<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Mark one
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1995
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.
- -------------------------------------------------------------------------------
(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)
(516-755-5500)
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $.01 par value The American 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 December 8, 1995 the Registrant had 21,372,200 shares of Common Stock
outstanding.
<PAGE> 2
ENZO BIOCHEM, INC.
FORM 10-Q
October 31, 1995
INDEX
-----
PAGE
NUMBER
------
PART I - FINANCIAL INFORMATION
- -------
Item 1. Financial Statements
Consolidated Balance Sheet - October 31, 1995 and July 31, 1995.... 3
Consolidated Statement of Operations
For the three months ended October 31, 1995 and 1994.......... 5
Consolidated Statement of Cash Flows
For the three months ended October 31, 1995 and 1994.......... 6
Notes to Consolidated Financial Statements......................... 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................. 9
<PAGE> 3
ENZO BIOCHEM, INC.
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
CONSOLIDATED BALANCE SHEET
<CAPTION>
October 31, July 31,
1995 1995
(unaudited)
----------- -----------
(in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $15,465 $11,068
Accounts receivable, less allowance for doubtful accounts 11,850 10,914
Current portion of note receivable - litigation settlement 5,000 5,000
Inventories 2,232 2,198
Other 767 1,077
----------- -----------
Total current assets 35,314 30,257
----------- -----------
Property and equipment, at cost, less accumulated depreciation
and amortization 13,740 13,892
Long term portion of note receivable - litigation settlement 8,346 13,121
Cost in excess of fair value of net tangible assets acquired,
less accumulated amortization 9,953 10,046
Deferred patent costs, less accumulated amortization 4,938 4,971
Other 167 171
----------- -----------
$72,458 $72,458
=========== ===========
</TABLE>
<PAGE> 4
<TABLE>
ENZO BIOCHEM, INC.
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
October 31, July 31,
1995 1995
(unaudited)
----------- -----------
(in thousands)
<S> <C> <C>
Current liabilities:
Trade accounts payable $ 1,001 $ 1,580
Accrued legal fees 856 922
Income taxes payable 272 1,074
Other accrued expenses 2,348 2,147
Current portion of long-term debt 31 32
Current portion of obligations under capital leases 45 53
----------- -----------
Total current liabilities 4,553 5,808
----------- -----------
Long-term debt 73 81
Obligations under capital lease 4,687 4,617
Other deferred liabilities 882 840
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:
21,372,200 shares at October 31, 1995 and
21,334,600 shares at July 31, 1995 214 213
Additional paid-in capital 81,851 81,605
Accumulated deficit (19,802) (20,706)
----------- -----------
Total stockholders' equity 62,263 61,112
----------- -----------
$72,458 $72,458
=========== ===========
<FN>
See accompanying notes
</TABLE>
<PAGE> 5
<TABLE>
ENZO BIOCHEM, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended October 31,
-------------------------------------
1995 1994
----------------- -----------------
(In thousands, except per share data)
<S> <C> <C>
Revenues:
Operating revenues $ 8,556 $ 8,028
Costs and expenses:
Cost of sales and diagnostic services 3,681 3,550
Research and development expenses 585 460
Selling expenses 605 600
Provision for uncollectible accounts receivable 770 532
General and administrative expenses 1,971 2,134
Settlement of litigation (net of legal fees) -- (21,000)
----------------- -----------------
7,612 (13,724)
----------------- -----------------
Income before interest and provision for
income taxes 944 21,752
Interest income (expense) net 377 (2)
----------------- -----------------
Income before provision for income taxes 1,321 21,750
----------------- -----------------
Provision for taxes on income (417) (3,015)
----------------- -----------------
Net income $ 904 $18,735
================= =================
Net income per share $ 0.04 $ 0.86
================= =================
Weighted average common shares 22,351 21,793
================= =================
<FN>
See accompanying notes
</TABLE>
<PAGE> 6
<TABLE>
ENZO BIOCHEM, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended October 31,
-------------------------------------
1995 1994
----------------- -----------------
(In thousands, except per share data)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 904 $18,735
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of property
and equipment 217 185
Amortization of cost in excess of fair value of
tangible assets acquired 92 92
Amortization of deferred patent costs 120 120
Provision for uncollectible accounts receivable 770 532
Deferred income tax provision -- 3,000
Expenses related to leasehold 79
Prepaid expenses converted into legal fees from
previously issued stock 29 --
----------------- -----------------
2,211 22,664
----------------- -----------------
Change in assets and liabilities:
Note receivable - J&J settlement 4,775 (17,500)
Research contract receivable -- 6,500
Accounts receivable before provision for
uncollectible amounts (1,705) (1,141)
Inventories (34) (70)
Prepaid expense 242 224
Trade accounts payable and other accrued expenses (377) (2,034)
Accrued legal fees (66) 5,226
Income taxes payable (802) --
Accrued interest payable -- 6
Deferred liabilities 42 (109)
----------------- -----------------
2,075 (8,898)
----------------- -----------------
Net cash provided by operating activities $ 4,286 $13,766
================= =================
</TABLE>
<PAGE> 7
<TABLE>
ENZO BIOCHEM, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended October 31,
-------------------------------------
1995 1994
----------------- -----------------
(In thousands)
<S> <C> <C>
Cash flows from investing activities:
Capital expenditures (62) (264)
Patent costs deferred (48) (78)
----------------- -----------------
Net cash used by investing activities (110) (342)
----------------- -----------------
Cash flows from financing activities:
Payments of amounts due to banks -- (2,006)
Payments of obligations under capital lease (25) (19)
Proceeds from exercise of stock options 246 48
----------------- -----------------
Net cash provided by (used by) financing activities 221 (1,977)
----------------- -----------------
Net increase in cash and cash equivalents 4,397 11,447
Cash and cash equivalents at the beginning of the
year 11,068 4,151
----------------- -----------------
Cash and cash equivalents at the end of the period $15,465 $15,598
================= =================
</TABLE>
<PAGE> 8
ENZO BIOCHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1995
(Unaudited)
1. The consolidated balance sheet as of October 31, 1995, the consolidated
statement of operations for three months ended October 31, 1995 ("1996 Period")
and 1994 ("1995 Period") and the consolidated statement of cash flows for the
three months ended October 31, 1995 and 1994 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 October 31, 1995 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 1995 Annual Report on Form 10-K.
The results of operations for the three months ended October 31, 1995 are not
necessarily indicative of the results that may be expected for the full year.
2. On October 19, 1994 the Company executed a settlement agreement with
Johnson & Johnson, Inc. in the aggregate amount of $35.0 million pursuant to
which the Company received $15.0 million, and a promissory note requiring
Johnson & Johnson and its subsidiary, Ortho Diagnostics, Inc., to pay $5.0
million a year for each of the four successive anniversaries of said date.
These future payments are recorded at net present value discounted using an
interest rate of 5.25%. Pursuant to the terms of the settlement, all of the
Company's grants, licenses and intellectual property have been returned to the
Company in totality.
3. In March 1993, the Company filed suit in the United States District Court
for the District of Delaware charging patent infringement and acts of unfair
competition against Calgene, Inc. and seeking a declaratory judgment of
invalidity concerning Calgene, Inc.'s plant antisense patent. On February 9,
1994 the Company filed a second suit in the United States District Court for
the District of Delaware charging Calgene with infringement of a second
antisense patent owned by the Company. Calgene has filed a counterclaim in the
second Delaware action seeking a declaration that a third patent belonging to
the Company is invalid. The two Delaware actions have been consolidated and
were tried to the Court in April 1995. The parties are awaiting the Court's
decision. In addition, the Company filed suit on March 22, 1994 in the United
States District Court for the Western District of Washington against Calgene
and the Fred Hutchinson Cancer Research Center, alleging that the defendants
had conspired to issue a false and misleading press release regarding a
supposed "patent license" from Hutchinson to Calgene, and conspired to damage
the Company's antisense patents by improperly using confidential information to
challenge them in the Patent Office. The Complaint further charges that
Hutchinson is infringing and inducing Calgene to infringe the Company's
antisense patents. There can be no assurance that the Company will be
successful in any of the foregoing matters or that Calgene, Inc. and/or
Hutchinson will not be successful. However, even if the Company is not
successful, management does not believe there will be a significant monetary
impact.
4. Effective December 1, 1985, the Company entered into an agreement with the
City of New York to lease, over a fifty-year term, a six-story building located
<PAGE> 9
in New York City. During 1992 this lease was renegotiated. The Company has
recorded the fair market value of the real property in the amount of $3,000,000
as a capital lease obligation due in installments through 2036. Financing for
the renovation and equipping of such facility came principally from the
Company's own funds. The Company is carrying the capital leasehold interest at
its estimated fair market value.
5. In April, 1994, the Company signed a non-exclusive worldwide distribution
and supply agreement with Boehringer Mannheim Biochemicals. During fiscal 1995
similar agreements were signed with Amersham International and with Dako A/S.
In September 1995, a fourth agreement was concluded with VWR Scientific
Products (acquired from Baxter Healthcare). Under the terms of these
agreements, the distributor companies sell to the global medical research
market, a broad range of biochemical products and reagents manufactured and
supplied by Enzo. The agreements include products based on nonradioactive DNA
probe technology and include products that were developed and marketed by these
companies prior to the agreement, as well as products developed by Enzo, all of
which are covered by Enzo patents. The agreements extend for the life of the
last patent to expire for products involved.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
- -------------------------------
Net cash provided by operating activities decreased by approximately
$9,500,000 for the three months ended October 31, 1995 compared with three
months ended October 31, 1994 as a result of a decrease in the proceeds from
the J&J settlement offset by changes in operating assets and liabilities.
Net cash used from financing activities increased by approximately
$2,198,000 primarily from the proceeds of stock options of $200,000 offset by
the pay down of bank debt from the prior year. The Company's internal source
of cash generated by operations in addition to the proceeds from the J&J
settlement was sufficient to meet the Company's needs for investing and other
financing activities. At October 31, 1995 the Company had working capital of
approximately $30,761,000.
On October 19, 1994 the Company executed a settlement agreement with
Johnson & Johnson, Inc. pursuant to which the Company received $15.0 million
and a promissory note requiring Johnson & Johnson and its subsidiary, Ortho
Diagnostics, Inc., to pay $5.0 million a year for each of the four successive
anniversaries of said date. These future payments are recorded at net present
value discounted using an interest rate of 5.25%. Pursuant to the terms of the
settlement, all of the Company's grants, licenses and intellectual property
have been returned to the Company in totality.
Effective December 1, 1985, the Company entered into an agreement with the
City of New York to lease, over a fifty-year term, a six-story building located
in New York City. During 1992 this lease was renegotiated. The Company has
recorded the fair market value of the real property in the amount of $3,000,000
as a capital lease obligation due in installments through 2036. Financing for
the renovation and equipping of such facility came principally from the
Company's own funds. The Company has decided to carry the capital leasehold
interest at its estimated fair market value.
<PAGE> 10
Results of Operations
- ---------------------
Three months ended October 31, 1995 compared with three months ended
October 31, 1994
- --------------------------------------------------------------------
For the three months ended October 31, 1995 revenues at the clinical
reference laboratory increased by $112,000 due to an increase in the volume of
screening tests. Sales of research products increased by $416,000, primarily
from the Company's non-exclusive agreements to distribute the Company's
products.
Cost of sales increased by approximately $131,000 primarily due to
increased revenues from research products related to the non-exclusive
distribution agreements.
The provision for uncollectible accounts receivable increased by $238,000
primarily from a decrease in reimbursements from third party payers at the
clinical reference laboratory operations.
Research and development expenses increased by approximately $125,000 as a
result of an increase in research programs.
The provision for taxes decreased approximately $2,600,000 primarily due to
a reduction of income resulting from the prior year litigation settlement.
The decrease in general and administrative expenses of $163,000 was
primarily due to the decrease in legal fees.
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant had duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ENZO BIOCHEM, INC.
(registrant)
Date: December 13, 1995 By: /s/ Barry W. Weiner
-------------------------------------
Barry W. Weiner, Executive
Vice President-Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000316253
<NAME> ENZO BIOCHEM, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> OCT-31-1995
<CASH> 15,465
<SECURITIES> 0
<RECEIVABLES> 21,053
<ALLOWANCES> (4,203)
<INVENTORY> 2,233
<CURRENT-ASSETS> 35,314
<PP&E> 18,727
<DEPRECIATION> (4,987)
<TOTAL-ASSETS> 72,458
<CURRENT-LIABILITIES> 4,553
<BONDS> 0
<COMMON> 214
0
0
<OTHER-SE> 62,049
<TOTAL-LIABILITY-AND-EQUITY> 72,458
<SALES> 8,556
<TOTAL-REVENUES> 8,556
<CGS> 3,681
<TOTAL-COSTS> 3,931
<OTHER-EXPENSES> 3,161
<LOSS-PROVISION> 770
<INTEREST-EXPENSE> (944)
<INCOME-PRETAX> 1,321
<INCOME-TAX> 417
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 904
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
