<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 10-Q/A
--------------------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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 incorporation (I.R.S. Employer
or organization) Identification No.)
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 18,437,799
(Class) (Outstanding at July 31, 2000)
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<PAGE>
AVI BIOPHARMA, INC.
FORM 10-Q/A
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page
------------------------------ ----
<S> <C> <C>
Item 1. Financial Statements
Balance Sheets - June 30, 2000 and December 31, 1999 2
Statements of Operations - Three and Six Months Ended June 30, 2000 and 1999
and from July 22, 1980 (Inception) to June 30, 2000 3
Statements of Cash Flows - Three and Six Months Ended June 30, 2000 and 1999
and from July 22, 1980 (Inception) to June 30, 2000 4
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis 7
PART II - OTHER INFORMATION
---------------------------
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
</TABLE>
1
<PAGE>
AVI BIOPHARMA, INC.
(A Development Stage Company)
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------ -------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 6,949,190 $ 8,683,005
Short-term securities--available-for-sale 3,625,000 2,937,500
Other current assets 23,142 31,242
------------ -------------
Total Current Assets 10,597,332 11,651,747
Property and Equipment, net of accumulated
depreciation and amortization of $2,589,611
and $2,518,494 551,921 403,303
Patent Costs, net of accumulated amortization of
$490,768 and $418,268 894,917 844,731
Other Assets 382,595 29,847
------------ -------------
Total Assets $12,426,765 $ 12,929,628
============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 839,280 $ 727,673
Accrued liabilities 265,316 312,481
------------ -------------
Total Current Liabilities 1,104,596 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; 16,748,167 and 16,236,428
issued and outstanding 1,675 1,624
Additional paid-in capital 65,626,666 62,901,227
Accumulated other comprehensive income 728,000 40,500
Deficit accumulated during the development stage (55,034,172) (51,053,877)
------------- -------------
Total Shareholders' Equity 11,322,169 11,889,474
------------- -------------
Total Liabilities and Shareholders' Equity $12,426,765 $ 12,929,628
============= =============
</TABLE>
The accompanying notess are an integral part of these balance sheets.
2
<PAGE>
AVI BIOPHARMA, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
July 22, 1980
Three months ended June 30, Six months ended June 30, (Inception) to
2000 1999 2000 1999 June 30, 2000
------------ -------------- ---------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Revenues, from license fees, grants and
research contracts $ 18,250 $ 110 $ 1,150,123 $ 4,225 $ 1,991,340
Operating expenses:
Research and development 2,483,942 1,627,478 4,420,415 2,970,128 29,148,048
General and administrative 490,185 418,868 926,248 836,492 10,124,916
Acquired in-process research and
development -- 1,498 -- 61,337 19,545,028
------------ -------------- ----------- ------------- -------------
2,974,127 2,047,844 5,346,663 3,867,957 58,817,992
Other Income:
Interest income, net 115,464 50,549 216,245 127,088 1,695,730
Realized gain on sale of short-term investments -- -- -- -- 96,750
------------ -------------- ----------- ------------- -------------
115,464 50,549 216,245 127,088 1,792,480
------------ -------------- ----------- ------------- -------------
Net loss $(2,840,413) $ (1,997,185) $(3,980,295) $ (3,736,644) $(55,034,172)
============ ============== =========== ============= =============
Net loss per share - basic and diluted $ (0.17) $ (0.15) $ (0.24) $ (0.28)
============ ============== =========== =============
Weighted average number of common shares
outstanding for computing basic and diluted
earnings per share 16,710,194 13,351,206 16,534,932 13,350,287
============ ============== =========== =============
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
AVI BIOPHARMA, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Period
Six months ended June 30, July 22, 1980
---------------------------- (Inception) to
2000 1999 June 30, 2000
-------------- -------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(3,980,295) $(3,736,644) $(55,034,172)
Adjustments to reconcile net loss to net cash flows
used in operating activities:
Depreciation and amortization 148,692 143,884 3,202,223
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 -- 61,337 19,545,028
(Increase) decrease in:
Other current assets 8,100 471,156 (23,142)
Other assets (352,748) -- (382,595)
Net increase (decrease) in accounts payable and
accrued liabilities 64,442 (772,473) 1,104,596
-------------- ---------------- ---------------
Net cash used in operating activities (4,111,809) (3,832,740) (30,862,607)
Cash flows from investing activities:
Proceeds from sale or redemption of short-term investments -- -- 247,750
Purchase of property and equipment (224,810) (109,808) (3,206,696)
Patent costs (122,686) (135,537) (1,442,365)
Acquisition costs -- (61,337) (2,377,616)
------------- --------------- ---------------
Net cash used in investing activities (347,496) (306,682) (6,778,927)
Cash flows from financing activities:
Proceeds from sale of common stock, warrants, and
partnership units, net of offering costs, and exercise of
options 2,725,490 15,000 44,976,161
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 2,725,490 15,000 44,590,724
Increase (decrease) in cash and cash equivalents (1,733,815) (4,124,422) 6,949,190
Cash and cash equivalents:
Beginning of period 8,683,005 8,510,020 --
--------------- ----------------- -----------------
End of period $ 6,949,190 $ 4,385,598 $ 6,949,190
=============== ================= =================
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 $ 687,500 $ -- $ 728,000
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
AVI BIOPHARMA, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The financial information included herein for the three and six-month periods
ended June 30, 2000 and 1999 and the financial information as of June 30, 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 June 30, 2000 1999
--------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
Net loss $ (2,840,413) $(1,997,185)
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 16,710,194 13,351,206
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 16,710,194 13,351,206
================ ================
Net loss per share - basic and diluted $(0.17) $(0.15)
================ ================
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 2000 1999
------------------------------------------------------ ------------ ------------
<S> <C> <C>
Net loss $ (3,980,295) $ (3,736,644)
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 16,534,932 13,350,287
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 16,534,932 13,350,287
============ =============
Net loss per share - basic and diluted $(0.24) $(0.28)
============ =============
</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 June 30, 2000 1999
-------------------------------------------------------------- ------------- ----------
<S> <C> <C>
Warrants and stock options 7,907,987 7,077,082
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 2000 1999
-------------------------------------------------------------- ------------ ---------
<S> <C> <C>
Warrants and stock options 7,907,987 7,077,082
</TABLE>
NOTE 3. SUBSEQUENT EVENTS
In April 2000, the Company 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. Upon closing the Company will receive from SuperGen, Inc.
$5,000,000 in cash and 347,826 shares of SuperGen, Inc. common stock in exchange
for 1,684,211 shares of AVI common stock and a warrant to purchase 1,665,878
shares of AVI common stock, subject to anti-dilution provisions. Closing of the
transaction will occur during the third quarter of 2000.
In July 2000, the Company completed a secondary offering for 3,000,000 shares of
common stock at $7.25 per share. Closing occurred in August 2000. Net proceeds
were approximately $20,000,000. In addition, the Company has granted the
underwriters an over-allotment option to purchase up to 450,000 additional
shares within 45 days from the date of the prospectus. If this over-allotment
option is exercised in full, net proceeds from the sale of 3,450,000 shares of
common stock are expected to be approximately $23,000,000.
6
<PAGE>
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/A 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 June 30, 2000, the Company's accumulated
deficit was $55,034,172.
RESULTS OF OPERATIONS
Revenues, from license fees, grants and research contracts, increased to $18,250
in the second quarter of 2000 from $110 in the second quarter of 1999. Revenues,
from license fees, grants and research contracts, increased to $1,150,123 for
the six months ended June 30, 2000 from $4,225 for the comparable period of 1999
due primarily to the receipt of a $1,000,000 fee for expansion of a license for
diagnostic applications. During the first quarter of 2000, the Company modified
an existing 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 first
quarter of 2000.
Operating expenses increased to $2,974,127 in the second quarter of 2000 from
$2,047,844 in the second quarter of 1999 and to $5,346,663 for the six months
ended June 30, 2000 from $3,867,957 for the comparable period 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 $115,464 in the second quarter of 2000 from $50,549 in the second quarter of
1999 and to $216,245 for the six months ended June 30, 2000 from $127,088 for
the comparable period in 1999 due to earnings on increased cash balances.
7
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents were $6,949,190 at June 30, 2000,
compared with $8,683,005 at December 31, 1999. The decrease of $1,733,815 was
primarily due to increases in research and development staffing and increased
expenses associated with clinical programs, outside collaborations, and
pre-clinical testing of the Company's technologies, partially offset by the
exercise of options and warrants during the six months ended June 30, 2000 and
the $1,000,000 license fee. In addition the Company's short-term securities
increased $687,500 to $3,625,000 at June 30, 2000 due to unrealized gains in the
value of these securities.
In April 2000, the Company 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. Upon closing the Company will receive from SuperGen, Inc.
$5,000,000 in cash and 347,826 shares of SuperGen, Inc. common stock in exchange
for 1,684,211 shares of AVI common stock and a warrant to purchase 1,665,878
shares of AVI common stock, subject to anti-dilution provisions. Closing of the
transaction will occur during the third quarter of 2000.
In July 2000, the Company completed a secondary offering for 3,000,000 shares of
common stock at $7.25 per share. Closing occurred in August 2000. Net proceeds
were approximately $20,000,000. In addition, the Company has granted the
underwriters an over-allotment option to purchase up to 450,000 additional
shares within 45 days from the date of the prospectus. If this over-allotment
option is exercised in full, net proceeds from the sale of 3,450,000 shares of
common stock are expected to be approximately $23,000,000.
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 twenty-four months
will be satisfied by existing cash resources.
8
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 11, 2000, at the Annual Meeting of the Company's Shareholders, the
shareholders approved each of the proposals set forth in the Company's Proxy
Statement dated April 11, 2000, briefly described below:
(i) The shareholders were requested to elect the following individuals to
the Board of Directors:
NOMINEE FOR WITHHELD
------- --- --------
James B. Hicks, Ph.D. 11,226,624 93,790
Joseph Rubinfeld, Ph.D. 11,226,324 94,090
Alan P. Timmins 11,226,249 94,165
Dwight D. Weller, Ph.D. 11,226,624 93,790
The foregoing directors were approved.
(ii) The shareholders were asked to approve the Company's 2000 Employee Stock
Purchase Plan. The proposal was approved by the shareholders, as 4,993,995
votes were cast for the proposal, 379,501 votes were against, and 49,645 votes
abstained.
(iii) The shareholders were asked to approve an amendment to the Company's
1992 Stock Incentive Plan. The proposal was approved by the shareholders, as
4,900,308 votes were cast for the proposal, 456,297 votes were against, and
66,536 votes abstained.
(iv) The shareholders were asked to approve the selection of Arthur Andersen
LLP as the Company's independent auditors. The proposal was approved by the
shareholders, as 11,229,482 votes were cast for the proposal, 48,358 votes
were against, and 42,574 votes abstained.
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.
<TABLE>
<CAPTION>
Exhibit No.
-----------
<S> <C>
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
The Company did not file any Reports on Form 8-K during the quarter ended June
30, 2000.
9
<PAGE>
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: August 4, 2000 AVI BIOPHARMA, INC.
By: /s/ DENIS R. BURGER, PH.D.
--------------------------
Denis R. Burger, Ph.D.
Chief Executive Officer
and Chairman (of the Board of Directors)
(Principal Executive Officer)
By: /s/ MARK M. WEBBER
--------------------------
Mark M. Webber
Chief Financial Officer
(Principal Financial and Accounting Officer)
10
