Filed pursuant to Rule 424(b)(3)
Registration No. 333-248528
PROSPECTUS
Subscription Rights to Purchase Up to 40,000 Units
Consisting of an Aggregate of Up to 30,000,000 Shares of Common
Stock
and Up to 40,000 Shares of Series C Preferred
Stock
at a Subscription Price of $1,090 Per Unit
We are distributing to holders of our common stock, par value $0.01
per share, at no charge, transferable subscription rights
(“Subscription Rights”) to purchase units (“Units”).
We refer to the offering that is the subject of this prospectus as
the “Rights Offering.” In the Rights Offering, you will
receive one Subscription Right for every share of common stock
owned at 5:00 p.m., New York City Time, on September 23, 2020,
the record date of the Rights Offering (the “Record Date”).
The Subscription Rights will be transferable and will be a new
issue of securities with no prior trading market. Although the
Subscription Rights are transferable, we do not intend to list the
Subscription Rights for trading on any securities exchange or
recognized trading system and your ability to transfer the
Subscription Rights will be limited and difficult.
For every 1,105 Subscription Rights held, you will be entitled to
purchase one Unit at a subscription price per Unit of $1,090 (the
“Subscription Price”). Each Unit consists of one share of
newly designated Series C Preferred Stock, par value $0.01 per
share (the “Preferred Stock”), and 750 shares of common
stock.
The Preferred Stock will rank senior to our common stock. The
liquidation preference of the Preferred Stock will initially be
$1,000 per share. On an annual basis, our Board of Directors may,
at its sole discretion, cause a dividend with respect to the
Preferred Stock to be paid in cash to the holders in an amount
equal to 3% of the liquidation preference then in effect. If the
dividend is not so paid in cash, the liquidation preference will be
adjusted and increased annually by an amount equal to 5% of the
liquidation preference per share as in effect at such time. The
Preferred Stock will be non-convertible and, except as required by
law, holders of Preferred Stock will have no voting rights. On and
after November 1, 2022, we will have the option to redeem the
shares of Preferred Stock, in whole or in part, at any time for an
amount up to or equal to the liquidation preference per share as in
effect at such time. Shares of Preferred Stock will also be
redeemable, at the option of the holder, in the event of a change
of control, as defined herein, of our company. The Preferred Stock
will not be listed for trading or quoted on any securities exchange
or recognized trading system.
The maximum aggregate number of Units, and the corresponding
aggregate number of shares of common stock and Preferred Stock
listed on this cover page and elsewhere in this prospectus,
are based on 44,214,603 shares of common stock outstanding as of
the Record Date.
The Subscription Rights are transferable until the Expiration Date
as hereinafter defined and, therefore, you may sell, transfer or
assign your Subscription Rights to anyone during the offering
period. There is no public market for the Subscription Rights and
we do not intend to list the Subscription Rights on any securities
exchange or recognized trading system. If you desire to transfer
your Subscription Rights, you will need to locate a buyer or
transferee of your Subscription Rights. We do not intend to
facilitate transfers among stockholders or otherwise create a
market for transfers and sales. Accordingly, we cannot provide you
any assurances as to the liquidity of a market for the Subscription
Rights and your ability to transfer the Subscription Rights will be
limited and difficult.
The Subscription Rights will expire if they are not exercised by
5:00 p.m., New York City Time, on October 9, 2020, unless the
Rights Offering is extended or earlier terminated by us in our sole
discretion (as it may be so extended, or earlier terminated, the
“Expiration Date”); provided, however, that
we may not extend the Expiration Date by more than 30 calendar days
past the original Expiration Date. If you exercise your
Subscription Rights, you may revoke such exercise before the
Expiration Date by following the instructions herein. If the
Expiration Date is extended, you may revoke your exercise of
Subscription Rights at any time until the final Expiration Date as
so extended. If we terminate the Rights Offering, all subscription
payments received will be returned as soon as practicable
thereafter without interest or deduction.
We have entered into an investment agreement (the “Investment
Agreement”) with Icahn Capital LP, which, together with its
affiliates, beneficially owns approximately 15% of our common stock
before giving effect to the Rights Offering, pursuant to which, and
subject to the terms and conditions thereof, Icahn Capital LP
has agreed to subscribe for its pro-rata share of the Rights
Offering. Icahn Capital LP has also agreed to purchase all Units
that remain unsubscribed for at the expiration of the Rights
Offering to the extent that other holders elect not to exercise all
of their respective Subscription Rights. No fees will be paid by us
to Icahn Capital LP in consideration of such investment commitment.
In light of the investment commitment, we anticipate that we will
receive gross proceeds of at least $43.6 million if the Rights
Offering is completed, whether or not any of the Subscription
Rights are exercised by the holders thereof.
Continental Stock Transfer & Trust Company, our transfer
agent, will serve as the Subscription Agent for the Rights
Offering, and Georgeson LLC will serve as the Information Agent for
the Rights Offering. The Subscription Agent will hold the funds we
receive from subscribers until we complete, abandon or terminate
the Rights Offering. If you want to participate in this Rights
Offering and you are the record holder of your shares, we recommend
that you submit your subscription documents to the Subscription
Agent well before the deadline. If you want to participate in this
Rights Offering and you hold shares through a broker, dealer, bank
or other nominee, you should promptly contact your broker, dealer,
bank or other nominee and submit your subscription documents in
accordance with the instructions and within the time period
provided by your broker, dealer, bank or other nominee. For a
detailed discussion, see “Description of the Rights Offering.”
Our common stock is currently quoted on the OTCQX market of the OTC
Markets Group, Inc. (“OTC”) under the symbol “ENZN.” On
September 22, 2020, the last reported sale price of our common
stock was $0.19 per share. There is no established public trading
market for the Subscription Rights, the Units or the Preferred
Stock, and we do not intend to list or quote the Subscription
Rights, the Units or the Preferred Stock on any securities exchange
or recognized trading system. Although the Subscription Rights are
transferable, we cannot give
you any assurance that a market for the Subscription Rights will
develop or, if a market does develop, how long it will continue or
at what prices the Subscription Rights will trade. You are
urged to obtain a current price quote for our common stock before
exercising your Subscription Rights.
The exercise of your Subscription Rights and investment in our
securities involves a high degree of risk. You should carefully
read the Risk Factors beginning on page 16, as well as the
risk factors in any document we incorporate by reference into this
prospectus before you make a decision as to the exercise of your
Subscription Rights.
| |
|
Per Unit |
|
|
Total |
|
| Subscription Price |
|
$ |
1,090 |
|
|
$ |
43,600,000 |
(1) |
(1) Before deducting estimated expenses of approximately
$200,000.
Our Board of Directors is not making any recommendation regarding
whether you should exercise your Subscription Rights.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal
offense.
It is anticipated that delivery of the common stock and Preferred
Stock comprising the Units will be made by book-entry credit on or
about October 16, 2020.
The date of this prospectus is September 23, 2020.
TABLE OF CONTENTS
ABOUT THIS
PROSPECTUS
This prospectus is part of a registration statement that we have
filed with the Securities and Exchange Commission (the
“Commission”). The exhibits to the registration statement
contain the full text of certain contracts and other important
documents we have summarized in this prospectus. Since these
summaries may not contain all the information that you may find
important in deciding whether to purchase our securities, you
should review the full text of these documents. The registration
statement and the exhibits can be obtained from the Commission as
indicated under the sections of this prospectus entitled “Where You
Can Find More Information” and “Incorporation of Certain Documents
by Reference.”
You should rely only on the information contained in this
prospectus or in any prospectus supplement or free-writing
prospectus or any amendment thereto. We have not authorized anyone
to provide you with additional or different information from that
contained in this prospectus. The information contained in this
prospectus is accurate only as of the date on the front cover of
this prospectus regardless of the time of delivery of this
prospectus or any exercise of the Subscription Rights. Our
business, financial condition, results of operations and prospects
may have changed since those dates. You should read carefully the
entirety of this prospectus and any applicable prospectus
supplement, as well as the documents incorporated by reference in
this prospectus and any applicable prospectus supplement, before
making an investment decision.
The distribution of this prospectus and the Rights Offering and the
sale of our securities in certain jurisdictions may be restricted
by law. This prospectus does not constitute an offer of, or a
solicitation of an offer to buy, any of our securities in any
jurisdiction in which such offer or solicitation is not permitted.
No action is being taken in any jurisdiction outside the United
States to permit an offering of our securities or possession or
distribution of this prospectus in that jurisdiction. Persons who
come into possession of this prospectus in jurisdictions outside
the United States are required to inform themselves about and to
observe any restrictions as to this offering and the distribution
of this prospectus applicable to those jurisdictions.
References in this prospectus to “Enzon,” the
“Company,” “we,” “us,” “our,” or
“its,” unless the context otherwise requires, refer to Enzon
Pharmaceuticals, Inc., a Delaware corporation, together with
its consolidated subsidiaries, and references in this prospectus to
the “Board of Directors” or “Board,” unless the
context otherwise requires, refer to the Board of Directors of
Enzon Pharmaceuticals, Inc.
CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS
This prospectus includes “forward-looking statements,” as such term
is used within the meaning of the Private Securities Litigation
Reform Act of 1995. These “forward-looking statements” are not
based on historical fact and involve assessments of certain risks,
developments, and uncertainties in our business looking to the
future. Such forward-looking statements can be identified by the
use of terminology such as “may,” “will,” “should,” “expect,”
“anticipate,” “estimate,” “intend,” “continue,” or “believe,” or
the negatives or other variations of these terms or comparable
terminology. Forward-looking statements may include projections,
forecasts, or estimates of future performance and developments.
Forward-looking statements contained in this prospectus are based
upon assumptions and assessments that we believe to be reasonable
as of the date of this prospectus. Whether those assumptions and
assessments will be realized will be determined by future factors,
developments, and events, which are difficult to predict and may be
beyond our control. Actual results, factors, developments, and
events may differ materially from those we assumed and assessed.
Risks, uncertainties, contingencies, and developments, including
those identified in the “Risk Factors” section of this prospectus
and in our most recent annual report on
Form 10-K, subsequent quarterly reports on
Form 10-Q and other filings we make with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”), incorporated by reference herein, could cause our future
operating results to differ materially from those set forth in any
forward-looking statement. We cannot assure you that any such
forward-looking statement, projection, forecast or estimate
contained can be realized or that actual returns, results, or
business prospects will not differ materially from those set forth
in any forward-looking statement. Given these uncertainties,
readers are cautioned not to place undue reliance on such
forward-looking statements. We disclaim any obligation to update
any such factors or to publicly announce the results of any
revisions to any of the forward-looking statements contained herein
to reflect future results, events or developments.
QUESTIONS AND ANSWERS
RELATING TO THE RIGHTS OFFERING
The following are examples of what we anticipate will be common
questions about the Rights Offering. The answers are based on
selected information from this prospectus. The following questions
and answers do not contain all of the information that may be
important to you and may not address all of the questions that you
may have about the Rights Offering. This prospectus contains more
detailed descriptions of the terms and conditions of the Rights
Offering and provides additional information about us and our
business, including potential risks related to the Rights Offering,
our common stock and Preferred Stock and our business.
Why are we conducting the Rights Offering?
The purpose of the offering is to position us as a public company
acquisition vehicle, where we can become an acquisition platform
and more fully utilize our net operating loss carryforwards and
enhance stockholder value. However, we do not have any current
plans, arrangements or understandings with respect to any
acquisitions or investments, and we are not currently involved in
any negotiations with respect to any such transactions. See “Use of
Proceeds.”
What is the Rights Offering?
We are distributing, at no charge, to all holders of our common
stock on the Record Date, transferable Subscription Rights to
purchase Units. For every 1,105 Subscription Rights held, you will
be entitled to purchase one Unit at the Subscription Price of
$1,090 per Unit. In the Rights Offering, you will receive one
Subscription Right for every share of common stock owned at 5:00
p.m., New York City Time, on the Record Date. Each Unit consists of
one share of newly designated Preferred Stock and 750 shares of our
common stock.
The common stock to be issued in the Rights Offering, like our
existing shares of common stock, will be quoted on the OTCQX market
of the OTC under the symbol “ENZN” and will not be listed for
trading on a national securities exchange. The Subscription Rights,
Units and Preferred Stock to be issued in the Rights Offering will
not be listed for trading or quoted on any securities exchange or
recognized trading system.
The Subscription Rights granted to you are transferable until the
Expiration Date and, therefore, you may sell, transfer or assign
your Subscription Rights to anyone during the offering period. The
Subscription Rights will be a
new issue of securities with no prior trading market. Although the
Subscription Rights are transferable, we do not intend to apply to
list the Subscription Rights for trading on any securities exchange
or any other market and your ability to transfer the Subscription
Rights will be limited and difficult. If you desire to transfer
your Subscription Rights, you will need to locate a buyer or
transferee of your Subscription Rights. We do not intend to
facilitate transfers among stockholders or otherwise create a
market for transfers and sales. Accordingly, we cannot provide you
any assurances as to the liquidity of a market for the Subscription
Rights. Furthermore, because there is likely to be an illiquid
market for the Subscription Rights, if any, the value that you
receive, if any, upon transfer of a Subscription Right will likely
be reduced, and may vary significantly from other transferors. We
are not responsible if you elect to sell your Subscription Rights
and no public or private market exists to facilitate the purchase
of Subscription Rights.
The maximum aggregate number of Units, and the corresponding
aggregate number of shares of common stock and Preferred Stock
listed on this cover page and elsewhere in this prospectus,
are based on 44,214,603 shares of common stock outstanding as of
the Record Date.
The Subscription Rights will expire if they are not exercised by
5:00 p.m., New York City Time, on the Expiration Date, unless
the Rights Offering is extended or earlier terminated by us in our
sole discretion; provided, however, that we may
not extend the Expiration Date by more than 30 calendar days past
the original Expiration Date. We will not be required to issue
Units to you if the Subscription Agent receives your Subscription
Rights Certificate or your subscription payment after that
time.
How do I exercise my Subscription Rights?
If you are a record holder of our common stock and wish to
participate in the Rights Offering, you must deliver to the
Subscription Agent, prior to the Expiration Date, all of the
following, which the Subscription Agent must receive (and funds
must clear) prior to 5:00 p.m., New York City Time, on
October 9, 2020, which is sixteen (16) calendar days
after the date of this prospectus:
|
· |
Your payment for exercise of the Subscription Rights. See the
section in this prospectus under the caption “Description of the
Rights Offering—Payment Method”; and |
| |
· |
Your
completed and fully executed Subscription Rights
Certificate. |
If you cannot deliver your Subscription Rights Certificate to the
Subscription Agent before the Expiration Date, you may use the
procedures for guaranteed delivery as described in “Description of
the Rights Offering—Guaranteed Delivery Procedures.”
If you are a beneficial owner of shares of our common stock that
are registered in the name of a broker, dealer, bank, or other
nominee, you will not receive a Subscription Rights Certificate.
Instead, we will issue one Subscription Right to such nominee
record holder for every share of our common stock held by such
nominee at the Record Date. If you are not contacted by your
nominee, you should promptly contact your nominee in order to
subscribe for Units in the Rights Offering and follow the
instructions provided by your nominee.
If you are a record holder of our common stock, the number of Units
you may purchase pursuant to your Subscription Rights is indicated
on the enclosed Subscription Rights Certificate. If you hold your
shares in the name of a broker, dealer, bank, or other nominee who
uses the services of the Depository Trust Company (“DTC”),
you will not receive a Subscription Rights Certificate. Instead,
DTC will issue one Subscription Right to your nominee record holder
for every share of our common stock that you beneficially own as of
the Record Date. See “Description of the Rights Offering—Exercise
of Rights.”
If you exercise your Subscription Rights, you may revoke such
exercise before the Expiration Date by following the instructions
herein. If the Expiration Date is extended, you may revoke your
exercise of Subscription Rights at any time until the final
Expiration Date as so extended. If we terminate the Rights
Offering, all subscription payments received will be returned as
soon as practicable thereafter without interest or deduction.
Will the Subscription Rights be listed or quoted?
No. We do not intend to list or quote the Subscription Rights on
any securities exchange or recognized trading system. Although the
Subscription Rights granted to you are transferable and, therefore,
you may sell, transfer or assign your Subscription Rights to anyone
during the offering period, your ability to transfer the
Subscription Rights will be limited and difficult. If you desire to
transfer your Subscription Rights, you will need to locate a buyer
or transferee of your Subscription Rights. We do not intend to
facilitate transfers among stockholders or otherwise create a
market for transfers and sales. We
cannot give you any assurance that a market for the Subscription
Rights will develop or, if a market does develop, how long it will
continue or at what prices the Subscription Rights will trade.
Furthermore, because there is likely to be an illiquid market for
the Subscription Rights, if any, the value that you receive, if
any, upon transfer of a Subscription Right will likely be reduced,
and may vary significantly from other transferors. We are not
responsible if you elect to sell your Subscription Rights and no
public or private market exists to facilitate the purchase of
Subscription Rights.
Please see “Risk
Factors—Although the Subscription Rights are transferable, there
may not be a trading market for the Subscription Rights, and the
transfer of Subscription Rights may be limited and difficult,” and
“Risk Factors—If you purchase Subscription Rights from a
transferor, we cannot assure you that you will be able to exercise
the Subscription Rights prior to the expiration of the Rights
Offering.”
What if I own shares in an amount that is not a whole multiple
of 1,105 as of the Record Date?
In the Rights Offering, you will receive one Subscription Right for
every share of common stock owned at 5:00 p.m., New York City Time,
on the Record Date. For every 1,105 Subscription Rights held, you
will be entitled to purchase one Unit at the Subscription Price. We
will not issue fractional Subscription Rights or fractional Units
in the Rights Offering. Accordingly, if you hold shares of common
stock in an amount other than a whole multiple of 1,105 shares and
wish to acquire a certain number of Units in the Rights Offering,
you will need to either acquire (i) additional shares of
common stock in the open market prior to the Record Date or
(ii) additional Subscription Rights during the offering period
of the Rights Offering, in each case in an amount sufficient to
increase your ownership of Subscription Rights to allow you to
participate at a level you desire to participate.
For example, if you hold 10,000 shares of common stock as of the
Record Date, you will receive 10,000 Subscription Rights but will
only be entitled to exercise 9,945 Subscription Rights for 9 Units
(consisting of an aggregate of 9 shares of Preferred Stock and
6,750 shares of common stock) for a Subscription Price of $9,810.
You will not be able to exercise any of the remaining 55
Subscription Rights you hold (10,000 Subscription Rights minus the
9,945 Subscription Rights exercised) unless you acquire an
additional number of Subscription Rights to hold at least 1,105
Subscription Rights during the offering period. Similarly, you
could increase the number of Subscription Rights you receive as of
the Record Date by acquiring 1,050 additional shares of common
stock prior to the Record Date.
What are the material terms of the Preferred Stock?
The Preferred Stock will rank senior to our common stock. The
liquidation preference of the Preferred Stock will be initially
$1,000 per share. On an annual basis, our Board of Directors may,
at its sole discretion, cause a dividend with respect to the
Preferred Stock to be paid in cash to the holders in an amount
equal to 3% of the liquidation preference as in effect at such
time. If the dividend is not so paid in cash, the liquidation
preference will be adjusted and increased annually by an amount
equal to 5% of the liquidation preference per share as in effect at
such time, that is not paid in cash to the holders on such date.
The accretion will continue until the shares of Preferred Stock are
redeemed, or until we liquidate, dissolve, or wind-up our affairs
at which time the Preferred Stock will have a preference in respect
of assets available for distribution to our stockholders. Due to
our ability to pay dividends on our Series C Preferred Stock
in kind by increasing the liquidation preference of the shares of
our Series C Preferred Stock, the payment of accrued dividends
in cash may be deferred until the redemption by us or the holders,
as applicable, of the Preferred Stock, or until our dissolution,
liquidation or winding up. No plan, arrangement or agreement is
currently in place that would prevent us from paying dividends with
respect to the Preferred Stock in cash.
On and after November 1, 2022, we will have the option to redeem
the shares of Preferred Stock, in whole or in part, at any time for
an amount up to or equal to the liquidation preference per share as
in effect at such time. The Preferred Stock is also redeemable at
the option of the holders if we undergo a change in control, which
is defined as the earliest to occur of (a) the date on which a
majority of the members of our Board of Directors are not
Continuing Directors (as defined in the Certificate of Designation)
and (b) the date on which a “person” or “group” (within the
meaning of Section 13(d)(3) of the Exchange Act)
beneficially owns in excess of 50% of our common stock. The
Preferred Stock is not convertible into shares of our common stock
or any other series or class of our capital stock. Except as
required by law, holders of shares of Preferred Stock will have no
voting rights.
For additional information about the terms of the Preferred Stock,
see “Description of Securities—Preferred Stock—Series C
Preferred Stock.”
Will the Units or Preferred Stock be listed or quoted?
The Units and Preferred Stock will not be listed for trading or
quoted on any securities exchange or recognized trading system.
Will fractional Subscription Rights or fractional Units be
issued?
No. We will not issue fractional Subscription Rights or
fractional Units or cash in lieu of such fractions in this Rights
Offering. As a result, if you hold shares of common stock in an
amount other than a whole multiple of 1,105 shares and wish to
acquire a certain number of Units in the Rights Offering, you will
need to either acquire (i) additional shares of common stock
in the open market prior to the Record Date or (ii) additional
Subscription Rights during the offering period of the Rights
Offering, in each case in an amount sufficient to increase your
ownership of Subscription Rights to allow you to participate at a
level you desire to participate. See “What if I own shares in an
amount that is not a whole multiple of 1,105 as of the Record
Date?” above.
What effect will the Rights Offering have on our outstanding
common stock?
Based on 44,214,603 shares of common stock outstanding as of
the Record Date, assuming no other transactions by us involving our
common stock prior to the expiration of the Rights Offering, we
expect to have 74,214,603 shares of our common stock issued
and outstanding and 40,000 shares of Preferred Stock issued
and outstanding following the completion of the Rights Offering
(including the investment commitment). The number of shares of
common stock and Preferred Stock that we will issue in this Rights
Offering is based on 40,000 Units to be subscribed for in the
Rights Offering and reflects the completion of the investment
commitment.
How was the Subscription Price determined?
The Subscription Price of $1,090 per share was determined by the
Board of Directors based on many factors, including, among other
things: (i) the price at which our stockholders might be
willing to participate in the Rights Offering, (ii) the amount
of proceeds desired to achieve our financing goals,
(iii) potential market conditions, (iv) historical and
current trading prices for our common stock, and (v) the terms
of the Preferred Stock.
The Subscription Price was not determined on the basis of any
investment bank or third-party valuation that was commissioned by
us. The Subscription Price does not bear any particular
relationship to the book value of our assets, past operations, cash
flows, losses, financial condition or other criteria for
ascertaining value. You should not consider the Subscription Price
as an indication of the value of our company or any inherent value
of shares of our common stock or Preferred Stock. The Board of
Directors reserves the right, exercisable in its sole discretion,
to change the Subscription Price or determine to cancel or
otherwise alter the terms of the Rights Offering. After the date of
this prospectus, our common stock may trade at prices below the
Subscription Price. You should obtain a current price quote for our
common stock before exercising your Subscription Rights and make
your own assessment of our business and financial condition, our
prospects for the future, and the terms of this Rights Offering. In
addition, there is no established trading market for the Preferred
Stock to be issued pursuant to this Rights Offering, and the
Preferred Stock may not be widely distributed.
Am I required to exercise all of the Subscription Rights I
receive in the Rights Offering?
No. For every 1,105 Subscription Rights held, you will be
entitled to purchase one Unit at the Subscription Price. We will
not issue fractional Subscription Rights or fractional Units in the
Rights Offering. As a result, assuming you own Subscription Rights
in an amount that equals a whole multiple of 1,105, you may
exercise any number of your Subscription Rights in multiples of
1,105, or you may choose not to exercise any Subscription Rights.
If you do not exercise any Subscription Rights, the number of
shares of our common stock you own will not change and you will not
receive any shares of Preferred Stock. However, if you choose not
to exercise your Subscription Rights in full (or you cannot
exercise any Subscription Rights because you do not hold
Subscription Rights in an amount that equals a whole multiple of
1,105) and other holders of Subscription Rights do exercise their
Subscription Rights, your proportionate ownership interest in our
company will decrease. See “What if I own shares in an amount that
is not a whole multiple of 1,105 as of the Record Date?” above.
How soon must I act to exercise my Subscription Rights?
If you received a Subscription Rights Certificate and elect to
exercise any or all of your Subscription Rights, the Subscription
Agent must receive your completed and signed Subscription Rights
Certificate and payment for your Subscription Rights you elect to
exercise before the Rights Offering expires on October 9,
2020, at 5:00 p.m., New York City Time. If you hold your shares of
common stock in the name of a broker, dealer, bank, or other
nominee, your nominee may establish a deadline before the
expiration of the Rights Offering by which you must provide it with
your instructions to exercise your Subscription Rights, along with
the required subscription payment.
May I transfer my Subscription Rights?
The Subscription Rights are transferable until the Expiration Date
and, therefore, you may sell, transfer or assign your Subscription
Rights to anyone during the offering period. The value of the
Subscription Rights, if any, will be reflected by the market price.
Subscription Rights will be sold by individual holders. See “Will
the Subscription Rights be listed or quoted?” above.
Record Holders. If you are a holder of record of our common
stock, you may transfer the Subscription Rights evidenced by a
single Subscription Rights Certificate by completing the transfer
instructions in accordance with the instructions on your
Subscription Rights Certificate. A portion of the Subscription
Rights evidenced by a single Subscription Rights Certificate may be
transferred by delivering to the Subscription Agent a Subscription
Rights Certificate properly endorsed for transfer, with
instructions to register that portion of the Subscription Rights
indicated in the name of the transferee and to issue a new
Subscription Rights Certificate to the transferee evidencing the
transferred Subscription Rights.
Other Holders. If you are a beneficial owner of common stock
that is registered in the name of a broker, dealer, bank or other
nominee, you will need to coordinate a transfer through your
broker, dealer, bank or other nominee
All Holders. If you wish to transfer
all or a portion of your Subscription Rights, you should allow a
sufficient amount of time prior to the Expiration Date for: (i) the
transfer instructions to be received and processed by the
Subscription Agent or applicable broker, dealer, bank or other
nominee; (ii) if required, a new Subscription Rights Certificate to
be issued and transmitted to the transferee or transferees with
respect to transferred Subscription Rights and to the transferor
with respect to retained Subscription Rights, if any; and (iii) the
Subscription Rights evidenced by such new Subscription Rights
Certificates to be exercised by the recipients thereof. The
required time will depend upon the method by which delivery of the
Subscription Rights Certificates and payment is made and the number
of transactions you instruct the Subscription Agent to effect.
Please bear in mind that the Rights Offering period is limited.
Neither we nor the Subscription Agent shall have any liability to a
transferee or transferor of rights if Subscription Rights are not
received in time for exercise prior to the Expiration Date.
Subscription Rights not exercised by the Expiration Date will
expire and have no value. Neither we nor the Subscription Agent
shall have any liability with respect to any expired Subscription
Rights.
For more information on transferring your Subscription Rights, see
“Description of the Rights Offering—Transferability of Subscription
Rights.”
Do any directors, officers, or principal stockholders have an
interest in the Rights Offering?
All holders of our common stock as of the Record Date for the
Rights Offering will receive, at no charge, the transferable
Subscription Rights to purchase Units as described in this
prospectus. To the extent that our directors and officers hold
shares of our common stock as of the Record Date, they will receive
the Subscription Rights and, while they are under no obligation to
do so, will be entitled to participate in the Rights Offering. As
of September 14, 2020, none of our directors or officers hold
shares of our common stock.
Pursuant to the Investment Agreement, Icahn Capital LP has
agreed to exercise in full the Subscription Rights issued to it
and, additionally, upon the expiration of the Rights Offering, to
purchase from us, at a price per Unit equal to the Subscription
Price, all Units that remain unsubscribed for at the expiration of
the Rights Offering. Icahn Capital LP, together with its
affiliates, is one of our largest stockholders and beneficially
owns approximately 15% of our common stock.
Other than as described, our officers, directors and principal
stockholders have no interests in the Rights Offering, and we have
not otherwise received any indication from any of our directors,
officers or other stockholders as to whether they plan to subscribe
for Units in the Rights Offering.
Why is Icahn Capital LP acting as backstop for the Rights
Offering?
Our objective is to raise $43.6 million in gross proceeds from our
Rights Offering. In the event that holders do not exercise all of
the Subscription Rights, we would fall short of that objective. We
have therefore entered into the Investment Agreement with Icahn
Capital LP, which, together with its affiliates, is one of our
largest stockholders, to ensure we will receive $43.6 million in
gross proceeds from this Rights Offering; provided, that the
gross proceeds from the Rights Offering and investment commitment
will not exceed the amount of $43.6 million in the aggregate.
Additionally, we do not believe that Icahn Capital LP’s increase in
our stock ownership should impair our ability to potentially use
our net operating loss carryforwards even if no stockholders other
than Icahn Capital LP participate in the Rights Offering.
Accordingly, having Icahn Capital LP provide the investment
commitment should not affect the potential impact of the Rights
Offering on our net operating loss carryforwards.
How many shares will Icahn Capital LP own after the Rights
Offering?
Icahn Capital LP, together with its affiliates, is one of our
largest stockholders and beneficially owns approximately 15% of our
common stock.
We expect to issue approximately 40,000 Units comprised of
30,000,000 shares of common stock and 40,000 shares of Preferred
Stock in the Rights Offering, as a result of which we will have an
aggregate of approximately 74,214,603 shares of common stock issued
and outstanding following the Rights Offering. If each of our
stockholders as of the Record Date purchases the full number of
Units to which each such holder is entitled, Icahn Capital LP
and its affiliates would beneficially own approximately 15% of our
combined issued and outstanding common stock. If none of our
stockholders as of the Record Date purchases Units in the Rights
Offering, then Icahn Capital LP will purchase, pursuant to the
Investment Agreement, all Units offered in the Rights Offering and
would own approximately 49.3% of our issued and outstanding common
stock.
In view of the large percentage of our common stock currently owned
by Icahn Capital LP, together with additional common stock that may
be acquired by Icahn Capital LP pursuant to the Investment
Agreement, we expect that Icahn Capital LP will continue to have
the ability to exert significant influence over our management and
policies.
How does the investment commitment by Icahn Capital LP
work?
Subject to certain conditions and pursuant to the Investment
Agreement, Icahn Capital LP has agreed to exercise in full the
Subscription Rights issued to it and, additionally, upon expiration
of the Rights Offering, to purchase from us, at a price per Unit
equal to the Subscription Price, that number of Units that remain
unsubscribed for at the expiration of the Rights Offering.
If all 40,000 Units available in this Rights Offering are sold
pursuant to the exercise of Subscription Rights, there will be no
unsubscribed Units, and no excess Units will be sold to Icahn
Capital LP pursuant to the Investment Agreement. Please see “The
Investment Agreement” for further conditions to the obligation of
Icahn Capital LP to consummate the transactions contemplated by the
Investment Agreement.
Is Icahn Capital LP receiving any fees for its investment
commitment?
No. Icahn Capital LP will not receive any fees for its
investment commitment. However, we have agreed to pay all of our
own fees and expenses (including attorneys’ fees) incurred in
connection with the Investment Agreement and the transactions
contemplated thereby. In addition, as part of the consideration for
entering into the Investment Agreement, we have agreed to terminate
the Standstill Agreement, dated December 8, 2016, entered into
with Icahn Capital LP and the parties identified therein, as well
as waive the applicability of Section 203 of the General
Corporation Law of the State of Delaware. Furthermore, we have
agreed to use our best efforts to register for resale all of the
shares of common stock then held by Icahn Capital LP and its
affiliates following the closing of the Rights Offering.
Has the Board of Directors made a recommendation to stockholders
regarding the Rights Offering?
No. Neither our Board of Directors nor our management has made
any recommendation regarding your exercise of the Subscription
Rights. Rights holders who exercise Subscription Rights and receive
Units comprised of shares of our common stock and Preferred Stock
will incur investment risk on new money invested. We cannot predict
the price at which our shares of common stock will trade, and,
therefore, we cannot assure you that the market price for our
common stock before, during or after this Rights Offering will be
above the Subscription Price, or that anyone purchasing Units at
the Subscription Price will be able to sell the shares of common
stock or Preferred Stock comprising the Units in the future at a
price equal to or greater than the Subscription Price. You are
urged to make your decision to invest based on your own assessment
of our business and financial condition, our prospects for the
future, the terms of the Rights Offering, the information in this
prospectus and other information relevant to your circumstances.
Please see “Risk Factors” for a discussion of some of the risks
involved in investing in our securities.
How do I exercise my Subscription Rights?
If you are a stockholder of record (meaning you hold your shares of
our common stock in your name and not through a broker, dealer,
bank, or other nominee) and you wish to participate in the Rights
Offering, you must deliver a properly completed and signed
Subscription Rights Certificate, together with full payment of the
Subscription Price for the Units subscribed for, to the
Subscription Agent before 5:00 p.m., New York City Time, on the
Expiration Date. If you are exercising your Subscription Rights
through your broker, dealer, bank, or other nominee, you should
promptly contact your broker, dealer, bank, or other nominee and
submit your subscription documents and full payment for the Units
subscribed for in accordance with the instructions and within the
time period provided by your broker, dealer, bank or other
nominee.
What if my shares are held in “street name”?
If you hold your shares of our common stock in the name of a
broker, dealer, bank, or other nominee, then your broker, dealer,
bank, or other nominee is the record holder of the shares you
beneficially own. The record holder must exercise the Subscription
Rights on your behalf. Therefore, you will need to have your record
holder act for you.
If you wish to participate in this Rights Offering and purchase
Units, please promptly contact the record holder of your shares. We
will ask the record holder of your shares, who may be your broker,
dealer, bank, or other nominee, to notify you of this Rights
Offering.
What form of payment is required?
Payments must be made in full in U.S. currency by:
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Personal
check drawn on a U.S. bank payable to “Continental Stock Transfer
& Trust Company, as subscription agent for Enzon
Pharmaceuticals, Inc.”; |
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Certified
check drawn on a U.S. bank payable to “Continental Stock Transfer
& Trust Company, as subscription agent for Enzon
Pharmaceuticals, Inc.”; |
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U.S.
postal money order payable to “Continental Stock Transfer &
Trust Company, as subscription agent for Enzon Pharmaceuticals,
Inc.”; or |
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Wire
transfer of immediately available funds to the account maintained
by the Subscription Agent (see the Subscription Rights Certificate
for the wire instructions). |
Payment received after 5:00 p.m., New York City Time, on the
Expiration Date will not be honored, and, in such event, the
Subscription Agent will return your payment to you, without
interest or deduction, as soon as practicable.
If you elect to exercise your Subscription Rights, you should
consider using a wire transfer or certified check drawn on a U.S.
bank to ensure that the Subscription Agent receives your funds
before the Rights Offering expires. If you send a personal check,
payment will not be deemed to have been received by the
Subscription Agent until the check has cleared. The clearinghouse
may require five or more business days to clear a personal check.
Accordingly, holders who wish to pay the Subscription Price by
means of a personal check should make payment sufficiently in
advance of the expiration of the Rights Offering to ensure that the
payment is received and clears by that date. If you send a wire
directly to the Subscription Agent’s account, payment will be
deemed to have been received by the Subscription Agent immediately
upon receipt of such wire transfer. If you send a certified check,
payment will be deemed to have been received by the Subscription
Agent immediately upon receipt of such instrument.
The method of payment of the
subscription payment to the Subscription Agent will be at the risk
of the holders of Subscription Rights. If sent by mail, we
recommend that you send those certificates and payments by
registered mail, properly insured, with return receipt requested,
or by overnight courier, and that you allow a sufficient number of
days to ensure delivery to the Subscription Agent and clearance of
payment before the Rights Offering expires.
If you send a payment that is insufficient to purchase the number
of Units you requested, or if the number of Units you requested is
not properly specified, then the funds will be applied to the
exercise of Subscription Rights only to the extent of the payment
actually received by the Subscription Agent. If you deliver
subscription payments in a manner different than that described in
this prospectus, then we may not honor the exercise of your
Subscription Rights.
You should read the instruction letter accompanying the
Subscription Rights Certificate carefully and strictly follow
it. DO NOT SEND SUBSCRIPTION RIGHTS CERTIFICATES OR
PAYMENTS DIRECTLY TO US.
When will I receive my new shares of common stock and Preferred
Stock?
We intend to issue the shares of common stock and Preferred Stock
comprising the Units in book-entry, or uncertificated, form to each
subscriber as soon as practicable after completion of the Rights
Offering; however, there may be a delay between the Expiration Date
and the date and time that the shares are issued and delivered to
you or your nominee, as applicable. We will issue the shares in
book-entry, or uncertificated, form to each subscriber; we will not
issue any stock certificates. If you are the holder of record of
our common stock, you will receive a direct registration, or DRS,
account statement from our transfer agent, Continental Stock
Transfer & Trust Company, reflecting ownership of the
shares of common stock and Preferred Stock comprising the Units
that you have purchased in the Rights Offering. If you hold your
shares of common stock in the name of a broker, dealer, bank, or
other nominee who uses the services of the Depository Trust Company
(“DTC”), DTC will credit your account with your nominee with
the securities you purchase in the Rights Offering. You may request
a statement of ownership from the nominee following the completion
of the Rights Offering.
After I send in my payment and Subscription Rights Certificate
to the Subscription Agent, may I cancel my exercise of Subscription
Rights?
Yes. If you exercise your Subscription Rights, you may revoke such
exercise before the Expiration Date by following the instructions
herein. If the Expiration Date is extended, you may revoke your
exercise of Subscription Rights at any time until the final
Expiration Date as so extended. If we terminate the Rights
Offering, all subscription payments received will be returned as
soon as practicable thereafter without interest or deduction. See
the section in this prospectus under the caption “The Rights
Offering—Revocation Rights.”
How much will we receive from the Rights Offering?
Assuming that we complete the investment commitment pursuant to the
Investment Agreement and all 40,000 Units are sold in the Rights
Offering, we estimate that the net proceeds from the Rights
Offering will be approximately $43.4 million, based on a
Subscription Price of $1,090 per Unit and after deducting
other expenses payable by us.
We intend to use the net proceeds from this offering to position us
as a public company acquisition vehicle, where we can become an
acquisition platform and more fully utilize our net operating loss
tax carryforwards and enhance stockholder value. However, we
do not have any current plans, arrangements or understandings with
respect to any acquisitions or investments, and we are currently
not involved in any negotiations with respect to any such
transactions. We cannot specify with certainty the particular uses
of the net proceeds stated above, and our allocation of the
proceeds may change depending on the success of our planned
initiatives. See “Use of Proceeds” in this prospectus.
Are there risks in exercising my Subscription Rights?
Yes. The exercise of your Subscription Rights involves risks.
Exercising your Subscription Rights involves the purchase of Units
comprised of additional shares of our common stock and Preferred
Stock, and you should consider this investment as carefully as you
would consider any other investment. The market price of our common
stock may not exceed the Subscription Price, and the market price
of our common stock may decline during or after the Rights
Offering. You may not be able to sell shares of our common stock or
Preferred Stock acquired in the Rights Offering at a price equal to
or greater than the Subscription Price. In addition, you should
carefully consider the risks described under the heading “Risk
Factors” for discussion of some of the risks involved in investing
in our securities.
Are there any conditions to the completion of the Rights
Offering?
No. There is no aggregate minimum subscription we must receive
to complete the Rights Offering. However, pursuant to the
Investment Agreement, Icahn Capital LP has agreed to exercise
in full the Subscription Rights issued to it and, additionally,
upon expiration of the Rights Offering, to purchase from us, at a
price per Unit equal to the Subscription Price, that number of
Units that remain unsubscribed for at the expiration of the Rights
Offering.
Can the Board of Directors terminate or extend the Rights
Offering?
Yes. Our Board of Directors may decide to terminate the Rights
Offering at any time and for any reason before the expiration of
the Rights Offering. We also have the right to extend the Rights
Offering for additional periods in our sole discretion;
provided, however, that we may not extend the
Expiration Date of the Rights Offering by more than 30 days past
the original Expiration Date. We do not presently intend to extend
the Rights Offering. We will notify stockholders and the public if
the Rights Offering is extended by issuing a press release
announcing the extension no later than 9:00 a.m., New York City
Time, on the next business day after the most recently announced
expiration date of the Rights Offering. If we terminate the Rights
Offering, we will issue a press release notifying stockholders and
the public of the termination.
If the Rights Offering is not completed or is terminated, will
my subscription payment be refunded to me?
Yes. The Subscription Agent will hold funds received in payment for
Units in a segregated account pending completion of the Rights
Offering. The Subscription Agent will hold this money until the
Rights Offering is completed or is terminated. To the extent you
properly exercise your Subscription Rights for an amount of Units
that exceeds the number of unsubscribed Units available to you, any
excess subscription payments will be returned to you as soon as
practicable after the expiration of the Rights Offering, without
interest or penalty. If we do not complete the Rights Offering, all
subscription payments received by the Subscription Agent will be
returned as soon as practicable after the termination or expiration
of the Rights Offering, without interest or deduction. If you own
shares in “street name,” it may take longer for you to receive your
subscription payment because the Subscription Agent will return
payments through the record holder of your shares.
How do I exercise my Subscription Rights if I live outside the
United States?
The Subscription Agent will hold Subscription Rights Certificates
for stockholders having addresses outside the United States. To
exercise Subscription Rights, non-U.S. stockholders must notify the
Subscription Agent and timely follow other procedures described in
the section entitled “The Rights Offering—Regulatory Limitations;
No Offer Made to California Residents; No Unlawful
Subscriptions.”
What fees or charges apply if I exercise my Subscription
Rights?
We are not charging any fee or sales commission to issue
Subscription Rights to you or to issue the Units or shares of
common stock or Preferred Stock comprising the Units to you if you
exercise your Subscription Rights. If you exercise your
Subscription Rights through a broker, dealer, bank, or other
nominee, you are responsible for paying any fees your broker,
dealer, bank, or other nominee may charge you.
What are the U.S. federal income tax consequences of receiving
and/or exercising my Subscription Rights?
For U.S. federal income tax purposes, we believe you should not
recognize income or loss in connection with the receipt or exercise
of Subscription Rights in the Rights Offering. You should consult
your tax advisor as to the tax consequences of the Rights Offering
in light of your particular circumstances. For a detailed
discussion, see “Material U.S. Federal Income Tax
Considerations.”
To whom should I send my forms and payment?
If your shares of common stock are held in the name of a broker,
dealer, bank, or other nominee, then you should send your
subscription documents and subscription payment to that broker,
dealer, bank, or other nominee. If you are the record holder, then
you should send your subscription documents, Subscription Rights
Certificate, notice of guaranteed delivery (if applicable) and
subscription payment to the Subscription Agent by hand delivery,
first class mail or courier service to:
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By Mail, Hand or Overnight Courier: |
Continental Stock Transfer & Trust Company
Attn: Reorganization Department
1 State Street
30th Floor
New York, NY 10004
(917) 262-2378 |
You or, if applicable, your nominee are solely responsible for
completing delivery to the Subscription Agent of your subscription
documents, Subscription Rights Certificate, notice of guaranteed
delivery (if applicable) and subscription payment. You should allow
sufficient time for delivery of your subscription materials to the
Subscription Agent and clearance of payment before the expiration
of the Rights Offering at 5:00 p.m., New York City Time, on the
Expiration Date.
Whom should I contact if I have other questions?
If you have other questions or need assistance, please contact the
Information Agent, Georgeson LLC, at (888) 605-8334 (toll
free).
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PROSPECTUS
SUMMARY
The
following summary provides an overview of us and this offering and
may not contain all the information that is important to you. This
summary is qualified in its entirety by, and should be read
together with, the information contained in other parts of this
prospectus and the documents we incorporate by reference. You
should read this prospectus and any documents that we incorporate
by reference carefully in their entirety before making a decision
about whether to invest in our securities.
Enzon Pharmaceuticals, Inc.
We manage our sources of royalty revenues from existing licensing
arrangements with other companies primarily related to sales of
certain drug products that utilize our proprietary technology. We
currently have no clinical operations and limited corporate
operations. We cannot assure you that we will earn material future
royalties or milestones.
In 2019, we earned limited revenues primarily from royalties and we
do not expect to generate material recurring revenues in future
periods. In July 2019, we received a $7.0 million milestone
payment that had been earned and recorded as revenue in
December 2018 when the U.S. Food and Drug Administration
(“FDA”) approved the Biologics License
Application (“BLA”) filed by Servier IP UK
Limited (“Servier”) for calaspargase
pegol – mknl (brand name ASPARLAS™), also known as SC Oncaspar, as a component of a
multi-agent chemotherapeutic regimen for the treatment of acute
lymphoblastic leukemia in pediatric and young adult patients age 1
month to 21 years.
The primary source of our royalties and milestone revenues in 2018
was the $7.0 million milestone payment due from Servier. After
being notified that the FDA had approved Servier’s BLA on
December 20, 2018, we recorded revenue and a milestone
receivable of $7.0 million at December 31, 2018.
Servier, a wholly-owned indirect subsidiary of Les Laboratoires
Servier, was the successor in interest to Sigma-Tau Finanziaria S.p.A. (“Sigma-Tau”)
under an asset purchase agreement (“Asset Purchase
Agreement”) entered into in November 2009 by and
among Klee
Pharmaceuticals, Inc., Defiante Farmacêutica, S.A. and
Sigma-Tau, on the one hand, and us, on the other
hand. Under a letter agreement
between us and Servier dated January 30,
2019, Servier
confirmed its obligation under the Asset Purchase Agreement to pay
the $7.0 million milestone payment to us, which it agreed to do
following the parties’ completion of procedures for claiming
benefits under the double tax treaty between the United States and
the United Kingdom. We received that $7.0 million milestone
payment, which had been recorded as a current receivable on
December 31, 2018, in July 2019. Under the letter
agreement, we also agreed to waive Servier’s obligations under the
Asset Purchase Agreement to pursue the development of SC Oncaspar
in Europe and the approval of SC Oncaspar by the European Medicines
Agency (“EMEA”), provided that we did not waive our right to
any applicable milestone payment it was due, if any, upon EMEA
approval of SC Oncaspar. At the present time, we are not aware of
any plans that Servier may have to seek EMEA approval of SC
Oncaspar.
In 2017, we and Nektar
Therapeutics, Inc. (“Nektar”) entered into
a second amendment (the “Nektar Second Amendment”) to their
Cross-License and Option Agreement (the “Nektar License
Agreement”). Pursuant to the Nektar Second Amendment, Nektar
paid us the sum of $7.0 million in full satisfaction of its
obligation to make future royalty payments to us under the Nektar
License Agreement. We received the full $7.0 million payment from
Nektar in 2017, which was recorded as non-recurring milestone
revenue.
Prior to 2017, our primary source of royalty revenues was derived
from sales of PegIntron, which is marketed by Merck &
Co., Inc. (“Merck”). At December 31, 2018,
according to Merck, we had a liability to Merck of approximately
$439,000 (net of a 25% royalty interest that we had previously
sold) based, primarily, on Merck’s assertions regarding recoupments
related to prior returns and rebates. In the first quarter of 2019,
net royalties from PegIntron were negative $51,000 due to returns
and rebates exceeding the amount of royalties earned. In the
second, third and fourth quarters of 2019, net royalty revenues
from sales of PegIntron were $142,000, $2,000 and $22,000,
respectively. As such, as asserted by Merck, our net liability to
Merck was $324,000 at December 31, 2019. We believe that we
will receive minimal additional royalties from Merck and may be
charged with additional chargebacks from returns and rebates in
amounts that, based on current estimates, are not expected to be
material.
In April 2013, we announced that we intended to distribute
excess cash, expected to arise from royalty revenues, in the form
of periodic dividends to stockholders. Since that time, we have
paid out an aggregate of approximately $149 million in dividends
(including approximately $8.0 million in 2019) to our
stockholders.
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On February 4, 2016, our Board of Directors adopted a Plan of
Liquidation and Dissolution (the “Plan of Liquidation and
Dissolution”), the implementation of which was postponed.
Following completion of the Rights Offering, we intend to withdraw
the Plan of Liquidation and Dissolution.
We have a marketing agreement with Micromet AG (“Micromet”),
now part of Amgen, Inc. (the “Micromet Agreement”),
that was entered into in 2004, under which Micromet is the
exclusive marketer of the parties’ combined intellectual property
portfolio in the field of single-chain antibody technology.
Under the Micromet Agreement, the parties agreed to share, on an
equal basis, in any licensing fees, milestone payments and royalty
revenue received by Micromet in connection with any licenses of the
patents within the portfolio by Micromet to any third party during
the term of the collaboration. To our knowledge, Micromet has a
license agreement with Viventia Biotech (Barbados) Inc.
(“Viventia”), now part of Sesen Bio, Inc.
(“Sesen”), that was entered into in 2005, under which
Micromet granted Viventia nonexclusive rights, with certain
sublicense rights, for know-how and patents allowing exploitation
of certain single chain antibody products, which patents cover some
key aspects of Vicineum, one of Sesen’s drug candidates. To our
knowledge, Micromet is entitled to receive (i) certain
milestone payments with respect to the filing of a new drug
application (“NDA”) for Vicineum with the FDA or the filing
of a marketing approval application for Vicineum with the EMEA;
(ii) certain milestone payments with respect to the first
commercial sale of Vicineum in the U.S. or Europe and
(iii) certain royalties on net sales for ten years from the
first commercial sale of Vicineum. Pursuant to the Micromet
Agreement, we would be entitled to a 50% share of these milestone
payments and royalties received by Micromet. Due to the challenges
associated with developing and obtaining approval for drug
products, there is substantial uncertainty whether any of these
milestones will be achieved. We also have no control over the time,
resources and effort that Sesen may devote to its programs and
limited access to information regarding or resulting from such
programs. Accordingly, there can be no assurance that we will
receive any of the milestone or royalty payments under the Micromet
Agreement. We will not recognize revenue until all revenue
recognition requirements are met.
Corporate Information
Our principal address is 20 Commerce Drive, Suite 135,
Cranford, New Jersey, 07016. Our telephone number is (732)
980-4500.
Recent Developments
Appointment of Directors
On August 4, 2020, the Board appointed Jordan Bleznick and
Randolph C. Read as directors to the Board, effective
August 4, 2020, to fill the vacancies created by the
resignations of Mr. Jonathan Christodoro and Dr. Odysseas
Kostas as of the same date. Messrs. Bleznick and Read will
each serve until the next annual meeting of our stockholders and
until such director’s successor is elected and qualified, subject
to such director’s earlier death, resignation, disqualification or
removal.
Mr. Bleznick was appointed by the Board after discussions with
Carl C. Icahn, one of our largest stockholders, and after
consideration by the Governance and Nominating Committee. There are
no arrangements or understandings between Mr. Bleznick and any
other persons pursuant to which Mr. Bleznick was selected as a
director. We are not aware of any relationships or transactions in
which Mr. Bleznick has or will have an interest, or was or is
a party, requiring disclosure under Item 404(a) of Regulation
S-K. No material plan, contract or arrangement (written or
otherwise) to which Mr. Bleznick is a party or a participant
was entered into or materially amended in connection with him
joining the Board, and Mr. Bleznick did not receive any grant
or award or any modification thereto, under any such plan, contract
or arrangement in connection with such event, other than the normal
cash fees payable to our directors.
Mr. Read was appointed by the Board after consideration by the
Governance and Nominating Committee. There are no arrangements or
understandings between Mr. Read and any other persons pursuant
to which Mr. Read was selected as a director. We are not aware
of any relationships or transactions in which Mr. Read has or
will have an interest, or was or is a party, requiring disclosure
under Item 404(a) of Regulation S-K. No material plan,
contract or arrangement (written or otherwise) to which
Mr. Read is a party or a participant was entered into or
materially amended in connection with him joining the Board, and
Mr. Read did not receive any grant or award or any
modification thereto, under any such plan, contract or arrangement
in connection with such event, other than the normal cash fees
payable to our directors.
Following the new Board appointments, Mr. Read was elected as
Chairman of the Board. The Board also appointed
Messrs. Bleznick and Read to its Finance and Audit Committee,
replacing Mr. Christodoro and Dr. Kostas, having
determined that each meets the requirements for financial literacy
and independence that the Board has used to select members of that
committee. Jennifer McNealey, who also serves as a director on the
Board, is the other member of the Finance and Audit Committee.
Messrs. Bleznick and Read were each determined by the Board to
qualify as an “audit committee financial expert,” as defined in
Item 407(d)(5) of Regulation S-K. Mr. Read was elected as
the Chairman of the Audit Committee.
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The Board has decided not to continue with separate compensation
and governance and nominating committees, having determined that
such committees are not required or necessary because the functions
of such committees can be adequately performed by the full Board,
which is comprised entirely of directors who would be considered
independent under Rule 10A-3(b)(1) of the Exchange Act,
and Nasdaq Marketplace Rule 5605(a)(2), and accordingly, has
dissolved those committees. While these independence requirements
are taken into account when the Board evaluates candidates for
election as directors, we are not currently subject to
Rule 10A-3 or Nasdaq listing standards as our common stock is
not listed on Nasdaq or any other national securities exchange and
currently trades in the over-the-counter market.
Mr. Bleznick, age 64, has been the Vice President/Taxes of
Starfire Holding Corporation, a privately held holding company of
Mr. Icahn, since September 2002. He has been the Chief
Tax Counsel for various affiliates of Mr. Icahn since
April 2002. From March 2000 through March 2002,
Mr. Bleznick was a partner in the New York City office of the
law firm of DLA Piper, formerly known as Piper Rudnick, LLP. From
March 1984 until February 2000, he was an associate and
then a partner at the New York City law firm of Gordon Altman
Weitzen Shalov and Wein. Mr. Bleznick received a B.A. in
Economics from the University of Cincinnati in 1976, a J.D. from
The Ohio State University College of Law in 1979 and a L.L.M. in
Taxation from the New York University School of Law in 1980.
Mr. Read, age 68, has been President and Chief Executive
Officer of Nevada Strategic Credit Investments, LLC since 2009.
Mr. Read has served since November 2018 as an independent
manager/director and Chairman of the Board of Managers of New York
REIT Liquidating, LLC, a successor to New York REIT, Inc., a
publicly traded (NYSE) real estate investment trust, where
Mr. Read served as an independent director from
December 2014 to November 2018, including as Chairman of
its Board of Directors from June 2015 to November 2018.
Mr. Read has served as an independent Director of SandRidge
Energy, Inc. since June 2018, including as Chairman of
its Audit Committee. Mr. Read has served as an independent
director of Luby’s, Inc. since August 2019. Mr. Read
served as an independent director of Business Development
Corporation of America from December 2014 to June 2018.
Mr. Read also served as an independent director of Business
Development Corporation of America II from December 2014 until
its liquidation and dissolution in December 2015.
Mr. Read served as the Chairman of the Board of Directors of
Healthcare Trust, Inc., a real estate investment trust, from
February 2015 to October 2016. Mr. Read also
previously served on the advisory board for Oxis Biotech, Inc.
during 2015 to 2016. Mr. Read has previously served as
President of a variety of other companies and has previously served
on a number of public and private company boards. He is a former
Board member of the Cleveland Clinic Lou Ruvo Center for Brain
Health. Mr. Read is admitted as a Certified Public Accountant
and has an M.B.A. in Finance from the Wharton Graduate School of
the University of Pennsylvania and a B.S. from Tulane
University.
2020 Annual Meeting
On September 2, 2020, the Company announced that it has postponed
its 2020 Annual Meeting of Stockholders, previously scheduled for
Thursday, September 17, 2020. The 2020 Annual Meeting will now be
held on Friday, December 18, 2020. Once determined by the Board of
Directors, the Company will announce the record date, time and
location of the 2020 Annual Meeting.
Stockholder proposals intended to be considered for inclusion in
the Company’s proxy statement and form of proxy for presentation at
the 2020 Annual Meeting must comply with Rule 14a-8 of the Exchange
Act. Any stockholder proposal to be considered for inclusion in the
Company’s proxy materials for the 2020 Annual Meeting must be
submitted to the Company a reasonable time before the Company
begins to print and send the proxy materials. The submission of a
stockholder proposal does not guarantee that it will be included in
the Company’s proxy materials.
Stockholders wishing to submit proposals for the 2020 Annual
Meeting outside the process of Rule 14a-8 or nominate individuals
to the Board of Directors must comply with the advance notice and
other provisions of Article II, Section 2.15 of the Company’s
Second Amended and Restated Bylaws. Since the date of the 2020
Annual Meeting is more than 25 days after the anniversary date of
the 2019 Annual Meeting, to be timely, a notice by the stockholder
must have been delivered to the Corporate Secretary of the Company
at the address set forth below no later than Monday, September 14,
2020.
Any proposals or director nominations submitted outside of Rule
14a-8 must be in proper form and delivered to or mailed and
received at the following address not later than the deadline
discussed above: Attn: Corporate Secretary, Enzon Pharmaceuticals,
Inc., 20 Commerce Drive, Suite 135, Cranford, New Jersey 07016. To
be in proper form, a stockholder proposal, including any director
nomination, must include all of the information required for such
proposal or nomination by the Company’s Second Amended and Restated
Bylaws.
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Rights Offering
Summary
The following summary describes the principal terms of the
Rights Offering, but is not intended to be complete. See the
information under the heading “Description of the Rights Offering”
in this prospectus for a more detailed description of the terms and
conditions of the Rights Offering.
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Securities to be Offered |
We are distributing to you, at no charge, transferable Subscription
Rights to purchase Units. You will receive one Subscription Right
for every share of common stock owned at 5:00 p.m., New York City
Time, on the Record Date.
For every 1,105 Subscription Rights held, you will be entitled to
purchase one Unit. Each Unit consists of one share of newly
designated Preferred Stock and 750 shares of common stock.
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Size of Offering |
40,000 Units, (which number is the maximum amount of Units,
calculated by using the number of shares of common stock
outstanding as of the Record Date). |
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Subscription Price |
$1,090 per Unit. |
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No Fractional Subscription Rights
or Fractional Units |
We will not issue fractional Subscription Rights, Units, shares or
cash in lieu of fractions in this Rights Offering. Accordingly, if
you hold shares of common stock in an amount other than a whole
multiple of 1,105 shares and wish to acquire a certain number of
Units in the Rights Offering, you will need to either acquire
(i) additional shares of common stock in the open market prior
to the Record Date or (ii) additional Subscription Rights
during the offering period of the Rights Offering, in each case in
an amount sufficient to increase your ownership of Subscription
Rights to allow you to participate at a level you desire to
participate. |
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Preferred Stock |
Dividends. On an annual basis, our Board of Directors may,
at its sole discretion, cause a dividend with respect to the
Preferred Stock to be paid in cash to the holders in an amount
equal to 3% of the liquidation preference as in effect at such time
(initially $1,000 per share). If the dividend is not so paid in
cash, the liquidation preference will be adjusted and increased
annually by an amount equal to 5% of the liquidation preference per
share as in effect at such time, that is not paid in cash to the
holders on such date.
Redemption. On and after November 1, 2022, we will have the
option to redeem the shares of Preferred Stock, in whole or in
part, at any time for an amount up to or equal to the liquidation
preference per share in effect at such time. Shares of Preferred
Stock will also be redeemable, at the option of the holder, in the
event of a change of control.
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No Conversion. The Preferred Stock will not be
convertible. |
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Liquidation Preference. The initial liquidation preference
of the Preferred Stock will be $1,000 per share. In the event of
the liquidation, dissolution or winding up of our company, the
holders of shares of Preferred Stock will be entitled to receive an
amount per share equal to the liquidation preference per share of
Preferred Stock as in effect at such time. |
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Voting Rights. Except as otherwise
provided by law, the holders of Preferred Stock will have no
special voting rights and their consent will not be required for
taking any corporate action. |
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Transferability. The Preferred Stock will not be listed
for trading or quoted on any securities exchange or recognized
trading system. |
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Record Date |
5:00 p.m., New York City Time, on September 23, 2020. |
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Expiration Date |
The Subscription Rights
will expire if they are not exercised by 5:00 p.m., New York City
Time, on October 9, 2020, unless the Rights Offering is extended or
earlier terminated by us in our sole discretion.
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Procedure for Exercising Subscription Rights
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To exercise your Subscription Rights, you must take the following
steps:
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· If you
are a record holder of our common stock, you must properly
complete and execute the Subscription Rights Certificate and
forward it, together with your full payment and, if applicable,
notice of guaranteed delivery, to the Subscription Agent to be
received before 5:00 p.m., New York City Time, on the Expiration
Date.
· If
you are a beneficial owner of shares of our common stock
that are registered in the name of a broker, dealer, bank, or other
nominee, you will not receive a Subscription Rights Certificate.
Instead, we will issue one Subscription Right to such nominee
record holder for each share of our common stock held by such
nominee at the Record Date. If you are not contacted by your
nominee, you should promptly contact your nominee in order to
subscribe for Units in the Rights Offering and follow the
instructions provided by your nominee.
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Issuance of Common Stock and
Preferred Stock |
We intend to issue the shares of common stock and Preferred Stock
comprising the Units in book-entry, or uncertificated, form to each
subscriber as soon as practicable after completion of the Rights
Offering. If you are the holder of record of our common stock, you
will receive a direct registration, or DRS, account statement from
our transfer agent, Continental Stock Transfer & Trust
Company, reflecting ownership of the shares of common stock and
Preferred Stock comprising the Units that you have purchased in the
Rights Offering. If you hold your shares of common stock in the
name of a broker, dealer, bank, or other nominee who uses the
services of DTC, DTC will credit your account with your nominee
with the securities you purchase in the Rights Offering. |
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Transferability of Subscription Rights |
The Subscription Rights will be transferable and will be
a new issue of securities
with no prior trading market. Although the Subscription Rights are
transferable, we do not intend to apply to list the Subscription
Rights for trading on any securities exchange or any other market
and your ability to transfer the Subscription Rights will be
limited and difficult. If you desire to transfer your Subscription
Rights, you will need to locate a buyer or transferee of your
Subscription Rights. We do not intend to facilitate transfers among
stockholders or otherwise create a market for transfers and sales.
Accordingly, we cannot provide you any assurances as to the
liquidity of a market for the Subscription Rights . Furthermore,
because there is likely to be an illiquid market for the
Subscription Rights, if any, the value that you receive, if any,
upon transfer of a Subscription Right will likely be reduced, and
may vary significantly from other transferors. We are not
responsible if you elect to sell your Subscription Rights and no
public or private market exists to facilitate the purchase of
Subscription Rights. Please see “Risk Factors” for a
discussion of some of the risks associated with transferring the
Subscription Rights.
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Non-Transferability of Units or Preferred Stock |
The Units and Preferred Stock will not be listed for trading or
quoted on any securities exchange or recognized trading
system. |
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No Board Recommendation |
Neither our Board of Directors nor our management has made any
recommendation regarding your exercise of the Subscription Rights.
Rights holders who exercise Subscription Rights will incur
investment risk on new money invested. You are urged to make your
decision to invest based on your own assessment of our business and
financial condition, our prospects for the future, the terms of the
Rights Offering, the information in this prospectus and other
information relevant to your circumstances. Please see “Risk
Factors” for a discussion of some of the risks involved in
investing in our securities. |
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Existing Stockholder Participation |
Icahn Capital LP, which, together with its affiliates, beneficially
owns approximately 15% of our outstanding shares of common stock,
has agreed to purchase its pro-rata share of Units plus any and all
unsubscribed Units in accordance with the Investment Agreement. See
“The Investment Agreement” for more information.
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Revocation |
If you exercise your Subscription Rights, you may revoke such
exercise before the Expiration Date by following the instructions
herein. If the Expiration Date is extended, you may revoke your
exercise of Subscription Rights at any time until the final
Expiration Date as so extended. See “The Rights Offering—Revocation
Rights.” |
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Use of Proceeds |
As all of the 40,000 Units will be sold in the Rights Offering
(assuming completion of the investment commitment pursuant to the
Investment Agreement), we estimate that the net proceeds from the
Rights Offering will be approximately $43.4 million, based on a
Subscription Price of $1,090 per Unit and after deducting other
expenses payable by us.
We intend to use the net proceeds from this offering to position us
as a public company acquisition vehicle, where we can become an
acquisition platform and more fully utilize our net operating loss
tax carryforwards and enhance stockholder value. However, we do not
have any current plans, arrangements or understandings with respect
to any acquisitions or investments, and we are currently not
involved in any negotiations with respect to any such transaction.
See “Use of Proceeds” in this prospectus.
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Material U.S. Federal Income Tax Considerations |
For U.S. federal income tax purposes, we believe you should not
recognize income or loss upon receipt or exercise of a Subscription
Right. You should consult your own tax advisor as to the tax
consequences of the Rights Offering in light of your particular
circumstances. See “Material U.S. Federal Income Tax
Considerations.”
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Extension and Termination |
Although we do not presently intend to do so, we may extend the
Rights Offering for additional time in our sole discretion;
provided, however, that we may not extend the
Expiration Date of the Rights Offering by more than 30 days past
the original Expiration Date. Our Board of Directors may decide to
terminate the Rights Offering at any time and for any reason before
the expiration of the Rights Offering. |
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Market for Common Stock |
Our common stock is quoted on the OTCQX market of the OTC under the
symbol “ENZN.”
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Risk Factors |
Before you exercise your Subscription Rights to purchase Units, you
should be aware that there are risks associated with your
investment, and you should carefully read and consider risks
described in the section captioned “Risk Factors” together with all
of the other information included in this prospectus. |
RISK FACTORS
Exercising your Subscription Rights and investing in our common
stock and Preferred Stock involves risks. Before making an
investment decision, you should carefully consider the risks and
uncertainties described under the section captioned “Risk Factors”
in our
Annual Report on Form 10-K for the fiscal year ended December 31,
2019, filed with the Commission on February 19, 2020,
as amended on April 24, 2020,
our Quarterly Report on Form 10-Q for the quarter ended March 31,
2020, filed with the Commission on April 30, 2020, and our
Quarterly Report on Form 10-Q for the quarter ended June 30,
2020, filed with the Commission on July 29, 2020, each of which
is incorporated by reference in this prospectus, together with all
of the information contained in this prospectus and documents
incorporated by reference herein. We caution you that the risks and
uncertainties we have described, among others, could cause our
actual results to differ materially from those expressed in
forward-looking statements made by us or on our behalf in filings
with the Commission, press releases, communications with investors
and oral statements.
Risks Related to the Rights Offering
Your interest in us may be diluted as a result of the Rights
Offering.
In the Rights Offering, our stockholders will receive one
transferable Subscription Right for each outstanding share of
common stock owned as of the Record Date, and for every 1,105
Subscription Rights held, a stockholder will be entitled to
purchase one Unit. Although the Subscription Rights are
transferable, we do not intend to apply to list the Subscription
Rights for trading on any securities exchange or any other market
and your ability to transfer the Subscription Rights will be
limited and difficult. If you desire to transfer your Subscription
Rights, you will need to locate a buyer or transferee of your
Subscription Rights.
We will not issue fractional Subscription Rights or Units in the
Rights Offering. Accordingly, if you hold shares of common stock in
an amount other than a whole multiple of 1,105 shares and wish to
acquire a certain number of Units in the Rights Offering, you will
need to either acquire (i) additional shares of common stock
in the open market prior to the Record Date or (ii) additional
Subscription Rights during the offering period of the Rights
Offering, in each case in an amount sufficient to increase your
ownership of Subscription Rights to allow you to participate at a
level you desire.
Stockholders who do not fully exercise their Subscription Rights or
who do not acquire during the offering period an amount of
Subscription Rights needed to participate in the Rights Offering at
such stockholder’s desired level should expect that they will, at
the completion of Rights Offering and the investment commitment,
own a smaller proportional interest in us than would otherwise be
the case had they fully exercised their Subscription Rights or
acquired the required amount of Subscription Rights needed to
purchase Units. After giving effect to the Rights Offering
(including the investment commitment), we will have approximately
74,214,603 shares of common stock outstanding, representing an
increase in outstanding shares of approximately 30,000,000.
Further, because the price per Unit being offered may be
substantially higher than the net tangible book value per share of
our common stock, you may suffer substantial dilution in the net
tangible book value of the common stock you purchase in this
offering. If you purchase Units in this offering at the
Subscription Price, you may suffer immediate and substantial
dilution in the net tangible book value of the common stock. See
“Dilution” in this prospectus for a more detailed discussion of the
dilution which may incur in connection with this Rights
Offering.
Although the Subscription Rights are transferable, there may
not be a trading market for the Subscription Rights, and the
transfer of Subscription Rights may be limited and
difficult.
The Subscription Rights will be new issues of securities with no
prior trading market. Although they are transferable, we do not
intend to apply to list the Subscription Rights for trading on any
securities exchange or any other market and your ability to
transfer the Subscription Rights will be limited and difficult. If
you desire to transfer your Subscription Rights, you will need to
locate a buyer or transferee of your Subscription Rights. We do not
intend to facilitate transfers among stockholders or otherwise
create a market for transfers and sales. Accordingly, we cannot
provide you any assurances as to the liquidity of a market for the
Subscription Rights and your ability to transfer the Subscription
Rights will be limited and difficult. Furthermore, because there is
likely to be an illiquid market for the Subscription Rights, if
any, the value that you receive, if any, upon transfer of a
Subscription Right will likely be reduced, and may vary
significantly from other transferors. We are not responsible if you
elect to sell your Subscription Rights and no public or private
market exists to facilitate the purchase of Subscription
Rights.
If you are a beneficial owner of our common stock that is
registered in the name of a broker, dealer, bank or other nominee,
you will need to coordinate a transfer through your broker, dealer,
bank or other nominee. Transfer mechanics through brokers, dealers,
banks and other nominees may be difficult and limited, and we
cannot guarantee that they would be able to process a transfer. If
you are a registered holder of common stock, you will need to
follow the transfer instructions on your Subscription Rights
Certificate, and ensure sufficient time for a transferee to
exercise the transferred Subscription Rights.
You may have difficulty selling your Subscription Rights should you
decide to do so, and stockholders who receive less than 1,105
Subscription Rights in the Rights Offering and therefore need to
acquire additional Subscription Rights to be able to participate in
the Rights Offering at a level they desire may be unable to do so.
Any market price of our Subscription Rights may not necessarily
bear any relationship to our book value, assets, past results of
operations, financial condition or any other established criteria
of value, and may not be indicative of the market price for shares
of our common stock in the future.
If you purchase Subscription Rights from a transferor, we
cannot assure you that you will be able to exercise the
Subscription Rights prior to the expiration of the Rights
Offering.
If you have purchased Subscription Rights, or have otherwise
received a transfer of Subscription Rights, we cannot assure you
that the Subscription Agent will be able to process the transfer
with sufficient time to allow you to exercise your Subscription
Rights prior to the Expiration Date of the Rights Offering. To the
extent your transfer is not processed prior to the Expiration Date,
you will not have satisfied the conditions to exercise your
Subscription Rights and will not receive the Units you wish to
purchase. Any sale or transfer is at the sole risk of the
transferor and transferee of Subscription Rights.
Because the subscription period for the Rights Offering is open
through October 9, 2020 (unless extended), the information known to
you at the time you acquire Subscription Rights through a transfer
may materially differ than at the end of the offering period. For
example, additional information, including but not limited to
financial and operating information about us, changes in our
industry, the stock market or the economy in general that may not
be available at the time you acquire Subscription Rights through a
transfer may be available at the end of the offering period that
will factor into your decision on whether to exercise Subscription
Rights. To the extent you view the additional information as
unfavorable, you may not have purchased the Subscription Rights
through a transfer had that information been available to you. In
such a case, if you seek to dispose of your Subscription Rights,
you may not be able to, or it may be at a price lower than when you
acquired them.
The Rights Offering may cause the price of our common stock
to decline and it may not recover for a substantial period of time
or at all.
The Subscription Price, together with the number of shares of our
common stock comprising the Units we propose to issue and
ultimately will issue in the Rights Offering (including the
investment commitment), may result in an immediate decrease in the
market value of our common stock. This decrease may continue after
the completion of the Rights Offering. If the market price of our
common stock falls below the Subscription Price, participants in
the Rights Offering will have committed to buy Units consisting of
shares of common stock at a price greater than the prevailing
market price. Further, if the holders of shares received upon
exercise of their Subscription Rights choose to sell some or all of
those shares, the resulting sales could depress the market price of
our common stock. We cannot assure you that the market price of our
shares of common stock will not decline prior to the Expiration
Date or that, after shares of our common stock are issued upon
exercise of Subscription Rights, a subscribing rights holder will
be able to sell shares of our common stock acquired in this
offering at a price greater than or equal to the Subscription
Price.
Our common stock price may be even more volatile as a result
of this Rights Offering.
Historically, the market price of our common stock has fluctuated
over a wide range for a variety of reasons, including
company-specific factors and global and industry-wide conditions
and events. In the future, the value of our common stock may be
impacted by our declining royalty revenues, our ability to monetize
our remaining assets, including our net operating loss
carryforwards, and any unexpected liabilities or expenses that
impact our continued operations, our ability to pay dividends or
make distributions to our stockholders and the success of any
future activities which we undertake.
In addition, the price of the common stock that will prevail in the
market after this Rights Offering may be higher or lower than the
Subscription Price depending on many factors, some of which are
beyond our control and may not be directly related to our operating
performance. Financings that may be available to us under current
market conditions frequently involve sales at prices below the
prices at which our common stock currently trades on the OTC, as
well as the issuance of warrants or convertible equity that require
exercise or conversion prices that are calculated in the future at
a discount to the then market price of our common stock.
We cannot assure you that the trading price of our common stock
will not decline after you elect to exercise your Subscription
Rights. If that occurs, you may have committed to buy Units
comprised of shares of common stock in the Rights Offering at a
price greater than the prevailing market price and could have an
immediate unrealized loss. Moreover, we cannot assure you that,
following the exercise of your Subscription Rights, you will be
able to sell your common stock at a price equal to or greater than
the Subscription Price, and you may lose all or part of your
investment in our common stock. Until shares of common stock are
delivered upon expiration of the Rights Offering, you will not be
able to sell the shares of our common stock that you purchase in
the Rights Offering. Shares of our common stock and Preferred Stock
comprising the Units purchased in the Rights Offering will be
issued as soon as practicable after the Rights Offering has
expired, payment for the Units subscribed for has cleared, and all
prorating calculations and reductions contemplated by the terms of
the Rights Offering have been effected. We will not pay you
interest on funds delivered to the Subscription Agent pursuant to
your exercise of Subscription Rights.
The Subscription Price determined for this Rights Offering is
not an indication of the fair value of our common stock or the
Preferred Stock.
In determining the Subscription Price, our Board of Directors
considered a number of factors, including, but not limited to, the
price at which our stockholders might be willing to participate in
the Rights Offering, the amount of proceeds desired to achieve our
financing goals, potential market conditions, historical and
current trading prices for our common stock, and the terms of the
Preferred Stock. No valuation consultant or investment banker has
opined upon the fairness or adequacy of the Subscription Price. The
Subscription Price is not intended to bear any relationship to the
book value of our assets or our past operations, cash flows,
losses, financial condition, net worth, or any other established
criteria used to value securities. You should not consider the
Subscription Price to be an indication of the value of our company
or the fair value of our common stock or the Preferred Stock
offered in the Rights Offering. After the date of this prospectus,
our common stock may trade at prices below the Subscription
Price.
Completion of the Rights Offering is not subject to us
raising a minimum offering amount.
Completion of the Rights Offering is not subject to us raising a
minimum offering amount and therefore the net proceeds from the
Rights Offering may be insufficient to meet our objectives, thereby
increasing the risk to investors in this Rights Offering, including
investing in a company that continues to require capital. See “Use
of Proceeds” in this prospectus.
We may use the proceeds
of this Rights Offering in ways with which you may
disagree.
We expect to use the net proceeds from the Rights Offering to
position us as a public company acquisition vehicle, where we can
become an acquisition platform and more fully utilize our net
operating loss tax carryforwards and enhance stockholder value.
However, we do not have any current plans, arrangements or
understandings with respect to any acquisitions or investments, and
we are not currently involved in any negotiations with respect to
any such transactions.
We will have significant discretion in the use of the net proceeds
of this offering, and it is possible that we may allocate the
proceeds differently than investors in this offering desire, or
that we will fail to maximize our return on these proceeds. You
will be relying on the judgment of our management with regard to
the use of the proceeds from the Rights Offering, and you will not
have the opportunity, as part of your investment decision, to
assess whether you believe the proceeds are being used
appropriately. See “Use of Proceeds” in this prospectus.
We may amend or modify the terms of the Rights Offering at
any time before the expiration of the Rights Offering in a way that
could adversely affect your investment.
Our Board of Directors reserves the right to amend or modify the
terms of the Rights Offering. The amendments or modifications may
be made for any reason and may adversely affect your Subscription
Rights. These changes may include, for example, changes to the
Subscription Price or other matters that may induce greater
participation by our stockholders in the Rights Offering. If we
make any fundamental change to the terms of the Rights Offering
after the date of effectiveness of this prospectus, we will file a
post-effective amendment to the registration statement in which
this prospectus is included and offer subscribers the opportunity
to cancel their subscriptions. In such event, we will issue
subscription refunds to each stockholder subscribing to purchase
Units in the Rights Offering and recirculate an amended prospectus
after the post-effective amendment is declared effective with the
Commission. If we extend the Expiration Date in connection with any
post-effective amendment, we will allow holders of Subscription
Rights a reasonable period of additional time to make new
investment decisions on the basis of the new information set forth
in the prospectus that will form a part of the post-effective
amendment. In such event, we will issue a press release announcing
the changes to the Rights Offering and the new Expiration Date.
Even if an amendment does not rise to the level that is fundamental
and would thus require us to offer to return your subscription
payment, the amendment may nonetheless adversely affect your rights
and any prospective return on your investment.
If we terminate this Rights Offering for any reason, we will
have no obligation other than to return subscription monies as soon
as practicable.
We may decide, in our sole discretion and for any reason, to cancel
or terminate the Rights Offering at any time prior to the
Expiration Date. If this offering is cancelled or terminated, we
will have no obligation with respect to Subscription Rights that
have been exercised except to return as soon as practicable,
without interest or deduction, all subscription payments deposited
with the Subscription Agent. If we terminate this Rights Offering
and you have not exercised any Subscription Rights, such
Subscription Rights will expire and be worthless.
If you do not act on a timely basis and follow subscription
instructions, your exercise of Subscription Rights may be
rejected.
Holders of Subscription Rights who desire to purchase Units in this
Rights Offering must act on a timely basis to ensure that all
required forms and payments are actually received by the
Subscription Agent prior to 5:00 p.m., New York City Time, on the
Expiration Date. If you are a beneficial owner of shares of common
stock and you wish to exercise your Subscription Rights, you must
act promptly to ensure that your broker, dealer, bank, trustee or
other nominee acts for you and that all required forms and payments
are actually received by your broker, dealer, bank, trustee or
other nominee in sufficient time to deliver such forms and payments
to the Subscription Agent to exercise the Subscription Rights
granted in this Rights Offering that you beneficially own prior to
5:00 p.m., New York City Time, on the Expiration Date, as the same
may be extended. We will not be responsible if your broker, dealer,
bank, trustee or other nominee fails to ensure that all required
forms and payments are actually received by the Subscription Agent
prior to 5:00 p.m., New York City Time, on the Expiration Date.
If you fail to complete and sign the required subscription forms,
send an incorrect payment amount, or otherwise fail to follow the
subscription procedures that apply to your exercise of Subscription
Rights in this Rights Offering, the Subscription Agent may,
depending on the circumstances, reject your subscription or accept
it only to the extent of the payment received. Neither we nor the
Subscription Agent undertakes to contact you concerning an
incomplete or incorrect subscription form or payment, nor are we
under any obligation to correct such forms or payment. We have the
sole discretion to determine whether a subscription exercise
properly follows the subscription procedures.
If you make payment of the Subscription Price by personal
check, your check may not clear in sufficient time to enable you to
purchase Units in the Rights Offering.
Any personal check used to pay for the Units to be issued in this
Rights Offering must clear prior to the Expiration Date, and the
clearing process may require five or more business days. If you
choose to exercise your Subscription Rights, in whole or in part,
and to pay for the Units by personal check and your check has not
cleared prior to the Expiration Date, you will not have satisfied
the conditions to exercise your Subscription Rights and will not
receive the shares of common stock and Preferred Stock comprising
the Units you wish to purchase.
You may not be able to immediately resell any shares of our
common stock or Preferred Stock comprising the Units that you
purchase upon the exercise of Subscription Rights immediately upon
expiration of the Rights Offering.
If you exercise your Subscription Rights, you may not be able to
resell the common stock or Preferred Stock comprising the Units you
purchase by exercising your Subscription Rights until you (or your
broker or other nominee) have received a book-entry representing
those shares. Although we will endeavor to issue the appropriate
book-entries as soon as practicable after completion of this
offering, there may be some delay between the Expiration Date and
the time that we issue the new book-entries.
We do not know how many stockholders will participate in the
Rights Offering.
Apart from Icahn Capital LP, who has agreed, pursuant to the
Investment Agreement, to provide the investment commitment and
ensure we will receive $43.6 million in gross proceeds from this
Rights Offering, we have no
other agreements or understandings with any persons or entities
with respect to their exercise of rights or their participation as
an underwriter, broker or dealer in the Rights Offering. We
therefore do not know how many other stockholders, if any, will
participate in our Rights Offering. If the closing of the
transaction contemplated by the Investment Agreement does not occur
and the Rights Offering is not otherwise fully subscribed, we will
not have the capital necessary to fund our contemplated uses of the
net proceeds of the Rights Offering and might need to look to other
sources of funding for these contemplated uses. There is no
assurance that these alternative sources will be available and at
what cost.
While we have entered
into the Investment Agreement with Icahn Capital LP, if the
conditions under the Investment Agreement are not satisfied, and we
are therefore unable to consummate the transactions contemplated by
the Investment Agreement, we will not consummate this Rights
Offering.
The closing of the transactions contemplated by the Investment
Agreement is subject to satisfaction or waiver of conditions,
including compliance with covenants and the accuracy of
representations and warranties provided in the Investment Agreement
and consummation of the Rights Offering. As a result, we cannot
guarantee that the transactions contemplated by the Investment
Agreement will be consummated. Failure to consummate the
transactions contemplated by the Investment Agreement could have
adverse effects on our business and results of operations and
financial condition.
Please see “The Investment Agreement” for further conditions to the
obligation of Icahn Capital LP to consummate the transactions
contemplated by the Investment Agreement.
You will not have any rights in the shares of common stock
and Preferred Stock comprising the Units that you purchase until
you actually receive such shares of common stock and Preferred
Stock.
You will not have any rights in the shares of common stock and
Preferred Stock comprising the Units that you purchase in the
Rights Offering until such shares of common stock and Preferred
Stock are actually issued to and received by you. We intend to
issue the shares as soon as reasonably possible after the
expiration of the Rights Offering; however, there may be a delay
between the Expiration Date of the Rights Offering and the date the
shares of common stock and Preferred Stock are actually issued and
delivered to you. You may not be able to resell the shares of
common stock and Preferred Stock until you, or your nominee, if
applicable, have actually received those shares.
You will not receive interest on subscription funds,
including any funds that may ultimately be returned to
you.
You will not earn any interest on your subscription funds while
they are being held by the Subscription Agent pending the closing
of this Rights Offering. In addition, if we terminate the Rights
Offering, neither we nor the Subscription Agent will have any
obligation with respect to the Subscription Rights except to
return, without interest or penalty, any excess subscription
payments to you.
The receipt of Subscription Rights may be treated as a
taxable distribution to you.
We believe the distribution of the Subscription Rights in this
Rights Offering should be a non-taxable distribution to holders of
shares of common stock under Section 305(a) of the
Internal Revenue Code of 1986, as amended, or the “Code.”
Please see the discussion on the “Material U.S. Federal Income Tax
Considerations” below. This position is not binding on the Internal
Revenue Service (“IRS”), or the courts, however. If this
Rights Offering is deemed to be part of a “disproportionate
distribution” under Section 305 of the Code, your receipt of
Subscription Rights in this offering may be treated as the receipt
of a taxable distribution to you equal to the fair market value of
the Subscription Rights. Any such distribution would be treated as
dividend income to the extent of our current and accumulated
earnings and profits, if any, with any excess being treated as a
return of capital to the extent thereof and then as capital gain.
Each holder of shares of common stock is urged to consult his, her
or its own tax advisor with respect to the particular tax
consequences of this Rights Offering.
The Rights Offering may limit our ability to use some or all
of our net operating loss carryforwards in the future.
The ultimate realization of our deferred income tax assets is
dependent upon generating future taxable income, executing tax
planning strategies, and reversals of existing taxable temporary
differences. We have recorded a full valuation allowance against
our deferred income tax assets. The valuation allowance may
fluctuate as conditions change. Our ability to utilize net
operating loss carryforwards to offset our future taxable income
and/or to recover previously paid taxes would be limited if we were
to undergo an “ownership change” within the meaning of
Section 382 of the Code. In general, an “ownership change”
occurs whenever the percentage of the stock of a corporation owned
by “5-percent stockholders” (within the meaning of Section 382
of the Code) increases by more than 50 percentage points over the
lowest percentage of the stock of such corporation owned by such
“5-percent stockholders” at any time over the testing period. An
ownership change under Section 382 of the Code would establish
an annual limitation to the amount of net operating loss
carryforwards we could utilize to offset our taxable income in any
single year. The application of these limitations might prevent
full utilization of the deferred tax assets attributable to our net
operating loss carryforwards.
Although we have taken steps intended to preserve our ability to
utilize our net operating loss carryforwards, such efforts may not
be successful. While we do not believe that the Rights Offering and
the issuance of shares pursuant to exercised rights will cause an
ownership change, the IRS and the courts are not bound by our
determination. Also, even if this offering and the issuance of
shares pursuant to exercised rights do not cause an ownership
change, they could increase the likelihood that we may undergo an
ownership change for purposes of Section 382 of the Code in
the future. Limitations imposed on our ability to utilize net
operating loss carryforwards could cause U.S. federal income taxes
to be paid earlier than would be paid if such limitations were not
in effect and could cause such net operating loss carryforwards to
expire unused, in each case reducing or eliminating the benefit of
such net operating loss carryforwards.
Exercising the Subscription Rights limits your ability to
engage in certain hedging transactions that could provide you with
financial benefits.
By exercising the Subscription Rights, you are representing to us
that you have not entered into any short sale or similar
transaction with respect to our common stock since the Record Date
for the Rights Offering. This requirement prevents you from
pursuing certain investment strategies that could provide you
greater financial benefits than you might have realized if the
Subscription Rights did not contain these requirements.
Risks Related to Our Common Stock
Our common stock will rank junior to the Preferred
Stock.
With respect to the payment of cash dividends and amount payable in
the event our liquidation, dissolution or winding up, our common
stock will rank junior to the Preferred Stock. This means that, unless full dividends
have been paid, redeemed in an amount in excess of the initial
liquidation value of $1,000 or set aside for payment on all
outstanding Preferred Stock for all dividends or increases in the
liquidation value in excess of the initial liquidation amount of
$1,000, no cash dividends may be declared or paid on our common
stock. Likewise, in the event of our voluntary or
involuntary liquidation, dissolution or winding up, no distribution
of our assets may be made to holders of our common stock until we
have paid to the holders of the Preferred Stock the liquidation
preference related to such Preferred Stock, plus in each case any
accrued and unpaid dividends.
The interests of our controlling stockholders may conflict
with the interests of other stockholders.
Mr. Jonathan Couchman, directly and indirectly, controls
approximately 18% of the voting power of our capital stock, and
Mr. Carl C. Icahn, directly and indirectly, controls
approximately 15% of the voting power of our capital stock (which
ownership, in each case, could increase in connection with the
Rights Offering under certain circumstances described in this
prospectus). Mr. Couchman and Mr. Icahn may have
interests that are different from, in addition to or not always
consistent with our interests or with the interests of our other
stockholders. To the extent that conflicts of interest may arise
between us and Mr. Couchman and his affiliates and/or
Mr. Icahn and his affiliates, those conflicts may be resolved
in a manner adverse to us or our other stockholders. In addition,
the existence of controlling stockholders may have the effect of
making it difficult for, or may discourage or delay, a third party
from seeking to acquire a majority of our outstanding common stock,
which may adversely affect the market price of our common
stock.
We have adopted a Section 382 Rights Plan, which may
discourage a corporate takeover.
On August 14, 2020, our Board of Directors adopted a
Section 382 rights plan (the “Section 382 Rights
Plan”) and declared a dividend distribution of one right for
each outstanding share of our common stock to stockholders of
record at the close of business on August 24, 2020. Each share
of our common stock issued thereafter will also include one right.
Each right entitles its holder, under certain circumstances, to
purchase from us one one-thousandth of a share of our
Series A-1 Junior Participating Preferred Stock, par value
$0.01 per share, at an exercise price of $1.20 per right, subject
to adjustment.
The Board adopted the Section 382 Rights Plan in an effort to
protect stockholder value by attempting to protect against a
possible limitation on our ability to use our net operating loss
carryforwards. We may utilize these net operating loss
carryforwards in certain circumstances to offset future U.S.
taxable income and reduce our U.S. federal income tax liability.
Because the Section 382 Rights Plan could make it more
expensive for a person to acquire a controlling interest in us, it
could have the effect of delaying or preventing a change in control
even if a change in control was in our stockholders’ interest.
Anti-takeover
provisions in our charter documents and under Delaware corporate
law may make it more difficult to acquire us, even though such
acquisitions may be beneficial to our
stockholders.
In addition to our
Section 382 Rights Plan, provisions of our certificate of
incorporation and by-laws, as well as provisions of Delaware
corporate law, could make it more difficult for a third party to
acquire us, even though such acquisitions may be beneficial to our
stockholders. These anti-takeover provisions include:
|
· |
lack of a provision for cumulative voting in the election of
directors; |
|
· |
the ability of our Board of Directors to authorize the issuance of
“blank check” preferred stock to increase the number of outstanding
shares and thwart a takeover attempt; |
|
· |
advance notice requirements for nominations for election to our
Board of Directors or for proposing matters that can be acted upon
by stockholders at stockholder meetings; and |
|
· |
limitations on who may call a special meeting of
stockholders. |
The provisions described
above, our Section 382 Rights Plan, and provisions of Delaware
corporate law relating to business combinations with interested
stockholders, along with the significant amount of common stock
beneficially owned by Messrs. Couchman and Icahn, may
discourage, delay or prevent a third party from acquiring us. These
provisions may also discourage, delay or prevent a third party from
acquiring a large portion of our securities, or initiating a tender
offer, even if our stockholders might receive a premium for their
shares in the acquisition over the then-current market
price.
Risks Related to the Preferred Stock
In the event of any dissolution, liquidation, or winding up
of our company, we may not be able to make distributions or
payments in full to all the holders of the Preferred Stock or, if
required, we may not be able to redeem such shares.
The Preferred Stock ranks senior to our common stock, but we may in
the future issue one or more series of preferred stock that ranks
senior to, junior to, or pari passu with, our Preferred
Stock. In the event of any dissolution, liquidation, winding up or
change of control of our company, we may not be able to make
distributions or payments in full to all the holders of the
Preferred Stock or, if required, to redeem the Preferred Stock, in
which case you could lose the entire value of your investment.
The dividends on our Preferred Stock can be paid in kind by
increasing the liquidation value of the shares of Preferred
Stock.
The terms of the Preferred Stock allow dividends on the shares of
Preferred Stock to be paid in kind by increasing the liquidation
value of the shares of Preferred Stock and, therefore, allow the
repayment of the principal and accrued dividends on the Preferred
Stock to be deferred until the earliest of the redemption of the
Preferred Stock or upon our dissolution, liquidation or winding up.
We may not have enough capital to repay the full amount of the
principal and accrued dividends when the payment of principal and
accrued dividends on the Preferred Stock become due.
The Preferred Stock is equity and is subordinate to our
existing and future indebtedness and other liabilities, and your
interests may be diluted in the event we issue additional shares of
preferred stock.
Shares of the Preferred Stock represent equity interests and do not
constitute indebtedness. As such, the Preferred Stock will rank
junior to all of our indebtedness and other non-equity claims of
our creditors with respect to assets available to satisfy our
claims, including in our liquidation, dissolution or winding up.
Our future debt may include restrictions on our ability to pay
distributions to preferred stockholders. Unlike indebtedness, where
principal and interest would customarily be payable on specified
due dates, in the case of preferred stock such as the Preferred
Stock, dividends are payable only if declared by our Board of
Directors (or a duly authorized committee thereof). Our ability to
pay dividends on the Preferred Stock may be limited by the terms of
our agreements governing future indebtedness and by the provisions
of other future agreements.
Subject to limitations prescribed by Delaware law and our charter,
our Board of Directors is authorized to issue, from our authorized
but unissued shares of capital stock, preferred stock in such
classes or series as our Board of Directors may determine and to
establish from time to time the number of shares of preferred stock
to be included in any such class or series. The issuance of
additional shares of Preferred Stock or additional shares of
preferred stock designated as ranking on parity with the Preferred
Stock would dilute the interests of the holders of shares of the
Preferred Stock, and the issuance of shares of any class or series
of our capital stock expressly designated as ranking senior to the
Preferred Stock or the incurrence of additional indebtedness could
affect our ability to pay distributions on, redeem or pay the
liquidation preference on the Preferred Stock.
The Preferred Stock is not convertible into common
stock.
The Preferred Stock will not be convertible into shares of common
stock and, therefore, holders of Preferred Stock will have no
rights with respect to shares of our common stock. In addition, the
Preferred Stock will accrue dividends at a fixed rate. Accordingly,
an increase in market price of our common stock will not
necessarily result in an increase in the value of the Preferred
Stock. The value of the Preferred Stock may depend more on dividend
and interest rates for other preferred stock, commercial paper and
other investment alternatives and our actual and perceived ability
to pay dividends on, and in the event of dissolution satisfy the
liquidation preference with respect to, the Preferred Stock.
Holders of shares of Preferred Stock will have no voting
rights.
Except as otherwise provided
by law, the holders of Preferred Stock will have no special voting
rights and their consent will not be required for taking any
corporate action. As a result, all matters submitted to
stockholders will be decided by the vote of holders of our common
stock. Holders of Preferred Stock will have no ability to influence
corporate matters and, as a result, we may take actions that
holders of our Preferred Stock do not view as
preferable.
There is no public market for the Preferred
Stock.
There is no established public trading market for the Preferred
Stock, and we do not expect a market to develop. We do not
currently intend to apply for listing of the Preferred Stock on any
securities exchange or recognized trading system. Purchasers of the
Preferred Stock may be unable to resell their shares of Preferred
Stock or sell them only at an unfavorable price for an extended
period of time, if at all.
USE OF PROCEEDS
Assuming that we complete the investment commitment pursuant to the
Investment Agreement and all 40,000 Units are sold in the Rights
Offering (which is the maximum amount of Units, calculated by using
the number of shares of common stock outstanding as of the Record
Date), we estimate that the net proceeds from the Rights Offering
will be approximately $43.4 million, based on a Subscription Price
of $1,090 per Unit and after deducting other expenses payable
by us.
We intend to use the net proceeds from this offering to position us
as a public company acquisition vehicle, where we can become an
acquisition platform and more fully utilize our net operating loss
tax carryforwards and enhance stockholder value. However, we
do not have any current plans, arrangements or understandings with
respect to any acquisitions or investments, and we are currently
not involved in any negotiations with respect to any such
transactions. We cannot specify with certainty the particular uses
of the net proceeds stated above, and our allocation of the
proceeds may change depending on the success of our planned
initiatives.
Our management will have broad discretion in the application of the
net proceeds from this Rights Offering, and investors will be
relying on the judgment of our management with regard to the use of
these net proceeds. Until we use the net proceeds of this Rights
Offering, we intend to invest the funds in short-term, investment
grade, interest-bearing securities such as money market accounts,
certificates of deposit, commercial paper and guaranteed
obligations of the U.S. government.
DILUTION
Purchasers of Units in the Rights Offering will experience an
immediate dilution of the net tangible book value per share of our
common stock. Our net tangible book value as of June 30, 2020
was approximately $5.6 million, or approximately $0.13 per share of
common stock (based upon 44,214,603 shares of our common stock
outstanding as of June 30, 2020). Net tangible book value per
share is equal to our total tangible assets less our total
liabilities, divided by the number of shares of our outstanding
common stock.
Dilution per share of common stock equals the difference between
the amount per share of common stock paid by purchasers of Units in
the Rights Offering (ascribing $1,000 per share to the Preferred
Stock contained in the Units) and the net tangible book value per
share of our common stock immediately after the Rights
Offering.
Based on the sale by us in this Rights Offering of a maximum of
40,000 Units (consisting of 30,000,000 shares of common stock and
40,000 shares of Preferred Stock, which numbers of Units, shares of
common stock and shares of Preferred Stock are estimated amounts,
calculated by using the number of shares of common stock and
outstanding as of June 30, 2020) at the Subscription Price of
$1,090 per Unit, and after deducting the value of Preferred Stock,
our pro forma net tangible book value as of June 30, 2020
would have been approximately $9.2 million, or $0.124 per
share. This represents an immediate dilution in pro forma net
tangible book value to existing stockholders of $0.002 per share
and an immediate increase to purchasers in the Rights Offering of
$0.004 per share. The following table illustrates this pro forma
per-share dilution:
| Subscription Price |
|
$ |
1,090 |
|
|
Net tangible book value per common share as of June 30, 2020,
before giving effect to the Rights Offering |
|
$ |
0.126 |
|
|
Dilution in net tangible book value per common share attributable
to the Rights Offering |
|
$ |
(0.002 |
) |
|
Pro forma net tangible book value per common share as of
June 30, 2020 after giving effect to the Rights Offering |
|
$ |
0.124 |
|
| Increase in pro forma
net tangible book value per common share to purchasers in the
Rights Offering |
|
$ |
0.004 |
|
The information above is as of June 30, 2020 and excludes
41,787 shares of our common stock issuable upon the exercise of
stock options outstanding as of June 30, 2020.
DESCRIPTION OF THE RIGHTS
OFFERING
The Rights Offering
We are distributing, at no charge, to all holders of our common
stock on the Record Date, transferable Subscription Rights to
purchase Units at a Subscription Price per Unit of $1,090. See
“—Subscription Price” below. In
the Rights Offering, you will receive one Subscription Right for
every share of common stock owned at 5:00 p.m., New York City Time,
on the Record Date. For every 1,105 Subscription Rights held, you
will be entitled to purchase one Unit at the Subscription Price.
Each Unit consists of one share of newly designated Preferred Stock
and 750 shares of our common stock.
The common stock to be issued in the Rights Offering, like our
existing shares of common stock, will be quoted on the OTCQX market
of the OTC under the symbol “ENZN” and will not be listed for
trading on a national securities exchange. The Subscription Rights,
Units and Preferred Stock to be issued in the Rights Offering will
not be listed for trading or quoted on any securities exchange or
recognized trading system. The Subscription Rights granted to you
are transferable and, therefore, you may sell, transfer or assign
your Subscription Rights to anyone during the offering period. The
Subscription Rights will be a
new issue of securities with no prior trading market. Although the
Subscription Rights are transferable, we do not intend to apply to
list the Subscription Rights for trading on any exchange or any
other market and your ability to transfer the Subscription Rights
will be limited and difficult. If you desire to transfer your
Subscription Rights, you will need to locate a buyer or transferee
of your Subscription Rights. We do not intend to facilitate
transfers among stockholders or otherwise create a market for
transfers and sales. Accordingly, we cannot provide you any
assurances as to the liquidity of a market for the Subscription
Rights. Furthermore, because there is likely to be an illiquid
market for the Subscription Rights, if any, the value that you
receive, if any, upon transfer of a Subscription Right will likely
be reduced, and may vary significantly from other transferors. We
are not responsible if you elect to sell your Subscription Rights
and no public or private market exists to facilitate the purchase
of Subscription Rights.
The maximum aggregate number of Units, and the corresponding
aggregate number of shares of common stock and Preferred Stock
disclosed in this prospectus, are what we are offering based on
44,214,603 shares of common stock outstanding as of the Record
Date.
Subscription Rights
Each holder as of 5:00 p.m., New York City Time, on the Record Date
will be granted one Subscription Right for each share of our common
stock owned at that time. For every 1,105 Subscription Rights held,
you will have the opportunity to purchase one Unit, which consists
of one share of newly designated Preferred Stock and 750 shares of
our common stock. For example, if you owned 1,105 shares of common
stock as of the Record Date, you would receive 1,105 Subscription
Rights and would have the right to purchase one Unit, or one share
of Preferred Stock and 750 shares of common stock, for a total
payment of $1,090 (the Subscription Price).
No Fractional Subscription Rights, Units or Shares
We will not issue fractional Subscription Rights, Units, shares or
cash in lieu of fractions in this Rights Offering. Accordingly, if
you hold shares of common stock in an amount other than a whole
multiple of 1,105 shares and wish to acquire a certain number of
Units in the Rights Offering, you will need to either acquire
(i) additional shares of common stock in the open market prior
to the Record Date or (ii) additional Subscription Rights
during the offering period of the Rights Offering, in each case in
an amount sufficient to increase your ownership of Subscription
Rights to allow you to participate at a level you desire to
participate.
For example, if you hold 10,000 shares of common stock as of the
Record Date, you will receive 10,000 Subscription Rights but will
only be entitled to exercise 9,945 Subscription Rights for 9 Units
(consisting of an aggregate of 9 shares of Preferred Stock and
6,750 shares of common stock) for a Subscription Price of $9,810.
You will not be able to exercise any of the remaining 55
Subscription Rights you hold (10,000 Subscription Rights minus the
9,945 Subscription Rights exercised) unless you acquire an
additional number of Subscription Rights to hold at least 1,105
Subscription Rights during the offering period.
Similarly, you could increase the number of Subscription Rights you
receive as of the Record Date by acquiring 1,050 additional shares
of common stock prior to the Record Date.
Limitation on the Purchase of Units
You may only purchase the number of whole Units purchasable upon
exercise of the requisite number of Subscription Rights distributed
to you in the Rights Offering. Accordingly, the number of Units
that you may purchase in the Rights Offering is limited by the
number of shares of our common stock you held on the Record Date,
the number of additional Subscription Rights you acquire during the
offering period, and by the extent to which other stockholders
exercise their Subscription Rights, which we cannot determine prior
to completion of the Rights Offering.
Subscription Price
The Subscription Price of $1,090 per Unit was determined by the
Board of Directors based on many factors, including, among other
things, the price at which our stockholders might be willing to
participate in the Rights Offering, the amount of proceeds desired
to achieve our financing goals, potential market conditions,
historical and current trading prices for our common stock, and the
terms of the Preferred Stock. The Subscription Price was not
determined on the basis of any investment bank or third-party
valuation that was commissioned by us. The Subscription Price does
not bear any particular relationship to the book value of our
assets, past operations, cash flows, losses, financial condition or
other criteria for ascertaining value. You should not consider the
Subscription Price as an indication of the value of our company or
any inherent value of shares of our common stock or Preferred
Stock. The Board of Directors reserves the right, exercisable in
its sole discretion, to change the Subscription Price or determine
to cancel or otherwise alter the terms of the Rights Offering.
After the date of this prospectus, our common stock may trade at
prices below the Subscription Price. You should obtain a current
price quote for our common stock before exercising your
Subscription Rights and make your own assessment of our business
and financial condition, our prospects for the future, and the
terms of this Rights Offering.
No Recombination
The common stock and Preferred Stock comprising the Units will
separate upon the effectiveness of the exercise of the Subscription
Rights and will be issued as separate securities, and the Units
will not trade as a separate security. Holders may not recombine
shares of common stock and Preferred Stock to receive a Unit.
Transferability of Subscription Rights
The Subscription Rights are transferable until the Expiration Date
and, therefore, you may sell, transfer or assign your Subscription
Rights to anyone during the offering period. The Subscription
Rights will be a new issue of securities with no prior trading
market. Although the Subscription Rights are transferable, we do
not intend to list or quote the Subscription Rights on any
securities exchange or recognized trading system and your ability
to transfer the Subscription Rights will be limited and difficult.
If you desire to transfer your Subscription Rights, you will need
to locate a buyer or transferee of your Subscription Rights. We do
not intend to facilitate transfers among stockholders or otherwise
create a market for transfers and sales. We
cannot give you any assurance that a market for the Subscription
Rights will develop or, if a market does develop, how long it will
continue or at what prices the Subscription Rights will trade.
Furthermore, because there is likely to be an illiquid market for
the Subscription Rights, if any, the value that you receive, if
any, upon transfer of a Subscription Right will likely be reduced,
and may vary significantly from other transferors. We are not
responsible if you elect to sell your Subscription Rights and no
public or private market exists to facilitate the purchase of
Subscription Rights.
Method of Transferring Subscription Rights
Registered Holder. To transfer all of your
Subscription Rights represented by a Subscription Rights
Certificate to a designated transferee, you must complete the
transfer portion of the Subscription Rights Certificate in its
entirety, execute the Subscription Rights Certificate and have your
signature guaranteed by an eligible guarantor institution (bank,
stock broker, savings & loan association or credit union)
with membership in an approved signature guarantee medallion
program pursuant to Rule 17Ad-15 of the Exchange Act. A
Subscription Rights Certificate that has been properly transferred
in its entirety may be exercised by a new holder without having a
new Subscription Rights Certificate issued by the Subscription
Agent. In order to exercise, or otherwise take action with respect
to, such a transferred Subscription Rights Certificate, the new
holder should deliver the Subscription Rights Certificate, together
with payment of the applicable price and complete separate
instructions signed by the new holder, to the Subscription Agent in
ample time to permit the Subscription Agent to take the desired
action.
Because only the Subscription Agent can issue Subscription Rights
Certificates, if you wish to transfer fewer than all of the
Subscription Rights evidenced by your Subscription Rights
Certificate to a designated transferee, or to subdivide your
Subscription Rights Certificates, you must instruct the
Subscription Agent as to the action to be taken with respect to the
Subscription Rights not sold or transferred, or you must divide
your Subscription Rights Certificate into Subscription Rights
Certificates of appropriate smaller denominations by following the
instructions below. The Subscription Rights Certificate evidencing
the number of Subscription Rights you intend to transfer can then
be transferred by following the instructions for transfers of all
rights represented by a Subscription Rights Certificate.
To have a Subscription Rights Certificate divided into smaller
denominations, send your Subscription Rights Certificate, together
with complete separate instructions (including specification of the
denominations into which you wish your rights to be divided) signed
by you, to the Subscription Agent, allowing a sufficient amount of
time for new Subscription Rights Certificates to be issued and
returned so that they can be used prior to the Expiration Date. The
Subscription Agent will facilitate subdivisions of Subscription
Rights Certificates only until 5:00 p.m, New York City Time,
on October 6, 2020, the third business day before the Expiration
Date. Subscription Rights Certificates may not be divided into
fractional rights, and any instruction to do so will be
rejected.
Other Holders. If you are a beneficial owner of our common
stock that is registered in the name of a broker, dealer, bank or
other nominee, you will need to coordinate a transfer through your
broker, dealer, bank or other nominee.
All Holders. Holders wishing to transfer all or a portion of
their Subscription Rights, or to subdivide Subscription Rights,
should allow a sufficient amount of time prior to the Expiration
Date for: (i) the transfer instructions to be received and
processed by the Subscription Agent or applicable broker, dealer,
bank or other nominee; (ii) if required, a new Subscription
Rights Certificate to be issued and transmitted to the transferee
or transferees with respect to transferred Subscription Rights and
to the transferor with respect to retained Subscription Rights, if
any; and (iii) the Subscription Rights evidenced by such new
Subscription Rights Certificates to be exercised by the recipients
thereof. Neither we nor the Subscription Agent shall have any
liability to a transferee or transferor of rights if Subscription
Rights are not received in time for exercise prior to the
Expiration Date. Subscription Rights not exercised by the
Expiration Date will expire and have no value. Neither we nor the
Subscription Agent shall have any liability with respect to any
expired Subscription Rights.
In designating the Subscription Rights transferable, rather than
non-transferable, the Board considered that the distribution of the
Subscription Rights themselves may have intrinsic value, which may
be viewed as partial compensation for the possible dilution of
non-participating stockholders’ interest by potentially receiving a
cash payment upon the sale for their Subscription Rights.
Furthermore, because the Subscription Rights are transferable, the
Rights Offering may increase the number of our stockholders, which
could increase the level of market interest in and visibility of
the company overall and potentially enhance the trading liquidity
of our shares.
Exercise of Rights
You may exercise some, all, or none of your Subscription Rights.
For every 1,105 Subscription Rights held, you will be entitled to
purchase one Unit at the Subscription Price. We will not issue
fractional Subscription Rights or fractional Units in the Rights
Offering. As a result, assuming you own Subscription Rights in an
amount that equals a whole multiple of 1,105, you may exercise any
number of your Subscription Rights in multiples of 1,105, or you
may choose not to exercise any Subscription Rights. See “—No
Fractional Subscription Rights, Units or Shares” above.
If you do not exercise any of your Subscription Rights, the number
of shares of our common stock you own will not change and you will
not receive any shares of Preferred Stock. If you do not exercise
your Subscription Rights in full (or you cannot exercise any
Subscription Rights because you do not hold Subscription Rights in
an amount that equals a whole multiple of 1,105), you will suffer
dilution of your percentage ownership of our common stock relative
to our other stockholders. We anticipate that we will issue
approximately 30,000,000 shares of our common stock in this Rights
Offering. Subject to certain conditions and pursuant to the
Investment Agreement, Icahn Capital LP has agreed to exercise
in full the Subscription Rights issued to it and, additionally, in
conjunction with the expiration of the Rights Offering, to purchase
from us, at a price per Unit equal to the Subscription Price, all
such Units that remain unsubscribed for pursuant to the exercise of
Subscription Rights. Accordingly, 30,000,000 shares of common stock
and 40,000 shares of Preferred Stock will be issued in the Rights
Offering. Your ownership interest will be diluted following the
consummation of the Rights Offering if you do not exercise your
Subscription Rights in full. You can avoid such dilution by fully
exercising such Subscription Rights.
You may exercise your Subscription Rights as follows:
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Subscription by Stockholders of Record: If you
are a stockholder of record, the number of Units you may purchase
pursuant to your Subscription Rights is indicated on the enclosed
Subscription Rights Certificate. You may exercise your Subscription
Rights by properly completing and executing the Subscription Rights
Certificate and forwarding it, together with your full payment and,
if applicable, notice of guaranteed delivery, to the Subscription
Agent at the address given below under “Subscription Agent,” to be
received before 5:00 p.m., New York City Time, on the Expiration
Date. |
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Subscription by Beneficial Owners: If you are a
beneficial owner of shares of our common stock that are registered
in the name of a broker, dealer, bank, or other nominee, you will
not receive a Subscription Rights Certificate. Instead, we will
issue one Subscription Right to such nominee record holder for
every share of our common stock held by such nominee at the Record
Date. If you are not contacted by your nominee, you should promptly
contact your nominee in order to subscribe for Units in the Rights
Offering and follow the instructions provided by your nominee. |
Subscription Agent
The Subscription Agent for the Rights Offering is Continental Stock
Transfer & Trust Company. The address to which
Subscription Rights Certificates and payments should be mailed or
delivered by overnight courier is provided below. If sent by mail,
we recommend that you send documents and payments by registered
mail, properly insured, with return receipt requested, and that you
allow a sufficient number of days to ensure delivery to the
Subscription Agent before the Rights Offering expires. Do not send
or deliver these materials to us.
| |
By Mail, Hand or Overnight Courier: |
|
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Continental Stock Transfer & Trust Company
Attn: Reorganization Department
1 State Street
30th Floor
New York, NY 10004
(917) 262-2378 |
|
If you deliver the Subscription Rights Certificate in a manner
different than that described in this prospectus, we may not honor
the exercise of your Subscription Rights.
Payment Method
Payments must be made in full in U.S. currency by:
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Personal check drawn on a U.S. bank payable to “Continental
Stock Transfer & Trust Company, as subscription agent for Enzon
Pharmaceuticals, Inc.”; |
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Certified check drawn on a U.S.
bank payable to “Continental Stock Transfer & Trust Company, as
subscription agent for Enzon Pharmaceuticals, Inc.”; |
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U.S. postal money order payable to “Continental Stock Transfer
& Trust Company, as subscription agent for Enzon
Pharmaceuticals, Inc.”; or |
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Wire transfer of immediately available funds to the account
maintained by the Subscription Agent (see the Subscription Rights
Certificate for the wire instructions). |
Payment received after 5:00 p.m., New York City Time, on the
Expiration Date will not be honored, and, in such event, the
Subscription Agent will return your payment to you, without
interest, as soon as practicable.
If you elect to exercise your Subscription Rights, you should
consider using a wire transfer or certified check drawn on a U.S.
bank to ensure that the Subscription Agent receives your funds
before the Rights Offering expires. If you send a personal check,
payment will not be deemed to have been received by the
Subscription Agent until the check has cleared. The clearinghouse
may require five or more business days to clear a personal check.
Accordingly, holders who wish to pay the Subscription Price by
means of a personal check should make payment sufficiently in
advance of the expiration of the Rights Offering to ensure that the
payment is received and clears by that date. If you send a wire
directly to the Subscription Agent’s account, payment will be
deemed to have been received by the Subscription Agent immediately
upon receipt of such wire transfer. If you send a certified check,
payment will be deemed to have been received by the Subscription
Agent immediately upon receipt of such instrument.
If you send a payment that is insufficient to purchase the number
of Units you requested, or if the number of Units you requested is
not properly specified, then the funds will be applied to the
exercise of Subscription Rights only to the extent of the payment
actually received by the Subscription Agent. If you deliver
subscription payments in a manner different than that described in
this prospectus, then we may not honor the exercise of your
Subscription Rights.
You should read the instruction letter accompanying the
Subscription Rights Certificate carefully and strictly follow
it. DO NOT SEND SUBSCRIPTION RIGHTS CERTIFICATES OR
PAYMENTS DIRECTLY TO US.
If you have any questions or
comments regarding completion of the materials, or the Rights
Offering or exercise of your Subscription Rights in general, please
contact the Information Agent for this Rights Offering,
Georgeson LLC, at (888) 605-8334 (toll free). You should
direct any requests for additional copies of this prospectus to the
Information Agent, Georgeson LLC, at (888) 605-8334 (toll
free).
Guaranteed Delivery Procedures
If you do not have adequate time to deliver the Subscription Rights
Certificate evidencing your Subscription Rights to the Subscription
Agent prior to the expiration of the Rights Offering, you may still
participate in the Rights Offering if you follow the guaranteed
delivery procedures set forth below prior to the expiration of the
Rights Offering:
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deliver your subscription payment to the Subscription Agent
covering all Subscription Rights that you are exercising, in
accordance with the procedures set forth above; |
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deliver your “Notice of Guaranteed Delivery” to the
Subscription Agent; and |
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within two (2) business days following the date you
submitted your Notice of Guaranteed Delivery, deliver to the
Subscription Agent the complete and properly signed Subscription
Rights Certificate (together with your beneficial owner election
form, if applicable), including any signature guarantees, if
necessary. |
All notices of guaranteed delivery must include a signature
guarantee from an eligible guarantor institution.
The notice of guaranteed delivery may be delivered to the
Subscription Agent in the same manner as Subscription Rights
Certificates at the address set forth in this prospectus.
If you have any questions or comments regarding completion or
delivery of the notice of guaranteed delivery, please contact the
Information Agent, Georgeson LLC, at (888) 605-8334 (toll
free).
Missing or Incomplete Subscription Forms or Payment
If you fail to complete and sign the Subscription Rights
Certificate or otherwise fail to follow the subscription procedures
that apply to the exercise of your Subscription Rights before the
Rights Offering expires, the Subscription Agent will reject your
subscription or accept it to the extent of the payment received.
Neither we nor our Subscription Agent undertakes any responsibility
or action to contact you concerning an incomplete or incorrect
subscription form, nor are we or our Subscription Agent under any
obligation to correct such forms. We have the sole discretion to
determine whether a subscription exercise properly complies with
the subscription procedures.
If you send a payment that is insufficient to purchase the number
of Units you requested, or if the number of Units you requested is
not specified in the forms, the payment received will be applied to
exercise your Subscription Rights to the fullest extent possible
based on the amount of the payment received. Any excess
subscription payments received by the Subscription Agent will be
returned, without interest or penalty, as soon as practicable
following the expiration of the Rights Offering.
Expiration Date; Extension
The Subscription Rights will expire if they are not exercised by
5:00 p.m., New York City Time, on the Expiration
Date unless the Rights Offering is extended or earlier
terminated by us in our sole discretion; provided,
however, that we may not extend the Expiration Date by
more than 30 calendar days past the original Expiration Date. We
will not be required to issue Units to you if the Subscription
Agent receives your Subscription Rights Certificate or your
subscription payment after that time.
We have the option to extend the Rights Offering by giving oral or
written notice to the Subscription Agent before the Rights Offering
expires in our sole discretion; provided, however, that we
may not extend the expiration date of the Rights Offering by more
than 30 days past the original expiration date. If we elect to
extend the Rights Offering, we will issue a press release
announcing the extension no later than 9:00 a.m., New York City
Time, on the next business day after the most recently announced
expiration date of the Rights Offering. We do not presently intend
to extend the Expiration Date of the Rights Offering.
If you exercise your Subscription Rights, you may revoke such
exercise at any time before the Expiration Date by following the
instructions herein. If the Expiration Date is extended, you may
revoke your exercise of Subscription Rights at any time until the
final Expiration Date as so extended. If we terminate the Rights
Offering, all subscription payments received will be returned as
soon as practicable thereafter without interest or deduction.
If you are a record holder of our common stock, the number of Units
you may purchase pursuant to your Subscription Rights is indicated
on the enclosed Subscription Rights Certificate. If you hold your
shares in the name of a broker, dealer, bank, or other nominee who
uses the services of DTC, you will not receive a Subscription
Rights Certificate. Instead, DTC will issue one Subscription Right
to your nominee record holder for every share of our common stock
that you beneficially own as of the Record Date. If you are not
contacted by your nominee, you should contact your nominee as soon
as possible.
Termination
Our Board of Directors may decide to terminate the Rights Offering
at any time and for any reason before the expiration of the Rights
Offering. We also have the right to extend the Rights Offering for
additional periods in our sole discretion; provided,
however, that we may not extend the Expiration Date of the
Rights Offering by more than 30 days past the original Expiration
Date. We do not presently intend to extend the Rights Offering. We
will notify stockholders and the public if the Rights Offering is
extended by issuing a press release announcing the extension no
later than 9:00 a.m., New York City Time, on the next business day
after the most recently announced expiration date of the Rights
Offering. If we terminate the Rights Offering, we will issue a
press release notifying stockholders and the public of the
termination.
Return of Funds upon Completion or Termination
The Subscription Agent will hold funds received in payment for
Units in a segregated account pending completion of the Rights
Offering. The Subscription Agent will hold this money until the
Rights Offering is completed or is terminated. To the extent you
properly exercise your Subscription Rights for an amount of Units
that exceeds the number of unsubscribed Units available to you, any
excess subscription payments will be returned to you as soon as
practicable after the expiration of the Rights Offering, without
interest or penalty. If we do not complete the Rights Offering, all
subscription payments received by the Subscription Agent will be
returned as soon as practicable after the termination or expiration
of the Rights Offering, without interest or deduction. If you own
shares in “street name,” it may take longer for you to receive your
subscription payment because the Subscription Agent will return
payments through the record holder of your shares.
Shares of Our Common Stock Outstanding After the Rights
Offering
Based on 44,214,603 shares of common stock outstanding as of
the Record Date, assuming no other transactions by us involving our
common stock prior to the expiration of the Rights Offering, if the
Rights Offering is completed (including the investment
commitment), 74,214,603 shares of our common stock will
be issued and outstanding and 40,000 shares of the Preferred
Stock will be issued and outstanding. The exact number of shares of
common stock and Preferred Stock that we will issue in this Rights
Offering will depend on the number of Units that are subscribed for
in the Rights Offering.
Notice to Brokers and Nominees
If you are a broker, dealer, bank, or other nominee that holds
shares of our common stock for the account of others on the Record
Date, you should notify the beneficial owners of the shares for
whom you are the nominee of the Rights Offering as soon as possible
to learn their intentions with respect to exercising their
Subscription Rights. If a beneficial owner of our common stock so
instructs, you should complete the Subscription Rights Certificate
and submit it to the Subscription Agent with the proper
subscription payment by the expiration date. You may exercise the
number of Subscription Rights to which all beneficial owners in the
aggregate otherwise would have been entitled had they been direct
holders of our common stock on the Record Date, provided
that you, as a nominee record holder, make a proper showing to
the Subscription Agent by submitting the form entitled “Nominee
Holder Certification,” which is provided with your Rights Offering
materials. If you did not receive this form, you should contact our
Subscription Agent to request a copy.
Validity of Subscriptions
We will resolve all questions regarding the validity and form of
the exercise of your Subscription Rights, including time of receipt
and eligibility to participate in the Rights Offering. In resolving
all such questions, we will review the relevant facts, and, if
necessary, consult with our legal advisors, and we may request
input from the relevant parties. Our determination will be final
and binding. We will not accept any alternative, conditional or
contingent subscriptions or directions. We reserve the absolute
right to reject any subscriptions or directions not properly
submitted or the acceptance of which would be unlawful. You must
resolve any irregularities in connection with your subscriptions
before the offering period expires, unless waived by us in our sole
discretion. Neither we nor the Subscription Agent will be under any
duty to notify you or your representative of defects in your
subscriptions. A subscription will be considered accepted, subject
to our right to withdraw or terminate the Rights Offering, only
when a properly completed and duly executed Subscription Rights
Certificate and any other required documents and the full
subscription payment have been received by the Subscription Agent.
Our interpretations of the terms and conditions of the Rights
Offering will be final and binding.
Stockholder Rights
You will have no rights as a holder of the shares of our common
stock or Preferred Stock comprising the Units you purchase in the
Rights Offering until such shares are issued in book-entry, or
uncertificated, form or your account at your broker, dealer, bank,
or other nominee is credited with such shares.
Regulatory Limitations; No Offer Made to California Residents;
No Unlawful Subscriptions
We will not mail this prospectus or Subscription Rights
Certificates to stockholders or holders of record with addresses
that are outside the United States or that have an army post office
or foreign post office address. The Subscription Agent will hold
these Subscription Rights Certificates for their account. To
exercise Subscription Rights, our foreign stockholders must notify
the Subscription Agent prior to 5:00 p.m., New York City Time,
on October 6, 2020, the third business day prior to the Expiration
Date, of your exercise of Subscription Rights and provide evidence
satisfactory to us, such as a legal opinion from local counsel,
that the exercise of such Subscription Rights does not violate the
laws of the jurisdiction in which such stockholder resides and
provide payment by a U.S. bank in U.S. dollars before the
expiration of the Rights Offering. If no notice is received by such
time or the evidence presented is not satisfactory to us, the
Subscription Rights represented thereby will expire.
We will not be required to issue to you shares of our common stock
or Preferred Stock comprising the Units acquired pursuant to the
Rights Offering if, in our opinion, you are required to obtain
prior clearance or approval from any state or federal regulatory
authorities to own or control such shares and if, at the time the
Rights Offering expires, you have not obtained such clearance or
approval.
The distribution of the Subscription Rights and the offer and sale
of the shares of common stock and Preferred Stock comprising the
Units issuable upon exercise of the Subscription Rights is not
registered or otherwise qualified in California. Accordingly, the
Rights Offering is not available to residents of California.
We reserve the absolute right to reject any subscriptions not
properly submitted or the acceptance of which would be unlawful. We
are not soliciting, selling or accepting any offers to participate
in our Rights Offering in any jurisdictions where such actions are
prohibited. No offers to purchase any shares of our common stock or
Preferred Stock are made to Subscription Rights holders who are
residents of such jurisdictions, and we will not sell or accept
offers for the purchase of our common stock or Preferred Stock from
such Subscription Rights holders.
Revocation Rights
If you exercise your Subscription Rights, you may revoke such
exercise before the Expiration Date by following the instructions
herein. If the Expiration Date is extended, you may revoke your
exercise of Subscription Rights at any time until the final
Expiration Date as so extended. If we terminate the Rights
Offering, all subscription payments received will be returned as
soon as practicable thereafter without interest or deduction. After
the expiration date of the Rights Offering, such exercises are
irrevocable.
To be effective, a written notice of revocation must be received by
the Subscription Agent at its address identified in this prospectus
prior to the Expiration Date of the Rights Offering, as may be
extended. Any notice of revocation must specify the name of the
person who exercised the Subscription Rights for which such
exercises are to be revoked and the number of Subscription Rights
to be revoked. Any funds received by the Subscription Agent will be
promptly returned to such holder following a revocation.
Revocations of Subscription Rights may not be cancelled; however,
you may exercise your Subscription Rights again by following one of
the procedures described above in the section entitled “The Rights
Offering—Exercise of Rights” at any time prior to the expiration of
the Rights Offering.
All questions as to the form and validity (including time of
receipt) of any notice of revocation will be determined by us, in
our sole discretion, which determination shall be final and
binding, subject to the judgments of any courts with jurisdiction
over us that might provide otherwise. Neither we nor any other
person will be under any duty to give notification of any defect or
irregularity in any notice of revocation or incur any liability for
failure to give any such notification, subject to the judgment of
any court with jurisdiction over us.
Minimum Subscriptions
There is no aggregate minimum subscription we must receive to
complete the Rights Offering. However, pursuant to the Investment
Agreement, Icahn Capital LP has agreed to exercise in full the
Subscription Rights issued to it and, additionally, in conjunction
with the expiration of the Rights Offering, to purchase from us, at
a price per Unit equal to the Subscription Price, all of the Units
that remain unsubscribed for pursuant to the exercise of
Subscription Rights. Accordingly, even if no stockholders other
than Icahn Capital LP exercise their rights, we will receive $43.6
million in aggregate gross proceeds.
Fees and Expenses
If you wish to exercise your Subscription Rights, the only cost to
you will be the payment of the Subscription Price for purchase of
the Units. We will pay all fees charged by the Subscription Agent
and Information Agent. We will not charge any fees or commissions
in connection with the issuance of the Subscription Rights to you
or the exercise of your Subscription Rights. If you hold your
shares of common stock through a nominee, you may be required to
pay your nominee certain service or administration fees in
connection with the exercise of your Subscription Rights. Please
check with your nominee in such regard. We are not responsible for
covering or reimbursing any such fees.
Issuance of Common Stock and Preferred Stock
You will have no rights as a holder of the shares of our common
stock and Preferred Stock comprising the Units you purchase in the
Rights Offering, if any, until the shares are actually received by
you.
We intend to issue the shares of common stock and Preferred Stock
in book-entry, or uncertificated, form to each subscriber as soon
as practicable after completion of the Rights Offering; however,
there may be a delay between the Expiration Date of the Rights
Offering and the date and time that the shares are issued and
delivered to you or your nominee, as applicable. We will issue the
shares in book-entry, or uncertificated, form to each subscriber;
we will not issue any stock certificates.
If you are the holder of record of our common stock, you will
receive a direct registration, or DRS, account statement of
ownership from our transfer agent, Continental Stock
Transfer & Trust Company, reflecting the shares of common
stock and Preferred Stock that you have acquired in the Rights
Offering.
If you hold your shares of common stock in the name of a broker,
dealer, bank, or other nominee who uses the services of DTC, DTC
will credit your account with your nominee with the securities you
acquire in the Rights Offering. You may request a statement of
ownership from the nominee following the completion of the Rights
Offering.
No Recommendation to Holders of Subscription Rights
Neither our Board of Directors nor our management has made any
recommendation regarding your exercise of the Subscription Rights.
Rights holders who exercise Subscription Rights will incur
investment risk on new money invested. We cannot predict the price
at which our shares of common stock comprising the Units will
trade, and, therefore, we cannot assure you that the market price
for our common stock before, during or after this Rights Offering
will be above the Subscription Price, or that anyone purchasing
shares at the Subscription Price will be able to sell those shares
or shares of the Preferred Stock comprising the Units purchased in
the Rights Offering in the future at a price equal to or greater
than the Subscription Price. You are urged to make your decision to
invest based on your own assessment of our business and financial
condition, our prospects for the future, the terms of the Rights
Offering, the information in this prospectus and other information
relevant to your circumstances. Please see “Risk Factors” for a
discussion of some of the risks involved in investing in our
securities.
Interests of our Directors, Officers, and Principal
Stockholders
All holders of our common stock as of the Record Date for the
Rights Offering will receive, at no charge, the transferable
Subscription Rights to purchase Units comprised of shares of our
common stock and Preferred Stock as described in this prospectus.
To the extent that our directors and officers hold shares of our
common stock as of the Record Date, they will receive the
Subscription Rights and, while they are under no obligation to do
so, will be entitled to participate in the Rights Offering. As of
September 14, 2020, none of our directors or officers held
shares of our common stock.
Pursuant to the Investment Agreement, Icahn Capital LP has
agreed to exercise in full the Subscription Rights issued to it
and, additionally, in conjunction with the expiration of the Rights
Offering, to purchase from us, at a price per Unit equal to the
Subscription Price, that number of Units that remain unsubscribed
for pursuant to the exercise of Subscription Rights. Icahn Capital
LP, together with its affiliates, is one of our largest
stockholders and beneficially owns approximately 15% of our common
stock.
Other than as described, our officers, directors and principal
stockholders have no interests in the Rights Offering, and we have
not otherwise received any indication from any of our directors,
officers or other stockholders as to whether they plan to subscribe
for Units in the Rights Offering.
Investment Commitment
Our objective is to raise
$43.6 million in gross proceeds from our Rights Offering. In the
event that all Subscription Rights are not exercised, we would fall
short of that objective. We have therefore entered into the
Investment Agreement with Icahn Capital LP, which, together with
its affiliates, is one of our largest stockholders, to ensure we
will receive $43.6 million in gross proceeds from this Rights
Offering; provided, that the gross proceeds from the Rights
Offering and investment commitment will not exceed the amount of
$43.6 million in the aggregate. Additionally, we do not believe
that Icahn Capital LP’s increase in our stock ownership should
impair our ability to potentially use our net operating loss
carryforwards even if no stockholders other than Icahn Capital LP
participate in the Rights Offering. Accordingly, having Icahn
Capital LP provide the investment commitment should not affect the
potential impact of the Rights Offering on our net operating loss
carryforwards.
Subject to certain conditions
and pursuant to the Investment Agreement, Icahn Capital LP has
agreed to exercise in full the Subscription Rights issued to it
and, additionally, in conjunction with the expiration of the Rights
Offering, to purchase from us, at a price per Unit equal to the
Subscription Price, that number of Units that remain unsubscribed
for pursuant to the exercise of Subscription Rights. If all 40,000
Units available in this Rights Offering are sold pursuant to the
exercise of Subscription Rights, there will be no unsubscribed
Units, and no excess Units will be sold to Icahn Capital LP
pursuant to the Investment Agreement.
Icahn Capital LP will not receive any fees for entering into the
Investment Agreement in connection with the Rights Offering. We
will pay all of our fees and expenses (including attorneys’ fees)
incurred in connection with the Investment Agreement and the
transactions contemplated thereby. In addition, as part of
the consideration for entering into the Investment Agreement, we
have agreed to terminate the Standstill Agreement, dated
December 8, 2016, entered into with Icahn Capital LP and the
parties identified therein, as well as waive the applicability of
Section 203 of the General Corporation Law of the State of
Delaware. Furthermore, we have also agreed to use our best efforts
to register for resale all of the shares of common stock then held
by Icahn Capital LP and its affiliates following the closing of the
Rights Offering.
U.S. Federal Income Tax Treatment of Subscription Rights
Distribution
For U.S. federal income tax purposes, we believe you generally
should not recognize income or loss in connection with the receipt
or exercise of Subscription Rights, but certain aspects of that
determination are not certain. This position is not binding on the
IRS or the courts, however. You are urged to consult your own tax
advisor as to your particular tax consequences resulting from the
receipt and exercise of Subscription Rights and the receipt,
ownership and disposition of our common stock and Preferred Stock.
See “Material U.S. Federal Income Tax Considerations.”
Listing and Quotation
Common Stock. The common stock to be issued in the Rights
Offering, like our existing shares of common stock, will be quoted
on the OTCQX market of the OTC under the symbol “ENZN” and will not
be listed for trading on a national securities exchange.
Units. There is no established public trading market for the
Units, and we do not intend to list or quote the Units on any
securities exchange or recognized trading system.
Preferred Stock. There is no established public trading
market for the Preferred Stock, and we do not intend to list or
quote the Preferred Stock on any securities exchange or recognized
trading system.
Subscription Rights. The Subscription Rights are
transferable until the Expiration Date and, therefore, you may
sell, transfer or assign your Subscription Rights to anyone during
the offering period. The Subscription Rights will be a new issue of securities with no prior
trading market. Although they are transferrable, we do not intend
to apply to list the Subscription Rights for trading on any
exchange or any other market and your ability to transfer the
Subscription Rights will be limited and difficult. If you desire to
transfer your Subscription Rights, you will need to locate a buyer
or transferee of your Subscription Rights. We do not intend to
facilitate transfers among stockholders or otherwise create a
market for transfers and sales. Accordingly, we cannot provide you
any assurances as to the liquidity of a market for the Subscription
Rights. Furthermore, because there is likely to be an illiquid
market for the Subscription Rights, if any, the value that you
receive, if any, upon transfer of a Subscription Right will likely
be reduced, and may vary significantly from other transferors. We
are not responsible if you elect to sell your Subscription Rights
and no public or private market exists to facilitate the purchase
of Subscription Rights.
Important
Do not send Subscription Rights Certificates directly to us. You
are responsible for choosing the payment and delivery method for
your Subscription Rights Certificate, and you bear the risks
associated with such delivery. If you choose to deliver your
Subscription Rights Certificate and payment by mail, we recommend
that you use registered mail, properly insured, with return receipt
requested. We also recommend that you allow a sufficient number of
days to ensure delivery to the Subscription Agent prior to the
Expiration Date.
THE INVESTMENT AGREEMENT
The Investment Commitment
On September 1, 2020, we entered into an Investment Agreement
with Icahn Capital LP which, together with its affiliates,
beneficially owns approximately 15% of our outstanding shares of
common stock. Subject to the terms and conditions of the Investment
Agreement, Icahn Capital LP has agreed to subscribe for its
pro-rata share of the Rights Offering, and, additionally, to
purchase all Units that remain unsubscribed for at the expiration
of the Rights Offering to the extent that other holders elect not
to exercise all of their respective Subscription Rights. No fees
will be paid by us to Icahn Capital LP in consideration of such
investment commitment.
In addition, we have agreed to use our best efforts to register for
resale all of the shares of common stock then held by Icahn Capital
LP and its affiliates following the closing of the Rights
Offering.
In light of the investment commitment, we anticipate that we will
receive gross proceeds of at least $43.6 million if the Rights
Offering is completed, whether or not any of the Subscription
Rights are exercised by the holders thereof.
Closing Conditions
The closing of the transactions contemplated by the Investment
Agreement is subject to the satisfaction or waiver of customary
conditions, including (i) the accuracy of representations and
warranties set forth in the Investment Agreement;
(ii) compliance with covenants; (iii) the effectiveness
of the registration statement related to the Rights Offering; and
(iv) consummation of the Rights Offering.
Fees and Expenses
Each party to the Investment Agreement will pay all of its own fees
and expenses (including attorneys’ fees) incurred in connection
with the Investment Agreement and the transactions contemplated
thereby. We will also pay all of our expenses associated with this
prospectus, the registration statement of which this prospectus
forms a part and the Rights Offering.
Termination
The Investment Agreement may be terminated at any time prior to the
closing of the Rights Offering by mutual agreement of the Board,
acting on our behalf, and Icahn Capital LP. Further, the Investment
Agreement will be terminated by either the Board, acting on our
behalf, or Icahn Capital LP upon written notice to the other party
if the Rights Offering is not consummated by December 31,
2020.
Indemnification
We have agreed to indemnify Icahn Capital LP and its affiliates and
each of their respective officers, directors, partners, employees,
agents and representatives for losses arising out of or relating to
any inaccuracy in or breach of our representations or warranties
contained in the Investment Agreement or our breach of any
agreement or covenant made by us in the Investment Agreement, other
than losses resulting from any action, suit, claim, matter or
proceeding initiated by or on behalf of a stockholder of the
Company (other than Icahn Capital LP with respect to its rights
under the Investment Agreement against us) relating to the
transactions contemplated by the Investment Agreement.
Icahn Capital LP has agreed to indemnify us and our affiliates and
each of our respective officers, directors, partners, employees,
agents and representatives from and against any and all losses
arising out of or relating to any inaccuracy in or breach of Icahn
Capital LP’s representations or warranties contained in the
Investment Agreement or Icahn Capital LP’s breach of any agreement
or covenant made by Icahn Capital LP in the Investment
Agreement.
DESCRIPTION OF SECURITIES
The following descriptions of our capital stock, Certificate of
Incorporation (including the Certificates of Designations), By-Laws
and Section 382 Rights Agreement are only summaries, and we
encourage you to review complete copies of our organizational
documents and the Section 382 Rights Agreement, which are
incorporated by reference as exhibits to the registration statement
of which this prospectus forms a part. You can obtain copies of
these documents by following the directions outlined in “Where You
Can Find More Information” elsewhere in this prospectus.
General
Our authorized capital stock consists of: (i) 170,000,000
shares of common stock and (ii) 3,000,000 shares of preferred
stock, par value $.01 per share.
Our common stock is currently quoted on the OTCQX market of the OTC
under the symbol “ENZN.”
Common Stock
Dividends
Holders of common stock are entitled to receive dividends when, as
and if declared by our Board of Directors out of funds legally
available for their payment, subject to the rights of holders of
any preferred stock that may be issued and outstanding and to
restrictions contained in agreements to which we are a party.
Voting Rights
Each holder of our common stock is entitled to one vote per share
on all matters submitted to a vote of stockholders. Generally, a
matter submitted for stockholder action shall be approved if the
votes cast “for” the matter exceed the votes cast “against” such
matter, unless a greater or different vote is required by statute,
any applicable law or regulation, the rights of any authorized
series of preferred stock, or our Certificate of Incorporation or
By-Laws. Other than in a contested election where directors are
elected by a plurality vote, a director nominee shall be elected to
the Board of Directors if the votes cast “for” such nominee’s
election exceed the votes cast “against” such nominee’s election.
Subject to any rights of the holders of any series of preferred
stock pursuant to applicable law or the Certificate of Designations
creating that series, all voting rights are vested in the holders
of shares of our common stock. Holders of shares of our common
stock do not have cumulative voting rights.
Rights Upon Liquidation
Upon our liquidation, dissolution or winding up, the holders of
common stock are entitled to share ratably in our net assets
available after the payment of all debts and other liabilities, and
after the satisfaction of the rights of any outstanding preferred
stock.
Other Rights
Holders of our common stock have no preemptive, redemption or
conversion rights, nor are they entitled to the benefit of any
sinking fund. The outstanding shares of common stock are validly
issued, fully paid and non-assessable.
Preferred Stock
Our Board of Directors is authorized, without further action by our
stockholders, to issue up to 3,000,000 shares of “blank check”
preferred stock, in one or more series, and to fix the
designations, powers, preferences and the relative, participating,
optional or other special rights and any qualifications,
limitations and restrictions of the shares of each series of
preferred stock.
Of our currently authorized preferred stock, (i) 600,000
shares were previously designated as Series B Preferred Stock
in connection with our rights plan, which expired on May 16,
2012, (ii) 100,000 shares were previously designated as
Series A Junior Participating Preferred Stock in connection
with our previous Section 382 rights plan, which expired on
April 30, 2017, and (iii) 100,000 shares are currently
designated as Series A-1 Junior Participating Preferred Stock
in connection with our Section 382 Rights Plan (as defined
below) adopted on August 14, 2020. In addition, 40,000 shares
will be designated as Series C Preferred Stock in connection
with the Rights Offering.
Series A-1 Junior Participating Preferred
Stock
Pursuant to the Certificate of Designation of Series A-1
Junior Participating Preferred Stock (“Series A-1 Preferred
Stock”), we may issue 100,000 shares of Series A-1
Preferred Stock.
Ranking
The Series A-1 Preferred Stock ranks junior to all other
series of our preferred stock as to the payment of dividends and
the distribution of assets, whether or not upon the dissolution,
liquidation or winding up of our company, unless the terms of any
such series provides otherwise.
Proportional Adjustment
In the event that we shall (i) declare any dividend on common
stock payable in shares of common stock, (ii) subdivide the
outstanding common stock or (iii) combine the outstanding
common stock into a smaller number of shares, then in each such
case we shall simultaneously effect a proportional adjustment to
the number of outstanding shares of Series A-1 Preferred
Stock.
Dividend Rights
Subject to the prior and superior right of the holders of any
shares of any series of preferred stock ranking prior and superior
to the shares of Series A-1 Preferred Stock with respect to
dividends, the holders of shares of Series A-1 Preferred
Stock, in preference to the holders of common stock, will be
entitled to receive when, as and if declared by the Board of
Directors out of funds legally available for the purpose, quarterly
dividends payable in cash on the last business day of March, June,
September and December in each year (referred to as a
“quarterly dividend payment date”), commencing on the first
quarterly dividend payment date after the first issuance of a share
or fraction of a share of Series A-1 Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to the greater
of (a) $1.20 or (b) subject to adjustment as set forth in
the Certificate of Designation, 1,000 times the aggregate per share
amount of all cash dividends, and 1,000 times the aggregate per
share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of common
stock or a subdivision of the outstanding shares of common stock
(by reclassification or otherwise), declared on the common stock
since the immediately preceding quarterly dividend payment date,
or, with respect to the first quarterly dividend payment date,
since the first issuance of any share or fraction of a share of
Series A-1 Preferred Stock.
We will be required to declare a dividend or distribution on the
Series A-1 Preferred Stock as provided in the preceding
paragraph immediately after we declare a dividend or distribution
on the common stock (other than a dividend payable in shares of
common stock).
Dividends will begin to accrue and be cumulative on outstanding
shares of Series A-1 Preferred Stock from the quarterly
dividend payment date first following the date of issue of such
shares of Series A-1 Preferred Stock, unless the date of issue
of such shares is prior to the record date for the first quarterly
dividend payment date, in which case dividends on such shares will
begin to accrue from the date of issue of such shares, or unless
the date of issue is a quarterly dividend payment date or is a date
after the record date for the determination of holders of shares of
Series A-1 Preferred Stock entitled to receive a quarterly
dividend and before such quarterly dividend payment date, in either
of which events such dividends will begin to accrue from such
quarterly dividend payment date. Accrued but unpaid dividends will
not bear interest. Dividends paid on the shares of Series A-1
Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares will be
allocated pro rata on a share-by-share basis among all such shares
at the time outstanding.
Voting Rights
Each share of Series A-1 Preferred Stock will entitle the
holder thereof to 1,000 votes on all matters submitted to a vote of
our stockholders. Except as otherwise provided in the Certificate
of Designation or by law, the holders of Series A-1 Preferred
Stock and the holders of common stock will vote together as one
class on all matters submitted to a vote of our stockholders.
Certain Restrictions on Dividends
Whenever quarterly dividends or other dividends or distributions
payable on the Series A-1 Preferred Stock as described above
are in arrears, we will be restricted in our ability to declare or
pay dividends on, redeem or purchase or otherwise acquire for
consideration, or make other distributions of shares of stock
ranking junior to, or on parity with, the Series A-1 Preferred
Stock (subject to specified exceptions for stock ranking on a
parity with the Series A-1 Preferred Stock). In such event, we
will also be restricted in our ability to purchase shares of
Series A-1 Preferred Stock.
Distribution Upon Liquidation, Dissolution or Winding Up
Upon any liquidation, dissolution or winding up of our company, the
holders of shares of Series A-1 Preferred Stock will be
entitled to receive an amount per share equal to $1,200 per share
of Series A-1 Preferred Stock, plus an amount equal to accrued
and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment.
Exchange Upon Consolidation or Merger
In the event we enter into any consolidation, merger, combination
or other transaction in which the shares of our common stock are
exchanged for or changed into other stock or securities, cash
and/or any other property, then in any such case each share of
Series A-1 Preferred Stock shall at the same time be similarly
exchanged or changed into an amount per share equal to 1,000 times
the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, for which or into
which each share of common stock is exchanged or changed.
No Redemption
Shares of Series A-1 Preferred Stock are not redeemable.
Amendment
Our Certificate of Incorporation may not be amended in any manner
which would materially alter or change the powers, preferences or
special rights of the shares of Series A-1 Preferred Stock so
as to affect them adversely without the affirmative vote of the
holders of a majority of the outstanding shares of Series A-1
Preferred Stock, voting separately as a class.
Series C Preferred Stock
For purposes of this section, we refer to the preferred stock to be
issued upon the exercise of Subscription Rights in this Rights
Offering as “Series C Preferred Stock.” The Certificate
of Designation setting forth the specific rights, preferences,
limitations and other terms of the Series C Preferred Stock
will be approved by our Board of Directors as of the date of this
prospectus. The Series C Preferred Stock is a single series of
authorized preferred stock consisting of 40,000 shares.
The Series C Preferred Stock will be fully paid and
non-assessable when issued. Holders of the Series C Preferred
Stock will not have preemptive or similar rights to acquire any of
our capital stock. Holders will not have the right to convert
Series C Preferred Stock into, or exchange shares of
Series C Preferred Stock for, shares of any other class or
series of shares or other securities of ours. The Series C
Preferred Stock has no stated maturity and will not be subject to
any sinking fund, retirement fund or purchase fund.
Ranking
The Series C Preferred Stock will rank senior to all junior
securities with respect to payment of dividends and distributions
of assets upon our liquidation, dissolution or winding up, whether
voluntary or involuntary. For purposes of the Certificate of
Designation of Series C Preferred Stock, “junior
securities” means collectively, our common stock and any other
class of securities that is specifically designated as junior to
the Series C Preferred Stock, including, but not limited to,
our Series A-1 Junior Participating Preferred
Stock.
We may in the future issue one or more series of preferred stock
that ranks senior to, junior to or pari passu with, the
Series C Preferred Stock.
Dividends
On an annual basis, our Board of Directors may, at its sole
discretion, cause a dividend with respect to the Series C
Preferred Stock to be paid in cash to the holders in an amount
equal to 3% of the liquidation preference as in effect at such time
(initially $1,000 per share). If the dividend is not so paid in
cash, the liquidation preference will be adjusted and increased
annually by an amount equal to 5% of the liquidation preference per
share as in effect at such time, that is not paid in cash to the
holders on such date. The initial dividend payments for the period
of time between the initial issuance date and the first dividend
payment date, if applicable, shall be prorated. Due to our ability
to pay dividends on our Series C Preferred Stock in kind by
increasing the liquidation preference of the shares of our
Series C Preferred Stock, the payment of accrued dividends in
cash may be deferred until the redemption by us or the holders, as
applicable, of the Series C Preferred Stock, or until our
dissolution, liquidation or winding up. No plan, arrangement or
agreement is currently in place that would prevent us from paying a
dividend with respect to the Series C Preferred Stock in
cash.
All
accrued and accumulated dividends on the shares of Series C
Preferred Stock will be paid prior to, and in preference to, any
dividend on any securities ranking junior to the Series C
Preferred Stock and will be fully declared and paid before any
dividends are declared and paid, or any other distributions or
redemptions are made, on any junior securities, provided
that (a) we will be permitted to declare or pay any
dividend or distribution payable on the shares of our common stock
in shares of common stock and (b) in the event that, as of the
applicable measurement date, there are shares of our
Series A-1 Junior Participating Preferred Stock issued and
outstanding, we will be permitted to declare or pay any dividend or
distribution on the Series A-1 Junior Participating Preferred
Stock pursuant to the Certificate of Designation for the
Series A-1 Junior Participating Preferred Stock. As our common
stock ranks junior to the Series C Preferred Stock,
unless full dividends have
been paid, redeemed in an amount in excess of the initial
liquidation value of $1,000 or set aside for payment on all
outstanding Preferred Stock for all dividends or increases in the
liquidation value in excess of the initial liquidation amount of
$1,000, no cash dividends may be declared or paid on our common
stock otherwise.
No Conversion
Holders will not have the right to convert Series C Preferred
Stock into, or exchange Series C Preferred Stock for, any
other securities or property of the Company.
Voting Rights
Except as otherwise provided by law, the holders of Series C
Preferred Stock will have no special voting rights and their
consent will not be required for taking any corporate action.
However, we must obtain the prior written consent of the holders of
Series C Preferred Stock in order to amend the Certificate of
Designation governing the Series C Preferred Stock, including,
under certain circumstances, in connection with a merger,
consolidation or other transaction between us and another entity.
See “—Amendment and Waiver” below.
Redemption
The Series C Preferred Stock is not subject to any mandatory
redemption, sinking fund, retirement fund, purchase fund or other
similar provisions.
On and after November 1, 2022, we will have the option to redeem
the shares of Series C Preferred Stock in whole or in part at any
time for an amount equal to the liquidation preference per share as
in effect at such time. There is no prohibition on the repurchase
or redemption of shares while there is any arrearage in the payment
of dividends. The Series C Preferred Stock is also redeemable
at the option of the holders if we undergo a “change of control”
which is defined as the earliest to occur of (a) the date on
which a majority of the members of our Board of Directors are not
Continuing Directors and (b) the date on which a “person” or
“group” (within the meaning of Section 13(d)(3) of the
Exchange Act) beneficially owns in excess of 50% of our common
stock. A “Continuing Director” means (a) each of the
individually identified three directors constituting the Board of
Directors as of the date of the Certificate of Designation
governing the Series C Preferred Stock (the “Current
Directors”), (b) directors whose nomination for election
by the stockholders or by the directors to fill vacancies is
approved by a majority of the Current Directors then serving, or
(c) any successor directors whose nomination for election by
the stockholders or by the directors to fill vacancies is approved
by a majority of the Continuing Directors or the successor
Continuing Directors then in office.
Our
ability to redeem the Series C Preferred Stock as described
above may be limited by the terms of our agreements governing our
existing and future indebtedness and by the provisions of other
existing and future agreements.
Liquidation Rights
The Series C Preferred Stock will have a preference upon
dissolution, liquidation or winding up of our company in respect of
assets available for distribution to holders of our junior
securities. The liquidation preference of the Series C
Preferred Stock is initially $1,000 per share. On an annual basis,
our Board of Directors may in its sole discretion, cause a dividend
with respect to the Series C Preferred Stock to be paid in
cash to the holders in an amount equal to 3% of the liquidation
preference as in effect at such time. If the dividend is not so
paid in cash, the liquidation preference will be adjusted and
increased annually by an amount equal to 5% of the liquidation
preference per share as in effect at such time, that is not paid in
cash to the holders on such date. The annual accretion will
continue until the shares are redeemed, or until we liquidate,
dissolve or wind-up our affairs.
Amendment and Waiver
No provision of the Certificate of Designation governing the
Series C Preferred Stock may be amended, modified or waived
without the affirmative vote of the holders of two-thirds
(2/3) of the outstanding shares of Series C Preferred Stock,
voting separately as a class, and any such written amendment,
modification or waiver will be binding upon us and each holder of
Series C Preferred Stock, provided that the prior
written consent of each holder of outstanding shares of
Series C Preferred Stock will be required in order to change
or waive (i) the definition of “Liquidation Preference
Adjustment” in the Certificate of Designation, (ii) the rate
at which or the manner in which dividends on the Series C
Preferred Stock accrue or accumulate or the times at which such
dividends become payable, or (iii) the provision governing the
amendment, modification or waiver of any provision of the
Certificate of Designation.
We are prohibited from amending, modifying or waiving the terms or
relative priorities of the Series C Preferred Stock through a
merger, consolidation or other transaction with another entity
unless we have obtained the prior written consent of the holders of
Series C Preferred Stock.
No Market
The Series C Preferred Stock will not be listed for trading or
quoted on any securities exchange or recognized trading system.
Transfer Agent
Continental Stock Transfer & Trust Company will be the
transfer agent for the Preferred Stock. The address of Continental
Stock Transfer & Trust Company is 1 State Street,
30th Floor, New York, New York 10004.
Book-Entry; Uncertificated Shares
The shares of Series C Preferred Stock will be issued in
book-entry, or uncertificated, form, meaning that you will receive
a direct registration, or DRS, account statement from our transfer
agent reflecting ownership of these securities if you are a holder
of record. If you hold your shares of our common stock in the name
of a bank, broker, dealer, or other nominee who uses the
services of DTC,
DTC will credit your account with your nominee with the securities
you purchased in the Rights Offering.
Section 382 Rights Plan
On August 14, 2020 (the “Rights Dividend Declaration
Date”), our Board of Directors adopted a Section 382
rights plan (the “Section 382 Rights Plan”) and
declared a dividend distribution of one right for each outstanding
share of Common Stock, to stockholders of record at the close of
business on August 24, 2020. Each right entitles its holder,
under certain circumstances described below, to purchase from us
one one-thousandth of a share of our Series A-1 Preferred
Stock at an exercise price of $1.20 per right, subject to
adjustment (referred to as the “purchase price”). The
description and terms of the rights are set forth in a
Section 382 Rights Agreement, dated as of August 14,
2020, by and between us and Continental Stock Transfer &
Trust Company, as Rights Agent (the “Section 382 Rights
Agreement”).
Our Board of Directors adopted the Section 382 Rights Plan in
an effort to protect stockholder value by attempting to protect
against a possible limitation on our ability to use our net
operating loss carryforwards. If we experience an “ownership
change,” as defined in Section 382 of the Code, our ability to
fully utilize the net operating loss carryforwards on an annual
basis will be substantially limited, and the timing of the usage of
the net operating loss carryforwards could be substantially
delayed, which could therefore significantly impair the value of
those benefits. The Section 382 Rights Plan is intended to act
as a deterrent to any person (an “Acquiring Person”)
acquiring (together with all affiliates and associates of such
person) beneficial ownership of 4.9% or more of our outstanding
common stock within the meaning of Section 382 of the Code,
without the approval of our Board of Directors. Stockholders who
beneficially own 4.9% or more of our outstanding common stock as of
the Rights Dividend Declaration Date will not be deemed to be an
Acquiring Person.
The Rights under the Section 382 Rights Plan
Initially, the rights are associated with shares of common stock
certificates or, in the case of uncertificated shares of common
stock, the book-entry account that evidences record ownership of
such shares, which will contain a notation incorporating the
Section 382 Rights Plan by reference, and are transferable
with and only with the underlying shares of common stock. New
rights will attach to any shares of common stock that become
outstanding after the record date and prior to the earlier of the
Distribution Date (as defined below) and the expiration date of the
Section 382 Rights Plan. If Series A-1 Preferred Stock is
issued upon exercise of the rights, each fractional share of
Series A-1 Preferred Stock would give the stockholder
approximately the same dividend, voting and liquidation rights as
does one share of our common stock. However, prior to exercise, a
right does not give its holder any rights as a stockholder of our
company, including any dividend, voting or liquidation rights.
Initial Exercisability
Subject to certain exceptions, the rights issued under the
Section 382 Rights Plan are not exercisable until the
“Distribution Date,” which occurs upon the earlier of:
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the close of business on the tenth day after the “Stock
Acquisition Date,” which is (a) the first date of public
announcement that an Acquiring Person has become such or
(b) such earlier date as a majority of our Board of Directors
has become aware of the existence of an Acquiring Person (in each
case, subject to certain exceptions), or |
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the close of business on the tenth business day (or such later
date as may be determined by our Board of Directors prior to such
time as any person or group becomes an Acquiring Person) following
the commencement of a tender offer or exchange offer which, if
consummated, would result in a person or group becoming an
Acquiring Person. |
Any existing stockholder or group that beneficially owns 4.9% or
more of our common stock has been grandfathered at its current
ownership level, but the rights will not be exercisable if, at any
time after the announcement of the Section 382 Rights Plan,
such stockholder or group increases its ownership of common stock
by one share of common stock. Certain synthetic interests in
securities created by derivative positions, whether or not such
interests are considered to be ownership of the underlying common
stock or are reportable for purposes of Regulation 13D of the
Exchange Act, are treated as beneficial ownership of the number of
shares of common stock equivalent to the economic exposure created
by the derivative position, to the extent actual shares of common
stock are directly or indirectly held by counterparties to the
derivatives contracts.
Separation and Distribution of Subscription
Rights
Until the earlier of the Distribution Date and the expiration date
of the Section 382 Rights Plan, the surrender for transfer of
any shares of common stock will also constitute the transfer of the
rights associated with those shares. As soon as practicable after
the Distribution Date, separate rights certificates will be mailed
to holders of record of common stock as of the close of business on
the Distribution Date. From and after the Distribution Date, the
separate rights certificates alone will represent the rights, and
the rights may be transferred apart from the transfer of the
underlying shares of common stock, unless and until the Board of
Directors has determined to effect an exchange pursuant to the
Section 382 Rights Agreement (as described below).
Expiration Date
The Section 382 Rights Agreement will expire on the earliest
of the following:
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the close of business on August 13, 2021 (the “final
expiration date”); |
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the redemption of the rights; |
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the exchange of the rights; |
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the close of business on the effective date of the repeal of
Section 382 of the Code or any successor statute if our Board
of Directors determines that the Section 382 Rights Agreement
is no longer necessary or desirable for the preservation of certain
tax benefits; or |
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the close of business on the first day of a taxable year to
which the Board determines that no tax benefits may be carried
forward. |
“Flip-In” Event
In the event that a person becomes an Acquiring Person (a
“Flip-in Event”), each holder of a right, other than rights
that are or, under certain circumstances, were beneficially owned
by the Acquiring Person (which will thereupon become void), will,
from and after the Distribution Date, have the right to receive,
upon exercise of a right and payment of the purchase price, a
number of shares of common stock having a market value of two times
the purchase price.
For example, at an exercise price of $1.20 per right, each right
not owned by an Acquiring Person (or certain related parties)
following a Flip-in Event will entitle its holder to purchase $2.40
worth of shares of common stock for $1.20. If the common stock at
the time of exercise had a market value per share of $0.20 the
holder of each valid right would be entitled to purchase twelve
shares of common stock for $1.20.
However, rights are not exercisable following the occurrence of a
person becoming an Acquiring Person until such time as the rights
are no longer redeemable by us (as described below under “–
Redemption”).
“Flip-Over” Event
In the event that, at any time following the Stock Acquisition
Date, any of the following occurs (each, a “Flip-over
Event”):
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We consolidate with, or merge with and into, any other entity,
and we are not the continuing or surviving entity; |
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Any entity engages in a share exchange with or consolidates
with, or merges with or into, us, and we are the continuing or
surviving entity and, in connection with such share exchange,
consolidation or merger, all or part of the outstanding shares of
common stock are changed into or exchanged for stock or other
securities of any other entity or cash or any other property;
or |
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We sell or otherwise transfer, in one transaction or a series
of related transactions, fifty percent (50%) or more of our assets,
cash flow or earning power, |
each holder of a right (except rights which previously have been
voided as described above) will have the right to receive, upon
exercise, common stock of the acquiring company having a value
equal to two times the exercise price of the right.
Preferred Share Provisions
Each share of Series A-1 Preferred Stock, if issued: will not
be redeemable, will entitle the holder thereof, when, as and if
declared, to quarterly dividend payments equal to the greater of
$1.20 per share and 1,000 times the amount of all cash dividends
plus 1,000 times the amount of non-cash dividends or other
distributions paid on one share of common stock, will entitle the
holder thereof to receive $1,200 plus accrued and unpaid dividends
per share upon liquidation, will have the same voting power as
1,000 shares of common stock and, if shares of common stock are
exchanged via merger, consolidation or a similar transaction, will
entitle the holder thereof to a per share payment equal to the
payment made on 1,000 shares of common stock.
Exempted Persons and Exempted Transactions
Our Board of Directors recognizes that there may be instances when
an acquisition of shares of common stock that would cause a
stockholder to become an Acquiring Person may not jeopardize or
endanger in any material respect the availability of the net
operating loss carryforwards to us. Accordingly, the
Section 382 Rights Agreement provides that the following
“Exempted Persons” cannot become an Acquiring Person:
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· |
We or
any of our subsidiaries; |
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· |
Any
officer, director or employee of ours or any of our subsidiaries
solely in respect of such person’s status or authority as
such; |
|
· |
Any
employee benefit plan of ours or any of our subsidiaries or any
entity or trustee holding (or acting in a fiduciary capacity in
respect of) shares of our capital stock for or pursuant to the
terms of any such plan, or for the purpose of funding other
employee benefits for employees of ours or any of our
subsidiaries;
and |
|
· |
Any
other person (together with all of its affiliates and associates)
whose beneficial ownership of 4.9% or more of the then outstanding
shares of common stock will not jeopardize or endanger the
availability to us of any tax benefit, as determined by our Board
of Directors in its sole discretion prior to the time any person
becomes an Acquiring Person; provided, however, that our Board of
Directors can revoke such person’s “Exempted Person Status” if it
subsequently makes a contrary determination regarding whether the
person jeopardizes or endangers the availability of any tax benefit
to us. |
Additionally, the Section 382 Rights Agreement provides that
an “Exempted Transaction,” as determined by our Board of Directors,
cannot result in a person becoming an Acquiring Person.
Redemption
At any time prior to the earlier of (1) the Stock Acquisition
Date and (2) the final expiration date, we may redeem the
rights in whole, but not in part, at a price of $0.01 per right
(the “Redemption Price”) (subject to adjustment). The
redemption of the rights may be made effective at such time, on
such basis and with such conditions as the Board of Directors in
its sole discretion may establish. Immediately upon any redemption
of the rights (or such later time as the Board of Directors may
establish), the right to exercise the rights will terminate, and
the only right of the holders of rights will be to receive the
Redemption Price for each right so held.
Exchange
At any time after any person or group becomes an Acquiring Person
and prior to the acquisition by the Acquiring Person of 50% or more
of the outstanding shares of common stock, the Board of Directors
may exchange the rights (other than rights that are a void), in
whole or in part, at an exchange ratio equal to (i) a number
of shares of common stock per right with a value equal to the
spread between the value of the number of shares of common stock
for which the rights may then be exercised and the purchase price
or (ii) if prior to the acquisition by the Acquiring Person of
50% or more of the then outstanding shares of common stock, one
share of common stock per right (subject to adjustment).
Immediately upon an exchange of any rights, the right to exercise
such rights will terminate and the only right of the holders of
rights will be to receive the number of shares of common stock
equal to the number of such rights held by such holder multiplied
by an exchange ratio.
Anti-Dilution Provisions
Our Board may adjust the purchase price of the Series A-1
Preferred Stock, the number of shares of Series A-1 Preferred
Stock issuable and the number of outstanding rights to prevent
dilution that may occur as a result of certain events, including
among others, a share dividend, a share split or a reclassification
of the Series A-1 Preferred Stock or of the common stock. With
certain exceptions, no adjustments to the purchase price will be
required until cumulative adjustments amount to at least 1% of the
purchase price.
Amendments
Prior to the Distribution Date, our Board of Directors is permitted
to supplement or amend any provision of the Section 382 Rights
Agreement in any respect without the approval of the holders of the
rights. From and after the Distribution Date, no amendment can
materially adversely affect the interests of the holders of the
rights (excluding the interests of any Acquiring Person).
Anti-Takeover Effects of Provisions of Our Certificate of
Incorporation, By-Laws, Other Agreements and Delaware Law
Section 382 Rights Plan
As described above, our Section 382 Rights Plan is designed to
protect stockholder value by mitigating the likelihood of an
“ownership change” that would substantially limit our ability to
use our net operating loss carryforwards to offset future taxable
income. The Section 382 Rights Plan provides, subject to
certain exceptions, that if a person (together with all affiliates
and associates of such person) acquires 4.9% or more of our
outstanding common stock, there would be a triggering event
potentially resulting in significant dilution in the voting power
and economic ownership of that person or group. Existing
stockholders who hold 4.9% or more of our outstanding common stock
as of the Rights Dividend Declaration Date (as defined above) will
trigger a dilutive event only if they acquire an additional 1% of
the outstanding shares of our common stock. For more information
about the Section 382 Rights Plan and the Section 382
Rights Agreement, see “—Section 382 Rights Plan” above.
Provisions of Our Certificate of Incorporation and
By-Laws
Some provisions of our Certificate of Incorporation and By-Laws
could delay or prevent a change in control of our company.
Advance Notice
Our By-Laws provide that a stockholder must notify us in writing,
within timeframes specified in the By-Laws, of any stockholder
nomination of a director and of any other business that the
stockholder intends to bring at a meeting of stockholders. Our
By-Laws also specify requirements as to the content of a
stockholder’s notice. In some instances, these provisions may
preclude our stockholders from bringing proposals or making
nominations for directors at our stockholder meetings.
Amendments to By-Laws
Our Certificate of Incorporation and By-Laws provide that our
By-Laws may be amended by our Board of Directors or by vote of the
holders of the shares entitled to vote in the election of
directors.
Changes to Board and Vacancies
Our By-Laws provide that directors may be removed only for cause by
the affirmative vote of the holders of a majority of the shares
then entitled to vote at an election of directors. The By-Laws also
provide that the number of directors may be increased or decreased,
within established limits, by affirmative vote of a majority of the
whole Board of Directors. Under our Certificate of Incorporation,
any vacancy on the Board of Directors, however occurring, including
a vacancy resulting from an enlargement of the Board of Directors,
may only be filled by vote of a majority of the directors then in
office, whether or not a quorum.
Authorized but Unissued Shares
The authorized but unissued shares of our common stock are
available for future issuance without stockholder approval. These
additional shares may be used for a variety of corporate purposes,
including public offerings to raise additional capital, corporate
acquisitions and employee benefit plans. The existence of
authorized but unissued and unreserved common stock could also
render more difficult or discourage an attempt to obtain control of
us by means of a proxy contest, tender offer, merger or
otherwise.
“Blank Check” Preferred Stock
Our Board of Directors is authorized, without further action by our
stockholders, to issue shares of “blank check” preferred stock, in
one or more series, and to fix the designations, powers,
preferences and the relative, participating, optional or other
special rights and any qualifications, limitations and restrictions
of the shares of each series of preferred stock. The issuance of
preferred stock could have the effect of delaying, deferring or
preventing a change in control, as well as decrease the amount of
earnings and assets available for distribution to holders of our
common stock or otherwise adversely affect their rights and powers,
including voting rights.
Series C Preferred Stock
Under the terms of our Series C Preferred Stock, we may be
required to redeem the Series C Preferred Stock in connection
with a “change in control” of our company, which is defined as
the
earliest to occur of (a) the date on which a majority of the
members of our Board of Directors are not Continuing Directors and
(b) the date on which a “person” or “group” (within the
meaning of Section 13(d)(3) of the Exchange Act)
beneficially owns in excess of 50% of our common stock. This may
delay the assumption of control by a holder of a large block of
capital stock and the removal of incumbent directors and
management, even if such removal may be beneficial to some or all
of our stockholders.
State Law Provisions
We are governed by the provisions of Section 203 of the DGCL.
These provisions, which are summarized below, may have the effect
of delaying, deterring or preventing a change in our control. They
could also impede a transaction in which our stockholders might
receive a premium over the then-current market price of our common
stock and our stockholders' ability to approve transactions that
they consider to be in their best interests.
In
general, Section 203 of the DGCL, subject to specific
exceptions, prohibits a Delaware corporation with a class of voting
stock listed on a national securities exchange or held of record by
2,000 or more stockholders from engaging in a business combination
with an interested stockholder (generally, the beneficial owner of
15% or more of the corporation’s outstanding voting stock) for
three years following the time the stockholder became an interested
stockholder, unless: (1) prior to such time the corporation’s
board of directors approved either the business combination or the
transaction that resulted in the stockholder becoming an interested
stockholder, (2) upon consummation of the transaction that
resulted in the stockholder becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of
the corporation outstanding at the time the transaction commenced,
excluding for purposes of determining the number of shares
outstanding those shares owned by directors, officers and specific
employee stock plans, or (3) on or after that date, the
business combination is approved by our Board of Directors and
authorized at an annual or special meeting of stockholders, and not
by written consent, by the affirmative vote of the holders of at
least 66 2/3% of the outstanding voting stock that is not owned by
the interested stockholder. A “business combination” includes,
among other things, a merger, asset sale, or other transaction
resulting in a financial benefit, other than proportionately as a
stockholder, to the interested stockholder.
The provisions of Section 203 may encourage companies
interested in acquiring us to negotiate in advance with our Board
of Directors since the stockholder approval requirement would be
avoided if our Board of Directors approves either the business
combination or the transaction that results in the stockholder
becoming an interested stockholder. These provisions also may have
the effect of preventing changes in our management or may make it
more difficult to accomplish transactions that stockholders may
otherwise deem to be in their best interests. We believe that the
benefits of increased protection of our ability to negotiate with
an unsolicited acquirer outweigh the disadvantages of discouraging
such proposals because, among other reasons, the negotiation of
such proposals could result in an improvement of their
terms.
MATERIAL U.S. FEDERAL INCOME TAX
CONSIDERATIONS
The following discussion is a summary of material U.S. federal
income tax consequences relating to the receipt and exercise (or
expiration) of the Subscription Rights acquired through the Rights
Offering and the ownership and disposition of shares of our common
stock and Preferred Stock received upon exercise of the
Subscription Rights and, unless otherwise noted in the following
discussion, is the opinion of Thompson Hine LLP, our U.S. counsel,
insofar as it relates to matters of U.S. federal income tax law and
legal conclusions with respect to those matters.
This summary deals only with Subscription Rights acquired through
the Rights Offering, shares of our common stock and Preferred Stock
acquired upon exercise of Subscription Rights, in each case, that
are held as capital assets by a beneficial owner. This discussion
does not address all aspects of U.S. federal income taxation that
may be relevant to such beneficial owners in light of their
personal circumstances, including the alternative minimum tax and
the Medicare contribution tax on investment income. This discussion
also does not address tax consequences to holders that may be
subject to special tax rules, including, without limitation,
insurance companies, real estate investment trusts, regulated
investment companies, grantor trusts, tax-exempt organizations,
employee stock purchase plans, partnerships and other pass-through
entities, persons holding Subscription Rights, or shares of our
common stock or Preferred Stock, as part of a hedging, integrated,
conversion or constructive sale transaction or a straddle,
financial institutions, brokers, dealers in securities or
currencies, traders that elect to mark-to-market their securities,
persons that acquired Subscription Rights, shares of our common
stock, or Preferred Stock in connection with employment or other
performance of services, persons that acquired Subscription Rights
other than upon the issuance of Subscription Rights on our common
stock, U.S. Holders (as defined below) that have a functional
currency other than the U.S. dollar, U.S. expatriates, and certain
former citizens or residents of the United States. In addition, the
discussion does not describe any tax consequences arising out of
the tax laws of any state, local or foreign jurisdiction, or any
U.S. federal tax considerations other than income taxation (such as
Medicare contribution taxation, net investment income tax or
estate, generation skipping or gift taxation).
The discussion below is based upon the provisions of the Internal
Revenue Code of 1986, as amended, or the “Code”, the United
States Treasury Regulations promulgated thereunder, or the “U.S.
Treasury Regulations”, rulings and judicial decisions, as of
the date hereof, and such authorities may be repealed, revoked or
modified, perhaps retroactively. We have not sought, and will not
seek, any rulings from the Internal Revenue Service, or the
“IRS”, regarding the matters discussed below. There can be
no assurance that the IRS or a court (if the matter were contested)
will not take positions concerning the tax consequences of the
receipt of Subscription Rights acquired through the Rights Offering
by persons holding shares of our common stock or Preferred Stock,
the exercise (or expiration) of the Subscription Rights, the
acquisition, ownership and disposition of shares of our common
stock and the acquisition, ownership and disposition of Preferred
Stock acquired upon exercise of the Subscription Rights that are
different from those discussed below.
As used herein, a “U.S. Holder” means a beneficial owner of
Subscription Rights or shares of our common stock and Preferred
Stock acquired upon exercise of Subscription Rights, as the case
may be, that is for U.S. federal income tax purposes: (1) an
individual who is a citizen or resident of the United States;
(2) a corporation (or other entity treated as a corporation
for U.S. federal income tax purposes) created or organized in or
under the laws of the United States or any state thereof or the
District of Columbia; (3) an estate the income of which is
subject to U.S. federal income taxation regardless of its source;
or (4) a trust (a) the administration of which is subject
to the primary supervision of a court within the United States and
one or more United States persons as described in
Section 7701(a)(30) of the Code have authority to control all
substantial decisions of the trust, or (b) that has a valid
election in effect to be treated as a United States person. A
“Non-U.S. Holder” is such a beneficial owner (other than an entity
or arrangement that is treated as a partnership for U.S. federal
income tax purposes) that is not a U.S. Holder.
If any entity or arrangement that is treated as a partnership for
U.S. federal income tax purposes is such a beneficial owner, the
U.S. federal income tax treatment of a partner will generally
depend upon the status of the partner and the activities of the
partnership. Holders that are partnerships (and partners in such
partnerships) are urged to consult their own tax advisors.
HOLDERS OF SHARES OF OUR COMMON STOCK SHOULD CONSULT THEIR OWN TAX
ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL INCOME TAX
LAWS TO THEIR PARTICULAR SITUATIONS AND THE CONSEQUENCES UNDER
FEDERAL ESTATE AND GIFT TAX LAWS, FOREIGN, STATE, AND LOCAL LAWS
AND TAX TREATIES OF THE RECEIPT, OWNERSHIP AND EXERCISE OF
SUBSCRIPTION RIGHTS AND THE ACQUISITION, OWNERSHIP, AND DISPOSITION
OF SHARES OF OUR COMMON STOCK AND PREFERRED STOCK ACQUIRED UPON
EXERCISE OF SUBSCRIPTION RIGHTS.
Tax Consequences to U.S. Holders
Taxation of Subscription Rights
Receipt of Subscription Rights
Although the authorities governing transactions such as this Rights
Offering are complex and do not speak directly to the consequences
of certain aspects of this Rights Offering, including the inclusion
of the right to purchase Preferred Stock in the Subscription Rights
(rather than the right to purchase only shares of our common
stock), we believe your receipt of Subscription Rights pursuant to
the Rights Offering should not be treated as a taxable distribution
with respect to your existing shares of common stock for U.S.
federal income tax purposes. Pursuant to
Section 305(a) of the Code, in general, the receipt by a
stockholder of a right to acquire stock should not be included in
the taxable income of the recipient. The general rule of
non-recognition in Section 305(a) is subject to
exceptions in Section 305(b), which include “disproportionate
distributions.” A disproportionate distribution is a distribution
or a series of distributions, including deemed distributions, that
has the effect of the receipt of cash or other property by some
stockholders and an increase in the proportionate interest of other
stockholders in a corporation’s assets or earnings and profits. We
believe your receipt of Subscription Rights should not be treated
as a disproportionate distribution.
Our position regarding the tax-free treatment of the Subscription
Rights distribution is not binding on the IRS, or the courts. If
this position is finally determined by the IRS or a court to be
incorrect, whether on the basis that the issuance of the
Subscription Rights is a “disproportionate distribution” or
otherwise, the fair market value of the Subscription Rights would
be taxable to holders of our common stock as a dividend to the
extent of the holder’s pro rata share of our current and
accumulated earnings and profits, if any, with any excess being
treated as a return of capital to the extent thereof and then as
capital gain. Although no assurance can be given, it is anticipated
that we will not have current and accumulated earnings and profits,
through the end of 2020.
The following discussion is based upon the treatment of the
Subscription Right issuance as a non-taxable distribution with
respect to your existing shares of common stock for U.S. federal
income tax purposes.
Tax Basis and Holding Period of the Subscription Rights
If the fair market value of the Subscription Rights you receive is
less than 15% of the fair market value of your existing shares of
common stock (with respect to which the Subscription Rights are
distributed) on the date you receive the Subscription Rights, the
Subscription Rights will be allocated a zero basis for U.S. federal
income tax purposes, unless you elect to allocate your basis in
your existing shares of common stock between your existing shares
of common stock and the Subscription Rights in proportion to the
relative fair market values of the existing shares of common stock
and the Subscription Rights, determined on the date of receipt of
the Subscription Rights. If you choose to allocate basis between
your existing shares of common stock and the Subscription Rights,
you must make this election on a statement included with your
timely filed tax return (including extensions) for the taxable year
in which you receive the Subscription Rights. Such an election is
irrevocable.
However, if the fair market value of the Subscription Rights you
receive is 15% or more of the fair market value of your existing
shares of common stock on the date you receive the Subscription
Rights, then you must allocate your basis in your existing shares
of common stock between those shares and the Subscription Rights
you receive in proportion to their fair market values determined on
the date you receive the Subscription Rights.
The fair market value of Subscription Rights on the date that
Subscription Rights are distributed is uncertain, and we have not
obtained, and do not intend to obtain, an appraisal of the fair
market value of Subscription Rights on that date. In determining
the fair market value of Subscription Rights, you should consider
all relevant facts and circumstances, including, if as we
anticipate Subscription Rights will be not quoted on the OTCQX, the
trading price of Subscription Rights on that date, any difference
between the Subscription Price of the Subscription Rights and the
trading price of our shares of common stock on the date that the
Subscription Rights are distributed, and the length of the period
during which Subscription Rights may be exercised.
The holding period for the Subscription Rights received in the
Rights Offering will include the holding period for the common
stock with respect to which the rights were received.
Sale of Subscription Rights
Except as described below in “Special Rules if Subscription
Rights Constitute Section 306 Stock,” if a U.S. Holder
sells or otherwise disposes of the Subscription Rights received in
the Rights Offering prior to the expiration date, the U.S. Holder
will recognize capital gain or loss equal to the difference between
the amount of cash and the fair market value of any property
received and the holder’s tax basis, if any, in the Subscription
Rights sold or otherwise disposed of. Any capital gain or loss
generally should be long-term capital gain or loss if the holding
period for the Subscription Rights, determined as described in
“—Tax Basis and Holding Period of the Subscription Rights”
above, exceeds one year at the time of disposition.
Special Rules if Subscription Rights Constitute
Section 306 Stock
The Subscription Rights may be treated as “Section 306 Stock”
for U.S. federal income tax purposes. The classification as
Section 306 Stock is relevant because Section 306 is
designed to prevent shareholders from receiving earnings and
profits in a capital transaction that permits an offset for tax
basis. Section 306 accomplishes its purpose by denying capital
gain treatment on a portion of the amount realized in a disposition
of Section 306 Stock and treating the disallowed portion as
dividend income or, in some cases, as ordinary income.
Section 306 Stock generally includes rights to acquire stock
(other than common stock) received in a non-taxable distribution
under Section 305(a) of the Code. Subscription Rights
will not be considered Section 306 Stock if no part of the
distribution would have been treated as a dividend distribution at
the time of the distribution of such Subscription Rights had money
been distributed in lieu of such Subscription Rights. To be treated
as a dividend distribution there must be current or accumulated
earnings and profits. Although no assurance can be given, it is
anticipated that we will not have current or accumulated earnings
and profits through the end of 2020, and if that were the case,
Subscription Rights, if distributed during 2020, will not be
considered Section 306 Stock.
Exercise of Subscription Rights
Generally, you will not recognize gain or loss upon the exercise of
a Subscription Right acquired in the Rights Offering. Your adjusted
tax basis, if any, in the Subscription Right (determined as
described in “Tax Basis in the Subscription Rights”) plus
the Subscription Price should be allocated between the new 750
shares of common stock and the one share of Preferred Stock
acquired upon exercise of the Subscription Right in proportion to
their relative fair market values on the exercise date. This
allocation will establish your initial tax basis for U.S. federal
income tax purposes in your new 750 shares of common stock and the
one share of Preferred Stock. The holding period of a share of
common stock or Preferred Stock acquired upon exercise of a
Subscription Right in the Rights Offering will begin on the date of
exercise.
If you exercise a Subscription Right received in the Rights
Offering after disposing of the shares of our common stock with
respect to which such Subscription Right is received, then certain
aspects of the tax treatment of the exercise of the Subscription
Right are unclear, including (1) the allocation of the tax
basis between the shares of common stock previously sold and the
Subscription Right, (2) the impact of such allocation on the
amount and timing of gain or loss recognized with respect to the
shares of our common stock previously sold, and (3) the impact
of such allocation on the tax basis of the shares of our common
stock and Preferred Stock acquired upon exercise of the
Subscription Right. If you exercise a Subscription Right received
in the Rights Offering after disposing of shares of our common
stock with respect to which the Subscription Right is received, you
should consult with your tax advisor.
Expiration of Subscription Rights
If you allow Subscription Rights received in the Rights Offering to
expire, you should not recognize any gain or loss for U.S. federal
income tax purposes, and you should re-allocate any portion of the
tax basis in your existing common stock previously allocated to the
Subscription Rights that have expired to the existing common stock.
If Subscription Rights expire without exercise after a holder has
disposed of its existing common stock and tax basis had previously
been allocated to Subscription Rights, such holder should consult
its tax advisor regarding the ability to recognize a loss (if any)
on the expiration of such Subscription Rights.
Taxation of Preferred Stock
Constructive and Actual Distributions with Respect to Shares of
Preferred Stock
If the allocation of the Subscription Price between the Preferred
Stock and the common stock results in an “issue price” for the
Preferred Stock that is lower than the price at which the Preferred
Stock may be redeemed under certain circumstances, this difference
in price (the “redemption premium”) may be treated as a
constructive distribution of additional stock on Preferred Stock
under Section 305(c) of the Code if the redemption
premium is in excess of a statutory de minimis amount. The
determination as to when and how the constructive distribution must
be recognized as taxable income by a holder is subject to a facts
and circumstances analysis under the applicable U.S. Treasury
Regulations. As described in more detail below, we intend to take
the position that annual accruals of the redemption premium and
concurrent income inclusions for the applicable holder are not
required under federal income tax law. Thompson Hine LLP is not
opining on this position because the application of the accrual
rules is based on a facts and circumstances analysis under the
U.S. Treasury Regulations and, further, the U.S. Treasury
Regulations fail to clearly identify the mechanics necessary to
accrue the redemption premium. If the IRS were to take a different
position with respect to the redemption premium, a U.S. Holder
would be required to take into account a constructive distribution
under principles similar to the principles governing the inclusion
of accrued original issue discount under
Section 1272(a) of the Code. Under those principles, a
U.S. holder is required to include the redemption premium in gross
income as it accrues under a constant yield method. The accruals
would be included in the holder’s taxable income to the extent of
our current and accumulated earnings and profits. Whether or not we
will have current or accumulated earnings and profits for 2020, or
future taxable periods during the time the Preferred Stock will be
outstanding cannot be known at this time. Although no assurance can
be given, it is anticipated that we will not have current and
accumulated earnings and profits through the end of 2020.
Our Board of Directors may, in its sole discretion, cause cash
dividends to be paid annually at 3% per annum for each year that
Preferred Stock is outstanding. If a cash dividend is not paid,
dividends at the rate of 5% per annum will accrue and the
liquidation preference on the Preferred Stock will be adjusted to
reflect the 5% per annum dividend. It is unclear whether these
accrued dividends will be treated as a redemption premium, in
excess of the statutory de minimis amount, that need to be accrued
under Section 305(c) redemption premium rules. The
Section 305(c) redemption premium rules could be
interpreted to include accruing dividends as a disguised premium.
The applicable U.S. Treasury Regulations fail to address this
issue. The preamble to the U.S. Treasury Regulations states that
due to the complexity of the issue, the U.S. Treasury Regulations
do not address accrued dividends. The limited legislative history
focuses on the intent of the issuer to accrue the dividends or pay
the dividends currently; stating that the IRS may treat such
dividends as a disguised redemption premium where there is no
intention for the dividends to be paid currently. We intend to take
the position that the accrual of dividends on the Preferred Stock
is not a disguised redemption premium and will not be includible in
the U.S. Holder’s taxable income until such dividends are declared
by our Board of Directors. If the IRS were to take a different
position with respect to the accrued dividends, a U.S. Holder would
be required to take into account a constructive distribution under
principles similar to the principles governing the inclusion of
accrued original issue discount under Section 1272(a) of
the Code. Such accruals would be included in the U.S. Holder’s
taxable income to the extent of our current and accumulated
earnings and profits. Whether or not we will have current or
accumulated earnings and profits for 2020, or future taxable
periods during the time the Preferred Stock will be outstanding
cannot be known at this time. Although no assurance can be given,
it is anticipated that we will not have current and accumulated
earnings and profits through the end of 2020.
If cash dividends (or other actual cash or property distributions)
are made, such dividends or other distributions will be treated as
dividends for U.S. federal income tax purpose to the extent of our
current or accumulated earnings and profits as determined under the
Code. Although no assurance can be given, it is anticipated that we
will not have current and accumulated earnings and profits through
the end of 2020. Any portion of a distribution that exceeds such
earnings and profits will first be applied to reduce a U.S.
Holder’s tax basis in the Preferred Stock on a share-by-share
basis, and the excess will be treated as gain from the disposition
of the Preferred Stock, the tax treatment of which is discussed
below.
Under current law, dividends received by individual holders of the
Preferred Stock will be subject to a reduced maximum tax rate of
20% if such dividends are treated as “qualified dividend income”
for U.S. federal income tax purposes. The rate reduction does not
apply to dividends received to the extent that the individual
shareholder elects to treat the dividends as “investment income,”
which may be offset against investment expenses. Furthermore, the
rate reduction does not apply to dividends that are paid to
individual shareholders with respect to Preferred Stock that is
held for 60 days or less during the 121 day period beginning on the
date which is 60 days before the date on which the Preferred Stock
becomes ex-dividend (or 90 days or less during a comparable 181 day
period for dividends on Preferred Stock attributable to periods
totaling more than 366 days). Also, if a dividend received by an
individual shareholder that qualifies for the rate reduction is an
“extraordinary dividend” within the meaning of Section 1059 of
the Code, any loss recognized by such individual shareholder on a
subsequent disposition of the stock will be treated as long-term
capital loss to the extent of such “extraordinary dividend,”
irrespective of such shareholder’s holding period for the stock.
Individual shareholders should consult their own tax advisors
regarding the implications of these rules in light of their
particular circumstances.
Dividends received by corporate shareholders generally will be
eligible for the dividends-received deduction. Generally, this
deduction is allowed if the underlying stock is held for at least
46 days during the 91 day period beginning on the date 45 days
before the ex-dividend date of the stock (or 90 days or less during
a comparable 181 day period for dividends on Preferred Stock
attributable to periods totaling more than 366 days). Corporate
shareholders of the Preferred Stock should also consider the effect
of Section 246A of the Code, which reduces the
dividends-received deduction allowed to a corporate shareholder
that has incurred indebtedness that is “directly attributable” to
an investment in portfolio stock such as preferred stock. If a
corporate shareholder receives a dividend on the Preferred Stock
that is an “extraordinary dividend” within the meaning of
Section 1059 of the Code, the shareholder in certain instances
must reduce its basis in the Preferred Stock by the amount of the
“nontaxed portion” of such “extraordinary dividend” that results
from the application of the dividends-received deduction. If the
“nontaxed portion” of such “extraordinary dividend” exceeds such
corporate shareholder’s basis, any excess will be taxed as gain as
if such shareholder had disposed of its shares in the year the
“extraordinary dividend” is paid. Each domestic corporate holder of
the Preferred Stock is urged to consult with its tax advisors with
respect to the eligibility for and the amount of any dividends
received deduction and the application of Code Section 1059 to
any dividends it may receive on the Preferred Stock.
Sale or other Taxable Disposition of Preferred Stock
Except as described below regarding Section 306 Stock, upon
the sale, exchange or other taxable disposition (other than certain
redemptions, as discussed below) of shares of Preferred Stock, in
general, you will recognize taxable gain or loss measured by the
difference, if any, between (i) the amount of cash and the
fair market value of any property received upon such taxable
disposition, and (ii) your adjusted tax basis in the shares of
Preferred Stock as allocated pursuant to the rules discussed
above. Such capital gain or loss will be long-term capital gain or
loss if the U.S. Holder’s holding period for the Preferred Stock is
longer than one year. A U.S. Holder should consult its own tax
advisors with respect to applicable tax rates and netting
rules for capital gains and losses. Certain limitations exist
on the deduction of capital losses by both corporate and
non-corporate taxpayers.
Special Rules if Preferred Stock Constitutes
Section 306 Stock
As discussed above in “Special Rules if Subscription Rights
Constitute Section 306 Stock,” it is possible for the
Subscription Rights to be treated as Section 306 Stock. If the
Subscription Rights are treated as Section 306 Stock, the
Preferred Stock received upon the exercise of the Subscription
Rights will also be treated as Section 306 Stock to the extent
the Subscription Rights were so treated. Thus, rules similar
to those described above under “Special Rules if
Subscription Rights Constitute Section 306 Stock”
generally would apply to a subsequent sale or taxable disposition
(other than in redemption) of the Preferred Stock that is treated
as Section 306 Stock, such that capital gain may be
recharacterized as ordinary income up to the amount of the fair
market value of the corresponding Subscription Rights and the
ability of U.S. Holders to recognize a loss on the sale or other
taxable disposition may be restricted.
Redemptions
If we redeem the Preferred Stock, the redemption will generally be
treated as a sale or exchange by the U.S. Holder if the
redemption:
|
· |
is “not essentially equivalent to a dividend” with respect to a
U.S. Holder under Section 302(b)(1) of the Code; |
|
· |
is a “substantially disproportionate” redemption with respect
to a U.S. Holder under Section 302(b)(2) of the
Code; |
|
· |
results in a “complete redemption” of a U.S. Holder’s stock
interest in the company under Section 302(b)(3) of the
Code; or |
|
· |
is a redemption of stock held by a non-corporate stockholder,
which results in a partial liquidation of the company under
Section 302(b)(4) of the Code. |
In determining whether any of these tests has been met, a U.S.
Holder must take into account not only shares of the Preferred
Stock and common stock that the U.S. Holder actually owns, but also
shares of our stock that the U.S. Holder constructively owns within
the meaning of Section 318 of the Code. If the redemption is
treated as a sale or exchange, the tax consequences of a U.S.
Holder would be as described above under “— Sale or other
Taxable Disposition of Preferred Stock.” If, instead, the
redemption is not treated as a sale or exchange, the amounts
received in redemption by the U.S. Holders will be treated in the
same manner as a cash dividend or other actual distribution as
described above in “Constructive and Actual Distributions with
Respect to Shares of Preferred Stock.” Each U.S. Holder of
shares of our Preferred Stock is urged to consult its own tax
advisor to determine whether a payment made in redemption will be
treated for U.S. federal income tax purposes as a distribution or
an exchange of such shares.
A redemption payment will be treated as “not essentially equivalent
to a dividend” if it results in a “meaningful reduction” in a U.S.
Holder’s aggregate stock interest in the company, which will depend
on the U.S. Holder’s particular facts and circumstances at such
time.
Satisfaction of the “substantially disproportionate” and “complete
redemption” exceptions depends on compliance with objective tests
set forth in Section 302(b)(2) and
Section 302(b)(3) of the Code, respectively. A redemption
does not qualify for the “substantially disproportionate” exception
if the stock redeemed is only non-voting stock, and, for this
purpose, stock which does not have voting rights until the
occurrence of an event is not treated as voting stock until the
occurrence of such specified event. Accordingly, any redemption of
the Preferred Stock generally will not qualify for the
“substantially disproportionate” exception because it has no voting
rights, except as may be required by law as provided in the
“Description of Securities – Preferred Stock – Series C
Preferred Stock.” A redemption will result in a “complete
redemption” if either (i) all of the shares of our stock
actually and constructively owned by a U.S. Holder are exchanged in
the redemption or (ii) all of the shares of our stock actually
owned by the U.S. Holder are exchanged in the redemption and the
U.S. Holder is eligible to waive, and the U.S. Holder effectively
waives, the attribution of shares of our stock constructively owned
by the U.S. Holder in accordance with the procedures described in
Section 302(c)(2) of Code.
For purposes of the “redemption from non-corporate stockholders in
a partial liquidation” test, a distribution will be treated as in
partial liquidation of a corporation if the distribution is not
essentially equivalent to a dividend (determined at the corporate
level rather than the stockholder level), is made pursuant to a
plan, and occurs within the taxable year in which the plan was
adopted or within the succeeding taxable year. For this purpose, a
distribution generally is not essentially equivalent to a dividend
if the distribution results in a corporate contraction. The
determination of what constitutes a corporate contraction is
factual in nature and has been interpreted under case law to
include the termination of a business or line of business. If the
redemption payment is treated as a dividend, the
rules discussed above in “— Distributions on Preferred Stock”
apply.
Special rules apply if and to the extent that Preferred Stock
constitutes Section 306 Stock, such that generally the amounts
received in redemption by the U.S. Holders will be treated in the
same manner as a cash dividend or other actual distribution as
described above in “Constructive and Actual Distributions with
Respect to Shares of Preferred Stock.” Certain exceptions
apply, including where the redemption qualifies for sale or
exchange treatment under Sections 302(b)(3) or
302(b)(4) of the Code.
Each U.S. Holder of Preferred Stock should consult its own tax
advisors to determine whether a payment made in redemption of the
Preferred Stock will be treated as a dividend or as a payment in
exchange for the Preferred Stock.
Information Reporting and Backup Withholding
Information reporting and backup withholding may apply with respect
to payments of dividends on the Preferred Stock and to certain
payments of proceeds on the sale or other disposition of the
Preferred Stock. Backup withholding (currently at a rate of 24%)
may apply under certain circumstances if you (1) fail to
furnish your social security or other taxpayer identification
number, or TIN, (2) furnish an incorrect TIN, (3) fail to
report interest or dividends properly, or (4) fail to provide
a certified statement, signed under penalty of perjury, that the
TIN provided is correct, that you are not subject to backup
withholding and that you are a U.S. person on IRS Form W-9 or
Substitute Form W-9. Any amount withheld from a payment under
the backup withholding rules is allowable as a credit against
(and may entitle you to a refund with respect to) your U.S. federal
income tax liability, provided that the required information is
timely furnished to the IRS. Certain persons are exempt from
information reporting and backup withholding, including
corporations and financial institutions, provided that they
demonstrate this fact, if requested. You are urged to consult your
own tax advisor as to your qualification for exemption from backup
withholding and the procedure for obtaining such exemption.
Taxation of Shares of Common Stock
Distributions
Distributions with respect to shares of our common stock acquired
upon exercise of Subscription Rights will be taxable as dividend
income when actually or constructively received to the extent of
our current or accumulated earnings and profits as determined for
U.S. federal income tax purposes. To the extent that the amount of
a distribution exceeds our current and accumulated earnings and
profits, such distribution will be treated first as a tax-free
return of capital to the extent of your adjusted tax basis in such
shares of our common stock and thereafter as capital gain.
Dividend income received by certain non-corporate U.S. Holders with
respect to shares of our common stock generally will be “qualified
dividends” subject to preferential rates of U.S. federal income
tax, provided that the U.S. Holder meets applicable holding period
and other requirements. Subject to similar exceptions for
short-term and hedged positions, dividend income on our shares of
common stock paid to U.S. Holders that are domestic corporations
generally will qualify for the dividends-received deduction. The
discussion of holding period for qualified dividends and the
dividends received deduction and extraordinary dividends set forth
in “Taxation of Preferred Stock—Constructive and Actual
Distributions with Respect to Shares of Preferred Stock”
generally applies to U.S. Holders of common stock.
Dispositions
Upon the sale, exchange or other taxable disposition of shares of
common stock acquired upon exercise of Subscription Rights, in
general, you will recognize taxable gain or loss measured by the
difference, if any, between (i) the amount of cash and the
fair market value of any property received upon such taxable
disposition, and (ii) your adjusted tax basis in the shares of
common stock as allocated pursuant to the rules discussed
above. Such capital gain or loss will be long-term capital gain or
loss if the U.S. Holder’s holding period for the shares of common
stock is longer than one year. A U.S. Holder should consult its own
tax advisors with respect to applicable tax rates and netting
rules for capital gains and losses. Certain limitations exist
on the deduction of capital losses by both corporate and
non-corporate taxpayers.
Information Reporting and Backup Withholding
You may be subject to information reporting and/or backup
withholding with respect to the gross proceeds from the disposition
of shares of our common stock acquired through the exercise of
Subscription Rights. Backup withholding (currently at the rate of
24%) may apply under certain circumstances if you (1) fail to
furnish your social security or other taxpayer identification
number, or TIN, (2) furnish an incorrect TIN, (3) fail to
report interest or dividends properly, or (4) fail to provide
a certified statement, signed under penalty of perjury, that the
TIN provided is correct, that you are not subject to backup
withholding and that you are a U.S. person on IRS Form W-9 or
Substitute Form W-9. Any amount withheld from a payment under
the backup withholding rules is allowable as a credit against
(and may entitle you to a refund with respect to) your U.S. federal
income tax liability, provided that the required information is
timely furnished to the IRS. Certain persons are exempt from
information reporting and backup withholding, including
corporations and financial institutions, provided that they
demonstrate this fact, if requested. You are urged to consult your
own tax advisor as to your qualification for exemption from backup
withholding and the procedure for obtaining such exemption.
Tax Consequences to Non-U.S. Holders
Overriding Effect of Tax Treaties
The United States has entered into tax treaties with a variety of
countries. The terms of those treaties typically override generally
applicable rules of the Code and may override the treatment
described below. If you are a Non-U.S. Holder and resident of a
country with a tax treaty with the United States, you are urged to
consult your own tax advisor as to the effect of such treaty on the
Subscription Rights and transactions related to them.
Taxation of the Subscription Rights
Receipt, Exercise and Expiration of the Subscription
Rights
The discussion below assumes that the receipt of Subscription
Rights will be treated as a nontaxable distribution. See “Tax
Consequences to U.S. Holders—Taxation of Subscription
Rights—Receipt of Subscription Rights” above. You should not be
subject to U.S. federal income tax (or any withholding thereof) on
the receipt, exercise or expiration of the Subscription Rights.
Taxation of Distributions on Common Stock or Preferred
Stock
In general, any cash or other actual distributions we make to a
Non-U.S. Holder of common stock or Preferred Stock to the extent
paid out of our current or accumulated earnings and profits (as
determined under U.S. federal income tax principles), will
constitute dividends for U.S. federal income tax purposes and,
provided such dividends are not effectively connected with the
Non-U.S. Holder’s conduct of a trade or business within the United
States, we will be required to withhold tax from the gross amount
of the dividend at a rate of 30%, unless such Non-U.S. Holder is
eligible for a reduced rate of withholding tax under an applicable
income tax treaty and provides proper certification of its
eligibility for such reduced rate (usually on an IRS
Form W-8BEN or W-8BEN-E, as applicable). Any distribution not
constituting a dividend will be treated first as reducing (but not
below zero) the Non-U.S. Holder’s adjusted tax basis in its shares
of Preferred Stock or common stock, as the case may be, and, to the
extent such distribution exceeds the Non-U.S. Holder’s adjusted tax
basis, as gain realized from the sale or other disposition of the
stock, which will be treated as described under “Tax Consequences
to Non-U.S. Holders—Sale or Other Disposition of Our Common Stock
or Preferred Stock” below. In addition, if we determine that we are
likely to be classified as a “U.S. real property holding
corporation” (see “Tax Consequences to Non-U.S. Holders—Sale or
Other Disposition of Our Common Stock or Preferred Stock” below),
we will withhold 15% of any distribution that exceeds our current
and accumulated earnings and profits.
Dividends that we pay to a Non-U.S. Holder that are effectively
connected with such Non-U.S. Holder’s conduct of a trade or
business within the United States (or if a tax treaty applies, are
attributable to a U.S. permanent establishment or fixed base
maintained by the Non-U.S. Holder) generally will not be subject to
U.S. withholding tax, provided such Non-U.S. Holder complies with
certain certification and disclosure requirements (usually by
providing an IRS Form W-8ECI). Instead, the effectively
connected income will be subject to regular U.S. income tax as if
the Non-U.S. Holder were a U.S. resident, unless an applicable
income tax treaty provides otherwise. A Non-U.S. corporation
receiving effectively connected dividends may also be subject to an
additional “branch profits tax” imposed at a rate of 30% (or a
lower treaty rate).
Non-U.S. Holders may be required to periodically update their IRS
Forms W-8.
Sale or Other Disposition of Our Common Stock or Preferred
Stock, including Redemptions of Preferred Stock
In general, you will not be subject to U.S. federal income tax on
any gain realized on a sale of shares of our common stock, or
Preferred Stock unless:
| |
● |
|
the gain is effectively connected
with your conduct of a trade or business within the United States
(and, if an income tax treaty applies, is attributable to a
permanent establishment in the United States); |
| |
● |
|
you are an individual, you hold
your Subscription Rights, shares of common stock or Preferred Stock
as capital assets, you are present in the United States for 183
days or more in the taxable year of disposition and certain other
conditions are met; or |
| |
● |
|
we are or have been a “United
States real property holding corporation” (“USRPHC”) for U.S.
federal income tax purposes at any time during the shorter of the
five-year period ending on the date of disposition or the period
that the Non-U.S. Holder held our stock, and, (i) in the case
of shares of our common stock, the Non-U.S. Holder has owned,
directly or constructively, more than 5% of our stock at any time
within the shorter of the five-year period preceding the
disposition or such Non-U.S. Holder’s holding period for the shares
of our stock and (ii) in the case of Preferred Stock, on the
date such Non-U.S. Holder acquired its interest in the Preferred
Stock, such Preferred Stock had a fair market value greater than
the fair market value on that date of 5% of our common stock. |
Gain that is effectively connected with your conduct of a trade or
business within the United States (and, if an income tax treaty
applies, is attributable to a permanent establishment within the
United States) generally will be subject to U.S. federal income
tax, net of certain deductions, at the same rates applicable to
U.S. persons. If you are a corporation, a “branch profits tax” of
30% (or a lower rate prescribed in an applicable income tax treaty)
also may apply to such effectively connected gain.
We believe that we are not currently, and have not been within the
relevant testing period, a USRPHC. However, no assurance can be
given that we will not become a USRPHC in the future. Determining
whether we are a USRPHC in the third bullet point above depends on
the fair market value of our United States real property interests
relative to the fair market value of our other trade or business
assets and our foreign real property interests. If we are a USRPHC
or become a USRPHC in the future, a Non-U.S. Holder may still not
be subject to U.S. federal income tax on a sale or other
disposition if an exception for 5% or less stockholders applies.
But, if the third bullet point above applies to a Non-U.S. Holder,
gain recognized by such holder on the sale, exchange or other
disposition of our stock will be subject to tax at generally
applicable U.S. federal income tax rates. In addition, a buyer of
our stock from such holder may be required to withhold U.S. federal
income tax at a rate of 15% of the amount realized upon such
disposition. You are urged to consult your own tax advisor
regarding the U.S. federal income tax considerations that could
result if we are, or become, a USRPHC and with respect to the
exception for 5% or less stockholders.
If a Non-U.S. Holder is subject to U.S. federal income tax on a
sale, exchange, redemption (except as discussed below) or other
taxable disposition of shares of common stock or Preferred Stock,
in general, such Non-U.S. Holder will recognize taxable gain or
loss measured by the difference, if any, between (i) the
amount of cash and the fair market value of any property received
upon such taxable disposition, and (ii) its adjusted tax basis
in the shares of common stock or Preferred Stock. Such capital gain
or loss will be long-term capital gain or loss if the Non-U.S.
Holder’s holding period for the common stock or the Preferred Stock
is longer than one year. A Non-U.S. Holder should consult its own
tax advisors with respect to applicable tax rates and netting
rules for capital gains and losses. Certain limitations exist
on the deduction of capital losses by both corporate and
non-corporate taxpayers.
If a Non-U.S. Holder is subject to U.S. federal income tax on any
disposition of the Preferred Stock, a redemption of shares of the
Preferred Stock will be a taxable event. If the redemption is
treated as a sale or exchange, instead of as a dividend, a Non-U.S.
Holder generally will recognize capital gain or loss, equal to the
difference between the amount of cash received and the fair market
value of any property received and the Non-U.S. Holder’s adjusted
tax basis in the Preferred Stock redeemed, and such capital gain or
loss will be long-term capital gain or loss if the Non-U.S.
Holder’s holding period for such Preferred Stock exceeds one year.
A payment made in redemption of the Preferred Stock may be treated
as a dividend (subject to taxation as discussed above under “Tax
Consequences of Non-U.S. Holders -- Taxation of Distributions on
Common or Preferred Stock”), rather than as payment in exchange
for the Preferred Stock, in the circumstances discussed above under
“Tax Consequences of U.S. Holders – Taxation of Preferred Stock
– Redemptions.” Each Non-U.S. Holder should consult its own tax
advisors to determine whether a payment made in redemption of the
Preferred Stock will be treated as a dividend or as payment in
exchange for Preferred Stock.
Information Reporting and Backup Withholding
Distributions on our common stock and the amount of tax withheld,
if any, with respect to such distributions will generally be
subject to information reporting. If you comply with certification
procedures to establish that you are not a United States person,
additional information reporting and backup withholding should not
apply to distributions on our common stock and information
reporting and backup withholding should not apply to the proceeds
from a sale or other disposition of shares of Preferred Stock or
shares of our common stock. The amount of any backup withholding
will generally be allowed as a refund or credit against your U.S.
federal income tax liability, provided that the required
information is timely furnished to the IRS.
Additional Withholding Requirements under FATCA
Sections 1471 through 1474 of the Code, and the U.S. Treasury
Regulations and administrative guidance issued thereunder
(“FATCA”), impose a 30% withholding tax on any dividends paid on
our common stock or the Preferred Stock if paid to a “foreign
financial institution” or a “non-financial foreign entity” (each as
defined in the Code) (including, in some cases, when such foreign
financial institution or non-financial foreign entity is acting as
an intermediary), unless (i) in the case of a foreign
financial institution, such institution enters into an agreement
with the U.S. government to withhold on certain payments, and to
collect and provide to the U.S. tax authorities substantial
information regarding U.S. account holders of such institution
(which includes certain equity and debt holders of such
institution, as well as certain account holders that are non-U.S.
entities with U.S. owners), (ii) in the case of a
non-financial foreign entity, such entity certifies that it does
not have any “substantial United States owners” (as defined in the
Code) or provides the applicable withholding agent with a
certification identifying the direct and indirect substantial
United States owners of the entity (in either case, generally on an
IRS Form W-8BEN-E), or (iii) the foreign financial
institution or non-financial foreign entity otherwise qualifies for
an exemption from these rules and provides appropriate
documentation (such as an IRS Form W-8BEN-E). Foreign
financial institutions located in jurisdictions that have an
intergovernmental agreement with the United States governing these
rules may be subject to different rules. Under certain
circumstances, a holder might be eligible for refunds or credits of
such taxes. Current provisions of the Code and U.S. Treasury
Regulations that govern FATCA treat gross proceeds from the sale or
other disposition of instruments that can produce U.S.-source
dividends (such as our common stock and the Preferred Stock) as
subject to FATCA withholding where such sale or other disposition
occurs after December 31, 2018. However, under proposed U.S.
Treasury Regulations (the preamble to which specifies that
taxpayers are permitted to rely on them pending finalization), such
gross proceeds are not subject to FATCA withholding. Non-U.S.
Holders are encouraged to consult their own tax advisors regarding
the effects of FATCA.
HOLDERS OF SHARES OF OUR COMMON STOCK SHOULD CONSULT THEIR OWN TAX
ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL INCOME TAX
LAWS TO THEIR PARTICULAR SITUATIONS AND THE CONSEQUENCES UNDER
FEDERAL ESTATE AND GIFT TAX LAWS, FOREIGN, STATE, AND LOCAL LAWS
AND TAX TREATIES OF THE RECEIPT, OWNERSHIP AND EXERCISE OF
SUBSCRIPTION RIGHTS AND THE ACQUISITION, OWNERSHIP, AND DISPOSITION
OF SHARES OF OUR COMMON STOCK AND PREFERRED STOCK ACQUIRED UPON
EXERCISE OF SUBSCRIPTION RIGHTS.
PLAN OF
DISTRIBUTION
As soon as practicable after the Record Date for the Rights
Offering, we will distribute the Subscription Rights, Subscription
Rights Certificates and copies of this prospectus to the holders of
our common stock as of the Record Date. Subscription Rights holders
who wish to exercise their Subscription Rights in multiples of
1,105 to purchase Units consisting of one share of Preferred Stock
and 750 shares of common stock must complete the Subscription
Rights Certificate and return it with payment for the Units to the
Subscription Agent at the following address:
|
By Mail, Hand or
Overnight Courier: |
Continental Stock Transfer &
Trust Company
Attn: Reorganization Department
1 State Street
30th Floor
New York, NY 10004
(917) 262-2378 |
If you wish to exercise your Subscription Rights, you should timely
comply with the procedures described in “Description of the Rights
Offering.” The common stock and Preferred Stock comprising the
Units offered pursuant to this prospectus is being offered by us
directly to all holders of our common stock. We intend to
distribute Subscription Rights Certificates, copies of this
prospectus and the accompanying exhibits, and other relevant
documents to those persons that were holders of our common stock as
of the Record Date. If this Rights Offering is not fully
subscribed, pursuant to the Investment Agreement, all unsubscribed
for Units will be purchased by Icahn Capital LP.
We have not employed any brokers, dealers or underwriters in
connection with the solicitation of exercise of Subscription
Rights, and, except as described herein, no other commissions, fees
or discounts will be paid in connection with this offering.
Except for the Investment Agreement or as otherwise disclosed in
this prospectus, we have not agreed to enter into any standby or
other arrangements to purchase or sell any Subscription Rights, any
Units or any shares of our common stock or Preferred Stock
comprising the Units.
The expenses of this Rights Offering are estimated to be
approximately $200,000.
If you have any questions or require any assistance, you should
contact our Information Agent for the Rights Offering, Georgeson
LLC, at (888) 605-8334 (toll free).
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Approval of Related Party Transactions
Our Board of Directors has adopted a formal written policy that we
will not enter into any “related party transaction” (defined
consistent with Item 404 of Regulation S-K under the Exchange Act)
unless the Finance and Audit Committee or a comparable committee of
disinterested directors approves such transaction. No member of the
Finance and Audit Committee or comparable committee shall
participate in the review or approval of any related party
transaction or any material amendment thereto where that member is
a related party in that transaction. In reviewing and approving any
related party transaction or any material amendment thereto, the
Finance and Audit Committee or comparable committee shall satisfy
itself that it has been fully informed as to the related party’s
relationship and interest and as to the material facts of the
proposed related party transaction or material amendment, and shall
determine that the related party transaction or material amendment
thereto is fair to us. Other than as described below, since
January 1, 2019, there have been no such related party
transactions.
Investment Commitment
On September 1, 2020, we entered into the Investment Agreement
with Icahn Capital LP, which, together with its affiliates,
beneficially owns approximately 15% of our common stock before
giving effect to the Rights Offering. Subject to the terms and
conditions of the Investment Agreement, Icahn Capital LP has
agreed to subscribe for its pro-rata share of the Rights Offering
and to purchase all Units that remain unsubscribed for at the
expiration of the Rights Offering to the extent that other holders
elect not to exercise all of their respective Subscription Rights.
No fees will be paid by us to Icahn Capital LP in consideration of
such investment commitment. As part of the consideration for
entering into the Investment Agreement, we have agreed to terminate
the Standstill Agreement, dated December 8, 2016, entered into
with Icahn Capital LP and the parties identified therein, as well
as waive the applicability of Section 203 of the General
Corporation Law of the State of Delaware. Furthermore, we have
agreed to use our best efforts to register for resale all of the
shares of common stock then held by Icahn Capital LP and its
affiliates following the closing of the Rights Offering. For more
information, see “The Investment Agreement.”
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of
September 14, 2020 concerning stock ownership of (i) each
person known by us to own beneficially more than 5% of our
outstanding common stock, (ii) each current director,
(iii) each of our named executive officers and (iv) all
of our current directors and executive officers as a group.
Information set forth in this table as to our directors, named
executive officers and all directors and executive officers as a
group is based upon information supplied by these individuals.
Information in this table as to our greater than 5% stockholders is
based solely upon the Schedules 13D or 13G filed by these
stockholders with the Commission. Where information is based on a
Schedule 13D or 13G, the number of shares owned is as of the date
for which information was provided in such schedules.
|
Name and Address of Beneficial Owner or Identity of
Group(1) |
|
Amount and
Nature of
Beneficial
Ownership(2)
|
|
|
Percentage of
Voting Stock
Outstanding(3)
|
|
| Jordan Bleznick,
Director |
|
|
— |
|
|
|
— |
|
| Jennifer McNealey,
Director |
|
|
— |
|
|
|
— |
|
| Randolph Read,
Chairman of the Board |
|
|
— |
|
|
|
— |
|
| Andrew
Rackear, Chief Executive Officer and Secretary |
|
|
25,000 |
(4) |
|
|
* |
|
| Richard L. Feinstein,
Vice President – Finance and Chief Financial Officer |
|
|
— |
|
|
|
— |
|
| Jonathan Couchman and
affiliated entities |
|
|
7,851,454 |
(5) |
|
|
17.8 |
% |
| Carl C. Icahn and
affiliated entities |
|
|
6,598,886 |
(6) |
|
|
14.9 |
% |
| Poplar Point Capital
Management LLC and affiliated entities |
|
|
2,906,966 |
(7) |
|
|
6.6 |
% |
| All Current Directors
and Current Executive Officers as a group (5 persons) |
|
|
25,000 |
(4) |
|
|
* |
|
* Less than one percent
|
1) |
The address for each of the executive officers and directors
listed in this table is c/o Enzon Pharmaceuticals, Inc., 20
Commerce Drive, Suite 135, Cranford, New Jersey, 07016. |
|
2) |
Beneficial ownership is determined in accordance
with the rules of the Commission that deem shares to be
beneficially owned by any person who has or shares voting or
investment power with respect to such shares. With respect to each
person set forth in the table, shares subject to stock options, if
any, held by such person that were exercisable as of
September 14, 2020 or will become exercisable within 60 days
after September 14, 2020 are deemed to be outstanding and to
be beneficially owned by such person for the purpose of computing
the percentage ownership of such person, but are not treated as
outstanding for the purpose of computing the percentage ownership
of any other person. Unless otherwise indicated below, the persons
and entities named in the table have sole voting and sole
investment power with respect to all the shares beneficially owned,
subject to community property laws where applicable. |
|
3) |
Based on
44,214,603 shares of common stock, which were issued and
outstanding as of September 14, 2020. Each share of common
stock is entitled to one vote. The percentage of voting stock
outstanding for each person set forth in the table is calculated by
dividing (i) the number of shares of common stock deemed to be
beneficially held by such person as of September 14, 2020 by
(ii) the sum of (A) the number of shares of common stock
outstanding as of September 14, 2020, plus (B) the number
of shares of common stock subject to stock options, if any, held by
such person that were exercisable as of September 14, 2020 or
will become exercisable within 60 days after September 14,
2020. |
|
4) |
Includes 25,000 shares subject to options, which were
exercisable as of September 14, 2020. |
|
5) |
Information concerning stock ownership was obtained from
Amendment No. 1 to the Schedule 13D jointly filed with the
Commission on August 5, 2020 by Jonathan Couchman, the
Couchman Family Fund (the “Foundation”) Xstelos Corp.
(“Xstelos”), Myrexis, Inc. (“Myrexis”), Brian
Harper, Harper Asset Management, LLC (“HAM”) and Michael
Pearce and a Form 4 subsequently filed on August 26, 2020
by the same parties. The address for Mr. Couchman and the
Foundation is c/o Couchman Management LLC, 630 Fifth Avenue,
Suite 2260, New York, New York 10020. The principal business
address of each of Mr. Couchman, the Foundation and Myrexis is
c/o Couchman Management LLC, 600 Fifth Avenue, 2nd Floor, New York,
New York 10020. The principal business address of Xstelos is 1105
North Market Street, Suite 1300, Wilmington, Delaware 19801.
The principal business address of Mr. Harper and HAM is 2248
Mariner Dr., Longmont, Colorado 80503. The principal business
address of Mr. Pearce is 193 Audubon Trail, Cashiers, North
Carolina 28717. Pursuant to the Schedule 13D/A and Form 4,
Mr. Couchman beneficially owns an aggregate of 7,851,454
shares and has sole voting and dispositive power with respect to
4,717,666 shares and shared voting and dispositive power with
respect to 3,133,788 shares, which include shares with respect to
which the Foundation, Xstelos and Myrexis have shared voting and
positive power. As sole trustee of the Foundation,
Mr. Couchman may be deemed to beneficially own the 400,000
shares owned by the Foundation. As the President and Chief
Executive Officer of Xstelos, Mr. Couchman may be deemed to
beneficially own the 2,100,524 shares of Common Stock owned by
Xstelos. As the President and Chief Executive Office of Myrexis,
Mr. Couchman may be deemed to beneficially own the 633,264
shares of Common Stock owned by Myrexis. |
The Schedule 13D/A and Form 4 also reports that
Mr. Harper, as President of HAM, may be deemed to beneficially
own 1,590,194 shares owned by HAM and have sole voting and
dispositive power over such shares. The Schedule 13D/A reports that
Mr. Pearce does not own any shares of common stock.
|
6) |
Information concerning stock ownership was obtained from
Amendment No. 9 to the Schedule 13D filed with the Commission
on November 29, 2016 by Carl C. Icahn and various entities
affiliated with him, including High River Limited Partnership
(“High River”), Hopper Investments LLC (“Hopper”),
Barberry Corp. (“Barberry”), Icahn Partners Master Fund
LP (“Icahn Master”), Icahn Offshore LP (“Icahn
Offshore”), Icahn Partners LP (“Icahn
Partners”), Icahn Offshore LP (“Icahn
Offshore”), Icahn Capital LP “(Icahn
Capital”), IPH GP LLC (“IPH”), Icahn
Enterprises Holdings L.P. (“Icahn Enterprises
Holdings”), Icahn Enterprises G.P. Inc. (“Icahn
Enterprises GP”), and Beckton Corp. (“Beckton”). The
address for Carl C. Icahn and entities affiliated with him is 16690
Collins Avenue, Suite PH-1, Sunny Isles Beach, FL 33160 (as
reported in Amendment No. 11 to the Schedule 13D/A filed with
the Commission on August 10, 2020). |
Pursuant to the Schedule 13D/A, of the 6,598,886 shares,
(i) High River has sole voting and dispositive power with
regard to 1,319,777 shares (each of Hopper, Barberry and
Mr. Icahn has shared voting and dispositive power with regard
to such shares), (ii) Icahn Master has sole voting and
dispositive power with regard to 2,147,937 shares (each of Icahn
Offshore, Icahn Capital, IPH, Icahn Enterprises
Holdings, Icahn Enterprises GP, Beckton and Mr. Icahn has
shared voting power and shared dispositive power with regard to
such shares), and (iii) Icahn Partners has sole voting and
dispositive power with regard to 3,131,172 shares (each of Icahn
Onshore, Icahn Capital, IPH, Icahn Enterprises
Holdings, Icahn Enterprises GP, Beckton and Mr. Icahn has
shared voting power and shared dispositive power with regard to
such shares).
Each of Hopper, Barberry and
Mr. Icahn, by virtue of their relationships to High River, may
be deemed to indirectly beneficially own the shares which High
River directly beneficially owns. Each of Hopper, Barberry and
Mr. Icahn disclaims beneficial ownership of such shares for
all other purposes. Each of Icahn Offshore, Icahn
Capital, IPH, Icahn Enterprises Holdings, Icahn
Enterprises GP, Beckton and Mr. Icahn, by virtue of their
relationships to Icahn Master may be deemed to indirectly
beneficially own the shares which Icahn Master directly
beneficially owns. Each of Icahn Offshore, Icahn
Capital, IPH, Icahn Enterprises Holdings, Icahn
Enterprises GP, Beckton and Mr. Icahn disclaims beneficial
ownership of such shares for all other purposes. Each of Icahn
Onshore, Icahn Capital, IPH, Icahn Enterprises
Holdings, Icahn Enterprises GP, Beckton and Mr. Icahn, by
virtue of their relationships to Icahn Partners may be deemed to
indirectly beneficially own the shares which Icahn Partners
directly beneficially owns. Each of Icahn Onshore, Icahn
Capital, IPH, Icahn Enterprises Holdings, Icahn
Enterprises GP, Beckton and Mr. Icahn disclaims beneficial
ownership of such shares for all other purposes.
|
7) |
Information concerning stock ownership was obtained from
Amendment No. 2 to the Schedule 13G jointly filed with the
Commission on January 22, 2020 by Poplar Point Capital
Management LLC (“PPCM”), Poplar Point Capital Partners LP
(“PPCP”), Poplar Point Capital GP LLC (“PPCGP”) and
Jad Fakhry. PPCM is the investment manager for PPCP. PPCGP is the
general partner of PPCP. Mr. Fakhry is the manager of, and
owns a controlling interest in, PPCM and PPCGP. The address for
PPCM, PPCP, PPCGP and Mr. Fakhry is c/o Poplar Point Capital
Management LLC, 840 Hinckley Road, Suite 250, Burlingame, CA
94010. PPCM, PPCP, PPCGP and Mr. Fakhry reported that they
have shared voting and dispositive power over all 2,906,966
shares. |
LEGAL MATTERS
The validity of the issuance of the securities offered hereby will
be passed upon for us by Thompson Hine LLP, New York, New York.
EXPERTS
The consolidated balance sheets of Enzon Pharmaceuticals, Inc.
and Subsidiaries as of December 31, 2019 and 2018 and the
related consolidated statements of operations, stockholders’
equity, and cash flows for each of the years then ended have been
audited by EisnerAmper LLP, an independent registered public
accounting firm, as stated in their report which is incorporated
herein. Such financial statements have been incorporated herein in
reliance on the report of such firm given upon their authority as
experts in accounting and auditing.
WHERE
YOU CAN FIND MORE INFORMATION
We have filed with the Commission a registration statement on
Form S-1, including exhibits, schedules and amendments filed
with the registration statement, under the Securities Act with
respect to this offering of securities. This prospectus, which
constitutes part of the registration statement, omits certain
information, exhibits, schedules and undertakings set forth in the
registration statement. You should refer to the registration
statement and its exhibits and schedules for additional
information. Whenever we make reference in this prospectus to any
of our contracts, agreements or other documents, the references are
not necessarily complete and you should refer to the exhibits filed
with the registration statement for copies of the actual contract,
agreement or other document. Statements contained in this
prospectus as to the contents of any contract or other document
referred to in this prospectus are not necessarily complete and,
where that contract is an exhibit to the registration statement,
each statement is qualified in all respects by reference to the
exhibit to which the reference relates.
The Commission maintains an internet website at http://www.sec.gov
that contains reports, proxy and information statements and other
information regarding issuers that file electronically with the
Commission. The periodic reports, proxy statements and other
information we file with the Commission are available for
inspection on the Commission’s website free of charge as soon as
reasonably practicable after they are electronically filed with, or
furnished to, the Commission. We also maintain a website at
http://www.enzon.com where you may access these materials free of
charge. We have included our website address as an inactive textual
reference only and the information contained in, and that can be
accessed through, our website is not incorporated into and is not
part of this prospectus.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
The Commission allows us to incorporate by reference the
information we file with it. This means that we can disclose
information to you by referring you to those documents. The
documents that have been incorporated by reference are an important
part of the prospectus, and you should review that information in
order to understand the nature of any investment by you in our
common stock and Preferred Stock. We are incorporating by reference
the documents listed below:
|
· |
The description of our
shares of common stock contained in
Exhibit
4.1 to our Annual Report
on Form 10-K for the fiscal year ended December 31, 2019 and the
description of the rights associated therewith contained in our
Form 8-A, filed on
August 14,
2020; |
|
· |
Our
Current Reports on Forms 8-K, filed on
August 7,
2020,
August 14,
2020,
August 31,
2020,
September 1, 2020,
September 2, 2020 and
September 15, 2020; and |
|
· |
Our
Definitive Proxy Statement on Schedule 14A, filed on
July 12,
2019. |
All documents subsequently filed by us pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act prior to the effective
date of the registration statement of which this prospectus forms a
part, including those made after the date of the initial filing of
the registration statement of which this prospectus forms a part
and prior to effectiveness of such registration statement, until we
file a post-effective amendment that indicates the termination of
the offering of the securities made by this prospectus, shall be
deemed to be incorporated herein by reference and are a part hereof
from the date of filing of such documents, except for the
documents, or portions thereof, that are "furnished" (e.g., the
portions of those documents set forth under Items 2.02 or 7.01 of
Form 8-K or other information "furnished" to the Commission)
rather than filed with the Commission. Any statement contained
herein or in a document incorporated or deemed to be incorporated
herein by reference shall be deemed to be modified or superseded
for purposes of this prospectus to the extent that a statement
contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated herein by reference
modifies or supersedes such statement.
The documents incorporated by reference into this prospectus are
also available on our corporate website at https://www.enzon.com
under the heading “Investors and Media.” Upon request, we will
provide to each person, including any beneficial owner, to whom
this prospectus is delivered, a copy of any or all of the reports
or documents that have been incorporated by reference into this
prospectus. If you would like a copy of any of these documents, at
no cost, please call us at (732) 980-4500 or through an e-mail
request to investor@enzon.com.
PROSPECTUS
Subscription Rights to Purchase Up to 40,000 Units
Consisting of an Aggregate of Up to 30,000,000 Shares of Common
Stock
and Up to 40,000 Shares of Series C Preferred Stock
at a Subscription Price of $1,090 Per Unit
September 23, 2020
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