UNITED STATESSECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
For the quarterly period ended September 30, 2000
OR
For the transition period from to
Commission file number 0-22613
AVI BIOPHARMA, INC.
(Exact name of registrant as specified in its charter)
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.
INDEX
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(A Development Stage Company)
BALANCE SHEETS
The accompanying notes are an integral part of these balance sheets
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STATEMENTS OF OPERATIONS
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STATEMENTS OF CASH FLOWS
The accompanying notes are an integral part of these statements
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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 and nine-month periods ended September 30, 2000 and 1999 and the financial information as of September 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.
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* The following common stock equivalents are excluded from earnings per share calculation as their effect would have been antidilutive:
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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 September 30, 2000, the Company's accumulated deficit was $57,286,276.
Results of Operations
Revenues, from license fees, grants and research contracts, increased to $122,215 in the third quarter of 2000 from $3,558 in the third quarter of 1999. Revenues, from license fees, grants and research contracts, increased to $1,272,338 for the nine months ended September 30, 2000 from $7,783 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.
Operating expenses increased to $2,713,449 in the third quarter of 2000 from $2,244,335 in the third quarter of 1999 and to $8,060,112 for the nine months ended September 30, 2000 from $6,112,292 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 $339,130 in the third quarter of 2000 from $35,696 in the third quarter of 1999 and to $555,375 for the nine months ended September 30, 2000 from $162,784 for the comparable period in 1999 due to earnings on increased cash balances.
Liquidity and Capital Resources
The Company's cash and cash equivalents were $29,554,775 at September 30, 2000, compared with $8,683,005 at December 31, 1999. The increase of $20,871,770 was primarily due to net proceeds of $19,886,619 from the Company's secondary offering completed August 1, 2000, net proceeds of $4,744,720 from the alliance with SuperGen, Inc. for shared development and marketing rights for Avicine and $2,754,635 from the exercise of options and warrants, offset by $5,811,372 used in operations and $702,832 used for investing activities which consist primarily of purchases of property and equipment and patent related costs. In addition the Company's short-term securities increased $5,655,386 to $8,592,886 at September 30, 2000 due to receiving 347,826 shares of SuperGen, Inc. common stock from the alliance with SuperGen, Inc. for shared development and marketing rights for Avicine, offset by unrealized losses 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
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in the United States. At closing the Company received 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 occurred 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 $19,886,619. In addition, representatives' warrants to purchase 300,000 shares of AVI common stock were issued to the underwriters' of the secondary offering.
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.
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PART II—OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
The Company did not file any Reports on Form 8-K during the quarter ended September 30, 2000.
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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.
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