SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A1
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended DECEMBER 31, 1995 Commission File No. 0-12957
ENZON, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-2372868
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
20 KINGSBRIDGE ROAD, PISCATAWAY, NEW JERSEY 08854
(Address of principal executive offices) (Zip Code)
(908) 980-4500
(Registrant's telephone number, including area code:)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
The number of shares of common stock, $.01 par value, outstanding as of
February 7, 1996 was 27,428,946 shares.
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ENZON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
December 31, 1995 and June 30, 1995
ASSETS LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, June 30, December 31, June 30,
1995 1995 1995 1995
(unaudited) * (unaudited) *
Current assets: Current liabilities:
Cash and cash Accounts payable $2,483,176 $1,561,968
equivalents $5,309,045 $8,102.989 Accrued expenses 3,414,892 4,045,302
Accounts receivable 2,775,147 2,362,277 Other current liabilities due to Sanofi - 1,312,829
Inventories 1,053,829 729,453 Winthrop
Other current assets 282,160 185,226 Total current liabilities 5,898,068 6,920,099
Total current assets 9,420,181 11,442,945 Accrued rent 1,001,350 1,006,508
Royalty advance - RPR 2,747,986 2,955,841
Other liabilities 2,937 4,076
3,752,273 3,966,425
Property and equipment 15,806,365 15,758,058 Commitments and contingencies
Less accumulated
depreciation Stockholders' equity:
and amortization 10,948,825 9,968,024
4,857,540 5,790,034 Preferred stock-$.01 par value, authorized
3,000,000 shares;
Other assets: issued and outstanding 109,000 shares at
Investments 78,616 78,616 December 31, 1995 and June 30, 1995
Other assets, net 55,952 46,627 (liquidation preference $25 per share
Patents, net 1,745,650 1,825,820 aggregating $2,725,000
1,880,218 1,951,063 at December 31, 1995) 1,090 1,090
Common Stock-$.01 par value, authorized
40,000 shares; issued and outstanding
26,328,874 shares at December 31,
1995 and June 30, 1995 263,289 263,289
Additional paid-in capital 111,740,179 111,494,180
Accumulated deficit (105,496,960)(103,461,041)
Total stockholders' equity 6,507,598 8,297,518
Total assets $16,157,939 $19,184,042 Total liabilities and
stockholders' equity $16,157,939 $19,184,042
*Condensed from audited financial statements.
The accompanying notes are an integral part of these unaudited consolidated
condensed financial statements.
ENZON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
Three Months and Six Months Ended December 31, 1995 and 1994
(Unaudited)
Three months ended Six months ended
December 31, December 31, December 31, December 31,
1995 1994 1995 1994
Revenues
Sales $2,541,976 $2,102,147 $5,351,024 $4,159,324
Contract revenue 788,236 100,000 904,736 1,900,000
Total revenues 3,330,212 2,202,147 6,255,760 6,059,324
Costs and expenses
Cost of sales 1,063,637 436,667 2,028,338 1,387,226
Research and development expenses 2,390,822 3,402,126 5,081,470 6,758,350
Selling, general and administrative 1,404,350 1,872,380 2,676,320 3,819,717
expenses
Total costs and expenses 4,858,809 5,711,173 9,786,128 11,965,293
Operating loss (1,528,597) (3,509,026) (3,530,368) (5,905,969)
Other income (expense)
Interest and dividend income 81,734 42,999 184,079 88,745
Interest expense (4,263) (818) (10,952) (3,588)
Other 1,318,379 39,238 1,321,322 685,584
1,395,850 81,419 1,494,449 770,741
Net loss ($132,747) ($3,427,607) ($2,035,919) ($5,135,228)
Net loss per common share ($0.01) $(0.14) ($0.08) ($0.21)
Weighted average number of common
shares outstanding
during the period 26,328,874 25,156,485 26,328,874 24,940,527
The accompanying notes are an integral part of these unaudited consolidated
condensed financial statements.
ENZON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Six Months Ended December 31, 1995 and 1994
(Unaudited)
Six months ended
December 31, December 31,
1995 1994
Cash flows from operating activities:
Net loss ($2,035,919) ($5,135,228)
Adjustment for decrease in liability recognized
pursuant to Sanofi Winthrop Agreement (1,312,829) -
Adjustment for depreciation and amortization 1,060,971 1,314,897
Compensation expense for issuance of stock options - 31,535
Reserve for shutdown of Enzon Labs Inc. - (75,601)
Gain on retirement of equipment - (37,968)
(Decrease) increase in accrued rent (5,158) 98,650
Decrease in royalty advance - RPR (207,855) -
Changes in assets and liabilities (243,836) (1,285,428)
Net cash used in operating activities (2,744,626) (5,089,143)
Cash flows from investing activities:
Capital expenditures (48,307) (211,321)
Proceeds from sale of equipment - 830,225
Proceeds from cash surrender value of
officers' life insurance - 373,186
Net cash (used in) provided by
investing activities (48,307) 992,090
Cash flows from financing activities:
Proceeds from issuance of common stock - 1,733,042
Principal payments of obligations
under capital leases (1,011) (12,712)
Net cash (used in) provided by
financing activities (1,011) 1,720,330
Net decrease in cash and cash equivalents (2,793,944) (2,376,723)
Cash and cash equivalents at beginning
of period 8,102,989 5,731,461
Cash and cash equivalents at end of period $5,309,045 $3,354,738
The accompanying notes are an integral part of these unaudited consolidated
condensed financial statements.
ENZON, INC. AND SUBSIDIARIES
Notes To Consolidated Condensed Financial Statements
(Unaudited)
(1) ORGANIZATION AND BASIS OF PRESENTATION
The unaudited consolidated condensed financial statements have been
prepared from the books and records of Enzon, Inc. and subsidiaries in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting only of normal and recurring adjustments) considered necessary for
a fair presentation have been included. Interim results are not necessarily
indicative of the results that may be expected for the year.
(2) NET LOSS PER COMMON SHARE
Net loss per common share is based on net loss for the relevant period,
adjusted for cumulative undeclared preferred stock dividends of $109,000 for
the six months ended December 31, 1995 and 1994, and $55,000 for the three
months ended December 31, 1995 and 1994, divided by the weighted average number
of shares issued and outstanding during the period. Stock options, warrants
and common stock issuable upon conversion of the preferred stock are not
reflected as their effect would be antidilutive for both primary and fully
diluted earnings per share computations. The total number of shares issued to
former shareholders of Enzon Labs Inc. (formerly known as Genex Corporation),
which was acquired on October 31, 1991, have been included in the weighted
average number of outstanding shares, as if all shares had been issued on
October 31, 1991, the date of acquisition.
(3) INVENTORIES
The composition of inventories at December 31, 1995 and June 30, 1995 is
as follows:
December 31, June 30,
1995 1995
Raw materials $467,000 $398,000
Work in process 459,000 134,000
Finished goods 128,000 260,000
$1,054,000 $792,000
(4) CASH FLOW INFORMATION
The Company considers all highly liquid securities with original
maturities of three months or less to be cash equivalents. Cash payments for
interest were approximately $11,000 and $1,000 for the six months ended
December 31, 1995 and 1994, respectively. There were no income tax payments
made for the six months ended December 31, 1995 and 1994. As part of the
commission due to the real estate broker in connection with the termination of
the lease at 40 Kingsbridge Road, the Company issued 150,000 five-year warrants
to purchase the Company's Common Stock at $2.50 per share during the six months
ended December 31, 1995. This transaction is a non-cash financing activity.
ENZON, INC. AND SUBSIDIARIES
Notes To Consolidated Condensed Financial Statements, Continued
(Unaudited)
(5) NON-QUALIFIED STOCK OPTION PLAN
During the six months ended December 31, 1995, the Company issued 550,000
stock options at an average exercise price of $3.42 under the Company's Non-
Qualified Stock Option Plan (the "Plan"), of which 180,000 were granted to
executive officers of the Company. None of the options granted during the
period are exercisable as of December 31, 1995. All options were granted with
exercise prices that equalled or exceeded the fair market value of the
underlying stock on the date of grant.
On December 5, 1995, the stockholders voted to amend the Plan to increase
the number of shares reserved for issuance to 6,200,000.
(6) RESTRUCTURING EXPENSE
During the quarter ended March 31, 1995, the Company recorded a
restructuring charge related to a workforce reduction and the termination of
one of its facility leases. As of June 30, 1995, approximately $758,000 of the
restructuring charge was unpaid and recorded in accrued expenses in the
Consolidated Condensed Balance Sheet. During the six months ended December 31,
1995, the Company paid the remaining $758,000, the majority of which
represented fees due the Company's real estate broker in connection with the
termination of the lease.
(7) OTHER INCOME
During the quarter ended December 31, 1995, the Company recognized as
other income approximately $1,313,000, representing the unused portion of an
advance received under a development and license agreement with Sanofi
Winthrop, Inc. ("Sanofi"). During October 1995, the Company learned that
Sanofi intended to cease development of PEG-SOD (Dismutec) due to the product's
failure to show a statistically significant difference between the treatment
group and the control group in a pivotal Phase III trial. Due, in part, to
this product failure, the Company believes it has no further obligations under
its agreement with Sanofi with respect to the $1,313,000 advance and therefore,
the Company has reversed the amount due Sanofi previously recorded as a current
liability.
(8) SUBSEQUENT EVENT
On January 31, 1996, the Company completed a private placement (the
"Private Placement") of Common Stock and Series B Convertible Preferred Stock
("Convertible Preferred Stock"), resulting in gross proceeds of $7,000,000,
with an institutional investor pursuant to Regulation D of the Securities Act
of 1933, as amended. The Company issued 1,094,890 shares of Common Stock for
$3,000,000, raising the outstanding common shares to 27,423,764 and 40,000
shares of Convertible Preferred Stock for $4,000,000. The Company also issued
five-year warrants (the "Warrants") to purchase 638,686 shares of Common Stock
at $4.11 per share. The Convertible Preferred Stock is convertible commencing
70 days after issuance. The conversion price for the Convertible Preferred
Stock is 80% of the market price for the five consecutive trading days ending
one trading day prior to the date of the conversion notice and the stated value
is $100 per share. The Convertible Preferred Stock will not pay a dividend.
In connection with the Private Placement, the Company agreed to register on a
Registration Statement on Form S-3 the Common Stock issued, the shares of
Common Stock underlying the Convertible Preferred Stock, the shares of Common
Stock underlying the Warrants and certain shares of Common Stock issuable in
the event the Company does not comply with certain of its obligations under the
agreements. The issuance of the Private Placement stock and warrants would not
have changed the net loss per common share reported for the three and six
months ended December 31, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ENZON, INC.
(Registrant)
Date: February 23, 1996 By:/s/_____________________
Peter G. Tombros
President and Chief Executive
Officer
By:/s/______________________
Kenneth J. Zuerblis
Vice President, Finance and
Chief Executive Officer
