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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
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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, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For the transition period from to
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Commission file number 0-22613
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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
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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
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock without par value 13,351,206
(Class) (Outstanding at May 3, 1999)
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Transitional Small Business Disclosure Format (check one): Yes No X
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AVI BIOPHARMA, INC.
FORM 10-QSB
INDEX
Page
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - March 31, 1999 and December 31, 1998 2
Statements of Operations - Three Months Ended March 31, 1999 and
1998 and from July 22, 1980 (Inception) to March 31, 1999
3
Statements of Cash Flows - Three Months Ended March 31, 1999 and 1998 and
from July 22, 1980 (Inception) to March 31, 1999 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
1
AVI BIOPHARMA, INC.
(A Development Stage Company)
BALANCE SHEETS
March 31, December 31,
1999 1998
----------------- -------------------
ASSETS
Current Assets:
Cash and cash equivalents $ 6,691,194 $ 8,510,020
Other current assets 43,313 509,428
----------------- -------------------
Total Current Assets 6,734,507 9,019,448
Property and Equipment, net of accumulated
depreciation and amortization of $ 2,420,122
and $2,386,310 479,723 411,828
Patent Costs, net of accumulated amortization of
$341,310 and $305,310 745,479 730,960
Other Assets 29,847 29,847
----------------- -------------------
Total Assets $ 7,989,556 $ 10,192,083
----------------- -------------------
----------------- -------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 462,415 $ 891,928
Accrued liabilities 245,916 294,471
----------------- -------------------
Total Current Liabilities 708,331 1,186,399
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; 13,351,206 and 13,346,166
issued and outstanding 1,335 1,335
Additional paid-in capital 51,794,785 51,779,785
Deficit accumulated during the development stage (44,514,895) (42,775,436)
----------------- -------------------
Total Shareholders' Equity 7,281,225 9,005,684
----------------- -------------------
Total Liabilities and Shareholders' Equity $ 7,989,556 $ 10,192,083
----------------- -------------------
----------------- -------------------
The accompanying notes are an integral part of these balance sheets.
2
AVI BIOPHARMA, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
July 22, 1980
Three months ended March 31, (Inception) to
1999 1998 March 31, 1999
---------------- ---------------- --------------------
Revenues, from grants and research contracts $ 4,115 $ 5,650 $ 828,308
Operating expenses:
Research and development 1,342,650 1,294,264 19,398,256
General and administrative 417,624 306,965 7,870,801
Acquired in-process research and
development 59,839 - 19,532,993
---------------- ---------------- --------------------
1,820,113 1,601,229 46,802,050
Other Income:
Interest income, net 76,539 170,721 1,362,097
Realized gain on sale of short-term investments - - 96,750
---------------- ---------------- --------------------
76,539 170,721 1,458,847
---------------- ---------------- --------------------
Net loss $ (1,739,459) $ (1,424,858) $ (44,514,895)
---------------- ---------------- --------------------
---------------- ---------------- --------------------
Net loss per share - basic and diluted $ (0.13) $ (0.13)
---------------- ----------------
---------------- ----------------
Weighted average number of common shares
outstanding for computing basic and diluted
loss per share 13,349,358 11,147,840
---------------- ----------------
---------------- ----------------
The accompanying notes are an integral part of these statements.
3
AVI BIOPHARMA, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
For the Period
Three months ended March 31, July 22, 1980
----------------------------------- (Inception) to
1999 1998 March 31, 1999
---------------- ---------------- -------------------
Cash flows from operating activities:
Net loss $ (1,739,459) $ (1,424,858) $ (44,514,895)
Adjustments to reconcile net loss to net cash flows
used in operating activities:
Depreciation and amortization 69,812 56,673 2,810,105
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 - 19,532,993
(Increase) decrease in:
Other current assets 466,115 (530,218) (43,313)
Other assets - - (29,847)
Net increase (decrease) in accounts payable and
accrued liabilities (478,068) 16,984 708,331
---------------- ---------------- -------------------
Net cash used in operating activities (1,621,761) (1,881,419) (20,811,171)
Cash flows from investing activities:
Proceeds from sale or redemption of short-term investments - - 247,750
Purchase of property and equipment (101,707) (6,513) (2,948,518)
Patent costs (50,519) (22,762) (1,086,789)
Acquisition costs (59,839) (89,695) (2,365,581)
---------------- ---------------- -------------------
Net cash used in investing activities (212,065) (118,970) (6,153,138)
Cash flows from financing activities:
Proceeds from sale of common stock, warrants, and
partnership units, net of offering costs, and exercise of
options 15,000 152,003 34,040,940
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 15,000 152,003 33,655,503
Increase (decrease) in cash and cash equivalents (1,818,826) (1,848,386) 6,691,194
Cash and cash equivalents:
Beginning of period 8,510,020 17,638,936 -
---------------- ---------------- -------------------
End of period $ 6,691,194 $ 15,790,550 $ 6,691,194
---------------- ---------------- -------------------
---------------- ---------------- -------------------
The accompanying notes are an integral part of these statements.
4
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, 1999 and 1998 and the financial information as of March 31, 1999 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, 1998 is derived from AVI BioPharma, Inc.'s (the Company's)
Form 10-KSB. The interim financial statements should be read in conjunction
with the financial statements and the notes thereto included in the Company's
Form 10-KSB. 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.
Three Months Ended March 31, 1999 1998
- ---------------------------------------------------------- --------------------- --------------------
Net loss $(1,739,459) $(1,424,858)
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 13,349,358 11,147,840
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 13,349,358 11,147,840
--------------------- --------------------
--------------------- --------------------
Net loss per share - basic and diluted $(0.13) $(0.13)
--------------------- --------------------
--------------------- --------------------
* The following common stock equivalents are excluded from earnings per share
calculation as their effect would have been antidilutive:
Three Months Ended March 31, 1999 1998
- ---------------------------------------------------------- --------------------- --------------------
Warrants and stock options 7,078,051 4,593,497
5
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-QSB 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 and grant
revenue, 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,
1999, the Company's accumulated deficit was $44,514,895.
RESULTS OF OPERATIONS
Operating expenses increased to $1,820,113 in the first quarter of 1999 from
$1,601,229 in the first quarter of 1998 due to increases in research and
development staffing and increased expenses associated with outside
collaborations and pre-clinical testing of the Company's technologies.
Additionally, increased general and administrative costs were incurred to
support the research expansion, and to broaden the Company's investor and
public relations efforts. Net interest income decreased to $76,539 in the
first quarter of 1999 from $170,721 in the first quarter of 1998 due to
earnings on decreased cash balances, which consisted of proceeds from the
initial public offering.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents were $6,691,194 at March 31, 1999,
compared with $8,510,020 at December 31, 1998. The decrease of $1,818,826 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. Additionally, increased
general and administrative costs were incurred to support internal research
expansion in the Company's core technology areas.
6
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 identified no
significant Year 2000 issues. The core business systems are compliant, or a
migration path to a compliant version will be in place by the year 2000. 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 the Company's 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. Failure of telephone service providers
or other monopolistic utilities could have a significant detrimental effect
on the Company's operations. There can be no assurances that such third
parties will successfully address their own Year 2000 issues over which the
Company has no control.
7
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, 1999.
8
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 3, 1999 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
5
3-MOS
DEC-31-1999
JAN-01-1999
MAR-31-1999
6,691,194
0
0
0
0
6,734,507
2,899,845
2,420,122
7,989,556
708,331
0
0
0
1,335
7,279,890
7,989,556
0
4,115
0
0
1,820,113
0
0
(1,739,459)
0
(1,739,459)
0
0
0
(1,739,459)
(0.13)
(0.13)
