SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
Mark one
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 2001
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ______________
Commission File Number 1-9974
ENZO BIOCHEM, INC.
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(Exact name of registrant as specified in its charter)
New York 13-2866202
- --------------------------------- ----------------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
60 Executive Blvd., Farmingdale, New York 11735
- ----------------------------------------- ----------
(Address of Principal Executive office) (Zip Code)
(631-755-5500)
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $0.01 par value New York Stock Exchange
- ----------------------------- -----------------------------------------
(Title of Class) (Name of Each Exchange on which Registered)
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant has
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---
As of March 7, 2001 the Registrant had 25,693,450 shares of Common Stock
outstanding.
ENZO BIOCHEM, INC.
FORM 10-Q
January 31, 2001
INDEX
PAGE
NUMBER
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet - January 31, 2001
and July 31, 2000 3
Consolidated Statement of Operations
For the six months ended January 31, 2001 and 2000 4
Consolidated Statement of Operations
For the three months ended January 31, 2001 and 2000 5
Consolidated Statement of Cash Flows
For the six months ended January 31, 2001 and 2000 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders 12
2
ENZO BIOCHEM, INC.
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEET
January 31, July 31,
2001 2000
(unaudited)
--------------------------
(in Thousands)
ASSETS
Current assets:
Cash and cash equivalents $54,387 $51,027
Accounts receivable, less allowance for doubtful accounts 20,809 20,211
Inventories 1,806 1,799
Deferred taxes 1,999 3,008
Other 1,602 1,071
------- -------
Total current assets 80,603 77,116
Property and equipment, at cost, less accumulated depreciation and amortization 2,867 2,801
Cost in excess of fair value of net tangible assets acquired, less accumulated
amortization 8,008 8,193
Deferred patent costs, less accumulated amortization 3,914 4,048
Other 132 127
------- -------
$95,524 $92,285
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $1,359 $1,470
Income taxes payable 383 376
Accrued legal fees 265 665
Accrued payroll 345 301
Other accrued expenses 517 812
------- -------
Total current liabilities 2,869 3,624
Deferred liability 730 796
Deferred taxes 689 689
Stockholders' equity:
Preferred Stock, $ .01 par value; authorized 25,000,000 shares; no shares
issued or outstanding
Common Stock, $ .01 par value; authorized 75,000,000 shares; shares issued
and outstanding; 26,974,920 shares at January 31, 2001 and 25,583,700,
shares at July 31, 2000 269 255
Additional paid-in capital 130,432 97,350
Accumulated deficit (39,465) (10,429)
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Total stockholders' equity 91,236 87,176
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$95,524 $92,285
======= =======
See accompanying notes
3
ENZO BIOCHEM, INC.
CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
Six Months Ended January 31,
2001 2000
-------------------------------------
(In thousands, except per share data)
Revenues:
Research product revenues $10,606 $8,487
Clinical laboratory services 17,129 14,689
------- ------
Total operating revenues 27,735 23,176
Costs and expenses:
Cost of research product revenues 3,455 3,605
Cost of clinical laboratory services 4,500 4,000
Research and development expense 2,939 2,514
Selling expense 1,770 1,463
Provision for uncollectable accounts receivable 6,196 5,211
General and administrative expenses 4,800 4,366
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Total costs and expenses 23,660 21,159
------- ------
Income before interest income and provision for taxes on income 4,075 2,017
Interest income - net 1,713 1,172
------- ------
Income before provision for taxes on income 5,788 3,189
Provision for taxes on income (2,550) (152)
------- ------
Net income $3,238 $3,037
====== ======
Net income per common share:
Basic $.12 $.12
==== ====
Diluted $.12 $.11
==== ====
Denominator for per share calculation:
Basic 26,972 26,334
====== ======
Diluted 28,089 27,929
====== ======
See accompanying notes
4
ENZO BIOCHEM, INC.
CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
Three Months Ended January 31,
2001 2000
-------------------------------------
(In thousands, except per share data)
Revenues:
Research product revenues $5,241 $4,155
Clinical laboratory services 8,635 7,409
------ ------
Total operating revenues 13,876 11,564
Costs and expenses:
Cost of research product revenues 1,612 1,684
Cost of clinical laboratory services 2,425 1,943
Research and development expense 1,600 1,261
Selling expense 909 764
Provision for uncollectable accounts receivable 2,990 2,725
General and administrative expenses 2,401 2,220
------ ------
Total costs and expenses 11,937 10,597
------ ------
Income before interest income and provision for taxes on income 1,939 967
Interest income - net 862 608
------ ------
Income before provision for taxes on income 2,801 1,575
Provision for taxes on income (1,236) (55)
------ ------
Net income $1,565 $1,520
====== ======
Net income per common share:
Basic $.06 $.06
==== ====
Diluted $.06 $.05
==== ====
Denominator for per share calculation:
Basic 26,954 26,300
====== ======
Diluted 28,169 27,787
====== ======
See accompanying notes
5
ENZO BIOCHEM, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
Six Months Ended January 31,
2001 2000
----------------------------
(In Thousands)
Cash flows from operating activities:
Net income $3,238 $3,037
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of property and equipment 541 410
Amortization of costs in excess of fair value of tangible assets
acquired 186 185
Amortization of deferred patent costs 360 342
Deferred income tax provision 1,009 ---
Issuance of warrants as compensation for services performed --- 60
Provision for uncollectable accounts receivable 6,196 5,211
Other 75 (40)
Deferred liabilities (65) (50)
Changes in operating assets and liabilities:
Accounts receivable before provision for uncollectable amounts (6,793) (7,671)
Inventories (7) (235)
Other assets (530) (144)
Trade accounts payable and other accrued expenses (469) 145
Income taxes payable 7 (250)
Accrued payroll 44 ---
Accrued legal fees (400) ---
------- -------
Total adjustments 154 (2,037)
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Net cash provided by operating activities 3,392 $1,000
------- -------
Cash flows from investing activities:
Capital expenditures (622) (481)
Patent costs deferred (226) (161)
Security deposit (6) ---
------- -------
Net cash used in investing activities (854) (642)
------- -------
Cash flows from financing activities:
Proceeds from exercise of stock options 822 2,965
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Net cash provided by financing activities 822 2,965
------- -------
Net increase in cash and cash equivalents 3,360 3,323
Cash and cash equivalents at the beginning of the year 51,027 43,218
------- -------
Cash and cash equivalents at the end of the period $54,387 $46,541
======= =======
See accompanying notes
6
ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2001
(Unaudited)
1. The consolidated balance sheet as of January 31, 2001, the
consolidated statements of operations for the three and six months ended January
31, 2001 ("2001 Period") and 2000 ("2000 Period") and the consolidated
statements of cash flows for the six months ended January 31, 2001 and 2000 have
been prepared by the Company without audit. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flows at
January 31, 2001 and for all periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these financial
statements be read in conjunction with the consolidated financial statements and
notes thereto included in the Company's 2000 Annual Report on Form 10-K. The
results of operations for the six months ended January 31, 2001 are not
necessarily indicative of the results that may be expected for the full year.
The Company follows the provisions of SFAS No. 128, "Earnings Per
Share". The following table sets forth the computation of basic and diluted
earnings per share pursuant to SFAS 128.
Six Months Ended January 31, Three Months Ended January 31,
2001 2000 2001 2000
---------------------------- ------------------------------
(In Thousands, except per share data)
Numerator:
Net income for numerator for basic and
diluted earnings per common share $3,238 $3,037 $1,565 $1,520
Denominator:
Denominator for basic earnings per common
equivalent share during the period 26,972 26,334 26,954 26,300
Effect of dilutive securities
Employee and director stock options and warrants 1,117 1,595 1,215 1,487
----- ----- ----- -----
Denominator for diluted earnings per common
equivalent share and assumed conversions 28,089 27,929 28,169 27,787
====== ====== ====== ======
Basic earnings per share $.12 $.12 $.06 $.06
Diluted earnings per share $.12 $.11 $.06 $.05
The Company declared a 5% stock dividend on January 16, 2001 payable
March 20, 2001 to shareholders of record as of February 27, 2001. The shares and
per share data have been adjusted to retroactively reflect this stock dividend.
The Company recorded a charge to accumulated deficit and a credit to common
stock and additional paid in capital in the amount of $32,274,000, which
reflects the fair value of the dividend on the date of declaration.
7
ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2001
(Unaudited)
Note 2 - Segment Information
The Company follows the provisions of SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information" ("SFAS No. 131"). The Company has two
reportable segments: research and development and clinical reference
laboratories. The Company's research and development segment conducts research
and development activities as well as selling products derived from these
activities. The clinical reference laboratories provide diagnostic services to
the health care community. The Company evaluates performance based on income
before (provision) for taxes on income. The accounting policies of the
reportable segments are the same as those described in the summary of
significant accounting policies. Costs excluded from income before (provision)
for taxes on income and reported as other consist of corporate general and
administrative costs which are not allocable to the two reportable segments.
Management of the Company assesses assets on a consolidated basis only and
therefore, assets by reportable segment has not been included in the reportable
segments below.
The following financial information (in thousands) represents the reportable
segments of the Company:
Research and Development Clinical Reference Laboratories
Six Months Ended January 31, Six Months Ended January 31,
2001 2000 2001 2000
---- ---- ---- ----
---------------------------------------------------------------------
Operating revenues:
Research product revenues $10,606 $8,487
Clinical laboratory services $17,129 $14,689
Cost and expenses:
Cost of research product revenues $3,455 3,605
Cost of clinical laboratory services $4,500 4,000
Research and development expense 2,939 2,514 ---
Interest income
Income before provision for taxes on income $3,401 $1,555 $2,121 $1,510
====== ====== ====== ======
Other Consolidated
Six Months Ended January 31, Six Months Ended January 31,
2001 2000 2001 2000
---- ---- ---- ----
---------------------------------------------------------------------------
Operating revenues:
Research product revenues $10,606 $8,487
Clinical laboratory services 17,129 14,689
Cost and expenses:
Cost of research product revenues 3,455 3,605
Cost of clinical laboratory services 4,500 4,000
Research and development expense 2,939 2,514
Interest income 1,713 1,172 1,713 1,172
Income before provision for taxes on income $266 $124 $5,788 $3,189
==== ==== ====== ======
Three Months Ended January 31, Three Months Ended January 31,
2001 2000 2001 2000
---- ---- ---- ----
-----------------------------------------------------------------------
Operating revenues:
Research product revenues $5,241 $4,155
Clinical laboratory services $8,635 $7,409
Cost and expenses:
Cost of research product revenues 1,612 1,684
Cost of clinical laboratory services 2,425 1,943
Research and development expense 1,600 1,261
Interest income
Income before provision for taxes on income $1,498 $704 $1,069 $808
====== ==== ====== ====
[RESTUBBED TABLE]
Three Months Ended January 31, Three Months Ended January 31,
2001 2000 2001 2000
---- ---- ---- ----
------------------------------------------------------------------------
Operating revenues:
Research product revenues $5,241 $4,155
Clinical laboratory services 8,635 $7,409
Cost and expenses:
Cost of research product revenues 1,612 1,684
Cost of clinical laboratory services 2,425 1,943
Research and development expense 1,600 1,261
Interest income $862 $608 862 608
Income before provision for taxes on income $234 $63 $2,801 $1,575
==== === ====== ======
8
ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2001
(Unaudited)
Item 2- Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
The Company at January 31, 2001, had cash and cash equivalents of $54.4
million an increase of $3.4 million from July 31, 2000. The Company had working
capital of $77.7 million at January 31, 2001 compared to $73.5 million at July
31, 2000.
The Company's net income for the six months ended January 31, 2001 was
$3.2 million which includes depreciation and amortization aggregating
approximately $1.1million. The Company's positive cash flow from operations was
sufficient to meet its current cash needs for the research and development
programs and other investing activities.
Net cash provided by operating activities for the six month period
ended January 31, 2001 was approximately $3.4 million and as compared to net
cash provided by operating activities of $1.0 million for the 2000 period. The
increase in net cash provided by operating activities from the 2000 to the 2001
period was primarily due to a deferred income tax provision, a net decrease in
the change in accounts receivable offset by an increase in other assets.
Net cash used in investing activities increased by approximately
$212,000 as a result of an increase in capital expenditures.
Net cash provided by financing activities decreased by approximately
$2.1 million from the 2000 period primarily as a result of the decrease in
proceeds from the exercise of stock options.
9
Results of Operations
Six months ended January 31, 2001 compared with six months ended January 31,
2000
Revenues from operations for the six month period ended January 31,
2001 increased by $4.5 million compared to revenues from operations for the six
month period ended January 31, 2000. This increase was due to an increase of
$2.4 million in revenue from the clinical reference laboratory operation and an
increase of $2.1 million of research product sales. The increase in research
product sales resulted primarily from an increase in the sales from the
Company's sales of labeling and detection reagents for the genomics and
sequencing markets. The increase in revenues from the clinical reference
laboratory operations resulted primarily from an increase in esoteric testing
revenue and from an increase in accounts being serviced.
Cost of sales increased by approximately $350,000 as a result of an
increase in the cost of clinical laboratory services of $500,000 offset by a
decrease of $150,000 in the cost of sales of research products from the
Company's distribution agreements activities.
Research and development expenses increased by approximately $425,000
as a result of an increase in expenses associated with the research programs.
Selling expenses increased by approximately $307,000 primarily due to
an increase in costs associated with the increase in revenue.
General and Administrative expenses increased by approximately $434,000
primarily due to an increase in legal fees.
The provision for income taxes for the six months ended January 31,
2001 were based on the effective federal, state and local income based tax
rates. The provision for income taxes for the six months ended January 31, 2000
are base on the alternative minimum tax method and current state and local
income taxes provided relate primarily to taxes computed based upon capital.
Results of Operations
Three months ended January 31, 2001 compared with three months ended January 31,
2000
Revenues from operations for the three month period ended January 31,
2001 increased by $2.3 million compared to revenues from operations for the six
month period ended January 31, 2000. This increase was due to an increase of
$1.2 million in revenue from the clinical reference laboratory operation and an
increase of $1.1 million of research product sales. The increase in research
product sales resulted primarily from an increase in the sales from the
Company's sales of labeling and detection reagents for the genomics and
sequencing markets. The increase in revenues from the clinical reference
laboratory operations resulted primarily from an increase in esoteric testing
revenue and from an increase in accounts being serviced.
Cost of sales increased by approximately $410,000 as a result of an
increase in the cost of clinical laboratory services of $482,000 offset by a
decrease of $72,000 in the cost of sales of research products from the Company's
distribution agreements activities.
Research and development expenses increased by approximately $339,000
result of an increase in expenses associated with the research programs.
Selling expenses increased by approximately $145,000 primarily due to
an increase in costs associated with the increase in revenue.
10
General and Administrative expenses increased by approximately $181,000
primarily due to an increase in legal fees.
The provision for income taxes for the three months ended January 31,
2001 were based on the effective federal, state and local income taxes rates.
The provision for income taxes for the three months ended January 31, 2000 are
based on the alternative minimum tax method and current state and local income
taxes provided relate primarily to taxes computed based upon capital.
11
PART II - Other Information
Item 1. Legal Proceedings
In September 1999, the U.S. Court of Appeals for the Federal Circuit issued a
decision in a patent infringement case brought by the Company against Calgene,
Inc., concerning antisense technology. Among other aspects of its decision, the
Court of Appeals remanded the case to the District Court for a determination of
whether the case was exceptional, which related to Calgene's claim for attorney
fees. There can be no assurance that the Company will be successful in
connection with Calgene's claim that the case is exceptional. However, even if
the Company is not successful, management does not believe there will be a
significant monetary inmpact.
In June 1999, the Company filed suit in the United States District Court for the
Southern District of New York against Gen-Probe Incorporated, Chugai Pharma
U.S.A., Inc., Chugai Pharmaceutical Co., Ltd., bioMerieux, Inc., bioMerieux SA,
and Becton Dickinson and Company, charging them with infringing the Company's
U.S. Patent 4,900,659, which concerns probes for the detection of the bacteria
that causes gonorrhea. On January 26, 2001, the court granted the defendants'
motion for summary judgment that the Company's patent is invalid. The grant of
summary judgment is being appealed to the Court of Appeals for the Federal
Circuit. The appeal proceedings are at an early stage. There can be no assurance
that the Company will be successful in these proceedings. However, even if the
Company is not successful, management does not believe that there will be a
significant monetary impact.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders was held on January 16, 2001
(b) The following matters were voted upon and the results were as follows:
(1) Shahram Rabbani was nominated by management and elected to serve
as director until the next Annual Meeting of Stockholders or until
his successors are elected and shall qualify. The Stockholders
voted 22,696,200 shares in the affirmative for Shahram Rabbani and
1,951,716 shares withheld.
(2) The stockholders voted 24,358,599 shares in the affirmative with
respect to the ratification of Ernst & Young LLp as the Company's
independent auditors for the fiscal year ended July 31, 2001 and
255,079 shares against and 34,238 shares abstained.
12
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ENZO BIOCHEM, INC.
------------------
(registrant)
Date: March 12, 2001 by: /s/ Shahram K. Rabbani
------------------------
Chief Operating Officer,
Secretary and Treasurer
13