Palatin Technologies Inc PRE 14A, filed May 13, 2022

Palatin Technologies Inc (PTN)

PRE 14A 2022-05-13 For: 2022-05-12

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DATE	Friday, June 24, 2022
TIME	9:00 a.m., Eastern Daylight Time
PLACE	The Annual Meeting will be a completely “virtual” meeting of stockholders. You will be able to listen and participate in the virtual annual meeting as well as vote, submit your questions during the live webcast of the meeting by visiting www.[●] and entering the 16‐digit control number included on your proxy card or the instructions that accompanied your proxy materials.

RECORD DATE	May 12, 2022

ITEMS OF BUSINESS	(1) election of seven directors nominated by our board of directors; (2) ratification of appointment of our independent registered public accounting firm for the fiscal year ending June 30, 2022; (3) adoption of an amendment to our restated certificate of incorporation to effect a reverse stock split of our common stock with an exchange ratio range of 10:1 and 25:1; (4) approval of an amendment to our 2011 Stock Incentive Plan, as amended and restated, to increase the number of shares available for equity awards by 15,000,000 shares; (5) approval, on an advisory, non-binding basis, of the compensation of our named executive officers (“say-on-pay”); and (6) approval of the adjournment of the annual meeting, if necessary, if there are insufficient votes at the time of the annual meeting to approve Item 3.

STOCK-HOLDER LIST	A list of all stockholders entitled to vote at the meeting will be available for examination by any stockholder, for any purpose germane to the meeting, during ordinary business hours for 10 days before the meeting, at our offices, Cedar Brook Corporate Center, 4B Cedar Brook Drive, Cranbury, New Jersey 08512. During the virtual annual meeting, such list will be available for examination at www.[●] using the 16‐digit control number included on your proxy card or the instructions that accompanied your proxy materials.

NOTICE OF VIRTUAL ANNUAL MEETING OF STOCKHOLDERS			1

VOTING PROCEDURES AND SOLICITATION			3

ITEM ONE: ELECTION OF DIRECTORS			10

THE NOMINEES			10

ITEM TWO: RATIFICATION OF APPOINTMENT OF KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM			19

REPORT OF THE AUDIT COMMITTEE			20

ITEM THREE: ADOPTION OF AN AMENDMENT TO OUR RESTATED CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE STOCK SPLIT			21

ITEM FOUR: APPROVAL OF AN INCREASE IN THE NUMBER OF SHARES OF COMMON STOCK AVAILABLE FOR ISSUANCE UNDER OUR 2011 STOCK INCENTIVE PLAN			27

ITEM FIVE: ADVISORY APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS			37

ITEM SIX: APPROVAL OF THE ADJOURNMENT OF THE ANNUAL MEETING, IF NECESSARY, TO SOLICIT ADDITIONAL PROXIES IF THERE ARE INSUFFICIENT VOTES TO APPROVE ITEM THREE.			38

EXECUTIVE COMPENSATION			42

EXECUTIVE OFFICERS			45

BENEFICIAL OWNERSHIP OF MANAGEMENT AND OTHERS			52

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS			55

OTHER ITEMS OF BUSINESS			55

STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR NEXT ANNUAL MEETING			55

	·	By Internet – www.proxyvote.com. If you have Internet access, you may transmit your proxy or voting instructions up until 11:59 p.m., Eastern Daylight Time on June 23, 2022. Go to www.proxyvote.com. You must have your proxy card or instructions in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.

	·	By telephone – 1-800-690-6903. You may submit a proxy or voting instructions using any touch-tone telephone up until 11:59 p.m., Eastern Daylight Time on June 23, 2022. Call 1-800-690-6903 toll free. You must have your proxy card or instructions in hand when you call this number and then follow the instructions.

	·	By mail – If you are a record holder of shares, mark, sign, and date your proxy card and return it in the postage-paid envelope we have provided.

	·	submitting another proxy over the Internet or by telephone until 11:59 p.m., Eastern Daylight Time, on June 23, 2022 (only your last Internet or telephone proxy will be counted);

	·	signing and returning another proxy card on a later date;

	·	sending written notice of revocation or change to the Secretary at our offices, 4B Cedar Brook Drive, Cranbury, New Jersey 08512; or

	·	voting your shares electronically at the virtual annual meeting.

	·	Common Stock: Each share of our Common Stock outstanding on the Record Date entitles the holder thereof to one vote on each matter submitted to the stockholders. As of the Record Date there were 231,773,670 shares outstanding.

	·	Series A Preferred Stock: Each share of our Series A Preferred Stock outstanding on the Record Date entitles the holder thereof to 16 votes per share. As of the Record Date there were 4,030 shares of Series A Preferred Stock outstanding with approximately 16 votes per share, for an aggregate of 66,059 votes.

	·	Series B Preferred Stock: Each share of Series B Preferred Stock outstanding on the Record Date has a number of votes equal to the number of shares of Common Stock issuable upon conversion of such share of Series B Preferred Stock (whether or not such shares are then convertible). Accordingly, as of the Record Date there were 8,100,000 shares outstanding convertible to an aggregate of 30,000,000 shares of Common Stock, with each share of Common Stock having one vote. The holders of the Series B Preferred Stock have agreed to not transfer their shares of Series B Preferred Stock until after the virtual annual meeting. The holders have also agreed to attend the virtual annual meeting, vote all shares of Series B Preferred Stock in favor of the reverse stock split amendment proposal (but no other proposal other than, if needed, the proposal to adjourn the meeting), and, upon request by the Company, grant an irrevocable proxy to vote all shares of Series B Preferred Stock in favor of the reverse stock split amendment proposal.

		By order of the board of directors,

		Stephen T. Wills, Secretary
		May [●], 2022

	·	Item Two: Ratifying the appointment of our independent registered public accounting firm for the fiscal year ending June 30, 2022 requires the affirmative vote of a majority of the votes cast on that item. Banks, brokers, and other nominees holding shares of record for a beneficial owner have the discretionary authority to vote shares held in street name as to which they have not received instructions from the beneficial owner on this proposal. If, however, any broker, bank, or other nominee fails to exercise its discretion to vote any such shares on the proposal, the shares will not count as votes cast for or against the proposal. In addition, abstentions will not count as votes cast for or against the proposal.

	·	Item Three: Adoption of the amendment of our restated Certificate of Incorporation to effect a reverse stock split of our Common Stock requires the affirmative vote of the holders of a majority in voting power of all outstanding shares of Common Stock, Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, voting together as a single class. Please refer to the discussion above under “Voting Rights, Shares Outstanding and Votes per Share” for a description of the Series B Preferred Stock and Series C Preferred Stock, which is entitled to be voted together with the Common Stock and Series A Preferred Stock as a single class on Item 3. We believe that banks, brokers, and other nominees holding shares of record for a beneficial owner will have the discretionary authority to vote shares held in street name as to which they have not received instructions from the beneficial owner on this proposal. If any bank, broker, or other nominee fails to exercise its discretion to vote any such shares on the proposal, it will have the same effect as a vote against the proposal. In addition, abstentions will have the same effect as votes against the proposal.

	Number of Shares		Common Stock Equivalent Votes per Share		Aggregate Number of Votes		Percentage of Total Voting Power
Common Stock		231,773,670		1		231,773,670		88.52	%
Series A Preferred Stock		4,030		~16		66,059		0.03	%
Series B Preferred Stock		8,100,000		~3.7		30,000,000		11,46	%
Series C Preferred Stock (1)		900,000		74,074		66,666,660,000		-

	·	Item Four: Approval of an amendment to our 2011 Stock Incentive Plan, as amended and restated, to increase the number of shares available for equity awards by 15,000,000 shares, requires the affirmative vote of a majority of the votes cast on that item. Banks, brokers, and other nominees holding shares of record for a beneficial owner do not have the discretionary authority to vote shares held in street name as to which they have not received instructions from the beneficial owner on this proposal. Assuming a quorum has been established, abstentions and broker non-votes will have no effect on the outcome of this proposal.

	·	Item Five: Advisory approval of say-on-pay for named executive officers (yes or no) will be determined based on which of the two choices receives a majority of the votes cast on the proposal. Banks, brokers, and other nominees holding shares of record for a beneficial owner do not have the discretionary authority to vote shares held in street name as to which they have not received instructions from the beneficial owner on this proposal. Assuming a quorum has been established, abstentions and broker non-votes will have no effect on the outcome of the proposal.

	·	Item Six: To approve the adjournment of the annual meeting, if necessary, if there are insufficient votes at the time of the annual meeting to approve Item 3, requires the affirmative vote of the holders of a majority of the votes cast at the virtual meeting on that item. Banks, brokers, and other nominees holding shares of record for a beneficial owner have the discretionary authority to vote shares held in street name as to which they have not received instructions from the beneficial owner on this proposal. If, however, any broker, bank, or other nominee fails to exercise its discretion to vote any such shares on the proposal, the shares will not count as votes cast for or against the proposal. In addition, abstentions will not count as votes cast for or against the proposal.

NAME	AGE	POSITION WITH PALATIN
Carl Spana, Ph.D.	59	Chief Executive Officer, President and a Director
John K.A. Prendergast, Ph.D. (3)	68	Director, Chairman of the Board of Directors
Robert K. deVeer, Jr. (1) (2)	76	Director
J. Stanley Hull (1) (2)	69	Director
Alan W. Dunton, M.D. (1) (2)	67	Director
Arlene M. Morris (2) (3)	70	Director
Anthony M. Manning, Ph.D. (1) (3)	60	Director

	(1)	Member of the audit committee.
	(2)	Member of the compensation committee.
	(3)	Member of the nominating and corporate governance committee.

	·	The audit committee assists the board in its oversight of the integrity of the financial reporting and our compliance with applicable legal and regulatory requirements. It also oversees our internal controls and compliance activities and meets privately with representatives from our independent registered public accounting firm.

	·	The compensation committee assists the board in its oversight of risk relating to compensation policies and practices. The compensation committee annually reviews our compensation policies, programs, and procedures, including the incentives they create and mitigating factors that may reduce the likelihood of excessive risk taking, to determine whether they present a significant risk to our company.

NAME	FEES EARNED OR PAID IN CASH ($)		STOCK AWARDS ($) (1) (2)		Option awards ($) (1) (2)		Total ($)
John K.A. Prendergast, Ph.D.		97,500		57,500		57,500		212,500
Robert K. deVeer, Jr.		66,250		42,500		42,500		151,250
J. Stanley Hull		57,500		42,500		42,500		142,500
Alan W. Dunton, M.D.		69,750		42,500		42,500		154,750
Angela Rossetti (3)		53,750		-		-		53,750
Arlene Morris		53,750		42,500		42,500		138,750
Anthony Manning, Ph.D.		47,500		42,500		42,500		132,500

	OPTION AWARDS		STOCK AWARDS
Dr. Prendergast		866,500		265,000
Mr. deVeer		536,500		157,000
Mr. Hull		536,500		157,000
Dr. Dunton		536,500		147,000
Ms. Morris		476,500		127,000
Dr. Manning		404,000		105,500

(2)	Amounts in these columns represent the aggregate grant date fair value for stock awards and option awards. For a description of the assumptions we used to calculate these amounts, see Note 16 to the consolidated financial statements included in our annual report on Form 10-K for the year ended June 30, 2021 (our “Annual Report”). Amounts in this column include options granted on June 22, 2021 for our current fiscal year ending June 30, 2022.

(3)	Angela Rossetti resigned as a director effective December 17, 2020, but under an agreement with the board in connection with her resignation was paid cash retainers she would have received had she remained on the board through June 30, 2021.

	·	Issuance of preferred stock which would have rights and preferences superior to Common Stock, which may be more dilutive than issuing Common Stock;
	·	Entering into license or similar agreements relating to one or more of our products, which may require us to relinquish valuable rights to our technologies or product candidates, or grant licenses on terms that are not favorable to us, and ultimately raise less money than through the issuance of Common Stock; and
	·	Entering into debt facilities and/or product-specific financing agreements with financial or investment institutions, which may significantly reduce prospective upfront license or similar payments and revenues or royalties on the sale of our products.

	COMMON STOCK OUTSTANDING OR RESERVED
Common Stock outstanding		231,773,670
Shares of Common Stock issuable upon conversion of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock		66,059

			COMMON STOCK OUTSTANDING OR RESERVED
Shares of Common Stock issuable upon exercise of outstanding warrants			0
Shares of Common Stock issuable upon exercise or vesting of outstanding stock options and restricted stock units under all plans			34,488,287
Shares of Common Stock available for issuance under our 2011 Stock Incentive Plan			1,135,034
Total			267,463,050

	·	will be proportionate to the reverse split ratio;

	·	will last in the marketplace for any length of time;

	·	will be sufficient to meet the listing requirements of the NYSE American; or

	·	will be sufficient to facilitate raising capital.

Effect of Reverse Split
			New Common Stock
	Common Stock authorized, outstanding or reserved		One-for-ten split ratio		One-for-twenty-five split ratio
Common Stock authorized		300,000,000		300,000,000		300,000,000
Common Stock outstanding		231,773,670		23,177,367		9,270,946
Shares of Common Stock issuable upon conversion of Series A Preferred Stock		66,059		6,605		2,642
Shares of Common Stock issuable upon conversion of Series B and Series C Preferred Stock (1) Shares of Common Stock issuable upon exercise of outstanding options and restricted stock units		34,488,287		3,448,828		1,379,531
Shares of Common Stock issuable under our 2011 Stock Incentive Plan (2)		1,135,034		113,503		45,401

(1)	Assumes that Series B and Series C Preferred Stock are converted to Common Stock. The holders of Series B and Series C Preferred Stock have the right to (a) convert into shares of Common Stock, (b) redeem the shares of Series B and Series C Preferred Stock, or (c) convert the shares of Series B and Series C Preferred Stock into long-term debt.

(2)	If Item 4 at the 2022 annual meeting is approved, our 2011 Stock Incentive Plan would be amended to increase the number of shares available for equity awards by 15,000,000 shares, subject to adjustment as New Common Stock if the reverse split is implemented. At a one-for-ten split ratio the increase in the 2011 Stock Incentive Plan would be 1,500,000 New Common Stock shares, and at a one-for-twenty-five split ratio the increase in the 2011 Stock Incentive Plan would be 600,000 New Common Stock shares.

	·	If your shares are held in “street name” – that is, through an account at a brokerage firm, bank or other holder of record, the number of shares you hold will automatically be adjusted to reflect the reverse stock split.

	·	If your shares are registered directly in your name with our transfer agent, American Stock, and your shares are held in book-entry form (i.e., your shares are not represented by a physical stock certificate), the number of shares you hold will automatically be adjusted to reflect the reverse stock split. You will be sent a transmittal letter by American Stock. You will need to return a properly completed and duly executed transmittal letter to American Stock in order to receive any cash payment in lieu of fractional shares or any other distributions, if any, that may be declared and payable to holders of record.

	·	If your shares are registered directly in your name with American Stock and your shares are held in certificated form (that is, your shares are represented by one or more physical stock certificates), you will receive a transmittal letter asking you to surrender your certificate(s) representing pre-split shares in exchange for a New Common Stock certificate representing the post-split shares of New Common Stock that you will hold immediately following the reverse split. You will need to return a properly completed and duly executed transmittal letter, together with your certificate(s) representing pre-split shares, to American Stock in order to receive a New Common Stock certificate and any cash payment in lieu of fractional shares or any other distributions, if any, that may be declared and payable to holders of record following the reverse stock split.

YEAR	TIME-BASED RSUS		PERFORMANCE-BASED RSUS (AT TARGET)		TIME-BASED STOCK OPTIONS		PERFORMANCE-BASED STOCK OPTIONS (AT TARGET)		TOTAL AWARDS		WEIGHTED AVERAGE # OF COMMON SHARES		BURN RATE
2019		896,725		620,725		2,340,200		0		3,857,650		207,677,721		1.86	%
2020		2,080,966		1,316,984		3,597,266		2,182,584		9,177,800		234,684,776		3.91	%
2021		2,235,770		1,008,580		3,310,905		235,195		6,790,450		236,650,101		2.87	%
Average Burn Rate (2019-2021)														2.88	%

	·	The maximum number of shares that may be issued under the 2011 Plan is 57,500,000, plus the number of shares available to be granted under the Prior Plan on May 11, 2011, the date of the initial stockholder approval of the 2011 Plan, and shares which become available under the 2011 Plan if they are forfeited or otherwise become available under the Prior Plan on or after May 11, 2011.

	·	The 2011 Plan does not permit what has been labeled by some stockholder groups as “liberal share counting” when determining the number of shares that have been granted. Only awards that are cancelled, forfeited or which are paid in cash can be added back to the share reserve.

	·	Dividends or dividend equivalents provided with respect to awards will be accumulated or deemed reinvested until such award is earned and vested, including the satisfaction of any service vesting conditions and any applicable performance goals.

	·	The 2011 Plan prohibits the use of “discounted” stock options or SARs.

	·	The 2011 Plan prohibits the re-pricing of stock options and SARs without stockholder approval.

	·	Any awards granted under the 2011 Plan are subject to forfeiture or repayment if a participant has engaged in detrimental activity (as described below). Awards may also be subject to forfeiture or repayment pursuant to the terms of any compensation recovery policy adopted to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act or any rules issued by the SEC or the NYSE American.

	·	an amendment to reduce the exercise price of any outstanding stock option or base price of any outstanding SAR;

	·	the cancellation of an outstanding stock option or SAR and replacement with a stock option having a lower exercise price or with a SAR having a lower base price; and

	·	the cancellation of an outstanding stock option or SAR and replacement with another award under the 2011 Plan.

PLAN CATEGORY	NUMBER OF SECURITIES TO BE ISSUED UPON EXERCISE OF OUTSTANDING OPTIONS, WARRANTS AND RIGHTS			WEIGHTED-AVERAGE EXERCISE PRICE OF OUTSTANDING OPTIONS, WARRANTS AND RIGHTS			NUMBER OF SECURITIES REMAINING AVAILABLE FOR FUTURE ISSUANCE UNDER EQUITY COMPENSATION PLANS (EXCLUDING SECURITIES REFLECTED IN COLUMN (A))
	(a)			(b)			(c)
Equity compensation plans approved by security holders		36,723,2	(1)	$	0.72	(2)		738,817
Equity compensation plans not approved by security holders		25,0	(3)	$	0.70			-
Total		36,748,262						738,817

(1)	Includes 21,882,500 options and 14,840,762 restricted stock units granted under our 2011 Stock Incentive Plan.

(2)	The amount in column (a) for equity compensation plans approved by security holders includes 14,376,762 shares reserved for issuance on vesting of outstanding restricted stock units, granted under our 2011 Stock Incentive Plan, which vest on various dates through June 22, 2025, subject to the fulfillment of service, market conditions, or performance conditions. Because no exercise price is required for issuance of shares on vesting of the restricted stock units, the weighted-average exercise price in column (b) does not take the restricted stock units into account.

(3)	Consists of two warrants to purchase 12,500 shares at $0.70 per share issued in connection with a contract for financial advisory services. These warrants expired unexercised on August 4, 2021.

Equity Compensation Plan Information as of May [●], 2022
PLAN CATEGORY	NUMBER OF SECURITIES TO BE ISSUED UPON EXERCISE OF OUTSTANDING OPTIONS, WARRANTS AND RIGHTS			WEIGHTED-AVERAGE EXERCISE PRICE OF OUTSTANDING OPTIONS, WARRANTS AND RIGHTS			NUMBER OF SECURITIES REMAINING AVAILABLE FOR FUTURE ISSUANCE UNDER EQUITY COMPENSATION PLANS (EXCLUDING SECURITIES REFLECTED IN COLUMN (A))
	(a)			(b)			(c)
Equity compensation plans approved by security holders		34,488,2	(1)	$	0.72	(2)		1,135,034
Total		34,488,287						1,135,034

(1)	Includes 21,543,350 options and 12,944,937 restricted stock units granted under our 2011 Stock Incentive Plan. Our 2005 Stock Plan has terminated, and all shares subject to outstanding awards under the 2005 Stock Plan expired prior to exercise and became available for issuance under the 2011 Stock Incentive Plan.

(2)	The amount in column (a) for equity compensation plans approved by security holders includes 12,944,937 shares reserved for issuance on vesting of outstanding restricted stock units, granted under our 2011 Stock Incentive Plan, which vest on various dates through June 22, 2025, subject to the fulfillment of service, market conditions, or performance conditions. Because no exercise price is required for issuance of shares on vesting of the restricted stock units, the weighted-average exercise price in column (b) does not take the restricted stock units into account.

2011 Stock Incentive Plan
Name and Position	Dollar value ($)		Number of Units

Carl Spana, Ph.D. President and Chief Executive Officer
Time-based stock option				575,000
Performance-based stock option				1,150,000
Performance-based restricted stock units		127,682.50		232,150
Stephen T. Wills, Chief Financial Officer, Chief Operating Officer and Executive Vice President
Time-based stock option				497,000
Performance-based stock option				994,000
Performance-based restricted stock units		119,267.50		216,850
Executive Group
Time-based stock option				1,072,000
Performance-based stock option				2,144,000
Performance-based restricted stock units		246,950.00		449,000
Non-Executive Director Group				0
Non-Executive Officer Employee Group				0

	·	Carl Spana, Ph.D., our President and Chief Executive Officer (our “CEO”); and

	·	Stephen T. Wills, our Chief Financial Officer and Chief Operating Officer (our “CFO/COO”).


	·	We have ongoing development programs for other ocular indications, including diabetic retinopathy and macular edema, and intend to initiate further studies this year.

	·	PL8177, a selective MC1r agonist peptide, has received orphan drug designation for non-infectious uveitis, and is ready for Phase 2 proof-of-concept studies.

	·	PL8177 in an oral, intestinal delivery formulation is our lead clinical development candidate for inflammatory bowel diseases. We intend to initiate Phase 2 studies this year.

	·	Revenue – Generated revenue of $(188,597) for fiscal 2021, compared to revenue of $117,989 million for the fiscal year ended June 30, 2020 (“fiscal 2020”).

	·	Net Loss – Reported net loss of $(33.6) million for fiscal 2021, compared to net loss of $(22.4) million for fiscal 2020.

	·	Net Loss Per Share – Recorded net loss per share (basic and diluted) of $(0.14) for fiscal 2021, compared to net loss per share (basic and diluted) of $(0.10) for fiscal 2020.

	·	Cash at End of Fiscal 2021 – Cash and cash equivalents were $60.1 million at June 30, 2021, compared to $82.9 million at June 30, 2020.

	·	STOCKHOLDER ENGAGEMENT. We attend investor conferences in the biotechnology and pharmaceutical industries and meet with our institutional and other investors at those conferences. We also held teleconference meetings, led by our Chief Financial Officer, with stockholders seeking to engage with us. We intend to continue engaging with our stockholders on a regular basis. Elements of our executive compensation program which we have addressed over the past several years are disclosed below.