, whether through reorganization,
recapitalization, stock split-up, combination of shares, sale of assets, merger
or consolidation in which the Company is the surviving corporation, then, there
shall be substituted for each share of the Common Stock then subject to any
Option and for each share of the Common Stock reserved for issuance in
accordance with the provisions of the Plan but not yet
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covered by an Option and for each share of the Common Stock referred to in
Sections 6B and 9B, the number and kind of shares of stock or other securities
into which each outstanding share of the Common Stock shall be so changed or for
which each such share shall be exchanged.
B. In the event that there shall be any change, other than as specified
in Section 13, in the number or kind of outstanding shares of the Common Stock,
or of any stock or other securities into which the Common Stock shall have been
changed, or for which it shall have been exchanged, then, if the Committee
shall, in its sole discretion, determine that such change equitably requires an
adjustment in the number or kind of shares then subject to any Option and the
number or kind of shares reserved for issuance in accordance with the provisions
of the Plan but not yet covered by an Option and the number or kind of shares
referred to in Sections 6B and 9B, such adjustment shall be made by the
Committee and shall be effective and binding for all purposes of the Plan and of
each stock option agreement or certificate entered into in accordance with the
provisions of the Plan.
C. In the case of any substitution or adjustment in accordance with the
provisions of this Section 13, the option price in each stock option agreement
or certificate for each share covered thereby prior to such substitution or
adjustment shall be the option price for all shares of stock or other securities
which shall have been substituted for such share or to which such share shall
have been adjusted in accordance with the provisions of this Section 13.
D. No adjustment or substitution provided for in this Section 13 shall
require the Company to sell a fractional share under any stock option agreement
or certificate.
E. In the event of the dissolution or liquidation of the Company, or a
merger, reorganization or consolidation in which the Company is not the
surviving corporation, then, except as otherwise provided in the second sentence
of Section 13A, each Option, to the extent not theretofore exercised, shall
terminate forthwith.
14. PURCHASE FOR INVESTMENT, WITHHOLDING AND WAIVERS.
A. Unless the shares to be issued upon the exercise of an Option by a
Participant shall be registered prior to the issuance thereof under the
Securities Act of 1933, as amended, such Par ticipant will, as a condition of
the Company's obligation to issue such shares, be required to give a
representation in writing that he or she is acquiring such shares for his or her
own account as an investment and not with a view to, or for sale in connection
with, the distribution of any thereof.
B. In the event of the death of a Participant, a condition of exercising
any Option shall be the delivery to the Company of such tax waivers and other
documents as the Committee shall determine.
C. In the case of each non-incentive stock option, a condition of
exercising the same shall be the entry by the person exercising the same into
such arrangements with the Company with respect to withholding as the Committee
may determine.
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15. NO STOCKHOLDER STATUS.
Neither any Participant nor his or her legal representatives, legatees
or distributees shall be or be deemed to be the holder of any share of the
Common Stock covered by an Option unless and until a certificate for such share
has been issued. Upon payment of the purchase price thereof, a share issued upon
exercise of an Option shall be fully paid and non-assessable.
16. NO RESTRICTIONS ON CORPORATE ACTS.
Neither the existence of the Plan nor any Option shall in any way affect
the right or power of the Company or its stockholders to make or authorize any
or all adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock ahead of or affecting the Common Stock or the rights thereof, or
dissolution or liquidation of the Company, or any sale or transfer of all or any
part of its assets or business, or any other corporate act or proceeding whether
of a similar character or otherwise.
17. OPTIONS GRANTED IN CONNECTION WITH ACQUISITIONS.
In the event that the Committee determines that, in connection with the
acquisition by the Company or a Subsidiary of another corporation which will
become a Subsidiary or division of the Company or a Subsidiary (such corporation
being hereafter referred to as an "Acquired Subsidiary"), Options may be granted
hereunder to employees and other personnel of an Acquired Subsidiary in exchange
for then outstanding options to purchase securities of the Acquired Subsidiary.
Such Options may be granted at such option prices, may be exercisable
immediately or at any time or times either in whole or in part, and may contain
such other provisions not inconsistent with the Plan, or the requirements set
forth in Section 19 that certain amendments to the Plan be approved by the
stockholders of the Company, as the Committee, in its discretion, shall deem
appropriate at the time of the granting of such Options.
18. NO EMPLOYMENT OR SERVICE RIGHT.
Neither the existence of the Plan nor the grant of any Option shall
require the Company or any Subsidiary to continue any Participant in the employ
of the Company or such Subsidiary or require the Company to continue any
Participant as a director of the Company.
19. TERMINATION AND AMENDMENT OF THE PLAN.
The Board may at any time terminate the Plan or make such modifications
of the Plan as it shall deem advisable; provided, however, that the Board may
not without further approval of the holders of a majority of the shares of the
Common Stock present in person or by proxy at any special or annual meeting of
the stockholders, increase the number of shares as to which Options
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<PAGE>
may be granted under the Plan (as adjusted in accordance with the provisions of
Section 13), or change the manner of determining the option prices, or extend
the period during which an Option may be granted or exercised; provided,
however, the provisions of the Plan governing the grant of Non-Employee
Director's Formula Options may not be amended except by the vote of a majority
of the members of the Board and by the vote of a majority of the members of the
Board who are employees of the Company or a Subsidiary and shall not be amended
more than once every six months, other than to comport with changes in the Code,
the Employee Retirement Income Security Act of 1974 or the Rules of the
Securities and Exchange Commission promulgated under Section 16 of the Exchange
Act. Except as otherwise provided in Section 13, no termination or amendment of
the Plan may, without the consent of the Participant to whom any Option shall
theretofore have been granted, adversely affect the rights of such Participant
under such Option.
20. EXPIRATION AND TERMINATION OF THE PLAN.
The Plan shall terminate on August 27, 2006 or at such earlier time as
the Board may determine. Options may be granted under the Plan at any time and
from time to time prior to its termination. Any Option outstanding under the
Plan at the time of the termination of the Plan shall remain in effect until
such Option shall have been exercised or shall have expired in accordance with
its terms.
Page 9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from financial
statements for the three and six month period ended December 31, 1997 and is
qualified in its entirety be reference to such financial statements.
</LEGEND>
<CIK> 0000911216
<NAME> Palatin Technologies, Inc.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-1-1997
<PERIOD-END> DEC-31-1997
<CASH> 7,144,772
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,386,198
<PP&E> 1,980,485
<DEPRECIATION> 318,511
<TOTAL-ASSETS> 9,127,460
<CURRENT-LIABILITIES> 2,073,708
<BONDS> 445,541
0
1,378
<COMMON> 30,619
<OTHER-SE> 6,058,211
<TOTAL-LIABILITY-AND-EQUITY> 9,127,460
<SALES> 0
<TOTAL-REVENUES> 33,967
<CGS> 0
<TOTAL-COSTS> 4,343,464
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 124,179
<INCOME-PRETAX> (4,164,918)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,164,918)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,164,918)
<EPS-PRIMARY> (1.37)
<EPS-DILUTED> (1.37)
</TABLE>
