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 $0.19 per share. There is no established
public trading market for the Subscription Rights, the Units or the Preferred Stock, and we do not intend to list or quote the
Subscription Rights, the Units or the Preferred Stock on any securities exchange or recognized trading system. Although the Subscription
Rights are transferable, we cannot give you any assurance that a market for the Subscription
Rights will develop or, if a market does develop, how long it will continue or at what prices the Subscription Rights will trade.
You are urged to obtain a current price quote for our common stock before exercising your Subscription Rights.
The exercise of your Subscription Rights
and investment in our securities involves a high degree of risk. You should carefully read the Risk Factors beginning on page 16,
as well as the risk factors in any document we incorporate by reference into this prospectus before you make a decision as to
the exercise of your Subscription Rights.
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Per Unit
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Total
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Subscription Price
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$
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1,090
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$
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43,600,000
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(1)
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(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:
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·
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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
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Your completed and fully
executed Subscription Rights Certificate.
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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).
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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:
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Continental Stock Transfer &
Trust Company
Attn: Reorganization Department
1 State Street
30th Floor
New York, NY 10004
(917) 262-2378
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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
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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
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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
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$1,090 per Unit.
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No
Fractional Subscription Rights
or Fractional Units
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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
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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
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5:00 p.m., New York City
Time, on September 23, 2020.
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Expiration
Date
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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Our
common stock is quoted on the OTCQX market of the OTC under the symbol “ENZN.”
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Risk
Factors
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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.
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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:
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lack
of a provision for cumulative voting in the election of directors;
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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;
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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
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limitations
on who may call a special meeting of stockholders.
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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 $0.004 per share. The following table illustrates
this pro forma per-share dilution:
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Subscription Price
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$
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1,090
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Net tangible book value per common
share as of June 30, 2020, before giving effect to the Rights Offering
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$
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0.126
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Dilution in net tangible book
value per common share attributable to the Rights Offering
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$
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(0.002
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)
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Pro forma net tangible book value
per common share as of June 30, 2020 after giving effect to the Rights Offering
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$
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0.124
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Increase in pro forma net tangible book value per common share to purchasers
in the Rights Offering
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$
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0.004
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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.
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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.
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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
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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).
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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.
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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.
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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.
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“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,
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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;
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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
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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.
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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:
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is
“not essentially equivalent to a dividend” with respect to a U.S. Holder
under Section 302(b)(1) of the Code;
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is
a “substantially disproportionate” redemption with respect to a U.S. Holder
under Section 302(b)(2) of the Code;
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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
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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.
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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:
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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);
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●
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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
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●
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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.
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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:
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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
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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.
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Name and Address of
Beneficial Owner or Identity of Group(1)
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Amount
and
Nature
of
Beneficial
Ownership(2)
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Percentage
of
Voting
Stock
Outstanding(3)
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Jordan Bleznick, Director
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—
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—
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Jennifer McNealey, Director
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—
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—
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Randolph Read, Chairman of the Board
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—
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—
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Andrew Rackear, Chief Executive Officer and Secretary
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25,000
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(4)
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*
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Richard L. Feinstein, Vice President – Finance and Chief Financial Officer
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—
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—
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Jonathan Couchman and affiliated entities
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7,851,454
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(5)
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17.8
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%
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Carl C. Icahn and affiliated entities
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6,598,886
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(6)
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14.9
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%
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Poplar Point Capital Management LLC and affiliated entities
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2,906,966
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(7)
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6.6
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%
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All Current Directors and Current Executive Officers as a group (5 persons)
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25,000
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(4)
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*
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* Less than one percent
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1)
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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.
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2)
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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.
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3)
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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.
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4)
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Includes 25,000 shares subject to options, which were exercisable
as of September 14, 2020.
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5)
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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.
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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.
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6)
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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).
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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.
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7)
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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.
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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:
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·
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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;
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·
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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
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·
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Our
Definitive Proxy Statement on Schedule 14A, filed on July
12, 2019.
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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
Grafico Azioni Enzon (QX) (USOTC:ENZN)
Storico
Da Gen 2025 a Feb 2025
Grafico Azioni Enzon (QX) (USOTC:ENZN)
Storico
Da Feb 2024 a Feb 2025
