Rights Offering | (15) Rights Offering On September 1, 2020, the Company’s Board of Directors approved a Rights Offering, by which the Company distributed, at no charge to all holders of its common stock on September 23, 2020 (the “Record Date”), transferable subscription rights to purchase Units at a subscription price per Unit of $1,090. In the Rights Offering each stockholder received 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, a stockholder was entitled to purchase one Unit at the subscription price. Each Unit consisted of newly designated Series C preferred stock, par value $0.01, and 750 shares of the Company’s common stock. It is the intention of the Company to use the approximately $43 million of net proceeds from the Rights Offering, to position the Company as a public company acquisition vehicle, where it can become an acquisition platform and more fully utilize its net operating loss carryforwards and enhance stockholder value. The Company does not, however, have any current plans, arrangements or understandings with respect to any acquisitions or investment and is, currently, not involved in any negotiations with respect to any such transactions. On an annual basis, the Company’s 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. Holders of Series C preferred stock do not have any voting rights and the Series C preferred stock is not convertible into shares of the Company’s common stock. The initial liquidation value of the Series C preferred stock is $1,000 per share. On or after November 1, 2022, the Company may redeem the Series C preferred stock at any time, in whole or in part, based on the liquidation preference per share as in effect at such time. Holders of Series C preferred stock have the right to demand that the Company redeem their shares in the event that the Company undergoes a change of control. On September 1, 2020, the Company entered into an Investment Agreement with Icahn Capital LP (the “Investment Agreement”) in connection with the Rights Offering. Icahn Capital LP, together with its affiliates, owned approximately 15% of the Company’s then outstanding shares of common stock and is one of the Company’s largest stockholders. Subject to the terms and conditions of the Investment Agreement, Icahn Capital LP 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 elected not to exercise all of their respective subscription rights. No fees were paid by the Company to Icahn Capital LP in consideration of such investment commitment. In connection with the execution of the Investment Agreement, the parties agreed to terminate the Standstill Agreement, dated December 18, 2016, by and between the Company, Icahn Capital LP and the other affiliated parties identified therein, so that it shall be of no further force or effect; and waive the applicability of Section 203 of the Delaware General Corporation Law of the State of Delaware to Icahn Capital LP and its affiliates. In addition, the Company agreed to use its best efforts to register for resale all of the shares of the Company’s common stock then held by Icahn Capital LP and its affiliates following the closing of the Rights Offering. The subscription period for the Rights Offering ended on October 9, 2020. On October 14, 2020, the Company reported that stockholders exercised subscription rights to purchase 6,694 units. Pursuant to the Investment Agreement, Icahn Capital LP subscribed for 5,971 of such units (its pro-rata share of the Rights Offering). In addition, pursuant to its investment commitment Icahn Capital LP purchased all 33,306 units that remained unsubscribed for at the expiration of the Rights Offering. As a result of such purchases, Icahn Capital LP and its affiliates own 48.6% of the Company’s common stock. As a result of the sale of all 40,000 units available for purchase in the Rights Offering, the Company currently has 40,000 shares of Series C preferred stock outstanding and an aggregate of 74,214,603 shares of common stock outstanding following the Rights Offering and realized gross proceeds of $43.6 million. The Company believes that the completion of the Rights Offering will not limit the use of its net operating loss carryforwards due to any Section 382 limitations. Assuming the Rights Offering closed on September 30, 2020, the Series C preferred shares were issued, the common shares were issued and the gross proceeds of $43.6 million had been received as of that date, the following are the pro forma balance sheet and calculation of pro forma loss per share: Enzon Pharmaceuticals, Inc. and Subsidiaries Pro Forma Condensed Consolidated Balance Sheet As of September 30, 2020 (In thousands) (Unaudited) ASSETS Pro Forma As Reported Adjustments Pro Forma Current assets: Cash $ 5,311 $ 43,600 (1) $ 48,911 Deferred offering costs 457 (457) (2) — Other current assets 56 56 Total assets $ 5,824 $ 43,143 $ 48,967 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable, accrued expenses and other current liabilities $ 654 $ — $ 654 Total liabilities 654 — 654 Commitments and contingencies Mezzanine equity Series C preferred stock - $1,000 par value, 40,000 shares authorized, issued,and outstanding (liquidation value $40,000) — 40,000 (3) 40,000 Stockholders' equity Preferred stock - $0.01 par value, 2,960,000 shares authorized; no shares issued and outstanding — — — Common stock - $.01 par value, 74,214,603 shares authorized, issued, and outstanding 442 300 (4) 742 Additional paid-in capital 75,690 2,843 (5) 78,533 Accumulated deficit (70,962) — (70,962) Total stockholders' equity 5,170 3,143 8,313 Total liabilities, mezzanine equity and stockholders' equity $ 5,824 $ 43,143 $ 48,967 Pro FormaAdjustments (1) To record receipt of proceeds of Rights Offering (2) To record reclassification of deferred offering costs (3) To record issuance of 40,000 shares of Series C preferred stock at par value (4) To record issuance of 30 million shares of common stock at par value (5) To record addition of $3.3 million of capital in excess of par value less $457,000 of deferred offering costs Enzon Pharmaceuticals, Inc. and Subsidiaries Pro Forma Loss Per Share- Basic and Diluted For the Periods (In thousands except per share data) (Unaudited) Three Months Ended September 30, 2020 Pro Forma As Reported Adjustments Pro Forma Loss $ (407) $ (885) Weighted average shares outstanding 44,215 30,000 (x) 74,215 Loss per share - basic and diluted $ (0.01) $ (0.01) Nine Months Ended September 30, 2020 Pro Forma As Reported Adjustments Pro Forma Loss $ (885) $ (885) Weighted average shares outstanding 44,215 30,000 (x) 74,215 Loss per share - basic and diluted $ (0.02) $ (0.01) Pro Forma Adjustments (x) |