<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
------------------------
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM
--------------- TO
--------------- .
COMMISSION FILE NUMBER: 0-28272
AVIGEN, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 13-3647113
(STATE OR OTHER JURISDICTION OF INCORPORATION (I.R.S. EMPLOYER IDENTIFICATION NO.)
OR ORGANIZATION)
</TABLE>
1201 HARBOR BAY PARKWAY, SUITE 1000, ALAMEDA, CALIFORNIA 94502
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
(510) 748-7150
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
As of November 3, 1998, 7,364,406 shares of the registrant's Common Stock,
$.001 par value, were issued and outstanding.
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AVIGEN, INC.
FORM 10-Q
QUARTER ENDED MARCH 31, 1998
INDEX
<TABLE>
<CAPTION>
PAGE
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements (Unaudited)
Condensed Balance Sheets September 30, 1998 and June 30,
1998...................................................... 3
Condensed Statements of Operations
Three months ended September 30, 1997 and 1998 and for the
period from
October 22, 1992 (inception) through September 30, 1998... 4
Condensed Statements of Cash Flows
Three months ended September 30, 1998 and 1997 and for the
period from
October 22, 1992 (inception) through September 30, 1998... 5
Notes to Condensed Financial Statements..................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results
of Operations............................................. 7
Item 3. Quantitative and Qualitative Disclosure About Market Risk... 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................... 10
Item 2. Changes in Securities and Use of Proceeds................... 10
Item 3. Defaults upon Senior Securities............................. 10
Item 4. Submission of Matters to a Vote of Security Holders......... 10
Item 5. Other Information........................................... 10
Item 6. Exhibits and Reports on Form 8-K............................ 10
Signatures............................................................ 11
</TABLE>
2
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AVIGEN, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30, JUNE 30, SEPTEMBER 30,
1998 1998 1998 1998
------------ ------------- -------- -------------
(NOTE) (UNAUDITED)
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents........... $ 1,279,658 $ 2,601,842 $ 1,280 $ 2,602
Investment in marketable
securities....................... 3,197,230 1,933,545 3,197 1,933
------------ ------------ -------- --------
Total current assets............. 4,476,888 4,535,392 4,477 4,535
Property and equipment, net........... 1,359,105 1,221,608 1,359 41,727
Deposits and other assets............. 160,754 472,475 161 472
------------ ------------ -------- --------
Total assets................ $ 5,996,747 $ 6,229,475 $ 5,997 $ 6,229
============ ============ ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.................... $ 243,609 $ 159,922 $ 244 $ 160
Accrued compensation and related
expenses......................... 146,748 133,521 147 133
Other accrued liabilities........... 383,640 363,010 384 363
Capital lease obligations -- current
portion.......................... 587,073 433,186 587 433
------------ ------------ -------- --------
Total current liabilities........ 1,361,070 1,089,639 1,362 1,089
Accrued rent........................ 192,246 182,388 112 182
Capital lease obligations (less
current portion)................. 860,144 860,144 860 860
Stockholders' equity:
Common Stock, $.001 par value,
30,000,000 shares authorized,
8,561,018 shares issued and
outstanding at September 30,
1998, 7,305,858 shares issued and
outstanding at June 30, 1998..... 7,306 8,561 7 9
Additional paid-in capital.......... 30,782,046 33,527,219 30,782 33,527
Deferred compensation............... (46,245) (36,094) (46) (36)
Deficit accumulated during the
development stage................ (27,159,820) (29,402,382) (27,160) (29,402)
------------ ------------ -------- --------
Total stockholders' equity....... 3,583,287 4,097,304 3,583 4,098
------------ ------------ -------- --------
Total liabilities and
stockholders' equity...... $ 5,996,747 $ 6,229,475 $ 5,997 $ 6,229
============ ============ ======== ========
</TABLE>
Note: The balance sheet at June 30, 1998 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. See notes to condensed financial statements.
See accompanying notes.
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AVIGEN, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 22,
1992
THREE MONTHS ENDED (INCEPTION)
SEPTEMBER 30, THROUGH
-------------------------- SEPTEMBER 30,
1997 1998 1998
----------- ----------- -------------
<S> <C> <C> <C>
Grant revenue...................................... $ -- $ 150,000 $ 513,000
Expenses:
Research and development......................... 1,434,000 1,663,000 20,262,000
General and administrative....................... 692,000 756,000 10,354,000
----------- ----------- ------------
Total expenses.............................. 2,126,000 2,149,000 30,616,000
----------- ----------- ------------
Loss from operations............................... (2,126,000) (2,269,425) (30,103,353)
Interest expense................................... (58,000) (54,000) (1,006,000)
Interest income.................................... 185,000 82,000 1,539,000
Other income(expense).............................. (7,000) (12,000) 168,000
----------- ----------- ------------
Net loss........................................... $(2,006,000) $(2,243,000) $ (29,402)
=========== =========== ============
Basic and diluted net loss per share............... $ (0.28) $ (0.29)
=========== ===========
Shares used in calculation of basic and diluted net
loss per share................................... 7,288,585 7,805,004
=========== ===========
</TABLE>
See accompanying notes.
4
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AVIGEN, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 22, * ROUNDED TO
1992 NEAREST THOUSAND
THREE MONTHS ENDED (INCEPTION) --------------------------------
SEPTEMBER 30, THROUGH *
------------------------- SEPTEMBER 30, * * 10-22-97 TO
1997 1998 1998 1997 1998 9-30-98
----------- ----------- ------------- ------- ------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.......................................... $(2,005,740) $(2,242,562) $(29,402,382) $(2,006) $(2,243) $(29,402)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization................... 164,994 161,048 2,514,557 165 161 2,515
Amortization of deferred compensation........... 10,151 10,151 126,510 10 10 127
Write-off of organization costs................. -- -- 145,741 -- -- 146
Noncash interest expense........................ -- -- 509,652 -- -- 510
Common stock issued for services................ -- -- 11,250 -- -- 11
Stock options issued for services............... -- -- 67,491 -- -- 67
Changes in operating assets and liabilities:
Prepaids, deposits and other assets........... (80,760) (311,721) (472,475) (80) (312) (473)
Accounts payable, accrued liabilities and
accrued compensation and related expenses... (110,265) (117,544) 953,897 (110) (117) 954
Accrued rent.................................. (9,858) (9,858) 182,388 (10) (10) 182
----------- ----------- ------------ ------- ------- --------
Net cash used in operating activities............. (2,031,478) (2,510,486) (25,363,371) (2,031) (2,510) (25,363)
INVESTING ACTIVITIES
Purchases of property and equipment............... (142,592) (23,551) (3,484,057) (143) (24) (3,484)
Disposal of property and equipment................ -- -- 47,033 -- -- 47
Organization costs................................ -- -- (218,601) -- -- (219)
Purchase of marketable securities................. (2,915,875) -- (38,270,247) (2,916) -- (38,270)
Maturities of marketable securities............... 608,760 -- 7,373,462 609 -- 7,373
Sale of marketable securities..................... 3,051,138 1,263,685 28,963,242 3,051 1,264 28,963
----------- ----------- ------------ ------- ------- --------
Net cash provided by (used in) investing
activities...................................... 601,431 1,240,134 (5,589,168) 601 1,240 (5,589)
FINANCING ACTIVITIES
Proceeds from notes payable....................... -- -- 2,132,800 -- -- 2,133
Repayment of notes payable........................ -- -- (1,709,800) -- -- (1,710)
Proceeds from 1996 bridge financing............... -- -- 1,937,500 -- -- 1,938
Payment of bridge financing costs................. -- -- (193,750) -- -- (194)
Repayment of 1996 bridge financing................ -- -- (1,937,500) -- -- (1,938)
Proceeds from sale-leaseback of equipment......... 284,196 -- 1,926,746 284 -- 1,927
Payments on capital lease obligations............. (126,556) (153,887) (859,697) (126) (154) (860)
Proceeds from issuance of preferred stock, net of
issuance costs.................................. -- -- 9,884,477 -- -- 9,884
Proceeds from issuance of common stock, net of
issuance costs and repurchases.................. 92 2,746,428 22,373,610 0 2,747 22,374
----------- ----------- ------------ ------- ------- --------
Net cash provided by financing activities......... 157,732 2,592,541 33,554,386 158 2,593 33,554
Net (decrease) income in cash and cash
equivalents..................................... (1,272,315) 1,322,189 2,601,847 1,272 1,322 2,602
Cash and cash equivalents, beginning of period.... 3,407,057 1,279,658 -- 3,407 1,280 --
----------- ----------- ------------ ------- ------- --------
Cash and cash equivalents, end of period.......... $ 2,134,742 $ 2,601,847 $ 2,601,847 $ 2,135 $ 2,602 $ 2,602
=========== =========== ============ ======= ======= ========
</TABLE>
See accompanying notes.
5
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AVIGEN, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL STATEMENTS
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the accompanying financial
statements include all adjustments, consisting only of normal recurring
adjustments and accruals, that Avigen, Inc. (the "Company") considers necessary
for a fair presentation of its financial position as of September 30, 1998 and
its results of operations and cash flows for the three months ended September
30, 1997 and 1998. These unaudited interim financial statements should be read
in conjunction with the audited financial statements of the Company and the
notes thereto included in the Company's annual report on Form 10-K for the
fiscal year ended June 30, 1998, filed with the Securities and Exchange
Commission.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
We will require substantial additional funding in order to complete the
research and development activities currently contemplated and to commercialize
our proposed products. We anticipate that our existing capital resources will be
adequate to fund our needs for at least the next 12 months. Our future capital
requirements will depend on many factors, including continued scientific
progress in research and development programs, the scope and results of
preclinical studies and clinical trials, the time and costs involved in
obtaining regulatory approvals, the costs involved in filing, prosecuting and
enforcing patent claims, competing technological developments, the cost of
manufacturing scale-up, the cost of commercialization activities and other
factors which may not be within our control.
We intend to seek additional funding through public or private equity or
debt financing, when market conditions allow. If we raise additional funds by
issuing equity securities, there may be further dilution to existing
stockholders. We cannot assure you that we will be able to enter into such
collaborative or financing arrangements on acceptable terms or at all. Without
such additional funding, we may be required to delay, reduce the scope of or
eliminate one or more of our research or development programs.
Certain balances have been reclassified to conform to the 1998
presentations.
2. GRANT REVENUE
Revenue consists of revenue from grants which are recognized in accordance
with the terms of the related agreements.
3. BASIC AND DILUTED NET LOSS PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings per Share. Statement 128
replaced the previously reported primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per share,
basic earnings per share excludes any dilutive effects of options, warrants, and
convertible securities. Basic net loss per share is computed using the weighted
average number of common shares outstanding. Diluted earnings per share is very
similar to the previously reported fully diluted earnings per share. The
potential shares to be issued upon the assumed exercise of the options and
warrants using the treasury stock method are not added to the denominator for
the dilutive net loss per share computation because the inclusion of such shares
would be antidilutive due to the loss for the period. All net loss per share
amounts for all periods have been presented, and where necessary, restated to
conform to the Statement 128 requirements. The adoption of SFAS 128 did not have
a material impact of the Company's earnings per share calculation for all
periods presented.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion may be understood more fully by reference to the
financial statements, notes to the financial statements, and management's
discussion and analysis contained in the Company's Annual Report on Form 10-K
for the year ended June 30, 1998, filed with the Securities and Exchange
Commission.
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements that involve risks
and uncertainties. The Company's actual results could differ materially from the
results discussed in the forward-looking statements. Factors that might cause or
contribute to such differences include, but are not limited to, those discussed
herein and under the caption "Risk Factors" in the Company's Annual Report on
Form 10-K.
OVERVIEW
Avigen is a leader in the development of gene therapy products derived from
adeno-associated virus ("AAV") for the treatment of inherited and acquired
diseases. The Company's proposed gene therapy products are designed for in vivo
administration to achieve the production of therapeutic proteins within the
body. The Company is developing two broad-based proprietary gene delivery
technologies: AAV vectors and the Targeted Vector Integration ("TVI") system.
The Company believes AAV vectors can be used to deliver genes for the treatment
of brain, liver and prostate cancer, anemia, hemophilia, hyperlipidemia and
metabolic storage diseases. The Company also believes its TVI system will allow
it to pursue more effective treatments for blood cell-related diseases including
sickle cell anemia, beta-thalassemia and human immunodeficiency virus ("HIV")
infection.
Since its inception, the Company has devoted substantially all of its
resources to research and development activities. The Company is a development
stage company and has not received any revenue from the sale of products. The
Company does not anticipate generating revenue from the sale of products in the
foreseeable future. The Company expects its source of revenue, if any, for the
next several years to consist of government grants and payments under
collaborative arrangements. The Company has incurred losses since its inception
and expects to incur substantial losses over the next several years due to
ongoing and planned research and development efforts, including preclinical
studies and clinical trials. At September 30, 1998, the Company had an
accumulated deficit of approximately $29.4 million.
RESULTS OF OPERATION
Three Month Periods Ended September 30, 1998 and 1997
Grant revenue increased from $-0- for the period ended September 30, 1997
to $150,000 for the period ended September 30, 1998. Grant revenue consisted of
reimbursements under a National Institute of Health grant. Revenues earned under
research grants are determined by the timing of the award from the issuing
agency. As a result, research grant revenue earned in one period is not
predictive of research grant revenue to be earned in future periods.
The Company's Research and Development expenses increased from $1,434,000
for the period ended September 30, 1997 to $1,663,000 for the period ended
September 30, 1998. The increase from 1997 to 1998 was due primarily to the
increased number of personnel and development costs related to vector production
and patent expenditures.
General and administrative expenses increased from $692,000 for the period
ended September 30, 1997 to $756,000 for the period ended September 30, 1998.
The increase from 1997 to 1998 was primarily due to the hiring of key personnel
and increased use of consultants.
Interest income decreased from $185,000 for the period ended September 30,
1997 to $82,000 for the period ended September 30, 1998, primarily as a result
of the decreasing balance of the proceeds of the initial public offering.
7
<PAGE> 8
Interest expense decreased from $58,000 for the period ended September 30,
1997 to $54,000 for the period ended September 30, 1998, primarily as a result
of the paying down of the Company's equipment lease with Transamerica Business
Credit.
LIQUIDITY AND CAPITAL RESOURCES
In May 1996, the Company consummated an initial public offering (the
"Offering") of 2,500,000 shares of Common Stock with net proceeds to the Company
of approximately $17.7 million, net of expenses. In July 1996, the Company
issued 250,000 additional shares of Common Stock in connection with the exercise
of the underwriters' over-allotment option. Net proceeds from such sale were
approximately $1,850,000.
Prior to May 1996, the Company financed its operations primarily through
private placements of Common and Preferred Stock. On March 29, 1996, the Company
completed a Bridge Financing in which it issued promissory notes for
approximately $1.9 million (the "1996 Bridge Financing") and warrants to
purchase 193,750 shares of Common Stock at an exchange price of $7.09 per share.
The 1996 Bridge Financing Warrants expire in March 2001.
In August and September 1998, the Company issued 1,196,615 shares of common
stock in a private placement which resulted in cash proceeds of approximately
$2.7 million. The Company also issued warrants to these investors to acquire
239,323 shares at an exercise price ranging from $2.18 to $3.67 per share. The
warrants expire in August and September 2003.
Cash used in operations was $2,135,000 during the period ended September
30, 1997, compared to $2,602,000 during the period ended September 30, 1998. The
increase was primarily attributable to the increased use of consultants and the
hiring of additional personnel.
At September 30, 1998, the Company had cash, cash equivalents and
investments in marketable securities of approximately $4.5 million, compared to
$4.5 million at June 30, 1998. The Company expects its cash requirements to
increase significantly in future periods. Management believes its existing
capital resources and interest on funds available are adequate to maintain its
current and planned operations through the first calendar quarter of 1999. The
Company will require substantial funds to conduct the research and development
activities and preclinical studies and clinical testing of its potential
products and to manufacture and market any products that are developed.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
We will require substantial additional funding in order to complete the
research and development activities currently contemplated and to commercialize
our proposed products. We anticipate that our existing capital resources will be
adequate to fund our needs for at least the next 12 months. Our future capital
requirements will depend on many factors, including continued scientific
progress in research and development programs, the scope and results of
preclinical studies and clinical trials, the time and costs involved in
obtaining regulatory approvals, the costs involved in filing, prosecuting and
enforcing patent claims, competing technological developments, the cost of
manufacturing scale-up, the cost of commercialization activities and other
factors which may not be within our control.
We intend to seek additional funding through public or private equity or
debt financing, when market conditions allow. If we raise additional funds by
issuing equity securities, there may be further dilution to existing
stockholders. We cannot assure you that we will be able to enter into such
collaborative or financing arrangements on acceptable terms or at all. Without
such additional funding, we may be required to delay, reduce the scope of or
eliminate one or more of our research or development programs.
The Company's facility is approximately 23,000 square feet leased through
May 2003. Although the Company presently anticipates that it will either be able
to renew the lease of this facility or find suitable alternate facilities in the
same general area without a material disruption of its operations, there can be
no assurance that the Company can find suitable alternative facilities on terms
acceptable to the Company. To the extent the Company decides to develop its own
manufacturing facilities, it would require substantial additional capital.
8
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The Company's cash requirements may vary materially from those now planned
because of the results of research, development and clinical trials, the time
and costs involved in obtaining regulatory approvals, the cost of filing,
prosecuting, defending and enforcing patent claims and other intellectual
property rights, competing technological and market developments, changes in the
Company's existing research relationships, the ability of the Company to
establish collaborative arrangements, the development of commercialization
activities and arrangements and the purchase or lease of additional capital
equipment.
OTHER FACTORS THAT MAY EFFECT RESULTS
The Company uses computer software programs and operating systems in its
operations, including applications used in financial business systems and
various administrative functions. To the extent that these software applications
contain source code that is unable to appropriately interpret the upcoming
calendar year 2000, some level of modification, or possible replacement of such
source code or applications will be necessary. This condition is commonly
referred to as the Year 2000 Issue.
The Company anticipates that its costs associated with the upgrades and/or
conversion of computer software relating to the year 2000 issue is less than
$25,000. However, there can be no assurance that these estimates will be
achieved, and actual results could differ materially from those anticipated.
The Company has also initiated communications with its significant
suppliers to determine the extent to which the Company's operations are
vulnerable to those third parties' failure to solve their own year 2000 issues.
Contingency plans are to be installed to utilize vendors whose systems are Year
2000 compliant in the event that the Company's primary vendors fail to
adequately address their Year 2000 issues. However, there can be no assurance
that the systems of other companies with which the Company transacts business
will be converted on a timely basis and will not have an adverse effect on the
Company's operations.
Item 3. Quantitative and Qualitative Disclosure About Market Risk.
The Company maintains investment portfolio holdings of various issuers,
types and maturities. These securities are short-term and classified as
available for sale. Part of this portfolio includes minority equity investments
in several publicly traded companies, the values of which are subject to market
price volatility. Because of the short-term duration of the financial
instruments held by the Company, management does not believe that its financial
instruments are materially sensitive to changes in interest rates.
9
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The effective date of the Company's first registration statement, filed on
Form S-1 under the Securities Act of 1933 (No. 333-3220) relating to the
Company's initial public offering of its Common Stock, was May 22, 1996.
The Company has used approximately $15.8 million of the net proceeds from
the offering. The remaining net proceeds in the amount of $1.9 million have been
invested in cash, cash equivalents and short-term investments. The use of
proceeds from the offering does not represent a material change in the use of
the proceeds described in the Prospectus.
The Company completed a private placement on September 30, 1998 and
incurred expenses of approximately $185,000 of which approximately $135,000
represented underwriting discounts and commissions and $50,000 representing
other expenses. The net proceeds of the Private Placement to the Company after
total expenses was approximately $2.5 million.
Pursuant to the Common Stock and Warrant Purchase Agreement dated as of
August 7, 1998, the Company issued 1,196,615 shares of Common Stock and Warrants
to acquire 239,323 shares for an aggregate offering price of approximately $2.7
million. As of September 30, 1998, none of the proceeds of the offering have
been used.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are included herein:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
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10.34* Common Stock and Warrant Purchase Agreement by and among
Avigen and certain Purchasers listed on the Schedule of
Purchasers attached thereto.
10.35 Amendment to Common Stock and Warrant Purchase Agreement by
and among Avigen and certain Purchasers thereunder dated as
of September 25, 1998.
10.36 Management Transition Plan
27 Financial Data Schedule
</TABLE>
- ---------------
* Incorporated by reference from the Company's Annual Report on Form 10-K for
the year ended June 30, 1998, as filed with the SEC.
(b) Reports on Form 8-K
On October 9, 1998, the Company filed a report on Form 8-K relating to the
completion of the Company's private placement of Common Stock and Warrants to
purchase Common Stock in August and September 1998, raising approximately $2.7
million.
10
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AVIGEN, INC.
(Registrant)
Date: November 13, 1998 /s/ JOHN MONAHAN
--------------------------------------
John Monahan
Chief Executive Officer and President
Date: November 13, 1998 /s/ THOMAS J. PAULSON
--------------------------------------
Thomas J. Paulson
Vice President Finance,
Chief Financial Officer, and Secretary
11
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EXHIBIT 10.35
AMENDMENT
AMENDMENT dated as of September 25, 1998 (this "Amendment"), to
the AVIGEN, INC. COMMON STOCK AND WARRANT PURCHASE AGREEMENT dated August 7,
1998 (the "Purchase Agreement").
WHEREAS, the parties to the Purchase Agreement desire to make
certain modifications to the Purchase Agreement to the extent set forth herein;
NOW, THEREFORE, for good and valuable consideration, the receipt
and adequacy of which is hereby acknowledged, the parties agree as follows:
1. The Purchase Agreement is hereby amended by deleting the
reference to "UI-USA, Inc." in the fourth line of the first paragraph of the
Purchase Agreement, and substituting therefor "UNION D'ETUDES ET
D'INVESTISSEMENTS".
2. Section 1 of the Purchase Agreement is amended by deleting "up
to 2,000,000 shares" in the third line and substituting therefor "up to
$6,000,000". Section 1 is further amended by deleting "up to 600,000 shares" in
the fifth line and substituting therefor "shares equal to up to $1,200,000".
3. Section 9.1 of the Purchase Agreement is amended by deleting
"September 30, 1998" in the second line and substituting therefor "October 31,
1998" (such date to be referred to herein as the "Filing Date").
4. The Purchase Agreement is hereby further amended (a) by
deleting from the fifteenth, sixteenth, seventeenth, eighteenth and nineteenth
lines of the first full paragraph of Section 9.4 of the Purchase Agreement the
words "or the Placement Agent, respectively."
5. The Purchase Agreement is hereby further amended by deleting
in its entirety the first full paragraph of Section 9.4 of the Purchase
Agreement.
6. The Purchase Agreement is hereby further amended by deleting
"UI USA" on the signature page of the Purchase Agreement and substituting
therefor "UNION D'ETUDES ET D'INVESTISSEMENTS".
7. Except as expressly amended hereby, the Purchase Agreement
shall remain in full force and effect.
8. This Amendment shall be governed by and construed in
accordance with the laws of the State of California as applied to contracts
entered into and performed entirely in California without regard to conflicts of
law principles.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed by their duly authorized representatives as of the day and year
first above written.
AVIGEN, INC.
By:
---------------------------------
Name:
Title:
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed by their duly authorized representatives as of the day and year
first above written.
UNION D'ETUDES ET D'INVESTISSEMENTS
By:
---------------------------------
Name:
Title:
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed by their duly authorized representatives as of the day and year
first above written.
SCOR
By:
---------------------------------
Name:
Title:
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed by their duly authorized representatives as of the day and year
first above written.
LEVEN
By:
---------------------------------
Name:
Title:
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed by their duly authorized representatives as of the day and year
first above written.
OPG
By:
---------------------------------
Name:
Title:
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed by their duly authorized representatives as of the day and year
first above written.
---------------------------
Allison Gushee Molkenthin
<PAGE> 1
EXHIBIT 10.36
AVIGEN, INC.
MANAGEMENT TRANSITION PLAN
EFFECTIVE JULY 15, 1998
SECTION 1. INTRODUCTION
The Avigen, Inc. Management Transition Plan (the "Plan") is designed to
provide separation pay and benefits to eligible terminating employees.
SECTION 2. ELIGIBILITY AND PARTICIPATION; DEFINITIONS
You are eligible to participate in the Plan if (i) you are an employee
of the Company; (ii) you are notified in writing that you are eligible to
participate in the Plan; and (iii) your employment with the Company terminates
due to an "Involuntary Termination" (as hereinafter defined) or a "Constructive
Termination" (as hereinafter defined), in either case within two (2) months
prior to or eighteen (18) months following a "Change in Control" (as hereinafter
defined). The business decisions that may result in your becoming eligible to
participate in the Plan are decisions to be made by the Company, in its sole
discretion.
If you are eligible to participate in the Plan, you are automatically a
"Participant" in the Plan and may receive benefits as described below.
Participation ends when you are no longer eligible to receive benefits under the
Plan.
For purposes of this Plan, the following terms shall have the meanings
set forth below:
(a) "BOARD" means the Board of Directors of the Company.
(b) "CAUSE" means that, in the reasonable determination of the Company
or, in the case of the Chief Executive Officer, the Board, (i) you have
committed an intentional act to materially injure the Company; (ii) you have
intentionally refused or failed to follow lawful and reasonable directions of
the Board or the appropriate individual to whom you report; (iii) you have
willfully and habitually neglected your duties for the Company; or (iv) you have
been convicted of a felony involving moral turpitude that is likely to inflict
or has inflicted material injury on the Company. Notwithstanding the foregoing,
Cause shall not exist unless the conduct described in the preceding sentence has
not been cured within 15 days following your receipt of written notice from the
Company or the Board, as the case may be, specifying the particulars of your
conduct constituting Cause.
(c) "COMPANY" means Avigen, Inc., or following a Change in Control, the
surviving entity resulting from such transaction.
(d) "CONSTRUCTIVE TERMINATION" means that you voluntarily terminate your
employment with the Company after any of the following are undertaken without
your express written consent:
(i) the assignment to you of any duties or responsibilities which
result in a diminution in your position or function (but not merely a change in
title or reporting
<PAGE> 2
relationships) as in effect immediately prior to the earlier of the date of your
termination of employment or the date of the Change in Control;
(ii) a reduction by the Company in your annual base salary;
(iii) any failure by the Company to continue in effect any
benefit plan or program, including incentive plans or plans with respect to the
receipt of securities of the Company, in which you are participating at the time
of a Change in Control (hereinafter referred to as "Benefit Plans") or the
taking of any action by the Company that would adversely affect your
participation in or reduce your benefits under the Benefit Plans or deprive you
of any fringe benefit that you enjoyed at the time of a Change in Control;
provided, however, that no Constructive Termination shall be deemed to have
occurred under this Section 2(b)(iii) following a Change in Control if the
Company provides for your participation in benefit plans and programs which,
taken as a whole, are comparable to the Benefit Plans, as you determine in good
faith;
(iv) your relocation, or the relocation of the Company's
principal executive offices if your principal office is at such offices, to a
location more than thirty (30) miles from the location at which you were
performing your duties prior to the Change in Control, except for required
travel on the Company's business to an extent substantially consistent with your
business travel obligations at the time of the Change in Control;
(v) a material breach of this Plan or a material breach of a
written agreement with you regarding the terms and conditions of your
employment; or
(vi) any failure by the Company to obtain the assumption of this
Plan or any material agreement with you regarding the terms and conditions of
your employment by any successor or assign of the Company.
(e) "CHANGE IN CONTROL" means (i) a sale of substantially all of the
assets of the Company, (ii) a merger or consolidation in which the Company is
not the surviving corporation or (iii) a reverse merger in which the Company is
the surviving corporation but the shares of the Company's common stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, or (iv) the individuals who, as of the date of the adoption of this
Plan, are members of the Board (the "Incumbent Board") cease for any reason to
constitute at least fifty percent (50%) of the Board (provided, however, that if
the election, or nomination for election, by the Company's shareholders of any
new director was approved by a vote of at least fifty percent (50%) of the
Incumbent Board, such new director shall be considered as a member of the
Incumbent Board).
(f) "INVOLUNTARY TERMINATION" means your dismissal or discharge by the
Company (or, if applicable, by any successor entity) for a reason other than for
Cause. The termination of your employment will not be deemed to be an
"Involuntary Termination" if your termination occurs as a result of your death
or disability.
SECTION 3. BENEFITS
2
<PAGE> 3
As a Participant in the Plan, you are eligible to receive the following
benefits:
(a) SALARY CONTINUATION. The Company shall continue your base salary, as
in effect on the date of the Constructive Termination or Involuntary
Termination, as the case may be, for the number of months specified in the
letter notifying you of your eligibility to participate in the Plan. Such amount
shall be paid to you in regular monthly installments over the number of months
of salary continuation or over a shorter period, as determined by the Company.
Any salary continuation payments that you receive shall be subject to all
required tax withholding.
(b) HEALTH BENEFITS. Provided that you elect continued coverage under
federal COBRA law, the Company shall pay, on your behalf, the premiums of your
group health insurance coverage, including coverage for your eligible
dependents. The number of months of such premium payments shall equal the number
of months of your salary continuation payments, but in no event shall such
premium payments be made for a period exceeding eighteen (18) months or be made
following the effective date of your coverage by a health plan of a subsequent
employer. For the balance of the period that you are entitled to coverage under
federal COBRA law, you shall be entitled to maintain coverage for yourself and
your eligible dependents at your own expense.
(c) PARACHUTE PAYMENTS. If any payment or benefit you would receive
under this Plan, when combined with any other payment or benefit you receive
pursuant to the termination of your employment with the Company, ("Payment")
would (i) constitute a "parachute payment" within the meaning of Section 280G of
the Internal Revenue Code of 1986, as amended (the "Code"), and (ii) but for
this sentence, be subject to the excise tax imposed by Section 4999 of the Code
(the "Excise Tax"), then such Payment shall be either (i) the full amount of
such Payment or (ii) such lesser amount (with cash payments being reduced before
stock option compensation) as would result in no portion of the Payment being
subject to the Excise Tax, whichever of the foregoing amounts, taking into
account the applicable federal, state and local employment taxes, income taxes,
and the Excise Tax results in your receipt, on an after-tax basis, of the
greater amount of the Payment notwithstanding that all or some portion of the
Payment may be subject to the Excise Tax.
SECTION 4. ADMINISTRATION AND OPERATION OF THE PLAN
The Company is the "Plan Sponsor" and the "Plan Administrator" of the
Plan, as such terms are defined in the Employee Retirement Income Security Act
of 1974 ("ERISA"). The Company, in its capacity as Plan Administrator of the
Plan, is the named fiduciary that has the authority to control and manage the
operation and administration of the Plan. The Company has the sole discretion to
make such rules, regulations, interpretations of the Plan and computations and
shall take such other action to administer the Plan as it may deem appropriate
in its sole discretion. Such rules, regulations, interpretations, computations,
and other actions shall be conclusive and binding upon all persons. The Company
may engage the services of such persons or organizations to render advice or
perform services with respect to its responsibilities under the Plan as it shall
determine to be necessary or appropriate. Such persons or organizations may
include (without limitation) actuaries, attorneys, accountants and consultants.
3
<PAGE> 4
Any person or group of persons may serve in more than one fiduciary
capacity with respect to the Plan. The responsibilities of the Company under the
Plan shall be carried out on its behalf by its directors, officers, employees
and agents, acting on behalf or in the name of the Company in their capacity as
directors, officers, employees and agents and not as individual fiduciaries. The
Company may delegate any of its fiduciary responsibilities under the Plan to
another person or persons pursuant to a written instrument that specifies the
fiduciary responsibilities so delegated to each such person.
SECTION 5. CLAIMS, INQUIRIES AND APPEALS
APPLICATIONS FOR BENEFITS AND INQUIRIES. Applications for benefits
should be in writing, signed and submitted to: Plan Administrator, Management
Transition Plan, Avigen, Inc., 1201 Harbor Bay Parkway, #1000, Alameda, CA
94502.
DENIAL OF CLAIMS. If any application for benefits is denied in whole or
in part, the Plan Administrator must notify you, in writing, of the denial of
the application, and of your right to review the denial. The written notice of
denial will be set forth in a manner designed to be understood, and will include
specific reasons for the denial, specific references to the Plan provision upon
which the denial is based, a description of any information or material that the
Plan Administrator needs to complete the review and an explanation of the Plan's
review procedure.
This written notice will be given to you within ninety (90) days after
the Plan Administrator receives the application, unless special circumstances
require an extension of time, in which case, the Plan Administrator has up to an
additional ninety (90) days for processing the application. If an extension of
time for processing is required, written notice of the extension will be
furnished to you before the end of the initial 90-day period.
This notice of extension will describe the special circumstances
necessitating the additional time and the date by which the Plan Administrator
is to render its decision on the application. If written notice of denial of the
application for benefits is not furnished within the specified time, the
application shall be deemed to be denied. You will then be permitted to appeal
the denial in accordance with the review procedure described below.
REQUEST FOR REVIEW. You (or your authorized representative) may appeal a
denied benefit claim by submitting a written request for a review to: Review
Panel, Management Transition Plan, Avigen, Inc., 1201 Harbor Bay Parkway, #1000,
Alameda, CA 94502.
The Review Panel shall be comprised of two (2) or more persons to be
appointed by the Company. Your appeal must be submitted within sixty (60) days
after the application is denied (or deemed denied). The Review Panel will give
you (or your representative) an opportunity to review pertinent documents in
preparing a request for a review.
A request for review must set forth all of the grounds on which it is
based, all facts in support of the request and any other matters that you or
your representative feel are pertinent. The Review Panel may require you or your
representative to submit additional facts, documents or other material as it may
find necessary or appropriate in making its review.
4
<PAGE> 5
DECISION ON REVIEW. The Review Panel will act on each request for review
within sixty (60) days after receipt of the request, unless special
circumstances require an extension of time (not to exceed an additional sixty
(60) days) for processing the request for a review. If an extension for review
is required, written notice of the extension will be furnished within the
initial 60-day period. The Review Panel will give written notice of its decision
to the applicant. In the event that the Review Panel confirms the denial of the
application for benefits in whole or in part, the notice will outline the
specific Plan provisions upon which the decision is based. If written notice of
the Review Panel's decision is not given within the time prescribed above, the
application will be deemed denied on review.
RULES AND PROCEDURES. The Plan Administrator and/or the Review Panel may
establish rules and procedures, consistent with the Plan and with ERISA, as
necessary and appropriate in carrying out their responsibilities in reviewing
benefit claims. If you wish to submit additional information in connection with
an appeal from the denial (or deemed denial) of benefits, you may be required to
do so at your own expense.
EXHAUSTION OF REMEDIES. No legal action for benefits under the Plan may
be brought until (i) a written application for benefits has been submitted in
accordance with the procedures described above, (ii) the person claiming
benefits has been notified by the Plan Administrator that the application is
denied (or the application is deemed denied due to the Plan Administrator's
failure to act on it within the time prescribed), (iii) a written request for a
review of the application has been submitted in accordance with the appeal
procedure described above and (iv) the person appealing the denial has been
notified in writing that the Review Panel has denied the appeal (or the appeal
is deemed to be denied due to the Review Panel's failure to take any action on
the claim within the time prescribed).
SECTION 6. OTHER TERMINATIONS
You are NOT eligible for benefits under this Plan if your employment
terminates due to death, disability or any other reason other than an
Involuntary Termination or a Constructive Termination that occurs within two (2)
months prior or within eighteen (18) months following a Change in Control.
SECTION 7. BASIS OF PAYMENTS TO AND FROM THE PLAN
All benefits under the Plan shall be paid by the Company. The Plan shall
be unfunded and benefits hereunder shall be paid only from the general assets of
the Company.
SECTION 8. AMENDMENT AND TERMINATION
The Company reserves the right to amend or terminate this Plan at any
time; provided, however, that this Plan may not be amended or terminated
following the earlier of a termination of employment described in clause (iii)
of the first paragraph of Section 2 or the occurrence of a Change in Control.
SECTION 9. NON-ALIENATION OF BENEFITS
5
<PAGE> 6
No Plan benefit may be anticipated, alienated, sold, transferred,
assigned, pledged, encumbered or charged, and any attempt to do so will be void.
SECTION 10. SUCCESSORS AND ASSIGNS
This Plan shall be binding on the successors and assigns of the Company.
SECTION 11. LEGAL CONSTRUCTION
This Plan shall be interpreted in accordance with ERISA and, to the
extent not preempted by ERISA, with the laws of the State of California. This
Plan constitutes both a plan document and a summary plan description for
purposes of ERISA.
SECTION 12. OTHER PLAN INFORMATION
PLAN IDENTIFICATION NUMBER: 510
EMPLOYER IDENTIFICATION NUMBER: 133647113
ENDING OF THE PLAN'S FISCAL YEAR: December 31
AGENT FOR THE SERVICE OF LEGAL PROCESS: The Plan's agent for service of
legal process is: Thomas J. Paulson, Secretary, Avigen, Inc. 1201 Harbor Bay
Parkway, #1000, Alameda, CA 94502.
SECTION 13. STATEMENT OF ERISA RIGHTS
As a participant in this Plan (which is a welfare benefit plan sponsored
by the Company) you are entitled to certain rights and protections under ERISA,
including the right to:
(a) Examine, without charge, at the Plan Administrator's office and at
other specified locations, such as work sites, all Plan documents and copies of
all documents filed by the Plan with the U.S. Department of Labor, such as
detailed annual reports;
(b) Obtain copies of all Plan documents and Plan information upon
written request to the Plan Administrator. The Plan Administrator may make a
reasonable charge for the copies; and
(c) Receive a summary of the Plan's annual financial report, in the case
of a plan which is required to file an annual financial report with the
Department of Labor. (Generally, all pension plans and welfare plans with 100 or
more participants must file these annual reports.)
In addition to creating rights for Plan participants, ERISA imposes
duties upon the people responsible for the operation of the employee benefit
plan. The people who operate the Plan, called "fiduciaries" of the Plan, have a
duty to do so prudently and in the interest of you and other Plan participants
and beneficiaries.
No one, including your employer or any other person, may fire you or
otherwise discriminate against you in any way to prevent you from obtaining a
Plan benefit or exercising
6
<PAGE> 7
your rights under ERISA. If your claim for a Plan benefit is denied in whole or
in part, you must receive a written explanation of the reason for the denial.
You have the right to have the Plan review and reconsider your claim.
Under ERISA, there are steps you can take to enforce the above rights.
For instance, if you request materials from the Plan and do not receive them
within 30 days, you may file suit in a federal court. In such a case, the court
may require the Plan Administrator to provide the materials and pay you up to
$100 a day until you receive the materials, unless the materials were not sent
because of reasons beyond the control of the Plan Administrator. If you have a
claim for benefits that is denied or ignored, in whole or in part, you may file
suit in a state or federal court. If it should happen that the Plan fiduciaries
misuse the Plan's money, or if you are discriminated against for asserting your
rights, you may seek assistance from the U.S. Department of Labor, or you may
file suit in a federal court. The court will decide who should pay court costs
and legal fees. If you are successful, the court may order the person you have
sued to pay these costs and fees. If you lose, the court may order you to pay
these costs and fees, for example, if it finds your claim is frivolous.
If you have any questions about the Plan, you should contact the Plan
Administrator. If you have any questions about your rights under ERISA, you
should contact the nearest area office of the U.S. Labor - Management Services
Administration, Department of Labor.
7
<PAGE> 8
AVIGEN, INC.
MANAGEMENT TRANSITION PLAN
NOTICE OF PARTICIPATION
TO:______________________________.
DATE:______________________________.
The Company has designated you as a Participant in Avigen, Inc. Management
Transition Plan (the "Plan"). A copy of the Plan document, which also
constitutes a summary plan description, is attached to this Notice. The terms
and conditions of your participation in the Plan are as set forth in the Plan
and herein. The details of your Plan benefits, as described in Sections 3(a) and
3(b) of the Plan, are as follows:
SALARY CONTINUATION PAYMENTS: ______________ months; provided that such period
shall continue for up to an additional ______________ months or, if earlier,
until the date you commence subsequent full-time employment.
HEALTH BENEFITS CONTINUATION PERIOD: ______________ months; provided that such
period shall continue for up to an additional ______________ months or, if
earlier, until the date you commence subsequent full-time employment.
Please retain a copy of this Notice of Participation, along with the Plan
document, for your records.
AVIGEN, INC.
By:________________________________
Its:_______________________________
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