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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, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to __________
Commission file number 0-22686
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PALATIN TECHNOLOGIES, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 95-4078884
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
214 CARNEGIE CENTER - SUITE 100
PRINCETON, NEW JERSEY 08540
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (609) 520-1911
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
As of February 9, 1999, 5,802,535 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
PART I - FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements
CONSOLIDATED BALANCE SHEETS -- As of December
31, 1998 and June 30, 1998............................ Page 3
CONSOLIDATED STATEMENTS OF OPERATIONS --
For the Three and Six Months Ended December 31,
1998 and December 31, 1997 and the Period from
January 28, 1986 (Commencement of Operations)
through December 31, 1998............................. Page 4
CONSOLIDATED STATEMENTS OF CASH FLOWS -- For the Six
Months Ended December 31, 1998 and December 31,
1997 and the Period From January 28, 1986
(Commencement of Operations) through December
31, 1998.............................................. Page 5
Notes to Consolidated Financial Statements..................... Page 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................. Page 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings..................................... Page 11
Item 2. Changes in Securities and Use of Proceeds............. Page 11
Item 3. Defaults Upon Senior Securities....................... Page 11
Item 4. Submission of Matters to a Vote of Security Holders... Page 11
Item 5. Other Information..................................... Page 11
Item 6. Exhibits and Reports on Form 8-K...................... Page 12
Signatures............................................................. Page 12
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PALATIN TECHNOLOGIES, INC.
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
DECEMBER 31,
1998 JUNE 30, 1998
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents, including restricted cash of $185,000 $ 2,153,266 $ 4,511,187
Prepaid expenses and other 178,845 277,765
------------- -------------
Total current assets 2,332,111 4,788,952
Fixed assets, net of accumulated depreciation and amortization
of $564,152 and $454,705, respectively 1,517,772 1,610,117
Intangibles, net of accumulated amortization of $122,023 and
$116,247, respectively 70,223 76,000
------------- -------------
$ 3,920,106 $ 6,475,069
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 711,278 $ 461,546
Accrued expenses 1,128,363 1,134,388
Current portion of long-term debt 445,541 939,588
------------- -------------
Total current liabilities 2,285,182 2,535,522
------------- -------------
Deferred license revenue -- 550,000
------------- -------------
Commitments and contingencies (Note 4)
Stockholders' equity:
Preferred stock of $.01 par value - authorized 10,000,000 shares; Series A
Convertible; 71,501 and 88,329 shares issued and outstanding
as of December 31, 1998 and June 30, 1998, respectively; 715 883
Series B Convertible; 17,925 and 18,875 shares issued and outstanding
as of December 31, 1998 and June 30, 1998; respectively; 179 189
Common stock of $.01 par value - authorized 75,000,000 shares;
Issued and outstanding 5,123,704 and 4,099,623 shares as of
December 31, 1998 and June 30, 1998, respectively; 51,237 40,996
Additional paid-in capital 29,893,798 26,610,101
Warrants 573,537 573,537
Unamortized deferred compensation (409,855) (516,179)
Deficit accumulated during development stage (28,474,687) (23,319,980)
------------- -------------
Total stockholder's equity 1,634,924 3,389,547
------------- -------------
$ 3,920,106 $ 6,475,069
============= =============
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these financial statements.
3
<PAGE>
PALATIN TECHNOLOGIES, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
INCEPTION
JANUARY 28, 1986)
THROUGH
THREE MONTHS ENDED DECEMBER 31, SIX MONTHS ENDED DECEMBER 31, DECEMBER
1998 1997 1998 1997 31, 1998
-------------- ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Grants and contracts $ -- $ -- $ -- $ 33,967 3,244,652
License fees and royalties 550,000 -- 550,000 -- 1,234,296
Product -- -- -- -- 318,917
------------- ------------- ------------- ------------- ------------
Total revenues
550,000 -- 550,000 33,967 4,797,865
------------- ------------- ------------- ------------- ------------
OPERATING EXPENSES:
Research and development 2,205,272 1,474,070 4,342,863 2,863,848 19,260,970
General and administrative 543,174 799,379 1,389,464 1,479,616 11,933,064
Restructuring charge -- -- -- -- 284,000
Net intangibles write down -- -- -- -- 259,334
------------- ------------- ------------- ------------- ------------
Total operating expenses
2,748,446 2,273,449 5,732,327 4,343,464 31,737,368
------------- ------------- ------------- ------------- ------------
OTHER INCOME (EXPENSES):
Interest income 25,004 122,879 85,220 268,758 861,379
Interest expense (23,601) (48,656) (57,600) (124,179) (1,702,593)
Placement agent commissions and
fees on debt offering -- -- -- -- (168,970)
Merger costs -- -- -- -- (525,000)
------------- ------------- ------------- ------------- ------------
Total other (expenses) 1,403 74,223 27,620 144,579 (1,535,184)
------------- ------------- ------------- ------------- ------------
NET LOSS (2,197,043) (2,199,226) (5,154,707) (4,164,918) (28,474,687)
PREFERRED STOCK DIVIDEND -- -- -- -- (3,121,525)
------------- ------------- ------------- ------------- ------------
NET LOSS ATTRIBUTABLE TO COMMON
STOCKHOLDERS $ (2,197,043) $ (2,199,226) $ (5,154,707) $ (4,164,918) $(31,596,212)
============= ============= ============= ============= =============
Basic and diluted net loss per common share $ (0.46) $ (0.72) $ (1.11) $ (1.37) $ (32.59)
============= ============= ============= ============= =============
Weighted average number of common shares
outstanding used in computing basic and
diluted net loss per common share 4,745,953 3,044,695 4,624,021 3,038,695 969,462
============= ============= ============= ============= =============
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these financial statements.
4
<PAGE>
PALATIN TECHNOLOGIES, INC
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Inception
(January 28, 1986)
Six Months Ended December 31, Through
1998 1997 December 31, 1998
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (5,154,707) $ (4,164,918) $(28,474,687)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization 115,223 87,918 719,877
License fee -- -- 500,000
Interest expense on note payable -- -- 72,691
Accrued interest on long-term financing -- -- 796,038
Accrued interest on short-term financing -- -- 7,936
Intangibles and equipment write down -- -- 278,318
Equity and notes payable issued for expenses -- -- 623,688
Settlement with consultant -- -- (28,731)
Deferred revenue (550,000) -- --
Amortization of deferred compensation 435,984 380,147 2,553,677
Changes in certain operating assets and liabilities:
Accounts receivable -- 84,562 --
Prepaid expenses and other (98,920) (66,430) (376,686)
Intangibles -- (11,250) (445,700)
Accounts payable 249,732 (75,285) 710,378
Accrued expenses (6,025) (587,599) 668,096
------------- ------------- -------------
Net cash used for operating activities (5,008,713) (4,352,855) (22,395,105)
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (17,101) (821,341) (2,137,264)
------------- ------------- -------------
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 -- -- (1,850,000)
Proceeds from notes payable and long term debt -- -- 1,951,327
Payments on notes payable and long term debt (494,047) (496,184) (1,863,834)
Proceeds from paid-in capital from common
stock warrants -- -- 100,000
Proceeds from common stock, stock option
issuances, net 3,161,940 8,435 13,297,419
Proceeds from preferred stock, net -- -- 13,210,326
Purchase of treasury stock -- -- (1,667)
------------- ------------- -------------
Net cash provided by (used for) financing
activities 2,667,893 (487,749) 26,685,635
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (2,357,921) (5,661,945) 2,153,266
CASH AND CASH EQUIVALENTS, beginning
of period 4,511,187 12,806,717 --
------------- ------------- -------------
CASH AND CASH EQUIVALENTS, end of period $ 2,153,266 $ 7,144,772 $ 2,153,266
============= ============= =============
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of these financial 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 and ethical drug development
utilizing peptide, monoclonal antibody and radiopharmaceutical technologies.
Business Risk and Liquidity - The Company's accompanying financial statements
have been prepared in conformity with principles of accounting applicable to a
going concern. These principles contemplate the realization of assets and the
satisfaction of liabilities in the normal course of business.
As shown in the accompanying financial statements, the Company incurred
substantial net losses of $5,154,707 for the six months ended December 31, 1998
and has a deficit accumulated during development stage of $28,474,687. The
Company anticipates incurring additional operating 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 various technologies. 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.
The Company expects that its existing capital resources, including funds
received in February 1999 (see Note 7), will be adequate to fund the Company's
projected operations through May 31, 1999. The Company is actively seeking
additional funds through equity or debt financing, strategic alliances with
corporate partners and others, and through other sources. Based on the Company's
historical ability to raise capital and current market conditions, the Company
believes financing alternatives are available. There can be no assurance the
Company's efforts will be successful. If adequate funds are not available, the
Company may be required to delay, scale back or eliminate certain aspects of its
operations or attempt to obtain funds through arrangements with collaborative
partners or others that may require the Company to relinquish rights to certain
of its technologies, product candidates, products or potential markets. If
adequate funds are not available, the Company's business, financial condition
and results of operations will be materially and adversely affected.
(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 disclosures
normally included in the Company's audited annual financial statements have 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, 1998 and June 30, 1998,
and the results of operations for the three and six month periods ended December
31, 1998 and 1997 and for the period from inception (January 28, 1986) to
December 31, 1998 and cash flows for the six months ended December 31, 1998 and
1997, and for the period from inception (January 28, 1986) to December 31, 1998.
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, 1999.
The accompanying financial statements and the related notes should be read in
conjunction with the Company's audited financial statements for the fiscal years
ended June 30, 1998 and 1997 and the ten months ended June 30, 1996, filed with
the Company's Form 10-KSB for the year ended June 30, 1998.
(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 subsidiary of Palatin, Interfilm Technologies, Inc.,
is inactive. All significant intercompany accounts and transactions have been
eliminated in consolidation.
6
<PAGE>
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.
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 -- Grant and contract revenues are recognized as services
are provided. License and royalty revenues are recognized when earned. Product
revenues are recognized upon shipment.
Research and Development Costs -- The costs of research and development
activities are expensed as incurred.
Net Loss per Common Share -- Effective December 31, 1997 the Company adopted
SFAS No. 128, "Earnings per Share" ("SFAS 128"), which supersedes Accounting
Principles Board Opinion No. 15, "Earnings per Share." SFAS 128 requires dual
presentation of basic and diluted earnings per share ("EPS") for complex capital
structures on the face of the statement of operations. Basic EPS is computed by
dividing the income (loss) by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution from the
exercise or conversion of securities into common stock, such as stock options.
For the six months ended December 31, 1998 and 1997 and for the period from
inception (January 28, 1986) through December 31, 1998, there were no dilutive
effects of stock options or warrants as the Company incurred a net loss in each
period. Options and warrants to purchase 2,228,640 shares of common stock at
prices ranging from $0.20 to $360 per share were outstanding at December 31,
1998. In accordance with the provisions of SFAS 128, EPS for prior periods have
been restated.
(4) COMMITMENTS AND CONTINGENCIES:
Consulting Agreements - The Company is obligated under four consulting
agreements to make payments totaling $200,800 in fiscal 1999.
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.
(5) STOCKHOLDERS' EQUITY:
On December 31, 1998, the Company sold securities consisting of 287,500 shares
of common stock ("Shares"), with each Share including a detachable five-year
non-redeemable warrant ("Warrants"), through a private placement to accredited
investors for gross proceeds of $1,150,000. Each Warrant entitles the purchaser
to purchase one share of common stock at $4.375. The net proceeds of
approximately $1,000,000 will be used for working capital and the Company's
research and development programs.
(6) LICENSING FEES AND ROYALTIES:
The Company recognized $550,000 in license fees as revenue during the quarter
ended December 31, 1998 related to its termination of a license option agreement
with Nihon Medi-Physics ("Nihon"). This $550,000 was previously reported as
deferred license revenue. See Part II, Item 5, Other Information.
(7) SUBSEQUENT EVENTS:
On February 8, 1999, the Company sold securities consisting of 651,750 Shares,
with each share including a Warrant entitling the purchaser to purchase one
share of common stock at $4.70, through a private placement to accredited
investors for gross proceeds of $2,607,000. The net proceeds of approximately
$2,350,000 will be used for working capital and the Company's research and
development programs
7
<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. When used in this Form 10-QSB, statements that are not statements of
historical fact may be deemed to be forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date of this Form 10-QSB. The Company undertakes no
obligation to publicly release the result of any revisions to these
forward-looking statements that may be made to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
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 filings with the Commission, including the
Company's Form 10-KSB for the year ended June 30, 1998. 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, 1998 Compared to Three and Six
Month Periods Ended December 31, 1997.
Grants and contracts - There was no revenue from grants and contracts during the
three and six month period ended December 31, 1998 and three month period ended
December 31, 1997, compared to $33,967 from grants in the six month period ended
December 31, 1997. The Company recognized $550,000 in license fees as revenue
during the quarter ended December 31, 1998 related to its termination of a
license option agreement with Nihon Medi-Physics. This $550,000 was previously
reported as deferred license revenue. 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.
Sales - There was no revenue from the sale of products during the three and six
month periods ended December 31, 1998 and December 31, 1997. 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 - Research and development expenses increased to
$2,205,272 for the three month period ended December 31, 1998 compared to
$1,474,070 for the three month period ended December 31, 1997, and increased to
$4,342,863 for the six month period ended December 31, 1998 compared to
$2,863,848 for the six month period ended December 31, 1997. The Company
substantially increased research and development spending, primarily relating to
development of the Company's LeuTech(TM) 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
PT-14(TM) peptide therapeutic product and MIDAS(TM) metallopeptide technology.
The Company expects research and development expenses to continue to increase in
future quarters as the Company expands clinical trials and manufacturing efforts
on the LeuTech product and expands efforts to develop PT-14 and MIDAS
technology.
General and administrative - General and administrative expenses decreased to
$543,174 for the three month period ended December 31, 1998 compared to $799,379
for the three month period ended December 31, 1997 and expenses decreased to
$1,389,464 for the six month period ended December 31, 1998 compared to
$1,479,616 for the six month period ended December 31, 1997. The decrease in
8
<PAGE>
general and administrative expenses were mainly attributable to the continuous
efforts of management to control administrative expenses such as salaries and
out-source consulting fees in addition to the aggressive pursuit of price
negotiations and discounts.
Interest income - Interest income decreased to $25,004 for the three month
period ended December 31, 1998 compared to $122,879 for the three month period
ended December 31, 1997 and interest income decreased to $85,220 for the six
month period ended December 31, 1998 compared to $268,758 for the six month
period ended December 31, 1997. The decrease in interest income is primarily the
result of the depletion of funds available for investment purposes and used to
fund the Company's operations.
Interest expense - Interest expense decreased to $23,601 for the three month
period ended December 31, 1998 compared to $48,656 for the three month period
ended December 31, 1997 and interest expense decreased to $57,600 for the six
month period ended December 31, 1998 compared to $124,179 for the six month
period ended December 31, 1997. The decrease in interest expense is due to the
repayment by the Company of a portion of outstanding principal on long-term debt
provided by Phoenixcor.
Net loss - Net loss increased to $2,197,043 and $5,154,707 for the three and six
month periods ended December 31, 1998 compared to $2,199,226 and $4,164,918 for
the three and six month periods ended December 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has incurred net operating losses and as of
December 31, 1998, had a deficit accumulated during development stage of
$28,474,687. The Company has financed its net operating losses through December
31, 1998 by a series of debt and equity financings. At December 31, 1998, the
Company had cash and cash equivalents of $2,153,266.
For the six months ended December 31, 1998, the net decrease in cash amounted to
$2,357,921. Cash used for operating activities was $5,008,713, net cash used for
investing activities was $17,101 and cash provided by financing activities was
$2,667,893.
In the six months ended December 31, 1998, the Company completed private
placements totaling 651,136 shares of common stock of the Company, together with
detachable, five-year non-redeemable warrants to purchase an additional 287,500
shares of common stock at $4.375, for gross proceeds of $3,150,000 and net
proceeds of approximately $3,000,000. The net proceeds will be used for working
capital and the Company's research and development of the LeuTech product and an
oral dosage form of PT-14.
On February 8, 1999, the Company sold securities consisting of 651,750 shares of
common stock and detachable, five-year non-redeemable warrants to purchase an
additional 651,750 shares of common stock at $4.70. The Company realized gross
proceeds of $2,607,000 and net proceeds of approximately $2,350,000. The net
proceeds will be used for working capital and the Company's research and
development programs.
On December 29, 1998, the Company and Nihon terminated the existing license
option agreement between them, and entered into a letter of intent relating to
development of diagnostic and therapeutic radiopharmaceutical products based on
the Company's MIDAS peptide technology. The letter provides for certain up-front
payments, together with certain milestone-based payments to be made at later
dates. The Company anticipates entering into a definitive agreement in the first
quarter of 1999. There can be no assurance that the Company and Nihon will ever
enter into a definitive agreement, that additional payments provided for in the
agreement will be made, or that a strategic alliance between the Company and
Nihon will result in the development or commercialization of any product.
The Company's monthly payments on long-term debt payable to Phoenixcor 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.
9
<PAGE>
The Company has entered into three license agreements, which require minimum
yearly payments. Future minimum fiscal year payments under the license
agreements are as follows: 1999 - $150,000, 2000 - $200,000, 2001 - $150,000,
2002 - $200,000 and 2003 - $200,000.
The Company expects to continue actively searching for certain products and
technologies to license or acquire in the future and corporate partnerships,
depending on the financial resources of the Company. 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. There can be no assurance that any acquisition will be
consummated in the future.
The Company has incurred negative cash flows from operations since its
inception, and has expended, and expects to continue to expend in the future,
substantial funds to complete its planned product development efforts. The
Company anticipates incurring additional losses over at least the next several
years, and expects such losses to increase as the Company expands its research
and development activities relating to LeuTech, PT-14 and its MIDAS technology.
The Company's future capital requirements and the adequacy of available funds
depends on numerous factors, including progress in its product development
efforts, the magnitude and scope of such efforts, progress with pre-clinical
studies and clinical trials, progress with regulatory affairs activities, the
cost of filing, prosecution, defending and enforcing patent claims and other
intellectual property rights, competing technological and market developments,
and identifying and consummating suitable strategic alliances. To achieve
profitability, the Company, alone or with others, must successfully develop and
commercialize its 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.
The Company expects that its existing capital resources will be adequate to fund
the Company's projected operations through May 31, 1999. The Company is actively
seeking additional funds through equity or debt financing, strategic alliances
with corporate partners and others, or through other sources. Based on the
Company's historical ability to raise capital and current market conditions, the
Company believes financing alternatives are available. There can be no assurance
the Company's efforts will be successful. If adequate funds are not available,
the Company may be required to delay, scale back or eliminate certain aspects of
its operations or attempt to obtain funds through arrangements with
collaborative partners or others that may require the Company to relinquish
rights to certain of its technologies, product candidates, products or potential
markets. If adequate funds are not available, the Company's business, financial
condition and results of operations will be materially and adversely affected.
YEAR 2000 COMPATIBILITY
The year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. In other words,
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in system failures or miscalculations
causing disruptions of operations, including, among others, a temporary
inability to process transactions and information or engage in similar normal
business activities.
The Company is working to resolve the potential impact of the year 2000 on the
ability of the Company's computerized information systems to accurately process
information that may be date-sensitive. The Company is in the process of
conducting a review of all hardware and software throughout the organization.
With this review the Company will be better able to measure the scope of effort
needed to ensure that all departmental operations will continue to function as
of January 1, 2000. With approximately 20 stand-alone personal computers the
Company believes that it does not have significant year 2000 issues related to
its computerized information systems. This review is expected to be completed
during 1999.
In addition, it is also possible that certain computer systems or software
products of the Company's suppliers and contractors may not be year 2000
compatible. Since the Company is not heavily dependent on any particular
software package or vendor in its operations, the Company's assessment of these
year 2000 issues related to its suppliers and contractors is minimal.
The Company currently believes that costs of addressing these issues will not
have a material adverse impact on the Company's financial position and plans to
devote all resources required to resolve any significant year 2000 issues in a
timely manner.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
As of December 31, 1998, the Company sold securities consisting of 287,500
shares of unregistered common stock ("Shares"), with each Share including a
detachable five-year non-redeemable warrant ("Warrants"), through a private
placement, for gross proceeds of $1,150,000. Each Warrant entitles the purchaser
to purchase one share of common stock at $4.375 per share. The Company paid
commissions of $92,000 in connection with the sale of the securities. The net
proceeds of the offering, approximately $1,000,000, will be used for working
capital and the Company's research and development prog.rams. The securities
were sold to accredited investors, pursuant to Rule 506 of Regulation D
("Regulation D") promulgated under the Securities Act of 1933, as amended
("Securities Act"). The investors represented to the Company that they were
purchasing the securities on their own account for investment and not with a
view toward resale or distribution to others. The certificates representing the
Shares and Warrants bear restrictive legends. The Company has agreed to
undertake to file a registration statement under the Securities Act, registering
the Shares and common stock underlying the Warrants.
As of February 8, 1999 (the final closing of the private placement), the Company
sold securities consisting of 651,750 Shares with Warrants, with the Warrants
exercisable at $4.70 per share, for gross proceeds of $2,607,000. The Company
paid commissions of $222,000 and agreed to issue warrants to purchase 51,000
shares of common stock at $5.17 per share in connection with the sale of the
securities. The net proceeds of the offering, approximately $2,350,000, will be
used for working capital and the Company's research and development programs.
The securities were sold to accredited investors, pursuant to Regulation D. The
investors represented to the Company that they were purchasing the securities on
their own account for investment and not with a view toward resale or
distribution to others. The certificates representing the Shares and Warrants
bear restrictive legends. The Company has agreed to undertake to file a
registration statement under the Securities Act, registering the Shares and
common stock underlying the Warrants.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
On December 2, 1998, the Company announced that Charles L. Putnam, 45, and
Robert K. deVeer, Jr., 52, had been appointed to its Board of Directors,
increasing the size of the Board to eight. Mr. Putnam is an Executive Vice
President and Chief Operating Officer of the Company. Mr. deVeer is currently
President of deVeer Capital. From 1973 to 1995, Mr. deVeer was with CS First
Boston of New York, holding positions including Managing Director, Head of
Project Finance, Head of Industrials and Head of Natural Resources, and a member
of the Investment Banking Committee. Mr. deVeer received a B.A. degree in
Economics from Yale University and an M.B.A. in finance from Stanford
University.
On December 29, 1998, the Company announced that its license option agreement
with Nihon had been terminated based on the determination of the Company and
Nihon to change the development emphasis under the license option agreement. The
Company also announced that a letter of intent was entered into with Nihon
relating to development of diagnostic and therapeutic radiopharmaceutical
products, as described in Part I, Item 2, Management's Discussion and Analysis
of Financial Condition and Results of Operation.
On February 4, 1999, the Company announced that it had initiated Phase 2
clinical trials of its LeuTech infection imaging agent for diagnosis of bone
infections known as osteomyelitis at four sites in the United States.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS
10.40 Form of Warrant dated as of December 31, 1998.
10.41 Form of Purchase Agreement and Amendment No. 1 dated as of
December 31, 1998.
10.42 Form of Registration Rights Agreement dated as of
December 31, 1998.
27.1 Financial Data Schedule
(B) REPORTS ON FORM 8-K
The Company filed no reports on Form 8-K during the three months ended December
31, 1998.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
PALATIN TECHNOLOGIES, INC.
(Registrant)
/s/ Edward J. Quilty
----------------------------
Date: February 16, 1998 Edward J. Quilty
Chairman of the Board
and Chief Executive Officer
/s/ Stephen T. Wills
----------------------------
Date: February 16, 1998 Stephen T. Wills
Vice President and Chief Financial
Officer (Principal Financial and
Accounting Officer)
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THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN
FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED
TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
____
_____ Warrants
PALATIN TECHNOLOGIES, INC.
COMMON STOCK PURCHASE WARRANT CERTIFICATE
THE WARRANTS EVIDENCED BY THIS CERTIFICATE
ARE NOT EXERCISABLE AFTER 5:00 P.M.,
NEW YORK CITY TIME, ON
December 31, 2003
THIS CERTIFIES THAT ________________________ or registered assigns is the
registered holder (the "Registered Holder") of the number of Warrants set forth
above, each of which represents the right to purchase one fully paid and
non-assessable share of Common Stock, par value $0.01 per share (the "Common
Stock"), of Palatin Technologies, Inc., a Delaware corporation (the "Company"),
at the initial exercise price of $4.375 per Warrant (the "Exercise Price") at
any time after the date on which the shares of Common Stock issuable upon
exercise of the Warrants evidenced hereby have been registered under the
Securities Act of 1933, as amended, or such other action as may be required by
federal or state law relating to the issuance or distribution of securities
shall have been taken, and prior to the Expiration Date (as hereinafter
defined), by surrendering this Warrant Certificate, with the Form of Election to
Purchase duly executed at the principal office of the Company and by paying in
full the Exercise Price, plus transfer taxes, if any. Payment of the Exercise
Price shall be made in United States currency, by certified check or money order
payable to the order of the Company. Unless otherwise defined herein, the
capitalized terms used herein shall have the meaning assigned to such terms in
the Purchase Agreement.
The Warrants have been issued pursuant to a private placement of Common
Stock and Warrants.
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This Warrant Certificate is issued under and in accordance with the
Purchase Agreement dated as of December 31, 1998, between the Company and the
Registered Holder, as amended and is subject to the terms and provisions
contained in said Purchase Agreement. The Registration Rights Agreement between
the Company and the Registered Holder governs the registration rights of the
shares of Common Stock underlying the Warrants.
EXERCISE OF WARRANTS
Issuance of Common Stock. As soon as practicable after the date of
exercise of any Warrants, the Company shall issue, or cause the transfer agent
for the Common Stock, if any, to issue a certificate or certificates for the
number of full shares of Common Stock to which such Registered Holder is
entitled, registered in accordance with the instructions set forth in the Form
of Election to Purchase. All shares of Common Stock issued upon the exercise of
any Warrants shall be validly authorized and issued, fully paid and
non-assessable, and free from all taxes, liens and charges created by the
Company in respect of the issue thereof. Each person in whose name any such
certificate for shares of Common Stock is issued shall for all purposes be
deemed to have become the holder of record of the Common Stock represented
thereby on the date of exercise of the Warrants resulting in the issuance of
such shares, irrespective of the date of issuance or delivery of such
certificate for shares of Common Stock.
Certificates for Unexercised Warrants. In the event that less than all
of the Warrants represented by a Warrant Certificate are exercised, the Company
shall execute and mail, by first-class mail, within 30 days of the date of
exercise, to the Registered Holder of such Warrant Certificate, or such other
person as shall be designated in the Form of Election to Purchase, a new Warrant
Certificate representing the number of full Warrants not exercised. In no event
shall a fraction of a Warrant be exercised, and the Company shall distribute no
Warrant Certificates representing fractions of Warrants. Final fractions of
shares shall be treated as provided for herein.
Reservation of Shares. The Company shall at all times reserve and keep
available for issuance upon the exercise of Warrants a number of its authorized
but unissued shares of Common Stock that will be sufficient to permit the
exercise in full of all outstanding Warrants.
ADJUSTMENTS AND NOTICE PROVISIONS
Adjustment of Exercise Price. Subject to the provisions hereof, the
Exercise Price in effect from time to time shall be subject to adjustment, as
follows:
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(a) In case the Company shall at any time after the date hereof (i)
declare a dividend on the outstanding Common Stock payable in shares of its
capital stock, (ii) subdivide the outstanding Common Stock, (iii) combine the
outstanding Common Stock into a smaller number of shares, or (iv) issue any
shares of its capital stock by reclassification of the Common Stock (including
any such reclassification in connection with a consolidation or merger in which
the Company is the continuing corporation), then, in each case, the Exercise
Price, and the number of shares of Common Stock issuable upon exercise of the
Warrants in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination, or reclassification, shall be
proportionately adjusted so that the Holders of the Warrants after such time
shall be entitled to receive the aggregate number and kind of shares which, if
such Warrants had been exercised immediately prior to such time, such Registered
Holders would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination or reclassification. Such
adjustment shall be made successively whenever any event listed above shall
occur.
(b) In case the Company shall issue or fix a record date for the
issuance to all holders of Common Stock of rights, options, or warrants to
subscribe for or purchase Common Stock (or securities convertible into or
exchangeable for Common Stock) at a price per share (or having a conversion or
exchange price per share, if a security convertible into or exchangeable for
Common Stock) less than the Current Market Price per share of Common Stock (as
determined below) on such record date, then, in each case, the Exercise Price
shall be adjusted by multiplying the Exercise Price in effect immediately prior
to such record date by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding on such record date plus the number of shares
of Common Stock which the aggregate offering price of the total number of shares
of Common Stock so to be offered (or the aggregate initial conversion or
exchange price of the convertible or exchangeable securities so to be offered)
would purchase at such Current Market Price and the denominator of which shall
be the number of shares of Common Stock outstanding on such record date plus the
number of additional shares of Common Stock to be offered for subscription or
purchase (or into which the convertible or exchangeable securities so to be
offered are initially convertible or exchangeable). Such adjustment shall become
effective at the close of business on such record date; provided, however, that,
to the extent the shares of Common Stock (or securities convertible into or
exchangeable for shares of Common Stock) are not delivered, the Exercise Price
shall be readjusted after the expiration of such rights, options, or warrants
(but only with respect to Warrants exercised after such expiration), to the
Exercise Price which would then be in effect had the adjustments made upon the
issuance of such rights, options, or warrants been made upon the basis of
delivery of only the number of shares of Common Stock (or securities convertible
into or exchangeable for shares of Common Stock) actually issued.
Notwithstanding anything to the contrary contained herein, no adjustment shall
be made to the Exercise Price until any condition to the vesting of such rights,
options or warrants shall be fulfilled or satisfied (and then only with respect
to the portion thereof which shall have vested). In case any subscription price
may be paid in a consideration part or all of
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<PAGE>
which shall be in a form other than cash, the value of such consideration shall
be as determined in good faith by the board of directors of the Company, whose
determination shall be conclusive absent manifest error. Shares of Common Stock
owned by or held for the account of the Company or any majority-owned subsidiary
shall not be deemed outstanding for the purpose of any such computation.
(c) In case the Company shall distribute to all holders of Common Stock
(including any such distribution made to the stockholders of the Company in
connection with a consolidation or merger in which the Company is the continuing
corporation) evidences of its indebtedness, cash (other than any cash dividend
which, together with any cash dividends paid within the twelve (12) months prior
to the record date for such distribution, does not exceed 5% of the Current
Market Price at the record date for such distribution) or assets (other than
distributions and dividends payable in shares of Common Stock), or rights,
options, or warrants to subscribe for or purchase Common Stock, or securities
convertible into or exchangeable for shares of Common Stock (excluding those
with respect to the issuance of which an adjustment of the Exercise Price is
provided pursuant to the foregoing paragraph), then, in each case, the Exercise
Price shall be adjusted by multiplying the Exercise Price in effect immediately
prior to the record date for the determination of stockholders entitled to
receive such distribution by a fraction, the numerator of which shall be the
Current Market Price per share of Common Stock on such record date, less the
fair market value (as determined in good faith by the board of directors of the
Company, whose determination shall be conclusive absent manifest error) of the
portion of the evidences of indebtedness or assets so to be distributed, or of
such rights, options, or warrants or convertible or exchangeable securities, or
the amount of such cash, applicable to one share, and the denominator of which
shall be such Current Market Price per share of Common Stock. Such adjustment
shall become effective at the close of business on such record date.
Current Market Price. For the purpose of any computation under this
Warrant, the Current Market Price per share of Common Stock on any date shall be
deemed to be the average of the daily closing prices for the fifteen (15)
consecutive trading days immediately preceding the date in question. The closing
price for each day shall be (a) the last reported sales price regular way or, in
case no such reported sale takes place on such day, the closing bid price
regular way, in either case on the principal national securities exchange or
market system (including, for purposes hereof, the NASDAQ National Market System
or the NASDAQ SmallCap) on which the Common Stock, is listed or admitted to
trading, (b) if the Common Stock, is not listed or admitted to trading on any
national securities exchange or market system, the highest reported bid price
for the Common Stock, as furnished by the National Association of Securities
Dealers, Inc. through NASDAQ or a similar organization if NASDAQ is no longer
reporting such information, or (c) if on any such date the Common Stock is not
listed or admitted to trading on any national securities exchange and is not
quoted by NASDAQ National Market System or NASDAQ SmallCap System or any similar
organization, as determined by reference to the "pink sheets" published by the
National Quotation Bureau or, if not so published, by such
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<PAGE>
other method of determining the market value of a share of Common Stock, as the
board of directors of the Company shall in good faith from time to time deem to
be fair, whose determination shall be conclusive absent manifest error shall be
used.
No Adjustments to Exercise Price. No adjustment in the Exercise Price
shall be required if such adjustment is less than $.05; provided, however, that
any adjustments which by reason of this Warrant are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Warrant shall be made to the nearest cent or to the
nearest one thousandth of a share, as the case may be.
Deferral of Adjustments to Exercise Price. In any case in which this
Warrant shall require that an adjustment in the Exercise Price be made effective
as of a record date for a specified event, the Company may elect to defer, until
the occurrence of such event, issuing to the Registered Holders of the Warrants,
if any Registered Holder has exercised a Warrant after such record date, the
shares of Common Stock, if any, issuable upon such exercise over and above the
shares of Common Stock, if any, issuable upon such exercise on the basis of the
Exercise Price in effect prior to such adjustment; provided, however, that the
Company shall deliver to such exercising Registered Holder a due bill or other
appropriate instrument evidencing such Registered Holder's right to receive such
additional shares upon the occurrence of the event requiring such adjustment.
Adjustment to Number of Shares. Upon each adjustment of the Exercise
Price as a result of the calculations made above the Warrants shall thereafter
evidence the right to purchase, at the adjusted Exercise Price, that number of
shares (calculated to the nearest thousandth) obtained by dividing (A) the
product obtained by multiplying the number of shares purchasable upon exercise
of the Warrants prior to adjustment of the number of shares by the Exercise
Price in effect prior to adjustment of the Exercise Price by (B) the Exercise
Price in effect after such adjustment of the Exercise Price.
Reorganization. In case of any capital reorganization, other than in the
cases referred to above, or the consolidation or merger of the Company with or
into another corporation (other than a merger or consolidation in which the
Company is the continuing corporation and which does not result in any
reclassification of the outstanding shares of Common Stock or the conversion of
such outstanding shares of Common Stock into shares of other stock or other
securities or property), or the sale of the property of the Company as an
entirety or substantially as an entirety (collectively such actions being
hereinafter referred to as "Reorganizations"), there shall thereafter be
deliverable upon exercise of any Warrant (in lieu of the number of shares of
Common Stock theretofore deliverable) the number of shares of stock or other
securities or property to which a Registered Holder of the number of shares of
Common Stock which would otherwise have been deliverable upon the exercise of
such Warrant would have been entitled upon such Reorganization if such Warrant
had been exercised in full immediately prior to such Reorganization. In case of
any Reorganization, appropriate adjustment, as determined in good faith by the
Board of Directors of the Company, shall be made in the application of the
provisions herein set
5
<PAGE>
forth with respect to the rights and interests of Registered Holders so that the
provisions set forth herein shall thereafter be applicable, as nearly as
practicable, in relation to any shares or other property thereafter deliverable
upon exercise of Warrants. The Company shall not effect any such Reorganization,
unless upon or prior to the consummation thereof the successor corporation, or
if the Company shall be the surviving corporation in any such Reorganization and
is not the issuer of the shares of stock or other securities or property to be
delivered to holders of shares of the Common Stock outstanding at the effective
time thereof, then such issuer, shall assume by written instrument the
obligation to deliver to the Registered Holder of any Warrant Certificate such
shares of stock, securities, cash or other property as such holder shall be
entitled to purchase in accordance with the foregoing provisions.
Notwithstanding anything to the contrary contained herein, in the event of sale
or conveyance or other transfer of all or substantially all of the assets of the
Company as a part of a plan for liquidation of the Company, all rights to
exercise any Warrant shall terminate thirty (30) days after the Company gives
written notice to each Registered Holder of a Warrant Certificate that such sale
or conveyance of other transfer has been consummated.
Reclassifications. (a) In case of any reclassification or change of the
shares of Common Stock issuable upon exercise of the Warrants (other than a
change in par value or from no par value to a specified par value, or as a
result of a subdivision or combination, but including any change in the shares
into two or more classes or series of shares), the Registered Holders of the
Warrants shall have the right thereafter to receive upon exercise of the
Warrants solely the kind and amount of shares of stock and other securities,
property, cash, or any combination thereof receivable upon such reclassification
or change by a Registered Holder of the number of shares of Common Stock for
which the Warrants might have been exercised immediately prior to such
reclassification or change. Thereafter, appropriate provision shall be as nearly
equivalent as practicable to the adjustments in this Warrant. The above
provisions of this paragraph shall similarly apply to successive
reclassifications and changes of shares of Common Stock.
(b) Notwithstanding anything to the contrary herein contained, in the
event of a transaction contemplated by the prior paragraph in which the
surviving, continuing, successor, or purchasing corporation demands that all
outstanding Warrants be extinguished prior to the closing date of the
contemplated transaction, the Company shall give prior notice (the "Merger
Notice") thereof to the Registered Holders advising them of such transaction.
The Registered Holders shall have ten (10) days after the date of the Merger
Notice to elect to (i) exercise the Warrants in the manner provided herein or
(ii) receive from the surviving, continuing, successor, or purchasing
corporation, with respect to outstanding Warrants, the same consideration
receivable by a Registered Holder of the number of shares of Common Stock for
which the Warrants might have been exercised immediately prior to such
consolidation, merger, sale, or purchase reduced by such amount of the
consideration as has a market value equal to the exercise price of the Warrants,
as determined by the Board of Directors of the Company, whose determination
shall be conclusive absent manifest error. If any Registered Holder fails to
timely notify the
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Company of its election, the Holder shall be deemed for all purposes to have
elected the option set forth in (ii) above. Any amounts receivable by a Holder
who has elected the option set forth in (ii) above shall be payable at the same
time as amounts payable to stockholders in connection with any such transaction.
Verification of Computations. Whenever the Exercise Price is adjusted as
provided in this Warrant, the Company will promptly obtain a certificate of the
chief financial officer of the Company setting forth the Exercise Price as so
adjusted and a brief statement of the facts accounting for such adjustment, and
will make available a brief summary thereof to the Registered Holders of the
Warrant Certificates, at their addresses listed on the register maintained for
the purpose by the Company.
Exercise Price Not Less Than Par Value. In no event shall the Exercise
Price be adjusted below the par value per share of the Common Stock.
Notice of Certain Actions. In case at any time the Company shall
propose:
(a) to pay any dividend or make any distribution on shares of
Common Stock in shares of Common Stock or make any other distribution
(other than regularly scheduled cash dividends which are not in a
greater amount per share than the most recent such cash dividend) to all
holders of Common Stock; or
(b) to issue any rights, warrants, or other securities to all
holders of Common Stock entitling them to purchase any additional shares
of Common Stock or any other rights, warrants, or other securities; or
(c) to effect any reclassification or change of outstanding
shares of Common Stock, or any consolidation, merger, sale, lease, or
conveyance of property, described above; or
(d) to effect any liquidation, dissolution, or winding-up of the
Company;
then, in each such case, the Company shall cause notice of such proposed action
to be mailed to each Registered Holder of a Warrant Certificate. Such notice
shall be mailed, at least ten (10) days prior to the record date for determining
holders of the Common Stock for purposes of receiving such payment or offer or
at least ten (10) days prior to the earlier of the date upon which such action
is to take place or any record date to determine holders of Common Stock
entitled to receive such securities or other property, as the case may be.
Notice of Adjustments. Whenever any adjustment is made pursuant to this
Warrant, the Company shall cause notice of such adjustment to be mailed to each
Registered Holder of a Warrant Certificate within fifteen (15) days thereafter,
such notice to include in reasonable detail (i) the events precipitating the
adjustment, (ii) the
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<PAGE>
computation of any adjustments, and (iii) the Exercise Price, the number of
shares or the securities or other property purchasable upon exercise of each
Warrant after giving effect to such adjustment.
Warrant Certificate Amendments. Irrespective of any adjustments pursuant
to this Warrant, Warrant Certificates theretofore or thereafter issued need not
be amended or replaced, but certificates thereafter issued shall bear an
appropriate legend or other notice of any adjustments.
Fractional Shares. The Company shall not be required upon the exercise
of any Warrant to issue fractional shares of Common Stock which may result from
adjustments in accordance with this Warrant to the Exercise Price or number of
shares of Common Stock purchasable under each Warrant. If more than one Warrant
is exercised at one time by the same Registered Holder, the number of full
shares of Common Stock which shall be deliverable shall be computed based on the
number of shares deliverable in exchange for the aggregate number of Warrants
exercised. With respect to any final fraction of a share called for upon the
exercise of any Warrant or Warrants, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to the same fraction of the
Current Market Price of a share of Common Stock calculated in accordance with
this Warrant.
Adjustments Not Provided For. If any change to the capitalization of the
Company should occur with respect to which a favorable adjustment to the rights
and interests of the Registered Holders of the Warrants should be made, and such
adjustment is not otherwise provided for in this Warrant, such appropriate
adjustment should be made as determined in good faith by the Board of Directors
of the Company.
No Warrant may be exercised after 5:00 P.M., New York City time, on the
expiration date (the "Expiration Date") which will be December 31, 2003. All
Warrants evidenced hereby shall thereafter become void.
OTHER PROVISIONS RELATING TO
RIGHTS OF REGISTERED HOLDERS
OF WARRANT CERTIFICATES
Rights of Warrant Holders. No Warrant Certificate shall entitle the
registered holder thereof to any of the rights of a stockholder of the Company,
including, without limitation, the right to vote, to receive dividends and other
distributions, to receive any notice of, or to attend, meetings of stockholders
or any other proceedings of the Company.
Lost, Stolen, Mutilated or Destroyed Warrant Certificates. If any
Warrant Certificate shall be mutilated, lost, stolen or destroyed, the Company
in its discretion may execute and deliver, in exchange and substitution for and
upon cancellation of a mutilated
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Warrant Certificate, or in lieu of or in substitution for a lost, stolen or
destroyed Warrant Certificate, a new Warrant Certificate for the number of
Warrants represented by the Warrant Certificate so mutilated, lost, stolen or
destroyed but only upon receipt of evidence of such loss, theft or destruction
of such Warrant Certificate, and of the ownership thereof, and indemnity, if
requested, all satisfactory to the Company. Applicants for such substitute
Warrant Certificates shall also comply with such other reasonable regulations
and pay such other reasonable charges incidental thereto as the Company may
prescribe. Any such new Warrant Certificate shall constitute an original
contractual obligation of the Company, whether or not the allegedly lost,
stolen, mutilated or destroyed Warrant Certificate shall be at any time
enforceable by anyone.
SPLIT UP, COMBINATION, EXCHANGE, TRANSFER,
AND CANCELLATION OF WARRANT CERTIFICATES
Split Up, Combination, Exchange and Transfer of Warrant Certificates.
Prior to the latest time at which the Warrants may be exercised, subject to any
applicable laws, rules or regulations restricting transferability, Warrant
Certificates, subject to the provisions hereof, may be split up, combined or
exchanged for other Warrant Certificates representing a like aggregate number of
Warrants or may be transferred in whole or in part. Any holder desiring to split
up, combine or exchange a Warrant Certificate or Warrant Certificates shall make
such request in writing delivered to the Company at its principal office and
shall surrender the Warrant Certificate or Warrant Certificates so to be split
up, combined or exchanged at said office with the Form of Assignment. Upon any
such surrender for split up, combination, exchange or transfer, the Company
shall execute and deliver to the person entitled thereto a Warrant Certificate
or Warrant Certificates, as the case may be, as so requested in the Form of
Assignment. The Company may require the holder to pay a sum sufficient to cover
any tax or governmental charge that may be imposed in connection with any split
up, combination, exchange or transfer of Warrant Certificates prior to the
issuance of any new Warrant Certificate.
Cancellation of Warrant Certificates. Any Warrant Certificate
surrendered upon the exercise of Warrants or for split up, combination, exchange
or transfer, or purchased or otherwise acquired by the Company, shall be
canceled and shall not be reissued by the Company; and, except as otherwise
provided herein in case of the exercise of less than all of the Warrants
evidenced by a Warrant Certificate or in case of a split up, combination,
exchange or transfer, no Warrant Certificate shall be issued hereunder in lieu
of such canceled Warrant Certificate. Any Warrant Certificate so canceled shall
be destroyed by the Company.
Agreement of Warrant Certificate Holders. Every holder of a Warrant
Certificate by accepting the same consents and agrees with the Company and with
every other holder of a Warrant Certificate that:
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(a) transfer of the Warrant Certificates shall be registered on
the books of the Company only if surrendered at the principal office of
the Company, duly endorsed or accompanied by a proper instrument of
transfer; and
(b) prior to due presentment for registration of transfer, the
Company may deem and treat the person in whose name the Warrant
Certificate is registered as the absolute owner thereof and of the
Warrants evidenced thereby (notwithstanding any notations of ownership
or writing on the Warrant Certificates made by anyone other than the
Company) for all purposes whatsoever, and the Company shall not be
affected by any notice to the contrary.
OTHER MATTERS
Governing Law. The laws of the State of New York shall govern this
Warrant Certificate.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed.
PALATIN TECHNOLOGIES, INC.
By: ______________________________
Edward J. Quilty, Chairman and
Chief Executive Officer
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FORM OF
ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise of the Warrants
represented by this Warrant Certificate and to purchase the shares of Common
Stock issuable upon the exercise of said Warrants, and requests that
certificates for such shares be issued and delivered as follows:
ISSUE
TO: ___________________________________________________________________
(NAME)
___________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
___________________________________________________________________
(SOCIAL SECURITY OR OTHER TAX IDENTIFYING NUMBER)
DELIVER
TO: ___________________________________________________________________
(NAME)
at ___________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
If the number of Warrants hereby exercised is less than all the Warrants
represented by this Warrant Certificate, the undersigned requests that a new
Warrant Certificate representing the number of full Warrants not exercised be
issued and delivered as set forth below.
In full payment of the purchase price with respect to the Warrants
exercised and transfer taxes, if any, the undersigned hereby tenders payment of
$ by certified check or money order payable in United States currency to the
order of the Company.
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Dated: ____________________
____________________________ ________________________________
(Insert Social Security or (Signature of registered
other identifying number holder)
of holder)
________________________________
(Signature of registered
holder, if co-owned)
NOTE: Signature must conform in all respects to name of holder as specified on
the face of the Warrant Certificate.
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FORM OF
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto the
Assignee named below all of the rights of the undersigned represented by the
within Warrant Certificate, with respect to the number of Warrants set forth
below:
Name of Assignee Address No. of Warrants
and does hereby irrevocably constitute and appoint ___________________________
Attorney to make such transfer on the books of Palatin Technologies, Inc.
maintained for that purpose, with full power of substitution in the premises.
Dated: ___________________, 19____.
______________________________ _________________________________
(Insert Social Security or Signature
other identifying number
of holder)
(Signature must conform in all respects to name of holder as specified on the
face of the Warrant Certificate.)
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PALATIN TECHNOLOGIES, INC.
-------------------------------------------------------------
PURCHASE AGREEMENT
-------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE PAGE NUMBER
1. PURCHASE AND SALE OF SHARES 2
1.1 Issue of Shares 2
2. CLOSING DATE; DELIVERY 2
2.1 Closing 2
2.2 Delivery 2
3 REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS OF THE
PURCHASER 3
3.1 Legal Power 3
3.2 Due Execution 3
3.3 Investment Representations 4
3.4 Remedies 6
3.5 Indemnification 6
4. COVENANTS OF THE COMPANY 6
4.1 Information 6
5. UNDERSTANDINGS 7
6. DEFAULTING PROSPECTIVE PURCHASERS 8
7. MISCELLANEOUS 9
7.1 Governing Law 9
7.2 Survival 9
7.3 Successors and Assigns 9
7.4 Entire Agreement 9
7.5 Severability 9
7.6 Amendment and Waiver 9
7.7 Notices 10
7.8 Fees and Expenses 10
7.9 Titles and Subtitles 10
7.10 Counterparts 10
7.11 No Waiver 10
8. ESCROW AGENT 10
9. EXECUTION OF AGREEMENT 12
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PALATIN TECHNOLOGIES, INC.
PURCHASE AGREEMENT
This Purchase Agreement (the "Agreement") is made as of _______, 1998
by and between Palatin Technologies, Inc., a Delaware corporation (the
"Company"), with its principal office at 214 Carnegie Center, Suite 100,
Princeton, New Jersey 08540, and each of the purchasers who are signatories
hereto and any other purchasers who are made a party to this Agreement pursuant
to Section 1 (individually, a "Purchaser" and collectively, the "Purchasers").
RECITALS
The Company is hereby offering (the "Offering") a minimum of
$3,000,000 and a maximum of $7,000,000 (a) shares (the "Shares") of the
Company's Common Stock, $.01 par value per share (the "Common Stock") and (b)
warrants (the "Warrants") to purchase one share of Common Stock of the Company.
The Shares and the Warrants offered in the Offering shall sometimes collectively
be referred to herein as the "Securities." The Securities will be sold by the
Company to Purchasers pursuant to Regulation D ("Regulation D") promulgated
under the Securities Act of 1933, as amended (the "Act").
The purchase price of the Shares to be offered in the Offering (the
"Offering Price") will be determined based upon the average reported closing
sales prices for the Common Stock on The Nasdaq SmallCap Market SM for the last
five (5) business days immediately prior to the Initial Closing Date (as defined
below). Every one share of Common Stock purchased in the Offering will entitle
the Purchaser to a Warrant to purchase one share of Common Stock at an exercise
price per share equal to the Offering Price, subject to certain adjustments. The
Warrants will be issued pursuant to a warrant agreement (the "Warrant
Agreement") between the Company and American Stock Transfer & Trust Company.
Each prospective purchaser has received and carefully read a copy of
a private placement memorandum, dated October 2, 1998, as amended (the
"Placement Memorandum"), describing the Company's business, financial and
operating condition, the Offering and information regarding risks to be
evaluated when contemplating an investment in the Company through the Offering.
AGREEMENT
In consideration of the Company's agreement to sell the Securities to
the undersigned upon the terms and conditions continued herein, each Purchaser
(severally and not jointly) agrees and represents as follows:
<PAGE>
1. PURCHASE AND SALE OF SECURITIES.
1.1 Issue of Securities.
(a) The Company has authorized the
issuance and sale of a minimum of $3,000,000 and a maximum of $7,000,000 of
Securities pursuant to the provisions of this Agreement.
(b) Subject to the terms and conditions set forth
herein, the Company hereby agrees to issue and sell to each Purchaser the
aggregate amount of Shares and Warrants set forth below on the Purchaser's
signature on the subscription page bearing such Purchaser's name. The Shares
shall be sold at the Offering Price.
(c) Subject to the terms and conditions set forth
herein, each Purchaser hereby agrees to purchase the amount of Shares and
Warrants as determined on the subscription page bearing such Purchaser's name
(each a "Subscription"). Each Purchaser shall severally, and not jointly, be
liable only for the purchase of the amount of Shares and Warrants that appears
on the subscription page hereof that relates to such Purchaser.
(d) The Company's agreement with each Purchaser
is a separate agreement and the sale of the Securities to each Purchaser is a
separate sale.
2. CLOSING DATE; DELIVERY.
2.1 Closing. The Company expects to hold an initial
closing of the Offering (the "Initial Closing") at any time after
subscriptions for a minimum of $3,000,000 of Securities have been accepted. The
final closing of the Offering (the "Final Closing Date") shall occur as soon as
practicable on the date on which Subscriptions for the maximum of $7,000,000 of
Securities have been accepted by the Company. The Company may hold additional
interim closings after the Initial Closing. Any such interim closing together
with the Initial Closing are each hereinafter referred to as an "Interim
Closing" and shall occur on one or more dates each hereinafter referred to as an
"Interim Closing Date," and each, together with the Final Closing Date, are
hereinafter referred to as a "Closing Date."
2.2 Delivery. On each Closing Date, subject to
the terms and conditions hereof, the Company shall deliver to each Purchaser (i)
stock certificates, registered in the name of the Purchaser, representing the
Shares to be purchased by the Purchaser from the Company, and (ii) warrant
certificates, registered in the name of the Purchaser, representing the Warrants
to be granted to the Purchaser by the Company, each dated as of the relevant
Closing Date, against payment of the purchase price therefor (the "Payment") by
wire transfer or previously cleared check, unless other means of payment shall
have been agreed upon by the Purchaser and the Company. The undersigned
understands that payments by check as provided in this Paragraph 2.2 shall be
delivered to Graham & James LLP as the escrow agent and, thereafter, such
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payment will be deposited as soon as practicable in an escrow account for the
undersigned's benefit. The wire transfer shall be made to Graham & James LLP, as
escrow agent in accordance with the wire transfer instructions attached as
Exhibit A hereto. The Payment will be made on or prior to the relevant Closing
Date. The Payment (or, in the case of the rejection of a portion of the
undersigned's subscription, the part of the Payment relating to such rejected
portion) will be returned promptly, without interest or deduction, on the basis
described in the Memorandum, if the undersigned's subscription is rejected in
whole or in part. Any Payment made by the Purchaser prior to the Initial Closing
is based on an estimated price per share of Common Stock of $4.00. The Purchaser
agrees to remit to the Company on the Initial Closing the balance of the Payment
if the Offering Price is greater than $4.00 per share. The Company agrees to
promptly remit to the Purchaser any excess Payment made by such Purchaser if the
Offering Price is less than $4.00 per share. Each party hereto shall deliver or
cause to be delivered at or prior to the Closing Date an executed copy of the
Registration Rights Agreement between the Company and the Purchaser and the
Company shall deliver to each Purchaser a fully-executed copy of the Agreement.
3. REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS OF THE
PURCHASER.
Each Purchaser hereby represents and warrants to, and
agrees with, the Company as follows:
3.1 Legal Power. If this Agreement is executed and
delivered on behalf of a partnership, corporation, limited liability company,
trust or estate: (i) such partnership, corporation, limited liability company,
trust or estate has the full legal right and power and all authority and
approval required (a) to execute and delivery, or authorize execution and
deliver of, this Agreement and all other instruments (including, without
limitation, the Registration Rights Agreement among the Purchasers and the
Company (the "Registration Rights Agreement") executed and delivered by or on
behalf of such partnership, corporation, limited liability company, trust or
estate in connection with the purchase of its Securities, (b) to delegate
authority pursuant to a power of attorney and (c) to purchase and hold such
Securities; (ii) the signature of the party signing on behalf of such
partnership, corporation, limited liability company, trust or estate is binding
upon such partnership, corporation, trust or estate; and (iii) such partnership,
corporation, limited liability company or trust has not been formed for the
specific purpose of acquiring such Securities, unless each beneficial owner of
such entity is qualified as an accredited investor within the meaning of Rule
501(a) of Regulation D and has submitted information substantiating such
individual qualification.
3.2 Due Execution. Each of this Agreement and the
Registration Rights Agreement (collectively, the "Operative Documents") has been
duly authorized, if Purchaser is a corporation, partnership, limited liability
company, trust or fiduciary, executed and delivered by Purchaser and, upon due
execution and delivery by the Company, the Operative Documents will be valid and
binding agreements of Purchaser, enforceable against Purchaser in accordance
with their terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws relating to or affecting creditors' rights and
subject to general equity principles.
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3.3 Investment Representations.
3.3.1 Purchaser is acquiring the Securities
for its own account, not as nominee or agent, for investment and not with a view
to or for resale in connection with any distribution or public offering thereof
within the meaning of the Act, except pursuant to an effective registration
statement under the Act.
3.3.2 Purchaser understand that (i) the
Securities have not been registered under the Act by reason of a specific
exemption therefrom, and may not be transferred or resold except pursuant to an
effective registration statement or exemption from registration and (ii) each
certificate or other document representing the Securities will be endorsed with
legends in substantially the following form:
A) THE SECURITIES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES
ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER
TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE
WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
B) Any legend required to be placed thereon by
applicable federal or state securities laws;
and (iii) the Company will instruct any transfer agent not to register the
transfer of any of the Securities unless the conditions specified in the
foregoing legend are satisfied.
3.3.3 The Purchaser has been furnished with
and has carefully read the Placement Memorandum (including, without limitation,
all appendices and supplements thereto, and is familiar with and understands the
terms of the Offering, including the rights to which the Purchaser is entitled
under the Registration Rights Agreement and the Warrant Agreement). The
Purchaser has been furnished with and has carefully read the Company's Quarterly
Report on Form 10-QSB for the Quarter ended September 30, 1998 (the "10-Q"). In
evaluating the suitability of an investment in the Company, the Purchaser has
not relied upon any representation or other information (whether oral or
written) from the Company, or any agent, employee or affiliate of the Company
other than as set forth in the Placement Memorandum or the 10-Q and the results
of Purchaser's own independent investigation. With respect to individual or
partnership tax and other economic considerations involved in this investment,
the Purchaser has carefully considered and has, to the extent the Purchaser
believes such discussion necessary, discussed with the Purchaser's professional
legal, tax, accounting and financial advisers the suitability of an investment
in the Securities for the Purchaser's particular tax and financial situation and
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has determined that the Securities being subscribed for by the Purchaser are a
suitable investment for the Purchaser.
3.3.4 The Purchaser acknowledges that (i) the
Purchaser has had the right to request copies of any documents, records and
books pertaining to this investment and (ii) such documents, records, and books
pertaining to this investment which the Purchaser requested (including, without
limitation, the Placement Memorandum) have been made available for inspection by
the Purchaser, the Purchaser's representative, attorney, accountant or
adviser(s) (the "Purchaser's advisers").
3.3.5 The Purchaser and/or the Purchaser's
adviser(s) has/have had a reasonable opportunity to ask questions of and receive
answers from a person or persons acting on behalf of the Company concerning the
Offering and all such questions have been answered to the full satisfaction of
the Purchaser.
3.3.6 The Purchaser is not subscribing for
Securities as a result of or subsequent to any advertisement, article, notice or
other communication published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or meeting.
3.3.7 Purchaser is an "accredited investor"
as such term is defined in Rule 501 under the Act and as indicated by the
Purchaser's responses to the Confidential Purchaser Questionnaire.
3.3.8 Purchaser is a resident of, and all
communications regarding Purchaser's purchase of the Securities were sent to
Purchaser, in the state of Purchaser's residence shown on the subscription page
attached hereto.
3.3.9 If the Purchaser is a natural person,
the Purchaser has reached the age of majority in the state or other jurisdiction
in which the Purchaser resides, has adequate means of providing for the
Purchaser's current financial needs and contingencies, is able to bear the
substantial economic risks of an investment in the Securities for an indefinite
period of time, has no need for liquidity in such investment and, at the present
time, could afford a complete loss of such investment.
3.3.10 The Purchaser or the Purchaser's
representative, as the case may be, has such knowledge and experience in
financial, tax and business matters so as to enable the Purchaser to utilize the
information made available to the Purchaser in connection with the Offering to
evaluate the merits and risks of an investment in the Securities and to make an
informed investment decision with respect thereto.
3.3.11 The Purchaser recognizes that an
investment in the Securities involves substantial risks, including loss of the
entire amount of such investment. Further, the Purchaser has carefully read and
considered the matters set forth under the caption "Risk Factors" in the
Placement Memorandum, and has taken full cognizance of and understands all of
the risks related to the purchase of the Securities.
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3.4 Remedies. The Purchaser acknowledges and agrees
that it shall not be entitled to seek any remedies with respect to the
Offering from any party other than the Company.
3.5 Indemnification. The Purchaser shall indemnify
and hold harmless the Company and each officer, director or control person of
the Company, who is or may be a party or is or may be threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of or
arising from any actual or alleged misrepresentation or misstatement of facts or
omission to represent or state facts made or alleged to have been made by the
Purchaser to the Company, or omitted or alleged to have been omitted by the
Purchaser, concerning the Purchaser or the Purchaser's authority to invest or
financial position in connection with the Offering, including, without
limitation, any such misrepresentation, misstatement or omission contained in
any investor qualification questionnaire or any other document submitted by the
Purchaser, against losses, liabilities and expenses for which the Company, or
any officer, director or control person of the Company has not otherwise been
reimbursed (including attorneys' fees, judgments, fines and amounts paid in
settlement) actually and reasonably incurred by the Company, or such officer,
director or control person in connection with such action, suit or proceeding.
4. COVENANTS OF THE COMPANY.
4.1 Information.
So long as the Company is subject to the periodic reporting
requirements of the Exchange Act, the Company shall deliver to each holder of
Securities all annual, quarterly or other reports to the extent such reports are
furnished to the Company's public security holders. In the event that the
Company is not so subject, until the fifth anniversary of the relevant Closing
Date the Company shall promptly furnish to each holder of Securities (i) as soon
as available, and in any event within 90 days after the end of each fiscal year
of the Company, a consolidated balance sheet of the Company and its consolidated
subsidiaries, if any, as of the end of such fiscal year and the related
consolidated statements of income, stockholders' equity and cash flows for such
fiscal year, setting forth in each case in comparative form the figures for the
previous fiscal year, all prepared in accordance with generally accepted
accounting principles and reported on by independent certified public
accountants of recognized national standing; and (ii) as soon as available, and
in any event within 45 days after the end of each of the first three fiscal
quarters of each fiscal year of the Company, a consolidated balance sheet of the
Company and its consolidated subsidiaries, if any, as of the end of such quarter
and the related consolidated statements of income and stockholder's equity
(together with any other quarterly financial statements being prepared by the
Company at such time), setting forth in each case in comparative form the
figures for the corresponding quarter and the corresponding portion of the
Company's previous fiscal year, all certified (subject to normal year-end
adjustments) as to fairness of presentation and consistency by the chief
financial or accounting officer of the Company.
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5. UNDERSTANDINGS
The Purchaser understands, acknowledges and agrees with the
Company as follows:
5.1 This Subscription may be rejected, in whole or in
part, by the Company, in the sole and absolute discretion of the Company, at any
time before any Closing Date notwithstanding prior receipt by the Purchaser of
notice of acceptance of the Purchaser's Subscription.
5.2 Except as otherwise set forth herein, the
Purchaser hereby acknowledges and agrees that the Subscription hereunder is
irrevocable by the Purchaser, that, except as required by law, the Purchaser is
not entitled to cancel, terminate or revoke this Agreement or any agreements of
the Purchaser hereunder and that this Agreement and such other agreements shall
survive the death or disability of the Purchaser and shall be binding upon and
inure to the benefit of the parties and their heirs, executors, administrators,
successors, legal representatives and permitted assigns. If the Purchaser is
more than one person, the obligations of the Purchaser hereunder shall be joint
and several and the agreements, representations, warranties and acknowledgments
herein contained shall be deemed to be made by and be binding upon each such
person and his/her heirs, executors, administrators, successors, legal
representatives and permitted assigns.
5.3 No federal or state agency has made any finding or
determination as to the accuracy or adequacy of the Placement Memorandum or as
to the fairness of the terms of this Offering for investment nor any
recommendation or endorsement of the Securities.
5.4 The Offering is intended to be exempt from
registration under the Securities Act by virtue of Section 4(2) of the
Securities Act and the provisions of Regulation D thereunder, which is in part
dependent upon the truth, completeness and accuracy of the statements made by
the Purchaser.
5.5 There can be no assurance that the Purchaser will
be able to sell or dispose of the Securities. It is understood that in order not
to jeopardize the Offering's exempt status under Section 4(2) of the Securities
Act and Regulation D, any transferee may, at a minimum, be required to fulfill
the investor suitability requirements thereunder.
5.6 Pennsylvania Merchant Group is not acting as placement
agent in connection with this Offering.
5.7 The Purchaser acknowledges that the information
contained in the Placement Memorandum or otherwise made available to the
Purchaser is confidential and non-public and agrees that all such information
shall be kept in confidence by the Purchaser and neither used by the Purchaser
for the Purchaser's personal benefit (other than in connection with this
Subscription) nor disclosed to any third party for any reason; provided,
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however, that this obligation shall not apply to any such information that (i)
is part of the public knowledge or literature and readily accessible at the date
hereof, (ii) becomes part of the public knowledge or literature and readily
accessible by publication (except as a result of a breach of this provision) or
(iii) is received from third parties (except third parties who disclose such
information in violation of any confidentiality agreements or obligations,
including, without limitation, any subscription or other similar agreement
entered into with the Company).
5.8 The representations, warranties nd agreements of
the Purchaser contained herein and in any other writing delivered in connection
with the transactions contemplated hereby shall be true and correct in all
respects on and as of the relevant Closing Date of the sale of the Securities as
if made on and as of such date and shall survive the execution and delivery of
this Agreement and the purchase of the Securities.
5.9 IN MAKING AN INVESTMENT DECISION, PURCHASERS MUST
RELY ON THEIR OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THE OFFERING,
INCLUDING THE MERITS AND RISKS INVOLVED. THE SECURITIES HAVE NOT BEEN
RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE
ACCURACY OR DETERMINED THE ADEQUACY OF THE PLACEMENT MEMORANDUM OR THIS PURCHASE
AGREEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
5.10 THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED, RESOLD OR OTHERWISE
DISPOSED OF EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. PURCHASERS
SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
5.11 If the Purchaser is a Registered Representative of
an NASD member firm, the Purchaser must give such firm the notice required by
the NASD's Rules of Fair Practice, receipt of which must be acknowledged by such
firm on the signature page hereof.
6. DEFAULTING PROSPECTIVE PURCHASERS. (a) If, on the relevant Closing
Date, a prospective Purchaser defaults in the performance of its obligations
under this Agreement, a non-defaulting prospective Purchaser may make
arrangements for the purchase of the Securities that would have been purchased
by such defaulting prospective Purchaser by other persons satisfactory to the
Company and the non-defaulting prospective Purchasers, but if no such
arrangements are made within 36 hours after such default, this Agreement shall
terminate without liability on the part of the non-defaulting prospective
Purchasers or the Company except that prospective Purchasers will continue to be
liable for the payment of expenses to the extent set forth in Section 7.8 and
except that the provisions of Section 3.5 shall not terminate and shall remain
in effect.
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(b) Nothing contained herein shall relieve a
defaulting prospective Purchaser of any liability it may have for damages caused
by its default. If other purchasers agree to purchase the Securities of a
defaulting prospective Purchaser, either the non-defaulting prospective
Purchaser or the Company may postpone a Closing Date for up to seven (7) full
business days in order to effect any changes that in the reasonable opinion of
counsel for the Company or counsel for the Placement Agent may be necessary in
the Placement Memorandum, the Operative Documents or in any other document or
arrangement, and the Company agrees to prepare and distribute promptly any
amendment or supplement to the Placement Memorandum that effects any such
changes.
7. MISCELLANEOUS
7.1 Governing Law. This Agreement shall be governed by
and construed under the laws of the State of New York without regard to any
otherwise applicable principles of conflicts of laws.
7.2 Survival. The representations and warranties made
by the parties in this Agreement shall survive the consummation of the
transactions herein contemplated until the expiration of the statute of
limitations with respect to claims arising under Section 10(b) of the Securities
Exchange Act of 1934, as amended, with respect to the purchase of Securities
hereunder.
7.3 Successors and Assigns. Except as otherwise
expressly provided herein, the provisions hereof shall inure to the benefit of,
and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto.
7.4 Entire Agreement. This Agreement and the Exhibits
hereto, constitute the full and entire understanding and agreement among the
parties with regard to the subjects hereof and no party shall be liable or bound
to any other party in any manner by any representations, warranties, covenants
or agreements except as specifically set forth herein or therein. Nothing in
this Agreement, express or implied, is intended to confer upon any party, other
than the parties hereto and their respective successors and assigns, any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided herein.
7.5 Severability. In the event that any provision
of this Agreement shall be invalid, illegal or unenforceable, it shall, to the
extent practicable, be modified so as to make it valid, legal and enforceable
and to retain as nearly as practicable the intent of the parties, and the
validity, legality, and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby. To the extent permitted by law, the
parties hereto waive the benefit of any provision of law that renders any
provision of this Agreement invalid or unenforceable in any respect.
7.6 Amendment and Waiver. Except as otherwise provided
herein, any term of this Agreement may be amended, and the observance of any
term of this Agreement may be waived (either generally or in a particular
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instance, either retroactively or prospectively, and either for a specified
period of time or indefinitely), with the written consent of the Company and the
Purchaser.
7.7 Notices. All notices and other communications
required or permitted hereunder shall be in writing and shall be deemed
effectively given upon personal delivery, on the first business day following
mailing by overnight courier, or on the fifth day following mailing by
registered or certified mail, return receipt requested, postage prepaid,
addressed to the Company and the Purchaser at the respective addresses included
herein.
7.8 Fees and Expenses. Except as otherwise provided
herein, the Company and the Purchasers shall bear their own expenses and legal
fees incurred on its behalf with respect to this Agreement and the transactions
contemplated hereby.
7.9 Titles and Subtitles. The titles of the
paragraphs and subparagraphs of this Agreement are for convenience of reference
only and are not to be considered in construing this Agreement.
7.10 Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an original, but all
of which together shall constitute one instrument.
7.11 No Waiver. No waiver by any party to this
Agreement of any one or more defaults by any other party or parties in the
performance of any of the provisions hereof shall operate or be construed as a
waiver of any future default or defaults, whether of a like or different nature.
Except as expressly provided herein, no failure or delay on the part of any
party in exercising any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy.
8. ESCROW AGENT. To induce Graham & James LLP to serve as the
escrow agent and to act in such capacity hereunder, it is agreed by the parties
hereto that:
(a) The escrow agent shall not be under any duty to
give the property held by it hereunder (the "Escrowed Property") any greater
degree of care than it gives its own similar property.
(b) This Section 8 of this Agreement expressly sets
forth all the duties of the escrow agent with respect to any and all matters
pertinent hereto. No implied duties or obligations shall be read into this
Agreement against the escrow agent. The escrow agent shall not be bound by the
provisions of any agreement among the other parties hereto except this Section 8
of this Agreement.
(c) The escrow agent shall not be liable, except for
its own gross negligence or willful misconduct and, except with respect to
claims based upon such gross negligence or willful misconduct that are
successfully asserted against the escrow agent, the other parties hereto shall
jointly and severally indemnify and hold harmless the escrow agent from and
against any and all losses, liabilities, claims, actions, damages and expenses,
10
<PAGE>
including, without limitation, reasonable attorneys' fees and disbursements,
arising out of or in connection with this Agreement.
(d) The escrow agent shall be entitled to rely upon
any order, judgment, certification, demand, notice, instrument or other writing
delivered to it hereunder without being required to determine the authenticity
or the correctness of any fact stated therein or the propriety or validity of
the service thereof. The escrow agent may act in reliance upon any instrument or
signature believed by it to be genuine and may assume that any person purporting
to give receipt or advice or make any statement or execute any document in
connection with the provisions hereof has been duly authorized to do so.
(e) The escrow agent may act pursuant to the advice
of counsel with respect to any matter relating to this Agreement and shall not
be liable for any action taken or omitted in accordance with such advice.
(f) The escrow agent does not have any interest in
the Escrowed Property deposited hereunder but is serving as escrow holder only
and having only possession thereof. The other parties shall, on a joint and
several basis, pay or reimburse the escrow agent upon request for any and all
expenses, if any, incurred by the escrow agent in connection with this Agreement
and transfer taxes or other taxes relating to the Escrowed Property incurred in
connection herewith and shall indemnify and hold harmless the escrow agent from
any amounts that it is obligated to pay in the way of such expenses and taxes.
This subparagraph and subparagraph (c) shall survive notwithstanding any
termination of this Agreement or the resignation of the escrow agent.
(g) The escrow agent makes no representation as to
the validity, value, genuineness or the collectability of any security or other
document or instrument held by or delivered to it.
(h) The escrow agent may at any time resign as suc
by delivering the Escrowed Property to any successor escrow agent jointly
designated by the other parties hereto in writing, or to any court of competent
jurisdiction, whereupon the escrow agent shall be discharged of and from any and
all further obligations arising in connection with this Agreement. The
resignation of the escrow agent will take effect on the earlier of (a) the
appointment of a successor (including a court of competent jurisdiction) or (b)
the day which is 30 days after the date of delivery of its written notice of
resignation to the other parties hereto. If at that time the escrow agent has
not received a designation of a successor escrow agent, the escrow agent's sole
responsibility after that time shall be to safekeep the Escrowed Property until
receipt of a designation of successor escrow agent or a joint written
disposition instruction by the other parties hereto or a final order of a court
of competent jurisdiction.
(i) In the event of any disagreement between the
other parties hereto resulting in adverse claims or demands being made in
connection with the Escrowed Property, or in the event that the escrow agent in
good faith is in doubt as to what action it should take hereunder, the escrow
agent shall be entitled to retain the Escrowed Property until the escrow agent
shall have received (i) a final non-appealable order of a court of competent
jurisdiction directing delivery of the Escrowed Property or (ii) a written
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agreement executed by the other parties hereto directing delivery of the
Escrowed Property, in which event the escrow agent shall disburse the Escrowed
Property in accordance with such order or agreement. Any court order shall be
accompanied by a legal opinion by counsel for the presenting party satisfactory
to the escrow agent to the effect that said opinion is final and non-appealable.
(j) Notwithstanding anything to the contrary
contained herein, the escrow agent's duties and obligations hereunder shall
terminate upon the release and distribution of the Escrowed Property in
accordance with the terms of this Agreement.
(k) Each of the Company and the Purchaser
understands and agrees that, notwithstanding its duties as escrow agent
hereunder, the escrow agent is the attorney for the Company, and, accordingly,
neither any services as escrow agent hereunder nor any provisions hereof, either
express or implied, shall restrict or inhibit the escrow agent in any way from
representing the Company or its affiliates in any action, dispute, controversy,
arbitration, suit or negotiation arising under this Agreement or under any other
agreement or in any manner or context whatsoever, whether or not directly or
indirectly involving the Company or its affiliates.
9. EXECUTION OF AGREEMENT.
THE PURCHASER ACKNOWLEDGES THAT THE PURCHASER HAS SIGNED THIS AGREEMENT
ON THE PURCHASER'S OWN BEHALF, AND NOT BY POWER OF ATTORNEY.
IN WITNESS WHEREOF, the parties have executed this Purchase Agreement
as of the day and year first written above.
- ----------------------------
Signature of Subscriber(s)
- ----------------------------
Name of Subscriber(s)
[please print]
- ----------------------------
Address of Subscriber(s)
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- ----------------------------
Social Security or Taxpayer
Identification Number of Subscriber(s)
- ----------------------------
Number of Shares Subscribed for
- ----------------------------
Number of Warrants Subscribed for
*$__________________________
Payment
Date: ____________, 1998
* If Subscriber is a Registered Representative with an NASD member firm, have
the following acknowledgment signed by the appropriate party:
The undersigned NASD member firm acknowledges receipt of the notice required by
Article 3, Sections 28(a) and (b) of the Rules of Fair Practice.
- ---------------------------------
Name of NASD Member Firm
- ---------------------------------
By: Authorized Officer
* Estimated based on $4.00 per Share of Common Stock. Adjustments will
be made in the Payment if the Offering Price, as defined in the
Purchase Agreement, is different than the estimated $4.00 price per
Share. The Purchaser agrees to remit to the Company on the Initial
Closing the balance of the Payment if the Offering Price is greater
than $4.00 per Share. The Company agrees to promptly remit to the
Purchaser any excess Payment made by the Purchaser if the Offering
Price is less than $4.00 per Share.
Subscription Accepted:
PALATIN TECHNOLOGIES, INC.
By:_________________________________
Edward J. Quilty
Chairman of the Board and
Chief Executive Officer
Date: __________, 1998
<PAGE>
EXHIBIT A
WIRE TRANSFER INSTRUCTIONS
Wire transfers should be made to Graham & James LLP, as Escrow Agent,
Citibank, N.A., 153 East 53rd Street, 20th Floor, New York, NY 10043, Account
Number 37069829, ABA Routing Number 021000089. Ref F/B/O Palatin Technologies,
Inc.
<PAGE>
PALATIN TECHNOLOGIES, INC.
AMENDMENT NO. 1
TO
PURCHASE AGREEMENT
Amendment No. 1, dated as of December 31, 1998 to the Purchase
Agreement (the "Agreement") made as of December ___, 1998 by and between Palatin
Technologies, Inc., a Delaware corporation (the "Company"), with its principal
office at 214 Carnegie Center, Suite 100, Princeton, New Jersey 08540, and each
of the purchasers who were signatories thereto and any other purchasers who are
made a party to such Agreement (individually, a "Purchaser" and collectively,
the "Purchasers").
RECITALS
WHEREAS, the Company and the Purchaser have entered into the
Agreement dated as of December __, 1998 (and the Company has entered into
similar purchase agreements with other Purchasers) relating to the Offering of a
minimum of $3,000,000 and a maximum of $7,000,000 (a) shares (the "Shares") of
the Company's Common Stock, $.01 par value per share (the "Common Stock") and
(b) warrants (the "Warrants") to purchase one share of Common Stock of the
Company but now wish to amend the Agreement to reduce the minimum of $3,000,000
to $1,150,000;
WHEREAS, the Agreement provides that the purchase price of the Shares
to be offered in the Offering (the "Offering Price") will be determined based
upon the average reported closing sales prices for the Common Stock on The
Nasdaq SmallCap Market SM for the last five (5) business days immediately prior
to the Initial Closing Date (as defined below) but now wish the Offering Price
be amended to $4.00 per Share;
WHEREAS, the Agreement provides that every one share of Common Stock
purchased in the Offering will entitle the Purchaser to a Warrant to purchase
one share of Common Stock at an exercise price per share equal to the Offering
Price, subject to certain adjustments but the parties now wish to amend the
exercise price of each Warrant to equal the average reported closing sales
prices for the Common Stock on the Nasdaq SmallCap Market SM for the five
business days immediately preceding each Closing Date of the Offering (exercise
price equal to $4.375 per Warrant on the Initial Closing Date).
WHEREAS, the Agreement provides that Warrants will be issued pursuant
to a Warrant Agreement between the Company and American Stock Transfer & Trust
Company but the parties now wish to amend the Agreement to have the Company act
as its own Warrant Agent.
WHEREAS, the Agreement provides that certain documents or
certificates be delivered on the Closing Date but the parties now wish to amend
the Agreement to provide delivery of such documents or certificates within ten
(10) business days following each Closing Date.
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WHEREAS, each prospective Purchaser has received and carefully read a
copy of a private placement memorandum, dated October 2, 1998, as amended by
Amendment No. 1 dated November 23, 1998, Amendment No. 2 dated December 15, 1998
and Amendment No. 3 dated December 30, 1998 (the "Placement Memorandum"),
describing the Company's business, financial and operating condition, the
Offering and information regarding risks to be evaluated when contemplating an
investment in the Company through the Offering.
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants hereinafter set forth, the parties agree as follows:
1. Definitions; References. Unless otherwise specifically defined
herein, each term used herein which is defined in the Agreement
has the meaning assigned to such term in the Agreement. Each
reference to "hereof," "hereunder," and "hereby" and each other
similar reference and each reference to "this Agreement" and
each other similar reference contained in the Agreement shall
from and after the date hereof refer to the Agreement as amended
hereby.
2. The Agreement is hereby amended in the following respects:
(a) The "$3,000,000" in the "Recitals" paragraph and in Section
1.1(a) and 2.1 of the Agreement is hereby deleted and
replaced with "$1,150,000".
(b) "The purchase price of the Shares to be offered in the
Offering (the "Offering Price") will be determined by the
average reported closing sales prices for the Common Stock
on the Nasdaq SmallCap MarketSM for the last five (5)
business days immediately prior to the Initial Closing
Date" as set forth in the "Recitals" is hereby deleted and
replaced with "The purchase price of the Shares to be
offered in the Offering (the "Offering Price") will be
$4.00."
(c) "Every one share of Common Stock purchased in the Offering
will entitle the Purchaser to a Warrant to purchase one
share of Common Stock at an exercise price per share equal
to the Offering Price, subject to certain adjustments" as
set forth in the "Recitals" is hereby deleted and replaced
with "Every one share of Common Stock purchased in the
Offering will entitle the Purchaser to a Warrant to
purchase one share of Common Stock at an exercise price per
Warrant equal to the average reported closing sales prices
for the Common Stock on the Nasdaq SmallCap Market SM for
the five (5) business days immediately preceding each
Closing Date of the Offering (exercise price equal to
$4.375 per Warrant on the Initial Closing Date)."
(d) "The Warrants will be issued pursuant to a warrant
agreement ("Warrant Agreement") between the Company and
American Stock Transfer & Trust Company" as set forth in
the "Recitals" is hereby deleted and replaced with "The
Warrants will be issued pursuant to Warrant Certificates
substantially in the form attached as Exhibit A hereto."
All references in the Agreement to a Warrant Agreement are
hereby deleted.
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(e) Section 2.1 of the Agreement is hereby amended to delete
"December 31, 1998" and replace it with "January 31,
1999."
(f) Section 2.2 of the Agreement is hereby amended to delete
"On each Closing Date" in the first line and to replace it
with "Within ten (10) business days following each Closing
Date."
3. No Other Amendments. Except as expressly amended hereby, the
terms and provisions of the Agreement shall remain in full force
and effect.
4. Counterparts. This Amendment No. 1 may be executed in
counterparts and by facsimile signature.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
No. 1 as of the date first above written.
_________________________________
Signature of Purchaser(s)
PALATIN TECHNOLOGIES, INC.
By:______________________________
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made this
31st day of December, 1998, by PALATIN TECHNOLOGIES, INC., a Delaware
corporation (the "Company"), for the benefit of each Purchaser (individually a
"Purchaser" and collectively the "Purchasers") entering into that certain
Purchase Agreement (the "Purchase Agreement") with the Company.
BACKGROUND
Pursuant to the Purchase Agreement, the Company has offered (the
"Offering") for sale a minimum of $1,150,000 and a maximum of $7,000,000 of (a)
shares (the "Shares") of the Company's Common Stock, par value $.01 per share
(the "Common Stock") and (b) warrants (the "Warrants") to purchase one share of
Common Stock of the Company. The Shares and Warrants shall from time to time be
collectively referred to herein as the "Securities." In order to induce the
Purchasers to purchase the Securities, the Company has agreed to provide the
registration rights set forth in this Agreement.
1. Securities Laws Representations and Covenants of Purchaser.
This Agreement is made for the benefit of the Purchasers in reliance
upon each Purchaser's representations to the Company, as the same are set forth
in Section 4 of the Purchase Agreement.
2. Registration Rights.
2.1 Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
(a) "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time
administering the Securities Act.
(b) "Form S-1, Form SB-1, Form S-2, Form SB-2 and Form S-3"
shall mean Form S-1, Form SB-1, Form S-2, Form SB-2 or
Form S-3, respectively, promulgated by the Commission or
any substantially similar form then in effect.
(c) "Purchasers" shall mean, collectively, the Purchasers,
their permitted assignees and transferees and,
individually, a Purchaser and any permitted assignee or
transferee of such Purchaser.
(d) The terms "Register", "Registered" and "Registration"
refer to a registration effected by preparing and filing
<PAGE>
a Registration Statement or Statements or similar
documents in compliance with the Securities Act, and the
declaration or ordering by the Commission of the
effectiveness of such Registration Statement.
(e) "Registrable Securities" shall mean the Shares and
Warrant Shares so long as such shares are ineligible for
sale under subparagraph (k) of Rule 144.
(f) "Registration Expenses" shall mean all expenses incurred
by the Company in complying with Section 2, including,
without limitation, all federal and state registration,
qualification and filing fees, printing expenses, fees
and disbursements of counsel for the Company, accountant
fees, blue sky fees and expenses and, the expense of any
special audits incident to or required by any such
Registration.
(g) "Registration Statement" shall mean Form S-1, Form SB-1,
Form S-2, Form SB-2 or Form S-3, whichever is
applicable, unless otherwise specified herein.
(h) "Rule 144" shall mean Rule 144 promulgated by the
Commission pursuant to the Securities Act.
(i) "Securities Act" shall mean the Securities Act of 1933,
as amended.
(j) "Selling Expenses" shall mean all underwriting discounts
and selling commissions applicable to the sale of
Registrable Securities pursuant to this Agreement.
(k) "Selling Stockholder" shall mean a holder of Registrable
Securities who requests Registration under Section 2.3
hereof or whose shares of Common Stock become Registered
pursuant to Section 2.2 hereof.
(l) "Warrant Shares" shall mean the shares of capital stock
of the Company underlying the Warrants.
Capitalized terms used but not defined herein shall have the meanings ascribed
to such terms in the Purchase Agreement.
2.2 Required Registration
(a) Within 30 days following the Final Closing Date of the
Offering, the Company shall file with the Commission a
Registration Statement for the purpose of Registering,
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<PAGE>
upon the effectiveness of such Registration Statement,
the Shares and the Warrant Shares.
(b) The Company shall use its best efforts to maintain with
the Commission a Registration Statement that is
effective and causes the Shares and the Warrant Shares
to be Registered under the Securities Act until the date
on which the Shares and the Warrant Shares are eligible
for resale or other disposition under Rule 144 without
regard to the volume limitations thereof.
2.3 Piggyback Registration
(a) Until the time set forth in Section 2.3(g) hereof, each
time that the Company proposes to Register a public
offering of its Common Stock, other than (i) pursuant to
a Registration Statement on Form S-4 or Form S-8 or
similar or successor forms or (ii) on a Registration
Statement filed in connection with an exchange offer or
other offer of Common Stock solely to the then-existing
stockholders of the Company, the Company shall promptly
give written notice of such proposed Registration to all
holders of Shares and Warrant Shares, which shall offer
such holders the right to request inclusion of any
Registrable Securities in the proposed Registration.
(b) Each holder of Shares or Warrant Shares shall have ten
(10) days or such longer period as shall be set forth in
the notice from the receipt of such notice to deliver to
the Company a written request specifying the number of
shares of Registrable Securities such holder intends to
sell and the holder's intended plan of disposition.
(c) The Company shall have the exclusive right to select all
underwriters for any underwritten public offering of
securities of the Company, including all Shares and
Warrant Shares. In the event that the proposed
Registration by the Company is, in whole or in part, an
underwritten public offering of securities of the
Company, any request under Section 2.3(b) shall contain
the holder's agreement that the Registrable Securities
will be included in the underwriting on the same terms
and conditions as the shares of Common Stock, if any,
otherwise being sold through underwriters under such
Registration.
(d) Upon receipt of a written request pursuant to Section
2.3(b), the Company shall promptly use its best efforts
to cause all such Registrable Securities to be
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<PAGE>
Registered, to the extent required to permit sale or
disposition as set forth in the written request.
(e) Notwithstanding the foregoing, if the managing
underwriter of an underwritten public offering
determines and advises in writing that the inclusion of
all Registrable Securities proposed to be included in
the underwritten public offering, together with any
shares proposed to be sold by the Company for its own
account and any other issued and outstanding shares of
Common Stock proposed to be included therein by holders
other than the holders of Registrable Securities (such
other holders' shares hereinafter collectively referred
to as the "Other Shares"), would interfere with the
successful marketing of the securities proposed to be
included in the underwritten public offering, including
the price at which such securities can be sold, then the
number of such shares of persons other than the Company
that otherwise would be included in such underwritten
public offering shall be excluded from such underwritten
public offering in a number deemed necessary by such
managing underwriter, first by excluding, to the extent
necessary, other shares held by persons who have not
exercised contractual rights to include such Shares in
the offering pursuant to the Prior Registration Rights
Agreements (as hereinafter defined), and then, to the
extent necessary, by excluding Registrable Securities
participating in such underwritten public offering, pro
rata, based on the number of shares of Registrable
Securities each holder proposes to include; and, then,
excluding to the extent necessary, other Shares proposed
to be included by the holders of other Shares who have
exercised registration rights granted to them under
registration rights agreements of the Company in effect
on the date hereof or any other registration rights in
effect on the date hereof (collectively, the "Prior
Registration Rights Agreements").
(f) All Shares and Warrant Shares that are not included in
an underwritten public offering pursuant to Section 2.3
shall be withheld from the market by the holders thereof
for a period, not to exceed 12 months following a public
offering, that the managing underwriter reasonably
determines is necessary in order to effect the
underwritten public offering. The holders of such Shares
and the Warrant Shares shall execute such documentation
as the managing underwriter reasonably requests to
evidence this lock-up.
(g) The registration rights provided by this Agreement shall
expire with respect to any Registrable Security upon the
earliest to occur of (i) the effectiveness of a
Registration Statement that includes in the Registration
effected thereby, at the request of a Selling
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<PAGE>
Stockholder, such Registrable Security; (ii) the date on
which such Registrable Security is eligible for resale
under Rule 144 without regard to the volume limitations
thereof; and (iii) five years from the date hereof.
2.4 Preparation and Filing. If and whenever the Company is under an
obligation pursuant to the provisions of this Section 2 to use
its best efforts to effect the Registration of any Registrable
Securities, the Company shall, as expeditiously as practicable:
(a) prepare and file with the Commission a Registration
Statement with respect to such Registrable Securities,
using such form of available Registration Statement as
is reasonably selected by the Company (unless otherwise
specified herein), and use its best efforts to cause
such Registration Statement to become and remain
effective, keeping each Selling Stockholder advised as
to the initiation, progress and completion of the
Registration;
(b) prepare and file with the Commission such amendments and
supplements to such Registration Statements and the
prospectus used in connection therewith as may be
necessary to keep such Registration Statement effective
for, in the case of a Required Registration under
Section 2.2, the period set forth in Section 2.2(b) and,
in the case of a Piggyback Registration under Section
2.3, six months, and to comply with the provisions of
the Securities Act with respect to the sale or other
disposition of all Registrable Securities covered by
such Registration Statement;
(c) furnish to each Selling Stockholder such number of
copies of any summary prospectus or other prospectus,
including a preliminary prospectus and all amendments
and supplements thereto, in conformity with the
requirements of the Securities Act, and such other
documents as such Selling Stockholder may reasonably
request in order to facilitate the public sale or other
disposition of such Registrable Securities; provided,
however, that no such prospectus need be furnished more
than, in the case of a Required Registration under
Section 2.2, six months after the conclusion of the
period set forth in Section 2.2(b) and, in the case of a
Piggyback Registration under Section 2.3, six months
after the effective date of the Registration Statement
related thereto;
(d) use its best efforts to register or qualify the
Registrable Securities covered by such Registration
Statement under the securities or blue sky laws of such
jurisdictions as each Selling Stockholder shall
reasonably request and do any and all other acts or
-5-
<PAGE>
things which may be reasonably necessary or advisable to
enable such holder to consummate the public sale or
other disposition in such jurisdictions of such
Registrable Securities; provided, however, that the
Company shall not be required to consent to general
service of process, qualify to do business as a foreign
corporation where it would not be otherwise required to
qualify or submit to liability for state or local taxes
where it is not liable for such taxes or provide any
undertaking or make any change in its Certificate of
Incorporation; and
(e) at any time when a prospectus covered by such
Registration Statement is required to be delivered under
the Securities Act within the appropriate period
mentioned in Section 2.2(b) or Section 2.3(b) hereof, as
the case may be, notify each Selling Stockholder of the
happening of any event as a result of which the
prospectus included in such Registration Statement, as
then in effect, includes an untrue statement of a
material fact or omits to state a material fact required
to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances
then existing and, at the request of such seller,
prepare, file and furnish to such seller a reasonable
number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such shares,
such prospectus shall not include an untrue statement of
a material fact or omit to state a material fact
required to be stated therein or necessary to make the
statement therein not misleading in the light of the
circumstances then existing. The Company may delay
amending or supplementing the prospectus for a period of
up to 90 days if the Company is then engaged in
negotiations regarding a material transaction that has
not been publicly disclosed, and the Selling
Stockholders shall suspend their sale of Shares until an
appropriate supplement or prospectus has been forwarded
to them or the proposed transaction is abandoned.
Notwithstanding the foregoing, with respect to the proposed Registration
of Registrable Securities pursuant to Section 2.3 hereof, the Company
may withdraw or cease proceeding with any proposed Registration of
Registrable Securities if it has withdrawn or ceased proceeding with the
proposed Registration of Common Stock of the Company with which the
Registration of such Registrable Securities was to be included.
2.5 Expenses. The Company shall pay all Registration Expenses
incurred by the Company in complying with this Section 2.
2.6 Information Furnished by Purchaser. It shall be a condition
precedent to the Company's obligations under this Agreement as
to any Selling Stockholder that each Selling Stockholder furnish
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<PAGE>
to the Company in writing such information regarding such
Selling Stockholder and the distribution proposed by such
Selling Stockholder as the Company may reasonably request.
2.7 Indemnification.
2.7.1 Company's Indemnification of Purchasers. The Company
shall indemnify each Selling Stockholder, each of its
officers, directors and constituent partners, and each
person controlling (within the meaning of the Securities
Act) such Selling Stockholder, against all claims,
losses, damages or liabilities (or actions in respect
thereof) suffered or incurred by any of them, to the
extent such claims, losses, damages or liabilities arise
out of or are based upon any untrue statement (or
alleged untrue statement) of a material fact contained
in any prospectus or any related Registration Statement
incident to any such Registration, or any omission (or
alleged omission) to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, or any violation by
the Company of any rule or regulation promulgated under
the Securities Act applicable to the Company and
relating to actions or inaction required of the Company
in connection with any such Registration; and the
Company will reimburse each such Selling Stockholder,
each of its officers, directors and constituent partners
and each person who controls any such Selling
Stockholder, for any reasonable, documented legal and
other expenses incurred in connection with investigating
or defending any such claim, loss, damage, liability or
action; provided, however, that the indemnity contained
in this Section 2.7.1 shall not apply to amounts paid in
settlement of any such claim, loss, damage, liability or
action if settlement is effected without the consent of
the Company (which consent shall not unreasonably be
withheld); and provided, further, that the Company will
not be liable in any such case to the extent that any
such claim, loss, damage, liability or expense arises
out of or is based upon any untrue (or alleged untrue)
statement or omission based upon written information
furnished to the Company by such Selling Stockholder,
underwriter, controlling person or other indemnified
person and stated to be for use in connection with the
offering of securities of the Company.
2.7.2 Selling Stockholder's Indemnification of Company. Each
Selling Stockholder shall indemnify the Company, each of
its directors and officers, each underwriter, if any, of
the Company's securities covered by a Registration
Statement, each person who controls the Company or such
underwriter within the meaning of the Securities Act,
and each other Selling Stockholder, each of its
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<PAGE>
officers, directors and constituent partners and each
person controlling such other Selling Stockholder,
against all claims, losses, damages and liabilities (or
actions in respect thereof) suffered or incurred by any
of them and arising out of or based upon any untrue
statement (or alleged untrue statement) of a material
fact contained in such Registration Statement or related
prospectus, or any omission (or alleged omission) to
state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, or any violation by such Selling Stockholder
of any rule or regulation promulgated under the
Securities Act applicable to such Selling Stockholder
and relating to actions or inaction required of such
Selling Stockholder in connection with the Registration
of the Registrable Securities pursuant to such
Registration Statement; and will reimburse the Company,
such other Selling Stockholders, such directors,
officers, partners, persons, underwriters and
controlling persons for any reasonable, documented legal
and other expenses incurred in connection with
investigating or defending any such claim, loss, damage,
liability or action; provided, however, that such
indemnification and reimbursement shall be to the
extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or
alleged omission) is made in such Registration Statement
or prospectus in reliance upon and in conformity with
written information furnished to the Company by such
Selling Stockholder and stated to be for use in
connection with the offering of Registrable Securities.
2.7.3 Indemnification Procedure. Promptly after receipt by an
indemnified party under this Section 2.7 of notice of
the commencement of any action which may give rise to a
claim for indemnification hereunder, such indemnified
party will, if a claim in respect thereof is to be made
against an indemnifying party under this Section 2.7,
notify the indemnifying party in writing of the
commencement thereof and generally summarize such
action. The indemnifying party shall have the right to
participate in and to assume the defense of such claim,
and shall be entitled to select counsel for the defense
of such claim with the approval of any parties entitled
to indemnification, which approval shall not be
unreasonably withheld. Notwithstanding the foregoing,
the parties entitled to indemnification shall have the
right to employ separate counsel (reasonably
satisfactory to the indemnifying party) to participate
in the defense thereof, but the fees and expenses of
such separate counsel shall be at the expense of such
indemnified parties unless the named parties to such
action or proceedings include both the indemnifying
party and the indemnified parties and the indemnifying
party or such indemnified parties shall have been
-8-
<PAGE>
advised by counsel that there are one or more legal
defenses available to the indemnified parties which are
different from or additional to those available to the
indemnifying party (in which case, if the indemnified
parties notify the indemnifying party in writing that
they elect to employ separate counsel at the reasonable
expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of
such action or proceeding on behalf of the indemnified
parties, it being understood, however, that the
indemnifying party shall not, in connection with any
such action or proceeding or separate or substantially
similar or related action or proceeding in the same
jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable,
documented fees and expenses of more than one separate
counsel at any time for all indemnified parties, which
counsel shall be designated in writing by the Purchasers
of a majority of the Registrable Securities).
2.7.4 Contribution. If the indemnification provided for in
this Section 2.7 from an indemnifying party is
unavailable to an indemnified party hereunder in respect
to any losses, claims, damages, liabilities or expenses
referred to herein, then the indemnifying party, in lieu
of indemnifying such indemnified party, shall contribute
to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities
or expenses in such proportion as is appropriate to
reflect the relative fault of the indemnifying party and
indemnified party in connection with the statements or
omissions which result in such losses, claims, damages,
liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of such
indemnifying party and indemnified party shall be
determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a
material fact relates to information supplied by such
indemnifying party or indemnified party and the parties'
relative intent, knowledge, access to information
supplied by such indemnifying party or indemnified party
and opportunity to correct or prevent such statement or
omission. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and
expenses referred to above shall be deemed to include
any documented legal or other fees or expenses
reasonably incurred by such party in connection with
investigating or defending any action, suit, proceeding
or claim, or in collecting such indemnity or
reimbursement from the indemnifying party.
-9-
<PAGE>
3. Covenants of the Company.
The Company agrees to:
(a) Notify the holders of Registrable Securities included in a
Registration Statement (i) of the issuance by the Commission of
any stop order suspending the effectiveness of such Registration
Statement and (ii) upon learning of the initiation of any
proceedings for the purpose of suspending such effectiveness,
the existence of such proceedings. The Company will make every
reasonable effort to prevent the issuance of any stop order and,
if any stop order is issued, to obtain the lifting thereof at
the earliest possible time.
(b) If the Common Stock is then listed on a national securities
exchange, use its best efforts to cause the Registrable
Securities to be listed on such exchange. If the Common Stock is
not then listed on a national securities exchange, use its best
efforts to facilitate the reporting of the Registrable
Securities on Nasdaq.
(c) Take all other reasonable actions necessary to expedite and
facilitate disposition of the Registrable Securities by the
holders thereof pursuant to the Registration Statement.
(d) With a view to making available to the holders of Registrable
Securities the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the
Commission that may at any time permit the Purchasers to sell
securities of the Company to the public without registration,
the Company agrees to:
(i) make and keep adequate current public information with
respect to the Company available, as those terms are
understood and defined in Rule 144, at all times after
90 days after the effective date of the first
Registration Statement filed by the Company for the
offering of its securities to the general public;
(ii) file with the Commission in a timely manner all reports
and other documents required of the Company under the
Securities Act and the Securities Exchange Act of 1934
(the "1934 Act"); and
(iii) furnish to each holder of Shares, so long as such holder
of Shares owns any Shares, forthwith upon written
request (a) a written statement by the Company as to
whether it has complied with the reporting requirements
of Rule 144, the Securities Act and the 1934 Act, (b) a
copy of the most recent annual or quarterly report of
-10-
<PAGE>
the Company and such other reports and documents so
filed by the Company and (c) such other information as
may be reasonably requested and as is publicly available
in availing the holders of Shares of any rule or
regulation of the Commission which permits the selling
of any such securities without registration.
(e) Prior to the filing of a Registration Statement or any amendment
thereto (whether pre-effective or post-effective), and prior to
the filing of any prospectus or prospectus supplement related
thereto, the Company will provide each Selling Stockholder with
copies of all pages thereto, if any, which reference such
Selling Stockholder.
(f) If the Registration Statement relates to an underwritten
offering, enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including,
without limitation, customary indemnification and contribution
obligations, with the underwriter's representative.
(g) Make generally available to its security holders as soon as
practicable, but not later than forty five (45) days after the
close of the period covered thereby, the Company's financial
statements as filed with the Commission.
(h) At the request of the Investors who hold a majority in interest
of the Registrable Securities being sold, furnish to the
underwriters, if any, on the date that Registrable Securities
are delivered to the underwriters for sale in connection with a
registration pursuant to this Agreement (i) an opinion, dated
such date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, and (ii) a letter,
dated such date, from the independent certified public
accountants of the Company, in form and substance as is
customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to
the underwriters.
(i) Make available for inspection by any underwriters participating
in the offering and the counsel, accountants or other agents
retained by such underwriter, all pertinent financial and other
records, corporate documents and properties of the Company, and
cause the Company's officers, directors and employees to supply
all information reasonably requested by such underwriters in
connection with the Registration Statement.
(j) Provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
-11-
<PAGE>
(k) Take all actions reasonably necessary to facilitate the timely
preparation and delivery of certificates (not bearing any
restrictive legend) representing the Registrable Securities sold
pursuant to the Registration Statement and to enable such
certificates to be in such denominations and registered in such
names as the Purchasers or any underwriters may reasonably
request.
4. Miscellaneous.
(a) This Agreement shall be governed by and construed under the laws
of the State of New York.
(b) This Agreement may not be assigned by a Purchaser other than to
the purchaser or transferee of more than 5,000 of the
Purchaser's Shares, which purchaser or transferee shall be a
permitted assign hereunder and under the Purchase Agreement.
Except as otherwise expressly provided herein, the provisions
hereof shall inure to the benefit of, and be binding upon, the
successors, permitted assigns, heirs, executors and
administrators of the parties hereto.
(c) This Agreement and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement among
the parties with regard to the subjects hereof and no party
shall be liable or bound to any other party in any manner by any
representations, warranties, covenants or agreements except as
specifically set forth herein or therein. Nothing in this
Agreement, express or implied, is intended to confer upon any
party, other than the parties hereto and their respective
successors and permitted assigns, any rights, remedies,
obligations, or liabilities under or by reason of this
Agreement, except as expressly provided herein.
(d) In the event that any provision of this Agreement shall be
invalid, illegal or unenforceable, it shall, to the extent
practicable, be modified so as to make it valid, legal and
enforceable and to retain as nearly as practicable the intent of
the parties, and the validity legality, and enforceability of
the remaining provisions shall not in any way be affected or
impaired thereby. To the extent permitted by law, the parties
waive the benefit of any provision of law that renders any
provision of the Agreement invalid or unenforceable in any
respect.
(e) Except as otherwise provided herein, any term of this Agreement
may be amended, and the observance of any term of this Agreement
may be waived (either generally or in a particular instance,
either retroactively or prospectively, and either for a
specified period of time or indefinitely), with the written
consent of the Company and the Purchaser.
-12-
<PAGE>
(f) All notices and other communications required or permitted
hereunder shall be in writing and shall be deemed effectively
given upon personal delivery, on the first business day
following mailing by overnight courier, or on the fifth day
following mailing by registered or certified mail, return
receipt requested, postage prepaid, addressed to the Company at
its address as set forth in the Purchase Agreement and to the
Purchaser at its address as shown on the books of the Company.
(g) The titles of the paragraphs and subparagraphs of this Agreement
are for convenience of reference only and are not to be
considered in construing this Agreement.
(h) This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which
together shall constitute one instrument.
(i) No waiver by any party to this Agreement of any one or more
defaults by any other party or parties in the performance of any
of the provisions hereof shall operate or be construed as a
waiver of any future default or defaults, whether of a like or
different nature. Except as expressly provided herein, no
failure or delay on the part of any party in exercising any
right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such
right, power or remedy preclude any other or further exercise
thereof or the exercise of any other right, power or remedy.
[SIGNATURE PAGE FOLLOWS]
-13-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration
Rights Agreement as of the day and year first written above.
- --------------------------- ---------------------------------
Signature of Subscriber(s)
- --------------------------- ---------------------------------
Name of Subscriber(s)
[please print]
- --------------------------- ---------------------------------
Address of Subscriber(s)
- --------------------------- ---------------------------------
Social Security or Taxpayer
Identification Number of Subscriber(s)
- ---------------------------
Number of Shares Subscribed for
- ---------------------------
Number of Warrants Subscribed for
Date: December 31, 1998
PALATIN TECHNOLOGIES, INC.
By:________________________
Edward J. Quilty
Chairman of the Board and
Chief Executive Officer
Date: December 31, 1998
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from financial
statements for the six month period ended December 31, 1998 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-30-1999
<PERIOD-START> JUL-1-1998
<PERIOD-END> DEC-31-1998
<CASH> 2,153,266
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,332,111
<PP&E> 2,081,924
<DEPRECIATION> 564,152
<TOTAL-ASSETS> 3,920,106
<CURRENT-LIABILITIES> 2,285,182
<BONDS> 0
0
894
<COMMON> 51,237
<OTHER-SE> 1,634,924
<TOTAL-LIABILITY-AND-EQUITY> 3,920,106
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 5,732,327
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57,600
<INCOME-PRETAX> (5,154,707)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,154,707)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,154,707)
<EPS-PRIMARY> (1.11)
<EPS-DILUTED> (1.11)
</TABLE>
