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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For the transition period from ________ to __________
Commission file number 0-22613
-------------------
AVI BIOPHARMA, INC.
(Exact name of registrant as specified in its charter)
Oregon 93-0797222
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One SW Columbia Street, Suite 1105, Portland, Oregon 97258
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: 503-227-0554
-------------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock with $.0001 par value 16,709,616
(Class) (Outstanding at May 3, 2000)
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AVI BIOPHARMA, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
<S> <C>
Balance Sheets - March 31, 2000 and December 31, 1999 2
Statements of Operations - Three Months Ended March 31, 2000 and 1999 and
from July 22, 1980 (Inception) to March 31, 2000 3
Statements of Cash Flows - Three Months Ended March 31, 2000 and 1999 and
from July 22, 1980 (Inception) to March 31, 2000 4
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis 6
PART II - OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K 8
Signatures 9
</TABLE>
1
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AVI BIOPHARMA, INC.
(A Development Stage Company)
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------------- -------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 9,580,282 $ 8,683,005
Short-term securities--available-for-sale 4,800,000 2,937,500
Other current assets 48,717 31,242
----------------- -------------------
Total Current Assets 14,428,999 11,651,747
Property and Equipment, net of accumulated
depreciation and amortization of $2,552,567
and $2,518,494 423,229 403,303
Patent Costs, net of accumulated amortization of
$454,268 and $418,268 849,852 844,731
Other Assets 89,309 29,847
----------------- -------------------
Total Assets $ 15,791,389 $ 12,929,628
================= ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 509,874 $ 727,673
Accrued liabilities 257,101 312,481
----------------- -------------------
Total Current Liabilities 766,975 1,040,154
Shareholders' Equity:
Preferred Stock, $.0001 par value, 2,000,000
shares authorized; none issued and outstanding - -
Common stock, $.0001 par value, 50,000,000
shares authorized; 16,658,784 and 16,236,428
issued and outstanding 1,666 1,624
Additional paid-in capital 65,313,507 62,901,227
Accumulated other comprehensive income 1,903,000 40,500
Deficit accumulated during the development stage (52,193,759) (51,053,877)
----------------- -------------------
Total Shareholders' Equity 15,024,414 11,889,474
----------------- -------------------
Total Liabilities and Shareholders' Equity $ 15,791,389 $ 12,929,628
================= ===================
The accompanying notes are an integral part of these balance sheets.
</TABLE>
2
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AVI BIOPHARMA, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
July 22, 1980
Three months ended March 31, (Inception) to
2000 1999 March 31, 2000
---------------- ---------------- ------------------------
<S> <C> <C> <C>
Revenues, from license fees, grants and
research contracts $ 1,131,873 $ 4,115 $ 1,973,090
Operating expenses:
Research and development 1,936,473 1,342,650 26,664,106
General and administrative 436,063 417,624 9,634,731
Acquired in-process research and
development - 59,839 19,545,028
---------------- ---------------- ------------------------
2,372,536 1,820,113 55,843,865
Other Income:
Interest income, net 100,781 76,539 1,580,266
Realized gain on sale of short-term investments - - 96,750
---------------- ---------------- ------------------------
100,781 76,539 1,677,016
---------------- ---------------- ------------------------
Net loss $ (1,139,882) $ (1,739,459) $ (52,193,759)
================ ================ ========================
Net loss per share - basic and diluted $ (0.07) $ (0.13)
================ ================
Weighted average number of common shares
outstanding for computing basic and diluted
loss per share 16,359,671 13,349,358
================ ================
The accompanying notes are an integral part of these statements.
</TABLE>
3
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AVI BIOPHARMA, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Period
Three months ended March 31, July 22, 1980
-------------------------------------- (Inception) to
2000 1999 March 31, 2000
------------------ ----------------- --------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (1,139,882) $ (1,739,459) $ (52,193,759)
Adjustments to reconcile net loss to net cash flows
used in operating activities:
Depreciation and amortization 72,722 69,812 3,126,253
Realized gain on sale of short-term investments -
available for sale - - (96,750)
Compensation expense on issuance of common
stock and partnership units - - 251,992
Compensation expense on issuance of options and
warrants to purchase common stock or partnership units - - 562,353
Conversion of interest accrued to common stock - - 7,860
Acquired in-process research and development - 59,839 19,545,028
(Increase) decrease in:
Other current assets (17,475) 466,115 (48,717)
Other assets (59,462) - (89,309)
Net increase (decrease) in accounts payable and
accrued liabilities (273,179) (478,068) 766,975
---------------- ---------------- -------------------
Net cash used in operating activities (1,417,276) (1,621,761) (28,168,074)
Cash flows from investing activities:
Proceeds from sale or redemption of short-term investments - - 247,750
Purchase of property and equipment (56,648) (101,707) (3,038,534)
Patent costs (41,121) (50,519) (1,360,800)
Acquisition costs - (59,839) (2,377,616)
---------------- ---------------- -------------------
Net cash used in investing activities (97,769) (212,065) (6,529,200)
Cash flows from financing activities:
Proceeds from sale of common stock, warrants, and
partnership units, net of offering costs, and exercise of
options 2,412,322 15,000 44,662,993
Buyback of common stock pursuant to rescission offering - - (288,795)
Withdrawal of partnership net assets - - (176,642)
Issuance of convertible debt - - 80,000
---------------- ---------------- -------------------
Net cash provided by financing activities 2,412,322 15,000 44,277,556
Increase (decrease) in cash and cash equivalents 897,277 (1,818,826) 9,580,282
Cash and cash equivalents:
Beginning of period 8,683,005 8,510,020 -
---------------- ---------------- -------------------
End of period $ 9,580,282 $ 6,691,194 $ 9,580,282
================ ================ ===================
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
ACTIVITIES AND FINANCING ACTIVITIES:
Short-term securities--available-for-
sale received in connection with the
private offering $ - $ - $ 2,897,000
Unrealized gain on short-term securities--
available-for-sale $ 1,862,500 $ - $ 1,903,000
- ---------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</TABLE>
4
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AVI BIOPHARMA, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The financial information included herein for the three-month periods ended
March 31, 2000 and 1999 and the financial information as of March 31, 2000 is
unaudited; however, such information reflects all adjustments consisting only
of normal recurring adjustments which are, in the opinion of management,
necessary for a fair presentation of the financial position, results of
operations and cash flows for the interim periods. The financial information
as of December 31, 1999 is derived from AVI BioPharma, Inc.'s (the Company's)
Form 10-K. The interim financial statements should be read in conjunction
with the financial statements and the notes thereto included in the Company's
Form 10-K. The results of operations for the interim periods presented are
not necessarily indicative of the results to be expected for the full year.
NOTE 2. EARNINGS PER SHARE
Basic EPS is calculated using the weighted average number of common shares
outstanding for the period and diluted EPS is computed using the weighted
average number of common shares and dilutive common equivalent shares
outstanding. Given that the Company is in a loss position, there is no
difference between basic EPS and diluted EPS since the common stock
equivalents would be antidilutive.
<TABLE>
<CAPTION>
Three Months Ended March 31, 2000 1999
- ---------------------------------------------------------- --------------------- --------------------
<S> <C> <C>
Net loss $(1,139,882) $(1,739,459)
Weighted average number of shares of common stock and
common stock equivalents outstanding:
Weighted average number of common shares
outstanding for computing basic earnings per share 16,359,671 13,349,358
Dilutive effect of warrants and stock options after
application of the treasury stock method * *
--------------------- --------------------
Weighted average number of common shares outstanding
for computing diluted earnings per share 16,359,671 13,349,358
===================== ====================
Net loss per share - basic and diluted $(0.07) $(0.13)
===================== ====================
</TABLE>
* The following common stock equivalents are excluded from earnings per share
calculation as their effect would have been antidilutive:
<TABLE>
<CAPTION>
Three Months Ended March 31, 2000 1999
- ---------------------------------------------------------- --------------------- --------------------
<S> <C> <C>
Warrants and stock options 7,803,265 7,078,051
</TABLE>
5
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NOTE 3. SUBSEQUENT EVENT
In April 2000, we entered into an alliance with SuperGen, Inc. for shared
development and marketing rights for Avicine. Under the terms of the
agreement, AVI and SuperGen will equally share in future clinical development
and FDA registration costs as well as in profits from product sales in the
United States. It is anticipated upon closing the Company will receive from
SuperGen, Inc. an initial payment of $20,000,000 in the form of cash and
common stock. Closing of the transaction will occur upon satisfaction of the
Hart-Scott-Rodino Act notification and review requirement.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
FORWARD-LOOKING INFORMATION
The Financial Statements and Notes thereto should be read in conjunction with
the following discussion. The discussion in this Form 10-Q contains certain
forward-looking statements that involve risks and uncertainties, including,
but not limited to, the results of research and development efforts, the
results of pre-clinical and clinical testing, the effect of regulation by FDA
and other agencies, the impact of competitive products, product development,
commercialization and technological difficulties, and other risks detailed in
the Company's Securities and Exchange Commission filings.
OVERVIEW
From its inception in July 1980, the Company has devoted its resources
primarily to fund its research and development efforts. The Company has been
unprofitable since inception and, other than limited interest, license fees
and grants, has had no material revenues from the sale of products or other
sources, and does not expect material revenues for at least the next 12
months. The Company expects to continue to incur losses for the foreseeable
future as it expands its research and development efforts. As of March 31,
2000, the Company's accumulated deficit was $52,193,759.
RESULTS OF OPERATIONS
Revenues, from license fees, grants and research contracts, increased to
$1,131,873 in the first quarter of 2000 from $4,115 in the first quarter of
1999 due to the receipt of a $1,000,000 fee for expansion of a license for
diagnostic applications, and receipts under an existing grant of $131,873.
During the first quarter of 2000, the Company modified their agreement with
AGDG. Under the previous agreement between the Company and AGDG, AGDG had a
non-exclusive, royalty bearing right to use certain technology in the
development of diagnostics and an obligation to pay royalties to the Company
on any sales resulting from this development. The agreement modification
resulted in AGDG having an exclusive right to the technology and having no
future royalty obligation to the Company. In consideration for this
modification, the Company received a $1 million license fee and a reduction
in future royalties to be paid to AGDG resulting from the sale of therapeutic
products. The $1 million was recognized as license fee revenue during the
period ended March 31, 2000.
Operating expenses increased to $2,372,536 in the first quarter of 2000 from
$1,820,113 in the first quarter of 1999 due to increases in research and
development staffing and increased expenses associated with outside
collaborations and pre-clinical and clinical testing of the Company's
technologies. Additionally, increased general and administrative costs were
incurred to support the research expansion, and to continue to broaden the
Company's investor and public relations efforts. Net interest income
increased to $100,781 in the first quarter of 2000 from $76,539 in the first
quarter of 1999 due to earnings on increased cash balances.
6
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents were $9,580,282 at March 31, 2000,
compared with $8,683,005 at December 31, 1999. The increase of $897,277 was
due primarily to the exercise of options and warrants during the first
quarter of 2000 and the $1,000,000 license fee, offset by increases in
research and development staffing and increased expenses associated with
outside collaborations and pre-clinical and clinical testing of our
technologies. In addition the Company's short-term securities increased
$1,862,500 to $4,800,000 at March 31, 2000 due to unrealized gains in the
value of these securities.
The Company's future expenditures and capital requirements will depend on
numerous factors, including without limitation, the progress of its research
and development programs, the progress of its pre-clinical and clinical
trials, the time and costs involved in obtaining regulatory approvals, the
cost of filing, prosecuting, defending and enforcing any patent claims and
other intellectual property rights, competing technological and market
developments, the ability of the Company to establish collaborative
arrangements and the terms of any such arrangements, and the costs associated
with commercialization of its products. The Company's cash requirements are
expected to continue to increase significantly each year as it expands its
activities and operations. There can be no assurance, however, that the
Company will ever be able to generate product revenues or achieve or sustain
profitability.
The Company expects that its cash requirements over the next twelve months
will be satisfied by existing cash resources.
YEAR 2000
The Year 2000 issue results from computer programs operating incorrectly when
the calendar year changes to January 1, 2000. Computer programs that have
date-sensitive software may recognize a two-digit date using "00" as calendar
year 1900 rather than the year 2000. This could result in system failure or
miscalculations and could cause disruptions of operations, including, among
other things, a temporary inability to engage in normal business activities.
The Company has evaluated its technology and data, including imbedded
non-informational technology, used in the creation and development of its
products and services and in its internal operations and has experienced no
significant Year 2000 issues. The core business systems are compliant. The
Company has not incurred material costs and believes that future costs
associated with addressing the Year 2000 issue will have an immaterial effect
on our financial results.
Although the Company has inquired of certain of its significant vendors as to
the status of their Year 2000 compliance initiatives, no binding assurances
have been received. The Company believes that parts and services used in
normal operations can be obtained from multiple sources and therefore is not
overly reliant on any single vendor.
7
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibit filed as a part of this report is listed below and this list
constitutes the exhibit index.
EXHIBIT NO.
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any Reports on Form 8-K during the quarter ended March
31, 2000.
8
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 10, 2000 AVI BIOPHARMA, INC.
By: /s/ DENIS R. BURGER, Ph.D.
-----------------------------------------
Denis R. Burger, Ph.D.
President, Chief Executive Officer
and Chairman (of the Board of Directors)
(Principal Executive Officer)
By: /s/ ALAN P. TIMMINS
-----------------------------------------
Alan P. Timmins
Chief Operating Officer,
Chief Financial Officer and Director
(Principal Financial and Accounting Officer)
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 9,580,282
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 14,428,999
<PP&E> 2,975,796
<DEPRECIATION> 2,552,567
<TOTAL-ASSETS> 15,791,389
<CURRENT-LIABILITIES> 766,975
<BONDS> 0
0
0
<COMMON> 1,666
<OTHER-SE> 13,119,748
<TOTAL-LIABILITY-AND-EQUITY> 15,791,389
<SALES> 0
<TOTAL-REVENUES> 1,131,873
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,372,536
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,139,882)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,139,882)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,139,882)
<EPS-BASIC> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
