10-Q

U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2000

or

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to __________


Commission file number 0-22686

PALATIN TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)

Delaware	95-4078884
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
103 Carnegie Center - Suite 200
Princeton, New Jersey	08540
(Address of principal executive offices)	(Zip Code)

Registrant'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 November 14, 2000, 10,886,185 shares of the registrants's common stock, par value $.01 per share, were outstanding.

PALATIN TECHNOLOGIES, INC.

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)
	CONSOLIDATED BALANCE SHEETS -- As of September 30, 2000 and June 30, 2000	Page 3
	CONSOLIDATED STATEMENTS OF OPERATIONS -- For the Three Months Ended September 30, 2000 and the Period from January 28, 1986 (Commencement of Operations) through September 30, 2000	Page 4
	CONSOLIDATED STATEMENTS OF CASH FLOWS -- For the Three Months Ended September 30, 2000 and September 30, 2000 and the Period from January 28, 1986 (Commencement of Operations) through September 30, 2000	Page 5
	Notes to Consolidated Financial Statements	Page 6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	Page 10
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	Page 13

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	Page 13
Item 2.	Changes in Securities and Use of Proceeds	Page 14
Item 3.	Defaults Upon Senior Securities	Page 14
Item 4.	Submission of Matters to a Vote of Security Holders	Page 14
Item 5.	Other Information	Page 14
Item 6.	Exhibits and Reports on Form 8-K	Page 14
	Signatures	Page 15

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

PALATIN TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Consolidated Balance Sheets
(unaudited)

                                                                       September 30, 2000   June 30, 2000
                                                                       ------------------   -------------
ASSETS
Current assets:
  Cash and cash equivalents                                              $  11,031,228     $   3,219,593
  Short-term investments                                                     2,831,350         2,155,617
  Accounts receivable                                                          795,081           953,163
  Prepaid expenses and other                                                   130,707           179,792
                                                                          -------------     -------------
      Total current assets                                                  14,788,366         6,508,165

Fixed assets, net of accumulated depreciation and amortization
  of  $981,464 and $914,846, respectively                                    1,522,390         1,573,140
Restricted cash                                                                263,075           263,075
Other                                                                          440,009           541,017
                                                                          -------------     -------------
                                                                         $  17,013,840     $   8,885,397
                                                                          =============     =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                                       $     699,712     $   1,012,070
  Accrued expenses                                                           1,083,237           968,166
                                                                          -------------     -------------
      Total current liabilities                                              1,782,949         1,980,236
                                                                          -------------     -------------


Commitments and contingencies (Note 5)


Stockholders' equity:
  Preferred stock of $.01 par value - authorized 10,000,000 shares;
    Series A Convertible; 30,917 and 31,561 shares issued and outstanding
      as of September 30, 2000 and June 30, 2000, respectively;                    309               316
    Series B Convertible; zero and 2,000 shares issued and outstanding
      as of September 30, 2000 and June 30, 2000 respectively;                       -                20
    Series C Convertible; 700,000 shares issued and outstanding
      as of September 30, 2000 and June 30, 2000 respectively;                   7,000             7,000
  Common stock of $.01 par value - authorized 75,000,000 shares;
    Issued and outstanding 10,022,969 and 7,902,372 shares as of
      September 30, 2000 and June 30, 2000, respectively;                      100,230            79,024
  Additional paid-in capital                                                60,851,233        50,324,603
  Deficit accumulated during development stage                             (45,727,881)      (43,505,802)
                                                                          -------------     -------------
      Total stockholders' equity                                            15,230,891         6,905,161
                                                                          -------------     -------------
                                                                         $  17,013,840     $   8,885,397
                                                                          =============     =============

The accompanying notes to the consolidated financial statements are an integral part of these financial statements.

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PALATIN TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Consolidated Statements of Operations
(unaudited)

                                                                                             Inception
                                                                                         (January 28, 1986)
                                                       Three Months Ended September 30,       through
                                                             2000             1999        September 30, 2000
                                                       --------------     -------------   ------------------
REVENUES:
     Grants and contracts                               $   855,081      $ 1,250,000      $  8,776,821
     License fees and royalties                                   -          500,000         1,734,296
     Other                                                        -                -           318,917
                                                         ------------     ------------     -------------

          Total revenues                                    855,081        1,750,000        10,830,034
                                                         ------------     ------------     -------------

OPERATING EXPENSES:
     Research and development                             2,455,597        2,448,623        35,202,885
     General and administrative                             706,575          769,434        20,058,849
     Net intangibles write down                                   -                -           259,334
                                                         ------------     ------------     -------------

          Total operating expenses                        3,162,172        3,218,057        55,521,068
                                                         ------------     ------------     -------------

OTHER INCOME (EXPENSES):
     Interest income                                         87,292           71,315         1,441,282
     Interest expense                                        (2,280)         (25,236)       (1,953,129)
     Merger costs                                                 -                -          (525,000)
                                                         ------------     ------------     -------------

          Total other income/(expenses)                      85,012           46,079        (1,036,847)
                                                         ------------     ------------     -------------

NET LOSS                                                 (2,222,079)      (1,421,978)      (45,727,881)

PREFERRED STOCK DIVIDEND                                          -                -        (3,121,525)
                                                         ------------     ------------     -------------

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS
                                                        $(2,222,079)     $(1,421,978)     $(48,849,406)
                                                         ============     ============     =============


Basic and diluted net loss per common share             $     (0.27)     $     (0.20)     $     (29.69)
                                                         ============     ============     =============

Weighted average number of common shares
     outstanding used in computing basic and
     diluted net loss per common share                    8,080,352        7,203,601         1,830,301
                                                         ============     ============     =============

The accompanying notes to the consolidated financial statements are an integral part of these financial statements.

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PALATIN TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows
(unaudited)

                                                                                              Inception
                                                                                          (January 28, 1986)
                                                        Three Months Ended September 30,       Through
                                                            2000              1999        September 30, 2000
                                                        ------------      -------------   ------------------

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                             $(2,222,079)      $(1,421,978)       (45,727,881)                                                                                           $
  Adjustments to reconcile net loss to net cash
    used for operating activities:
      Depreciation and amortization                         69,120            59,170          1,154,890
      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
      Common stock and notes payable issued for                                    -            751,038
expenses                          -
      Settlement with consultant                                 -                 -            (28,731)
      Acceleration of options previously granted                 -                 -          1,170,000
      Amortization of stock based compensation                   -             18,558         3,444,926
      Changes in certain operating assets and
liabilities:
        Accounts receivable                                 158,082       (1,250,000)          (795,081)
        Prepaid expenses and other                          147,591           148,459        (1,148,894)
        Accounts payable                                  (312,358)           209,872           699,712
        Accrued expenses and other                          115,071            20,816           622,070
                                                        ------------      ------------      -------------
            Net cash used for operating activities      (2,044,573)       (2,215,103)       (38,202,968)
                                                        ------------      ------------      -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of short-term investments                     (675,733)         (402,630)        (2,831,350)
  Purchases of property and equipment                      (15,868)           (4,812)        (2,559,195)
                                                        ------------      ------------      -------------
            Net cash used for investing activities        (691,601)         (407,442)        (5,390,545)
                                                        ------------      ------------      -------------

 CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from notes payable, related party                     -                 -            302,000
  Payments on notes payable, related party                       -                 -           (302,000)
  Proceeds from senior bridge notes payable                      -                 -          1,850,000
  Payments on senior bridge notes payable                        -                 -         (1,850,000)
  Proceeds from notes payable and long-term debt                 -                 -          3,951,327
  Payments on notes payable and long-term debt                   -                 -         (1,951,327)
  Proceeds from Common stock, stock option
     and warrant issuances, net                         10,547,809            13,948         28,416,082
  Proceeds from Preferred stock, net                             -        11,000,000         24,210,326
  Purchase of treasury stock                                     -                 -             (1,667)
                                                        ------------      ------------      -------------
            Net cash provided by financing activities   10,547,809        11,013,948         54,624,741
                                                        ------------      ------------      -------------

NET INCREASE (DECREASE) IN CASH
  AND CASH EQUIVALENTS                                   7,811,635         8,391,403         11,031,228

CASH AND CASH EQUIVALENTS, beginning
   of period                                             3,219,593         2,333,801                  -
                                                        ------------      ------------      -------------

CASH AND CASH EQUIVALENTS, end of period               $11,031,228       $10,725,204        $11,031,228                                                                                            $
                                                        ============      ============      =============

The accompanying notes to the consolidated financial statements are an integral part of these financial statements.

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PALATIN TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(unaudited)

(1)      Organization Activities:

Nature of Business -- Palatin Technologies, Inc., headquartered in Princeton, NJ with its research facility in Edison, NJ, is a development-stage, pharmaceutical company dedicated to developing and commercializing products and technologies for diagnostic imaging and ethical drug development utilizing peptide, monoclonal antibody, and radiopharmaceutical technologies. We are in the early stages of developing pharmaceutical products and technologies. We are concentrating our efforts on the following:

• MIDAS™, a peptide technology which may be useful to develop drugs to treat diseases or for diagnostic imaging. A peptide is a short chain of amino acids. We are engaged in research and development of this technology to treat obesity and eating disorders and for neural regeneration, and believe that this technology may have applications in a variety of other areas as well, including immune disorders, cancers and cardiology.

• PT-141, a drug to treat sexual dysfunction, initially male erectile dysfunction. PT-141 is a stabilized peptide that works like a natural hormone. PT-141 is in preclinical testing, and we expect to start clinical trials in late 2000 or early 2001.

• LeuTech®, a diagnostic imaging product used to image and locate the site of infection or inflammation within the body. We have completed clinical trials with LeuTech for the diagnosis of equivocal appendicitis and filed an application with the United States Food and Drug Administration for approval to market LeuTech for that indication. FDA review of our clinical efficacy and safety data is complete and the FDA has not requested any further data on efficacy or safety. However, the FDA has requested additional manufacturing and process validation data. We are currently working on responding to the FDA’s request for additional data.

Business Risk and Liquidity – As shown in the accompanying financial statements, we have incurred substantial net losses of $2,222,079 for the three months ended September 30, 2000 and have a deficit accumulated during development stage of $45,727,881. We anticipate incurring additional losses over at least the next several years, and such losses are expected to increase as we expand our research and development activities relating to various technologies. To achieve profitability, we must, alone or with others, successfully develop and commercialize our 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 we will be able to achieve profitability on a sustained basis, if at all.

In September and October of 2000, we received gross proceeds of $15.15 million in a private placement of common stock and warrants.

Management plans to continue to refine operations, control expenses, evaluate alternative methods to conduct its business, and seek available and attractive sources of financing and sharing of development costs. There can be no assurance that the Company’s efforts will be successful. Management believes that adequate financing has been obtained to fund operations through September 30, 2001, based on current expenditure levels.

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(2)      Basis of Presentation:

        The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnote disclosures required by generally accepted accounting principles for complete financial statements. In the opinion of management, these financial statements contain all adjustments (consisting of only normal recurring adjustments) considered necessary to present fairly the financial position as of September 30, 2000 and the results of operations and cash flows for the three month period ended September 30, 2000 and 1999 and for the period from inception (January 28, 1986) to September 30, 2000. The results of operations for the three month period ended September 30, 2000 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, 2001.

        The accompanying financial statements should be read in conjunction with the audited financial statements and notes thereto included in our annual report on Form 10-K, filed with the Securities and Exchange Commission, which includes financial statements as of June 30, 2000 and 1999 and for each of the three fiscal years in the period ended June 30, 2000.

(3)      Recent Accounting Pronouncements

In March 2000, the FASB issued interpretation No. 44, (“FIN 44”), “Accounting for certain transactions Involving Stock Compensation – an Interpretation of APB 25.” This Interpretation clarifies the definition of employee for purposes of applying APB 25 and provides the accounting consequences of various modifications to the terms of a previously fixed stock option or award. This Interpretation is effective July 1, 2000. The adoption of FIN 44 does not have a material impact on our financial statements.

In December 1999, the Securities and Exchange Commission issued Staff Bulletin No. 101, “Revenue Recognition in Financial Statements” (SAB 101) which is effective for fiscal years beginning after December 15, 1999. The bulletin draws on existing accounting rules and provides specific guidance on how those accounting rules should be applied, and specifically addresses revenue recognition for non-refundable technology access fees in the biotechnology industry. We expect that we will be required to defer non-refundable technology fees recorded in 1999 and recognize the related revenue over future periods. The SEC has extended the implementation date of SAB 101 until the fourth quarter of fiscal years beginning after December 15, 1999. In accordance with SAB 101, we expect to report a change in accounting principle and to record the impact of this change as a cumulative effect in our statement of operations.

(4)      Summary of Significant Accounting Policies:

Principles of Consolidation -- The consolidated financial statements include the accounts of our wholly-owned inactive subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates -- The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and

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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.

Short-Term Investments -- We account for investments in accordance with Statement of Financial Accounting Standards No. 115 “Accounting For Certain Investments in Debt and Equity Securities.” We classify such investments as available for sale investments and as such all investments are recorded at fair value. The investments consist of certificates of deposit. Unrealized gains and losses are classified as a separate component of stockholder’s equity. As of September 30, 2000 the unrealized gain on investments was immaterial. Realized gains and losses are recorded in the statement of operations in the period that the transaction occurs.

Fixed Assets -- Fixed assets consist of equipment, office furniture and leasehold improvements. Fixed assets are stated at cost. Depreciation is recognized using the straight-line method over the estimated useful lives of 5 years for equipment, 7 years for office furniture and over the term of the lease for leasehold improvements. Maintenance and repairs are expensed as incurred while expenditures that extend the useful life of an asset are capitalized.

Impairment of Long-Lived Assets -- We comply with Statement of Financial Accounting Standards No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.” We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. To determine recoverability of our long-lived assets, we evaluate the probability that future undiscounted net cash flows, without interest charges, will be less than the carrying amount of the assets. Impairment is measured at fair value. Fair value is determined by an evaluation of available price information at which assets could be bought or sold including quoted market prices, if available, or the present value of the estimated future discounted cash flows based on reasonable and supportable assumptions.

Revenue Recognition -- Grant and contract revenues are recognized as services stipulated in the underlying grants and/or contracts are provided based on the time and materials incurred. License revenues are recognized when the license fee is received and we have no further obligations.

Research and Development Costs -- The costs of research and development activities are expensed as incurred.

Stock Options and Warrants -- Warrants and the majority of common stock options have been issued at exercise prices greater than, or equal to, their fair market value at the date granted. Accordingly, no value has been assigned to these instruments. However, certain stock options were issued under non-plan option agreements and a non-qualified stock option plan at exercise prices below market value. The difference between the exercise price and the market value of these securities has been recorded as deferred compensation and is being expensed over the vesting period of the option.

Income Taxes -- We intend to file consolidated federal and combined state income tax returns. We account for income taxes in accordance with Statement of Financial Accounting Standards No. 109 (“SFAS 109”), “Accounting for Income Taxes.” SFAS 109 requires, among other things, the use of the liability method in computing deferred income taxes.

We provide for deferred income taxes relating to timing differences in the recognition of income and expense items (primarily relating to depreciation, amortization and certain leases) for

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financial and tax reporting purposes. Such amounts are measured using current tax laws and regulations in accordance with the provisions of SFAS 109.

In accordance with SFAS 109, we have recorded a valuation allowance against the realization of its deferred tax assets. The valuation allowance is based on management’s estimates and analysis, which includes tax laws which may limit our ability to utilize tax loss carryforwards.

Net Loss per Common Share -- We apply SFAS No. 128, “Earnings per Share” (“SFAS 128”). 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 three months ended September 30, 2000 and 1999 and for the period from inception (January 28, 1986) through September 30, 2000, there were no dilutive effects of stock options or warrants as we incurred a net loss in each period. Options and warrants to purchase 6,267,192 shares of common stock at prices ranging from $0.20 to $360 per share were outstanding at September 30, 2000.

Fair Value of Financial Instruments -- Statement of Financial Accounting Standards No. 107 (“SFAS 107”), “Disclosures about Fair Value of Financial Instruments,” requires disclosures of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate the value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. These techniques are significantly affected by the assumptions used, including discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. SFAS 107 excludes certain financial instruments and all non-financial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent our underlying value. Based on the above, the amount reported on the balance sheet approximates the fair value.

Reclassifications – Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation.

(5)      Commitments and Contingencies:

Leases– We lease two facilities in New Jersey under non-cancelable operating leases.

License Agreements – We currently maintain four license agreements that require minimum yearly payments. The cost to maintain these license agreements for the fiscal year ending June 30, 2001 amounts to $230,000. There were no payments due during the three months ended September 30, 2000 under these agreements.

(6)      Stockholders’ Equity:

In September and October of 2000, we received gross proceeds of $15.15 million in a private placement common stock and warrants. Investors purchased 2,532,368 shares of common stock in two tranches: 1,800,000 shares at $6.00 per share and 732,368 shares at $5.94 per share. For every five shares purchased, the investors also received a five-year warrant to purchase one share of common stock at an exercise price of $7.50 for the first tranche and $7.42 for the second tranche.

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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 accompanying notes filed as part of this report.

We make forward-looking statements in this report. Sometimes these statements contain words such as “anticipates,” “plans,” “intends,” “expects” and similar expressions to identify forward-looking statements. These statements are not guarantees of our future performance. Our business involves known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from what we say in this report. We describe a number of these factors in our annual report on Form 10-K for the year ended June 30, 2000. Given these uncertainties, you should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. We will not revise these forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.

We expect to incur substantial operating losses over the next several years due to continuing expenses associated with our research and development programs, including pre-clinical testing, clinical trials and manufacturing. Operating losses may fluctuate from quarter to quarter as a result of differences in the timing of when we incur expenses.

Results of Operations

Three Month Period Ended September 30, 2000 Compared to Three Month Period Ended September 30, 1999.

Grants and Contracts –Contract revenue decreased to $795,081 for the three month period ended September 30, 2000 compared to $1,250,000 for the three month period ended September 30, 1999, mainly due to decreased shared development costs of LeuTech pursuant to our strategic collaboration agreement with Mallinckrodt, Inc. We recorded $60,000 as grant revenue for the three months ended September 30, 2000. We had no revenue from grants recorded for the three-month period ended September 30, 1999.

License Fees and Royalties – We did not record any revenues from license fees for the three-month period ended September 30, 2000. We recorded $500,000 in license fees as revenue during the three month period ended September 30, 1999. We received these fees as a one-time, non-refundable payment pursuant to our strategic collaboration agreement with Mallinckrodt.

Research and development - Research and development expenses increased slightly to $2,455,597 for the three month period ended September 30, 2000 compared to $2,448,623 for the three month period ended September 30, 1999. These expenses related primarily to the development of LeuTech, including expenses for manufacturing scale-up and regulatory consulting. We expect research and development expenses to continue to increase in future quarters as we expand clinical trials and manufacturing efforts on LeuTech and expand our efforts to develop our MIDAS and PT-141 technologies.

General and administrative - General and administrative expenses decreased to $706,575 for the three month period ended September 30, 2000 compared to $769,434 for the three month period ended September 30, 1999. The decrease in general and administrative expenses is mainly

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attributable to a decrease in administrative salaries following the resignation of our former president and CEO in June 2000.

Interest income - Interest income increased to $87,292 for the three month period ended September 30, 2000 compared to $71,315 for the three month period ended September 30, 1999. Interest income increased primarily from the additional funds available pursuant to our recent financing.

Interest expense - Interest expense decreased to $2,280 for the three month period ended September 30, 2000 compared to $25,236 for the three month period ended September 30, 1999. Interest expense decreased because of the repayment of debt in the three months ended September 30, 1999.

Net loss - Net loss increased to $2,222,079 for the three month period ended September 30, 2000 compared to $1,421,978 for the three month period ended September 30, 1999. The increase is due to the reduction of revenues recorded pursuant to the provisions of our strategic collaboration agreement with Mallinckrodt.

Liquidity and Capital Resources

Since inception, we have incurred net operating losses. As of September 30, 2000, we had a deficit accumulated during development stage of $45,727,882. We have financed our net operating losses through September 30, 2000 by a series of debt and equity financings. At September 30, 2000, we had cash and investments of $14,513,139.

For the three months ended September 30, 2000, the net increase in cash was $7,811,635. Net cash used for operating activities was $2,044,573, net cash used for investing activities was $69,601 and net cash provided by financing activities was $10,547,809.

In September and October 2000, we received gross proceeds of $15.15 million in a private placement of common stock and warrants. Investors, consisting of European financial institutions and other foreign accredited investors, purchased approximately 2.5 million shares of common stock in two tranches: 1,800,000 shares at $6.00 per share and 732,368 shares at $5.94 per share. The net proceeds of approximately $14.1 million will be used primarily for general corporate purposes, especially for the development and clinical trials of new products based on our proprietary technologies.

We have three license agreements that require minimum yearly payments. Future minimum fiscal year payments under the license agreements are: 2001 - $230,000, 2002 - $280,000, 2003 - $280,000, 2004 - $280,000 and 2005 - $280,000.

As of April 2000, we entered into an amendment to our research facility’s lease, which increased our rentable space from approximately 10,500 square feet to approximately 15,800. Our aggregate future minimum lease payments escalate from approximately $203,000 until July 13, 2002 to $300,000 from July 14, 2002 through July 13, 2007.

On March 15, 2000 we entered into an agreement with Watson Laboratories Inc. (f/k/a TheraTech, Inc.) to terminate our License and Development Agreement with Watson dated March 18, 1998. In connection with the termination, we paid Watson approximately $500,000.

As of December 7, 1999, we entered into a five-year lease on administrative offices in Princeton, New Jersey. Minimum future lease payments range from approximately $187,374 in year one to approximately $202,070 in year five. We have entered into a sublease agreement with Derma Sciences, Inc. on our former administrative offices. Under the sublease agreement Derma reimburses us 100% of all rents and utility charges.

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On August 16, 1999, we entered into a strategic collaboration agreement with Mallinckrodt, a large international healthcare products company, to jointly develop and market LeuTech. Under the terms of the agreement, Mallinckrodt:

• received an exclusive worldwide license (excluding Europe) for sales, marketing and distributions of LeuTech and paid a licensing fee of $500,000;

• agreed to make milestone payments totaling $5,000,000 upon FDA approval of the first LeuTech indication and $5,000,000 on the attainment of sales goals following product launch;

• agreed to reimburse us for 50% of all ongoing LeuTech development costs, subject to a cap, which can be amended;

• agreed to pay to us a transfer price for each LeuTech product unit delivered to Mallinckrodt and a quarterly royalty on Mallinckrodt's future net sales of LeuTech;

• purchased 700,000 restricted shares of our non-voting Series C convertible preferred stock for $13,000,000; and

• agreed that the Series C convertible preferred stock would be convertible after five years, or earlier upon the occurrence of a change in control (as defined in the agreement), into 700,000 shares of our common stock with certain registration rights and anti-dilution rights.

In March 1997, we 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.

We are and expect to continue actively searching for certain products and technologies to license or acquire, now or in the future. If we are successful in identifying a product or technology for acquisition, we may require substantial funds for such an acquisition and subsequent development or commercialization. We do not know whether any acquisition will be consummated in the future.

We have incurred negative cash flows from operations since our inception, and have expended, and expect to continue to expend in the future, substantial funds to complete our planned product development efforts. We expect our existing capital resources, including the funds we received in September and October 2000, will be adequate to fund our projected operations through September 30, 2001, based on current expenditure levels.

We anticipate incurring additional losses over at least the next several years, and we expect our losses to increase as we expand our research and development activities relating to MIDAS, LeuTech and PT-141. To achieve profitability, we, alone or with others, must successfully develop and commercialize our 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 we do not know whether we will be able to achieve profitability on a sustained basis, if at all.

-12-

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk. Our exposure to market risk related to changes in interest rates relates primarily to our investment portfolio. We invest in instruments that meet high credit quality standards, and we limit the amount of credit exposure as to any one issue, issuer and type of investments.

As of September 30, 2000, our cash and cash equivalents and investments consisted of $14,250,064, most of which were short term investments having a maturity of less than one year. Due to the average maturity and conservative nature of our investment portfolio, we do not believe that short term fluctuations in interest rates would materially affect the value of our securities.

PART II - OTHER INFORMATION

Item 1.     Legal Proceedings.

On March 14, 2000, we announced that we would not be extending the merger consummation date of March 31, 2000 for our previously announced proposed merger with San Diego-based Molecular Biosystems, Inc. and would not be proceeding with the merger. Our decision not to proceed with the merger was based on management’s view that the merger was not in the best interests of our stockholders.

On or about April 28, 2000, Molecular Biosystems commenced a legal action against us and against Evergreen Merger Corporation, our wholly-owned shell subsidiary, in the Superior Court of the State of Delaware, County of New Castle. In the complaint, Molecular Biosystems seeks damages against us and Evergreen arising from the alleged improper termination of the merger agreement dated November 11, 1999, among Molecular Biosystems, Palatin and Evergreen. Under the merger agreement, Evergreen would have merged with and into Molecular Biosystems, which would have become a wholly-owned subsidiary of ours.

As a consequence of the claims alleged in the complaint, Molecular Biosystems contends that it is entitled to an award of damages against us and Evergreen in amounts to be determined at trial, but in any event, at least equal to $1,765,305. This figure represents the amount of a “breakup fee” of $1,000,000 provided for in the merger agreement and $765,305 for the costs and expenses incurred by Molecular Biosystems in connection with the proposed merger. In addition, Molecular Biosystems seeks consequential damages in an unstated amount plus interest and Molecular Biosystems’ costs and expenses of the action.

In our response filed in June of 2000, we have denied the material allegations. Management believes that we have good and meritorious defenses to the action and we intend vigorously to defend the action.

We are involved in various claims and litigation arising in the normal course of business, consisting of actions commenced against Palatin prior to the RhoMed merger. We believe that the outcome of such claims and litigation will not have a material adverse effect on our business.

-13-

Item 2.     Changes in Securities and Use of Proceeds.

In a private placement of common stock and warrants in September and October 2000, we sold 2,532,368 shares of our $.01 par value common stock to a total of nine investors in two tranches: 1,800,000 shares at $6.00 per share and 732,368 shares at $5.94 per share. The gross proceeds were approximately $15.15 million and the net proceeds were approximately $14.1 million. For every five shares purchased, the investors also received an immediately exercisable five-year warrant to purchase one share of common stock. The warrants for 360,000 shares issued in the first tranche have an exercise price of $7.50 per share, and the warrants for 146,472 shares issued in the second tranche have an exercise price of $7.42. We made the private placement solely to foreign accredited investors pursuant to Regulation D under the Securities Act of 1933. The investors represented to us that they were purchasing the securities for their own accounts for investment and not with a view toward resale or distribution to others. The certificates representing the shares of common stock and warrants bear restrictive legends.

In connection with the private placement, we paid a finder's fee of $1,060,391 and issued five-year warrants to the finder to purchase 216,000 shares of common stock at $6.60 per share and 87,884 shares of common stock at $6.53 per share.

Item 3.     Defaults Upon Senior Securities.

None.

Item 4.     Submission of Matters to a Vote of Security Holders.

None.

Item 5.     Other Information.

None.

Item 6.     Exhibits and Reports on Form 8-K.

     (a) Exhibits

10.1 Form of stock purchase agreement for the September-October 2000 private placement.

10.2 Form of registration rights agreement for the September-October 2000 private placement.

10.3 Form of warrant issued to purchasers in the September-October 2000 private placement.

27 Financial Data Schedule

     (b) Reports on Form 8-K

During the quarter ended September 30, 2000, we filed one report on Form 8-K. On September 21, 2000, we filed a report dated September 19, 2000, containing Item 5, Other Information, and Item 7, Exhibits. Item 5 reported our announcement that we received gross proceeds of $10.8 million in the first tranche of our private placement of stock and warrants. The Item 7 exhibit was our press release concerning the receipt of proceeds in the offering.

-14-

Signatures

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Palatin Technologies, Inc. (Registrant)
Date: November 14, 2000	/s/ Carl Spana              Carl Spana, Ph.D. President and Chief Executive Officer
Date: November 14, 2000	/s/ Stephen T. Wills              Stephen T. Wills Executive Vice President and Chief Financial Officer

-15-

EX-10.1

                           PALATIN TECHNOLOGIES, INC.



          _____________________________________________________________


                               PURCHASE AGREEMENT

          _____________________________________________________________






                                TABLE OF CONTENTS
         PAGE

         1.       PURCHASE AND SALE OF SHARES
         1.1      ISSUE OF SHARES

2.       CLOSING DATE; DELIVERY
         2.1      CLOSING
         2.2      DELIVERY

3        REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS OF THE PURCHASER
         3.1      LEGAL POWER
         3.2      DUE EXECUTION
         3.3      INVESTMENT REPRESENTATIONS
         3.4      REMEDIES
         3.5      INDEMNIFICATION

4.       COVENANTS OF THE COMPANY
         4.1      INFORMATION

5.       UNDERSTANDINGS


6.       DEFAULTING PROSPECTIVE PURCHASERS

7.       MISCELLANEOUS
         7.1      GOVERNING LAW
         7.2      SURVIVAL
         7.3      SUCCESSORS AND ASSIGNS
         7.4      ENTIRE AGREEMENT
         7.5      SEVERABILITY
         7.6      AMENDMENT AND WAIVER
         7.7      NOTICES
         7.8      FEES AND EXPENSES
         7.9      TITLES AND SUBTITLES
         7.10     COUNTERPARTS
         7.11     NO WAIVER

8.       ESCROW AGENT

9.       EXECUTION OF AGREEMENT


                                       i



                           PALATIN TECHNOLOGIES, INC.

                               PURCHASE AGREEMENT

    This Purchase Agreement (the "Agreement" or "Purchase Agreement") is made as
of ____________, 2000 by and between Palatin Technologies, Inc., a Delaware
corporation (the "Company"), with its principal office at 103 Carnegie Center,
Suite 200, 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 $5,000,000 and
a maximum of $15,000,000 (a) shares (the "Shares") of the Company's Common
Stock, $.01 par value per share (the "Common Stock"), and (b) redeemable
warrants (the "Warrants") entitling the investor to purchase one (1) share of
common stock for every five (5) shares of common stock purchased under the
agreement. The Shares and the Warrants offered in the Offering shall sometimes
collectively be referred to herein as the "Securities." The Company will sell
the Securities to Purchasers pursuant to Regulation D ("Regulation D") and/or
Regulation S ("Regulation S") 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 reported closing bid price
for the Common Stock on the American Stock Exchange (symbol "PTN") for the day
immediately preceding the initial closing date and any subsequent closing dates,
(as defined below). Every five shares 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 125% of the Offering Price.


                                    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:

    1.  PURCHASE AND SALE OF SECURITIES.

        1.1 ISSUE OF SECURITIES.

            (a) The Company has authorized the issuance and sale of a minimum of
        $5,000,000 and a maximum of $15,000,000 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
$5,000,000 of Securities have been accepted, which is expected to occur on or
about September 8, 2000. 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 $15,000,000 of Securities have been accepted by the Company but
no later than September 22, 2000, unless extended by the Company for an
additional period not exceeding 60 days, without notice to the Purchaser. 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 Mintz Levin
Cohn Ferris Glovsky and Popeo PC as the escrow agent and, thereafter, such
payment will be deposited as soon as practicable in an escrow account for the
undersigned's benefit. The wire transfer shall be made to Mintz Levin Cohn
Ferris Glovsky and Popeo PC, 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 and/or any subsequent Closing is
based on an estimated price per share of Common Stock of $6.50. The Purchaser
agrees to remit to the Company on the Initial Closing and/or any Interim Closing
the balance of the Payment if the Offering Price is greater than $6.50 per
share. The

                                       2




Company agrees to promptly remit to the Purchaser any excess Payment
made by such Purchaser if the Offering Price is less than $6.50 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.

    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. Alternatively, if Purchaser is a non-United States resident,
    such purchaser represents that it (a) is acquiring the Securities solely for
    its own account for investment purposes and not with a view to distribution
    or resale, and (b) will not sell, hypothecate, pledge or otherwise dispose
    of any interest in the Securities, in the United States, its territories and
    possessions or any area subject to its jurisdiction, or to any partnership

                                       3




    or other entity created or organized therein, unless such Securities have
    been either registered under the Act or are exempt from the registration
    requirements of the Act; in the opinion of the Company's counsel, and unless
    such Purchaser has complied with any applicable restrictions on transfer in
    this Agreement.

        3.3.2 Purchaser understands 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 is familiar with and understands the terms of the
    Offering, including the rights to which the Purchaser is entitled under the
    Registration Rights Agreement. The Purchaser has been furnished with and has
    carefully read the Company's Current Report on Form 8-K dated June 14, 2000
    (the "8-K"), the Company's Quarterly Reports on Form 10-QSB for the Quarters
    ended March 31, 2000 and December 31, 1999 (the "10-Qs"), and the Company's
    Annual Report on Form 10-KSB for the year ended June 30, 1999 (the "10-K").
    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 10-K, 10-Qs and 8-K 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 has determined that the
    Securities being subscribed for by the Purchaser are a suitable investment
    for the Purchaser.

                                       4




        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 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
    and country 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 "Important Factors Affecting Our
    Business" in the 10-K, and has taken full cognizance of and understands all
    of the risks related to the purchase of the Securities.

    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.

                                       5




    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.

                                       6




        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 this Agreement or the Registration Rights Agreement
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 Privatech, Inc. is acting as a finder in connection with this Offering
solely in Europe and will receive (i) a fee equal to 7% of the aggregate cash
value of the amount of equity investment raised by the Company through the
introduction by Privatech to qualified individuals or institutions and (ii)
warrants to purchase shares of Common Stock equal to 10% of the securities sold
as part of such investment.

    5.7 The Purchaser acknowledges that the information contained in this
Agreement and the Registration Rights Agreement or otherwise made available to
the Purchaser is confidential and non-public and agrees that all such
information shall be kept in confidence by

                                       7



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,
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 and 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. ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITY HAS NOT RECOMMENDED THE SECURITIES. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS
PURCHASE AGREEMENT OR OTHER WRITINGS DELIVERED IN CONNECTION WITH THE OFFER. 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

                                       8



set forth in Section 7.8 and except that the provisions of Section 3.5 shall not
terminate and shall remain in effect.

    (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.

                                       9




    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 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 Mintz Levin Cohn Ferris Glovsky and Popeo PC 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 provisions of any agreement shall not bind the escrow agent
among the other parties hereto except this Section 8 of this Agreement.

                                       10




    (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, 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 such 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.

                                       11




    (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 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)


                                       12





____________________________________________________
Social Security or Taxpayer
Identification Number of Subscriber(s)


____________________________________________________
Number of Shares Subscribed for


____________________________________________________
Number of Warrants Subscribed for


$___________________________________________________
U.S. Dollar Amount Invested

Date:    ____________, 2000

* If Subscriber is a Registered Representative with a 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



                                  Subscription Accepted:

                                  PALATIN TECHNOLOGIES, INC.

                                  By: _____________________________________
                                           Carl Spana, Ph.D.
                                           Chief Executive Officer
Date:  __________, 2000




                                       13






                                    EXHIBIT A

                           WIRE TRANSFER INSTRUCTIONS


    Wire transfers should be made to Mintz Levin Cohn Ferris Glovsky and Popeo
PC, as Escrow Agent, [Fleet Bank of Massachusetts, N.A., Malden MA 02148,
ABA#011000138, Account Name: Mintz Levin Cohn Ferris Glovsky and Popeo PC Firm
Account, Account Number 5838-6095, Reference: Palatin Technologies]

EX-10.2

                          REGISTRATION RIGHTS AGREEMENT

    This Registration Rights Agreement (this "Agreement") is made this ___ day
of _________, 2000, 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 up to a maximum of $15,000,000 of (a) shares (the "Shares") of the
Company's Common Stock, $.01 par value per share (the "Common Stock") and (b)
redeemable warrants (the "Warrants") to purchase one share of Common Stock of
the Company for every five shares of Common Stock purchased under the Purchase
agreement. The Shares and Warrants are sometimes collectively called 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 a Registration
            Statement or Statements or similar documents in compliance with the
            Securities Act,

                                       1




            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 the later to occur of sixty (60) days following the Final
            Closing Date of the Offering or November 22, 2000, the Company shall
            use its best efforts to file with the Commission a Registration
            Statement for the purpose of Registering, upon the effectiveness of
            such Registration Statement, the Shares and the Warrant Shares. The
            Company will use its

                                       2



            reasonable best efforts to ensure that the Registration Statement is
            declared effective within 60 days of the filing date.

        (b) The Company shall use its best efforts to maintain with the
            Commission a registration statement effective until the earlier of
            the second anniversary of the first date on which no Warrants remain
            unexercised or unexpired or the date all shares purchased by the
            Investors may be sold under Rule 144 during any 90 day period.

        (c) In the event the Registration Statement has not been declared
            effective by the SEC within 90 days of filing, the Company shall for
            each 30 day period ("Penalty Period") during which the shares of
            Common Stock remain unregistered pay to Investors, at the Company's
            election, either the number of additional shares of Common Stock
            equal to 1% ("Payment Amount") of the aggregate purchase price paid
            for the shares of Common Stock purchased under the Agreement divided
            by the market value (determined as of the last trading day of the
            Penalty Period) of a share of Common Stock ("Penalty Shares"), or a
            cash payment equal to the Payment Amount.



    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

                                       3



            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 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.

                                       4




        (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
            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;

                                       5




        (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 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.

                                       6





    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 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

                                       7



            Selling Stockholder, each of its 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
            advised by counsel that there are one or more legal defenses
            available to the indemnified parties which are different from or

                                       8




            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.


3.  COVENANTS OF THE COMPANY.

    The Company agrees to:

                                       9





        (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 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.

                                       10





        (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.

        (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.

                                       11





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.

    (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.

                                       12





    (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.

    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:    _____________, 2000


                                       13





PALATIN TECHNOLOGIES, INC.



By:_____________________________________
Carl Spana Ph.D.
Chief Executive Officer

Date:    _________________, 2000



                                       14

EX-10.3

                                    Exhibit A

                           FORM OF WARRANT CERTIFICATE

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
                              ______________, 2005



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 ________ fully paid and nonassessable shares 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 $_____ 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, or 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.

         This Warrant Certificate is issued under and in accordance with the
Purchase Agreement dated as of ___________, 2000, 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.

         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 nonassessable, 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.

         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.

         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.

Subject to the provisions hereof, the Exercise Price in effect from time to time
shall be subject to adjustment, as follows:

         (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

                                       2




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 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

                                       3




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.

         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 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 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.

         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

                                       4




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.

         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.

         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 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.

         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

                                       5




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.

         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 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.

         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.

In no event shall the Exercise Price be adjusted below the par value per share
of the Common Stock.

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

                                       6



          (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.

         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 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.

         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.

         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.

         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 ____________, 2005. All
Warrants evidenced hereby shall thereafter become void.

                                       7




         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.

         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 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 charge 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.

         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.

         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. The Company shall
destroy any Warrant Certificate so canceled.

         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:

                                       8




                  (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.

         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:_____________________________
                                                  Stephen T. Wills, CFO



                                       9




                                     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.



                                       10





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.



                                       11




                                     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: __________________ , 2000.



(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.)



                                       12

EX-27

 

<ARTICLE>                     5
<LEGEND>
This schedule contains summary financial information extracted from the
registrant's unaudited consolidated financial statements for the three month
period ended September 30, 2000 and is qualified in its entirety by reference to
those financial statements.


<CURRENCY>                      U.S. Dollars

                             
<PERIOD-TYPE>                   3-MOS
<FISCAL-YEAR-END>                              JUN-30-2000
<PERIOD-START>                                  JUL-1-2000
<PERIOD-END>                                   SEP-30-2000
<EXCHANGE-RATE>                                          1
<CASH>                                          11,031,228
<SECURITIES>                                     3,218,836
<RECEIVABLES>                                      795,081
<ALLOWANCES>                                             0
<INVENTORY>                                              0
<CURRENT-ASSETS>                                14,788,366
<PP&E>                                           2,503,854
<DEPRECIATION>                                     981,464
<TOTAL-ASSETS>                                  17,013,840
<CURRENT-LIABILITIES>                            1,782,949
<BONDS>                                                  0
<PREFERRED-MANDATORY>                                    0
<PREFERRED>                                          7,309
<COMMON>                                           100,230
<OTHER-SE>                                      15,123,352
<TOTAL-LIABILITY-AND-EQUITY>                    17,013,840
<SALES>                                                  0
<TOTAL-REVENUES>                                   855,081
<CGS>                                                    0
<TOTAL-COSTS>                                    3,162,172
<OTHER-EXPENSES>                                         0
<LOSS-PROVISION>                                         0
<INTEREST-EXPENSE>                                   2,280
<INCOME-PRETAX>                                 (2,222,079)
<INCOME-TAX>                                             0
<INCOME-CONTINUING>                             (2,222,079)
<DISCONTINUED>                                           0
<EXTRAORDINARY>                                          0
<CHANGES>                                                0
<NET-INCOME>                                    (2,222,079)
<EPS-BASIC>                                           (.27)
<EPS-DILUTED>                                         (.27)