<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------
FORM 10-QSB
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period ended September 30, 1996 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 0-21595
- --------------------------------------------------------------------------------
Enamelon, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3669775
---------------------- ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
15 Kimball Avenue, Yonkers, New York 10704
-----------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (914)237-1305
-------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes No X
------------------ --------------------
The registrant has outstanding 6,900,378 shares of common stock, as of
November 26, 1996.
<PAGE> 2
Part I Financial Information
Item 1. Financial Statements
ENAMELON, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
<TABLE>
<CAPTION>
September 30,
1996
----
ASSETS (unaudited)
<S> <C>
CURRENT:
Cash and cash equivalents ...................... $ 1,352,988
Prepaid expenses and other assets .............. 87,931
-----------
Total current assets ........................ 1,440,919
Equipment, less accumulated depreciation of
$52,556 .................................... 307,703
Deferred costs, less accumulated amortization of
$33,463 .................................... 589,596
Other assets - security deposit ................ 8,939
-----------
TOTAL ASSETS ....................................... $ 2,347,157
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued expenses ............................... $ 342,524
-----------
Total current liabilities .................. 342,524
-----------
Commitments
Redeemable preferred stock, net of offering costs
(note 2) ........................................ 1,904,000
-----------
STOCKHOLDERS' EQUITY (note 2)
Preferred stock, $0.01 par value - shares
authorized 4,172,750; none issued or
outstanding .............................. --
Common stock, $0.001 par value - shares
authorized 20,000,000; issued and
outstanding 4,641,979 .................... 4,641
Additional paid-in capital ..................... 4,082,743
Accumulated deficit during the development
stage ................................... (3,986,751)
-----------
Total stockholders' equity .............. 100,633
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ......... $ 2,347,157
===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 3
ENAMELON, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Period from
June 9, 1992
Three months ended Nine months ended (Inception) to
September 30, September 30, September 30,
------------------ ----------------- --------------
1995 1996 1995 1996 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Expenses:
Payroll and benefits ....... $ 100,141 $ 249,163 $ 242,653 $ 661,413 $ 1,269,783
Research and testing ....... 55,994 417,800 130,512 743,586 1,257,921
Administrative and other ... 95,857 134,479 341,594 481,669 1,323,391
----------- ----------- ----------- ----------- -----------
Total expenses ......... 251,992 801,442 714,759 1,886,668 3,851,095
Other charges (income):
Interest and dividends ..... (1,621) (25,021) (2,093) (93,500)
(134,313)
Write-off of deferred
offering costs ........... -- -- -- -- 269,969
----------- ----------- ----------- ----------- -----------
Net loss ....................... ($ 250,371) ($ 776,421) ($ 712,666) ($1,793,168) ($3,986,751)
=========== =========== =========== =========== ===========
Proforma net loss per
common share (note 3) ....... ($ 0.15) ($ 0.33)
=========== ===========
Weighted average
common shares outstanding .. 5,200,378 5,362,024
=========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 4
ENAMELON, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Accumulated
deficit
Common Stock Additional during the Total
Par paid-in development stockholders'
Shares value capital stage equity
--------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 ....................... 4,635,273 $ 4,635 $ 4,055,925 ($2,193,583) $ 1,866,977
Issuance of common stock for legal
services rendered (unaudited) .................. 6,706 6 26,818 -- 26,824
Net loss (unaudited) ............................. -- -- -- (1,793,168) (1,793,168)
--------- ----------- ----------- ----------- -----------
BALANCE, SEPTEMBER 30, 1996 (unaudited) .......... 4,641,979 $ 4,641 $ 4,082,743 ($3,986,751) $ 100,633
========= =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements
<PAGE> 5
ENAMELON, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Period from
June 9, 1992
(Inception) to
Nine Months ended September 30, September 30,
------------------------------ --------------
1995 1996 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................................... ($ 712,666) ($1,793,168) ($3,986,751)
Adjustments to reconcile net loss to net cash used in operating
activities:
Write-off of deferred offering costs ............................. -- -- 269,969
Stock issued for services ........................................ 147,695 26,824 174,519
Depreciation and amortization .................................... 16,541 42,247 86,016
Decrease (increase)in prepaid expenses and
other assets ................................................... 4,651 (76,853) (96,869)
Increase in accrued expenses ..................................... 113,639 168,585 342,524
----------- ----------- -----------
Net cash used in operating activities ............................ (430,140) (1,632,365) (3,213,191)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment ................................................. (16,393) (281,637) (360,259)
Patents, trademarks and licenses ....................................... (27,506) (107,523) (253,662)
----------- ----------- -----------
Net cash used in investing activities ............................ (43,899) (389,160) (613,921)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock ..................................... 1,568,709 -- 3,844,317
Proceeds from sale of preferred stock .................................. -- 2,004,000 2,004,000
Offering costs ......................................................... -- (420,153) (668,217)
Proceeds from loans .................................................... 52,626 -- --
----------- ----------- -----------
Net cash provided by financing activities ........................ 1,621,335 1,583,847 5,180,100
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents ...................... 1,147,296 (437,678) 1,352,988
Cash and cash equivalents, beginning of period ............................ 50,097 1,790,666 --
----------- ----------- -----------
Cash and cash equivalents, end of period .................................. $ 1,197,393 $ 1,352,988 $ 1,352,988
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING ACTIVITIES:
The Company issued common stock for professional services
performed by unrelated parties ...................................... $ 147,695 $ 26,824 $ 331,854
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 6
ENAMELON, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
(UNAUDITED)
1. Statement of information furnished
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310 of Regulation
S-SB. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) necessary for a fair presentation have been
included. Results for the interim period ended September 30, 1996 are not
necessarily indicative of results for the entire year.
For further information, refer to the financial statements and
footnotes thereto included in the Company's registration statement filed on Form
S-1.
2. Initial Public Offering
In October, 1996, the Company completed the initial public offering of
1,700,000 shares of common stock at $7.00 per share. Cash proceeds net of
underwriters cost was $11,067,000 which was received on October 29, 1996.
Concurrent with the public offering, 558,399 shares of redeemable preferred
stock were automatically converted into an equivalent number of shares of common
stock.
The Company intends to use approximately $4.0 million of the net
proceeds for the anticipated initial marketing costs of its proposed toothpaste
products and approximately $4.0 million to fund additional research and
development to improve the efficacy of, and provide claims substantiation for,
the Company's proposed products. An additional $1.5 million of the net proceeds
will be used to purchase manufacturing equipment for the production of the
Company's patent pending, split system toothpaste tube and for high speed tube
filling equipment. The balance of the net proceeds will be used for working
capital and other general corporate purposes, which may include the acquisition
of products or businesses that are compatible with the Company's existing
business or the financing of joint ventures or license agreements to market its
products.
3. Earnings per share
Earnings per share are presented for the three and nine months ended
September 30, 1996 on a pro forma basis to give effect to the conversion of the
redeemable preferred stock as a result of the public offering consummated in
October 1996. The calculation of earnings per share reflects the conversion of
the preferred stock as if it occurred on January 1, 1995. Earnings per share are
not presented for prior periods since the Company does not believe historical
earnings per share are meaningful as a result of changes in the Company's
capital structure effected by the public offering.
The weighted average number of common shares outstanding used in
computing the pro forma net loss per common share was adjusted for the effects
of the application of Securities and Exchange Commission (SEC) Staff Accounting
Bulletin (SAB) No.83. Pursuant to SAB No. 83, common stock issued by the Company
at a price less than the initial public offering price during the twelve months
immediately preceding the initial public offering, together with common stock
purchase warrants and options issued during such period with an exercise price
less than the initial public offering price, are treated as outstanding for all
periods presented. Earnings (loss) per share are computed using a treasury stock
method, under which the number of shares outstanding reflects an assumed use of
the proceeds from the issuance of such shares and from the assumed exercise of
such warrants and options, to repurchase shares of the Company's common stock at
the initial public offering price.
<PAGE> 7
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the Financial Statements and Notes thereto appearing in Form S-1.
GENERAL
The Company (a development stage company) was founded in June 1992 to
develop and market over-the-counter oral care products that prevent tooth decay
at its earliest stage and are based on proprietary formulations and
technologies. To date, the Company has not commenced any product
commercialization or realized any operating revenues.
The Company expects that it will be able to complete formulation of its
all-family toothpaste and the testing required by the monograph published by the
Food and Drug Administration by the end of 1996. After formulation of the
product and assuming successful completion of such studies, the Company intends
to begin in the early part of 1997 to test market Enamelon toothpaste in several
representative markets comprising approximately 5% of all United States
households. Test marketing and additional clinical human studies to substantiate
expected marketing claims including comparative advertising claims are expected
to continue throughout 1997, with a national roll-out of Enamelon toothpaste in
the first half of 1998. The Company expects to continue to incur operating
losses throughout this period and may require additional financing to continue
its operations thereafter.
RESULTS OF OPERATIONS
Three Months Ended September 30, 1996 Compared to Three Months Ended September
30, 1995
Total expenses were approximately $801,000 for the three months ended
September 30, 1996, compared with total expenses of $252,000 for the same period
in the prior year, an increase of $549,000. This increase was primarily the
result of higher payroll and benefits expenses of $149,000, higher research and
testing expenses of $362,000, and higher administrative and other expenses of
$38,000.
The increase in payroll and benefits expenses from $100,000 to $249,000
primarily resulted from increased annual compensation for certain senior
officers.
Research and testing expenses increased from $56,000 to $418,000
primarily as a result of continued in vivo and in vitro studies at several
universities and research facilities in its efforts to define and optimize
levels of ingredients in its toothpaste and to assess its performance in
remineralization of tooth enamel.
Administrative and other expenses increased from $96,000 to $134,000
primarily attributable to increased consulting and administrative office
expenses.
These increases were offset in part by $23,000 of additional interest
and dividend income.
Nine Months Ended September 30, 1996 Compared to Nine Months Ended September 30,
1995
Total expenses were approximately $1,887,000 for the nine months ended
September 30, 1996, compared with total expenses of $715,000 for the same period
in 1995, an increase of $1,172,000. The increase was primarily attributable to a
$419,000 increase in payroll and benefits expenses as well as a $613,000
increase in research and testing expenses and a $140,000 increase in
administrative and other expenses.
The increase in payroll and benefits expenses from $243,000 to $662,000
was attributable to increased compensation for certain senior officers.
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
The increase in research and testing expenses from $131,000 to $744,000
was the result of the expansion of the Company's research and development
program at its laboratory facility, additional laboratory supplies, expansion of
the in vitro studies and the initiation of human clinical trials at various
universities and research facilities.
The increase in administrative and other expenses of $140,000 from
$342,000 to $482,000, was primarily attributable to increased legal and
accounting fees incurred in connection with the Company's efforts to secure
additional investment capital and the preparation of interim financial
statements.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception in June 1992, the Company has financed its
operations primarily through private placements of Series A Preferred Stock and
Common Stock totaling approximately $5.5 million, net of expenses. At September
30, 1996, the Company had cash and cash equivalents of approximately $1.4
million and working capital of $1.1 million. The Company has no outstanding debt
(other than accounts payable and accrued expenses) or available lines of credit
as of September 30, 1996.
Since its inception and through September 30, 1996, the Company has
incurred losses aggregating approximately $4 million and had available net
operating loss carryforwards as of December 31, 1995 of approximately $2.2
million. The net operating loss carryforwards will expire if not used by the
period from 2007 through 2010 and may be limited by United States federal tax
law as a result of future changes in ownership. The Company expects to continue
to incur operating losses at least through 1998 while it continues clinical
testing and initial toothpaste marketing efforts. The Company expects to
introduce an all-family toothpaste to test markets in the early part of 1997.
Assuming the successful completion of test marketing, the Company intends to
begin a national roll-out of this product in the first half of 1998.
Since its inception and through September 30, 1996, the Company has
paid $360,000 for the purchase of equipment and approximately $254,000 for costs
associated with obtaining patents, trademarks and licenses rights.
In October, 1996, the Company completed the initial public offering of
1,700,000 shares of common stock at $7.00 per share. Cash proceeds net of
offering cost of approximately $10.5 million was received on October 29,1996.
Concurrent with the public offering, 558,399 shares of redeemable preferred
stock were automatically converted into an equivalent number of shares of common
stock.
The Company intends to use approximately $4.0 million of the net
proceeds for the anticipated initial marketing costs of its proposed toothpaste
products and approximately $4.0 million to fund additional research and
development to improve the efficacy of, and provide claims substantiation for,
the Company's proposed products. An additional $1.5 million of the net proceeds
will be used to purchase manufacturing equipment for the production of the
Company's patent pending, split system toothpaste tube and for high speed tube
filling equipment. The balance of the net proceeds will be used for working
capital and other general corporate purposes, which may include the acquisition
of products or businesses that are compatible with the Company's existing
business or the financing of joint ventures or license agreements to market its
products. If the Underwriters exercise the over-allotment option in full, the
Company will realize additional net proceeds, which will be added to the
Company's working capital.
The Company's cash requirements may vary materially from those now
planned depending on numerous factors, including the status of the Company's
marketing efforts, the Company's business development activities, the
availability of alternative financing for the acquisition of manufacturing
equipment, the results of clinical trials, the regulatory process and
competition. The Company currently estimates that the net proceeds of the
offering of approximately $10.5 million, together with its projected cash flow
from operations, if any, will be sufficient to finance its working capital and
other requirements for a period of approximately 18 months which includes the
test marketing period. Thereafter, or sooner if conditions necessitate, the
Company may need to raise additional funds through public or private
financings. If adequate funds are not available, then the Company may be
required to delay, reduce the scope of, or eliminate the commercial
introduction of its toothpaste product and otherwise reduce the proposed
operations.
<PAGE> 9
PART II. - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) No Reports on Form 8-K were filed during the quarter for which this
report is filed.
<PAGE> 10
Part II Other Information
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Enamelon, Inc.
Date December 5, 1996 By /S/ Dr. Steven R. Fox
------------------------ ----------------------------------
Dr. Steven R. Fox
Chairman of the Board of Directors
and Chief Executive Officer
(Principal Executive Office)
Date December 5, 1996 By /S/ Edwin Diaz
------------------------ ----------------------------------
Edwin Diaz
Vice President-Finance,
Chief Financial Officer and
Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ENAMELON, INC. BALANCE SHEET AS OF SEPTEMBER 30, 1996 AND THE CONDENSED
STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,352,988
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,440,919
<PP&E> 360,259
<DEPRECIATION> 52,556
<TOTAL-ASSETS> 2,347,157
<CURRENT-LIABILITIES> 342,524
<BONDS> 0
1,904,000
0
<COMMON> 4,641
<OTHER-SE> 95,992
<TOTAL-LIABILITY-AND-EQUITY> 2,347,157
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,886,668
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (93,500)
<INCOME-PRETAX> (1,793,168)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,793,168)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,793,168)
<EPS-PRIMARY> (.33)
<EPS-DILUTED> (.33)
</TABLE>
