##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2008
 OR
 o
    
    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 0-27264
 
 VIA Pharmaceuticals, Inc.
 (Exact name of registrant as specified in its charter)
 
 DELAWARE
    
    33-0687976(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 750 Battery Street, Suite 330
San Francisco, CA 94111
(Address of principal executive offices)
 (415) 283-2200
(Registrants telephone number, including area code)
 
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer  o
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 o þ




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##### 



Page No.PART I.  FINANCIAL INFORMATION
    
    
    1Item 1. Condensed Financial Statements
    
    
    1Unaudited Condensed Balance Sheets as of September 30, 2008 and December 31, 2007
    
    
    1Unaudited Condensed Statements of Operations for the Three and Nine Month Periods Ended
September 30, 2008 and 2007, and for the Period from June 14, 2004 (date of inception) to
September 30, 2008
    
    
    2Unaudited Condensed Statements of Cash Flows for the Nine Month Periods Ended September
30, 2008 and 2007, and for the Period from June 14, 2004 (date of inception) to September
30, 2008
    
    
    3Notes to the Unaudited Condensed Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17Item 4T. Controls and Procedures
    
    
    32PART II.  OTHER INFORMATION
    
    
    33Item 1. Legal Proceedings
    
    
    33Item 1A. Risk Factors
    
    
    33Item 6. Exhibits
    
    
    40SIGNATURE
    
    
    41EXHIBITSEX-31.1EX-31.2EX-32.1EX-32.2
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PART I.  FINANCIAL INFORMATION
 
 Item 1. Condensed Financial Statements
 VIA PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
 
 UNAUDITED CONDENSED BALANCE SHEETS
 SEPTEMBER 30,
    
    
    DECEMBER 31,2008
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    7,501,872
    
    
    $
    23,098,764Prepaid expenses and other current assets
    
    
    640,185
    
    
    
    953,347Total current assets
    
    
    8,142,057
    
    
    
    24,052,111Property and equipment-net
    
    
    337,953
    
    
    
    335,429Other non-current assets
    
    
    71,713
    
    
    
    97,401Total
    
    $
    8,551,723
    
    
    $
    24,484,941LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    457,278
    
    
    $
    748,719Accrued expenses and other liabilities
    
    
    2,548,155
    
    
    
    3,178,453Capital lease obligation-current portion
    
    
    
    
    
    
    2,051Total current liabilities
    
    
    3,005,433
    
    
    
    3,929,223Deferred rent
    
    
    22,966
    
    
    
    3,980Total liabilities
    
    
    3,028,399
    
    
    
    3,933,203Commitments and contingenciesStockholders equity:Common stock, $0.001 par value-200,000,000
shares authorized at September 30, 2008 and
December 31, 2007; 19,728,351 and
19,707,257 shares issued and outstanding at
September 30, 2008 and December 31, 2007,
respectively
    
    
    19,728
    
    
    
    19,707Preferred stock Series A, $0.001 par
value-5,000,000 shares authorized at
September 30, 2008 and December 31, 2007; 0
shares issued and outstanding at September
30, 2008 and December 31, 2007
    
    
    
    
    
    
    Convertible preferred stock Series C,
$0.001 par value-17,000 shares authorized
at September 30, 2008 and December 31,
2007; 2,000 shares issued and outstanding
at September 30, 2008 and December 31,
2007; liquidation preference of $2,000,000
    
    
    2
    
    
    
    2Additional paid-in capital
    
    
    61,902,526
    
    
    
    60,876,834Treasury stock- 0 and 2,014 shares at
September 30, 2008 and December 31, 2007,
respectively
    
    
    
    
    
    
    (10,276
    )Accumulated other comprehensive income
    
    
    
    
    
    
    16,884Deficit accumulated in the development stage
    
    
    (56,398,932
    )
    
    
    (40,351,413
    )Total stockholders equity
    
    
    5,523,324
    
    
    
    20,551,738Total
    
    $
    8,551,723
    
    
    $
    24,484,941
  1




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VIA PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
 
 UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
 PERIOD FROMJUNE 14, 2004(DATE OFTHREE MONTHS ENDED
    
    
    NINE MONTHS ENDED
    
    
    INCEPTION) TOSEPTEMBER 30,
    
    
    SEPTEMBER 30,
    
    
    SEPTEMBER 30,
    
    
    SEPTEMBER 30,
    
    
    SEPTEMBER 30,2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008Revenue
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Operating costs and
expenses:Research and development
    
    
    3,155,013
    
    
    
    2,435,352
    
    
    
    9,593,202
    
    
    
    7,496,679
    
    
    
    32,640,112General and
administration
    
    
    1,869,366
    
    
    
    2,169,659
    
    
    
    6,641,138
    
    
    
    5,630,367
    
    
    
    19,831,705Merger transaction costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,824,090
    
    
    
    3,824,090Total operating
costs and expenses
    
    
    5,024,379
    
    
    
    4,605,011
    
    
    
    16,234,340
    
    
    
    16,951,136
    
    
    
    56,295,907Operating loss
    
    
    (5,024,379
    )
    
    
    (4,605,011
    )
    
    
    (16,234,340
    )
    
    
    (16,951,136
    )
    
    
    (56,295,907
    )Other income (expense):Interest income
    
    
    32,002
    
    
    
    247,992
    
    
    
    185,195
    
    
    
    361,375
    
    
    
    910,166Interest expense
    
    
    (3,891
    )
    
    
    (129
    )
    
    
    (4,106
    )
    
    
    (59,873
    )
    
    
    (1,003,169
    )Other (expense) income
    
    
    28,996
    
    
    
    (3,145
    )
    
    
    5,732
    
    
    
    (11,481
    )
    
    
    (10,022
    )Total other income
(expense)
    
    
    57,107
    
    
    
    244,718
    
    
    
    186,821
    
    
    
    290,021
    
    
    
    (103,025
    )Net Loss
    
    $
    (4,967,272
    )
    
    $
    (4,360,293
    )
    
    $
    (16,047,519
    )
    
    $
    (16,661,115
    )
    
    $
    (56,398,932
    )Loss per share of common
stockbasic and diluted
    
    $
    (0.25
    )
    
    $
    (0.27
    )
    
    $
    (0.82
    )
    
    $
    (2.58
    )Weighted average shares
outstandingbasic and
diluted
    
    
    19,620,757
    
    
    
    15,907,161
    
    
    
    19,594,397
    
    
    
    6,468,872
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VIA PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
 
 UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
 PERIOD FROMJUNE 14, 2004(DATE OFNINE MONTHS ENDED
    
    
    INCEPTION) TOSEPTEMBER 30,
    
    
    SEPTEMBER 30,
    
    
    SEPTEMBER 30,2008
    
    
    2007
    
    
    2008Cash flows from operating activities:Net loss
    
    $
    (16,047,519
    )
    
    $
    (16,661,115
    )
    
    $
    (56,398,932
    )Adjustments to reconcile net loss to net cash used in operating
activities:Depreciation and amortization
    
    
    125,861
    
    
    
    80,033
    
    
    
    313,455Loss on disposal of property and equipment
    
    
    4,163
    
    
    
    
    
    
    
    4,163Change in unrealized gain on foreign currency hedge
    
    
    (16,884
    )
    
    
    5,237
    
    
    
    Stock compensation expense
    
    
    1,035,336
    
    
    
    652,462
    
    
    
    2,426,185Deferred rent
    
    
    18,985
    
    
    
    
    
    
    
    22,965Changes in assets and liabilities:Prepaid expenses and other assets
    
    
    337,875
    
    
    
    (864,938
    )
    
    
    (715,557
    )Accounts payable
    
    
    (293,030
    )
    
    
    (23,791
    )
    
    
    455,688Accrued expenses and other liabilities
    
    
    (630,298
    )
    
    
    2,152,478
    
    
    
    2,648,156Accrued merger transaction costs
    
    
    
    
    
    
    36,265
    
    
    
    Interest payable
    
    
    
    
    
    
    55,111
    
    
    
    992,722Net cash used in operating activities
    
    
    (15,465,511
    )
    
    
    (14,568,258
    )
    
    
    (50,251,155
    )Cash flows from investing activities:Purchase of property and equipment
    
    
    (129,983
    )
    
    
    (216,586
    )
    
    
    (637,350
    )Cash provided in the Merger
    
    
    
    
    
    
    11,147,160
    
    
    
    11,147,160Capitalized merger transaction costs
    
    
    
    
    
    
    (350,069
    )
    
    
    (350,069
    )Net cash provided by (used in) investing activities
    
    
    (129,983
    )
    
    
    10,580,505
    
    
    
    10,159,741Cash flows from financing activities:Proceeds from convertible promissory notes
    
    
    
    
    
    
    5,000,000
    
    
    
    24,425,000Capital lease payments
    
    
    (2,051
    )
    
    
    (1,982
    )
    
    
    (11,973
    )Issuance of common stock
    
    
    
    
    
    
    23,140,360
    
    
    
    23,141,360Exercise of stock options for the issuance of common stock
    
    
    653
    
    
    
    42,323
    
    
    
    44,699Repurchase and retirement of common stock
    
    
    
    
    
    
    (4,239
    )
    
    
    (5,800
    )Net cash provided by (used in) financing activities
    
    
    (1,398
    )
    
    
    28,176,462
    
    
    
    47,593,286Increase (decrease) in cash and cash equivalents
    
    
    (15,596,892
    )
    
    
    24,188,709
    
    
    
    7,501,872Cash and cash equivalents-beginning of period
    
    
    23,098,764
    
    
    
    3,337,360
    
    
    
    Cash and cash equivalents-end of period
    
    $
    7,501,872
    
    
    $
    27,526,069
    
    
    $
    7,501,872Supplemental disclosure of noncash activities:Interest on convertible debt converted to notes payable
    
    $
    
    
    
    $
    334,222
    
    
    $
    992,722Conversion of notes to preferred stock Series A
    
    $
    
    
    
    $
    13,334,222
    
    
    $
    25,517,722Accrued compensation converted to notes payable
    
    $
    
    
    
    $
    
    
    
    $
    100,000Equipment acquired under capital lease
    
    $
    
    
    
    $
    
    
    
    $
    11,973Stock issuance for license acquisition
    
    $
    
    
    
    $
    
    
    
    $
    1,000Retirement of treasury stock
    
    $
    10,276
    
    
    $
    
    
    
    $
    10,276Supplemental disclosure of cash flow information:Interest paid
    
    $
    4,106
    
    
    $
    466
    
    
    $
    5,393Taxes paid
    
    $
    4,241
    
    
    $
    33,163
    
    
    $
    40,220
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VIA PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
 
 NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
 1. ORGANIZATION
 Overview
     4




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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation Accounting and Reporting by Development Stage Enterprises
   Use of Estimates
 Significant Risks and Uncertainties
  5




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Cash and Cash Equivalents
 Property and Equipment
 Long-Lived Assets
 Acquired Intellectual Property Rights
 Research and Development Expenses Accounting for Research and Development
Costs.
  Income Taxes Accounting for
Uncertainty in Income Taxes  an Interpretation of FASB Statement No. 109
 6




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Earnings (Loss) Per Share of Common Stock
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net loss
    
    $
    (4,967,272
    )
    
    $
    (4,360,293
    )
    
    $
    (16,047,519
    )
    
    $
    (16,661,115
    )Weighted-average shares of common stock outstanding
    
    
    19,726,833
    
    
    
    16,135,802
    
    
    
    19,713,782
    
    
    
    6,708,009Less: Weighted-average shares of common stock
subject to repurchase
    
    
    (106,076
    )
    
    
    (228,641
    )
    
    
    (119,385
    )
    
    
    (239,137
    )Weighted-average shares used in computing basic
net loss per share
    
    
    19,620,757
    
    
    
    15,907,161
    
    
    
    19,594,397
    
    
    
    6,468,872Dilutive effect of common share equivalents
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted-average shares used in computing diluted
net loss per share
    
    
    19,620,757
    
    
    
    15,907,161
    
    
    
    19,594,397
    
    
    
    6,468,872Basic and diluted net loss per share
    
    $
    (0.25
    )
    
    $
    (0.27
    )
    
    $
    (0.82
    )
    
    $
    (2.58
    )
  Three and nine months endedSeptember 30,2008
    
    September 30,2007Common stock equivalents (in shares):Shares of common stock subject to outstanding options
    
    
    2,793,542
    
    
    
    1,171,298Shares of common stock subject to outstanding warrants
    
    
    231,454
    
    
    
    96,520Total shares of common stock equivalents
    
    
    3,024,996
    
    
    
    1,267,818
  Comprehensive Income (Loss)
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net loss
    
    $
    (4,967,272
    )
    
    $
    (4,360,293
    )
    
    $
    (16,047,519
    )
    
    $
    (16,661,115
    )Change in unrealized
gain (loss) on foreign
currency cash flow
hedges
    
    
    (10,869
    )
    
    
    (781
    )
    
    
    (16,884
    )
    
    
    5,237Total comprehensive loss
    
    $
    (4,978,141
    )
    
    $
    (4,361,074
    )
    
    $
    (16,064,403
    )
    
    $
    (16,655,878
    )
 Derivative Instruments Accounting for Derivative
Instruments and Hedging Activities.
 7




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New Accounting Pronouncements Disclosures about
Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133
 Share-based Payment  Certain Assumptions Used in Valuation Methods  Expected Term Share-Based Payment
 Business
Combinations Non-controlling Interest In Consolidated Financial
Statements an amendment of Accounting Research Bulletin No. 51.
 3. MERGER WITH CORAUTUS
  8




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Cash
    
    $
    11,147,160Accrued expenses
    
    
    (286,408
    )Merger transaction costs expensed
    
    
    3,824,090Total purchase price
    
    $
    14,684,842
  4. STOCK-BASED COMPENSATION
 Share-Based Payment Accounting for Stock-Based Compensation Accounting for Stock Issued to Employees.
   9




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Three months ended
    
    Nine months endedSeptember
30,2008
    
    September 30,2007
    
    September 30,2008
    
    September 30,2007Expected life from grant date
    
    
    6.25
    
    
    
    5.27-6.25
    
    
    
    2.50-6.25
    
    
    
    5.00-6.25Expected volatility
    
    
    82
    %
    
    
    74%-77
    %
    
    
    79%-82
    %
    
    
    68%-77
    %Risk free interest rate
    
    
    2.88
    %
    
    
    4.2%-5.03
    %
    
    
    2.48-3.49
    %
    
    
    4.2%-5.03
    %Dividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  Period fromJune 14, 2004Three months ended
    
    
    Nine months ended
    
    
    (date of inception) toSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008Research and development expense
    
    $
    32,557
    
    
    $
    27,202
    
    
    $
    280,796
    
    
    $
    209,456
    
    
    $
    780,006General and administrative expense
    
    
    212,667
    
    
    
    95,255
    
    
    
    754,540
    
    
    
    443,006
    
    
    
    1,638,802Total
    
    $
    245,224
    
    
    $
    122,457
    
    
    $
    1,035,336
    
    
    $
    652,462
    
    
    $
    2,418,808
  5. RESEARCH AND DEVELOPMENT
  10




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Period fromJune 14, 2004Three months ended
    
    
    Nine months ended
    
    
    (date of inception) toSeptember 30,2008
    
    
    September 30,2007
    
    
    September 30,2008
    
    
    September 30,2007
    
    

September 30,2008Externally generated R&D expense
    
    $
    2,322,001
    
    
    $
    1,846,494
    
    
    $
    6,431,574
    
    
    $
    5,648,691
    
    
    $
    23,587,068Internally generated R&D expense
    
    
    833,012
    
    
    
    588,858
    
    
    
    3,161,628
    
    
    
    1,847,988
    
    
    
    9,053,044Total
    
    $
    3,155,013
    
    
    $
    2,435,352
    
    
    $
    9,593,202
    
    
    $
    7,496,679
    
    
    $
    32,640,112
  Period fromJune 14, 2004Three months ended
    
    
    Nine months ended
    
    
    (date of inception) toSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008Externally generated R&D expense:In-licensing expenses
    
    $
    6,250
    
    
    $
    
    
    
    $
    18,750
    
    
    $
    1,635,000
    
    
    $
    4,863,750Clinical Research Organization expenses
    
    
    831,295
    
    
    
    674,964
    
    
    
    2,347,109
    
    
    
    1,548,857
    
    
    
    6,045,784Investigator expenses
    
    
    763,292
    
    
    
    435,014
    
    
    
    1,869,124
    
    
    
    736,398
    
    
    
    2,987,913Consulting expenses
    
    
    263,556
    
    
    
    313,487
    
    
    
    969,023
    
    
    
    818,926
    
    
    
    5,028,114Other
    
    
    457,608
    
    
    
    423,029
    
    
    
    1,227,568
    
    
    
    909,510
    
    
    
    4,661,507Total
    
    $
    2,322,001
    
    
    $
    1,846,494
    
    
    $
    6,431,574
    
    
    $
    5,648,691
    
    
    $
    23,587,068
  Period fromJune 14, 2004Three months ended
    
    
    Nine months ended
    
    
    (date of inception) toSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008Internally generated R&D expense:Payroll and payroll related expenses
    
    $
    650,577
    
    
    $
    421,914
    
    
    $
    2,241,690
    
    
    $
    1,270,597
    
    
    $
    6,283,909Stock-based compensation
    
    
    32,557
    
    
    
    27,202
    
    
    
    280,796
    
    
    
    209,457
    
    
    
    780,006Travel and entertainment expenses
    
    
    53,071
    
    
    
    46,999
    
    
    
    261,654
    
    
    
    127,164
    
    
    
    926,407Other
    
    
    96,807
    
    
    
    92,743
    
    
    
    377,488
    
    
    
    240,770
    
    
    
    1,062,722Total
    
    $
    833,012
    
    
    $
    588,858
    
    
    $
    3,161,628
    
    
    $
    1,847,988
    
    
    $
    9,053,044
 6. PROPERTY AND EQUIPMENT
  September 30,
    
    
    December 31,2008
    
    
    2007Property and equipment at cost:Computer equipment and software
    
    $
    308,649
    
    
    $
    291,149Furniture and fixtures
    
    
    108,869
    
    
    
    102,547Lab equipment
    
    
    46,946
    
    
    
    46,946Office equipment
    
    
    38,282
    
    
    
    35,409Leasehold Improvements
    
    
    129,740
    
    
    
    31,315Capital lease equipment
    
    
    11,973
    
    
    
    11,973Total property and equipment at cost
    
    
    644,459
    
    
    
    519,339Less: accumulated depreciation
    
    
    (306,506
    )
    
    
    (183,910
    )Total
    
    $
    337,953
    
    
    $
    335,429
 11




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##### Table of Contents



Period fromJune 14, 2004Three months ended
    
    
    Nine months ended
    
    
    (date of inception) toSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008Research and development expense
    
    $
    10,271
    
    
    $
    8,825
    
    
    $
    31,032
    
    
    $
    23,700
    
    
    $
    81,906General and administrative expense
    
    
    33,330
    
    
    
    24,184
    
    
    
    93,854
    
    
    
    55,358
    
    
    
    226,890Total
    
    $
    43,601
    
    
    $
    33,009
    
    
    $
    124,886
    
    
    $
    79,058
    
    
    $
    308,796
 7. FINANCING ARRANGEMENTS
   Debtors Accounting for a Modification or Exchange of Debt
Instruments
 8. EQUITY
  Common Stock
 (in shares)
    
    September 30,2008
    

December
31,20072007 Incentive Award Plan-outstanding and available to grant
    
    
    3,746,421
    
    
    
    3,267,515Common stock warrants
    
    
    231,454
    
    
    
    106,520Total
    
    
    3,977,875
    
    
    
    3,374,035
 12




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##### Table of Contents



Preferred Stock
  2007 Incentive Award Plan
  WeightedAverageNumber of
    
    
    ExerciseShares
    
    
    Price2007 Incentive Award Plan Options Outstanding  January 1, 2008
    
    
    2,642,110
    
    
    $
    7.02Granted
    
    
    282,750
    
    
    $
    2.82Exercised
    
    
    (21,094
    )
    
    $
    0.03Canceled
    
    
    (110,224
    )
    
    $
    2.462007 Incentive Award Plan Options Outstanding  September 30, 2008
    
    
    2,793,542
    
    
    $
    6.83
  13




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##### Table of Contents



Options Outstanding
    
    Options Vested or Expected to Vest
    
    Options ExercisableAverage
    
    Weighted
    
    Number
    
    Average
    
    Weighted
    
    
    
    
    
    WeightedNumber of
    
    Remaining
    
    Average
    
    Exercisable or
    
    Remaining
    
    Average
    
    
    
    
    
    AverageRange of Exercise
    
    Options
    
    Contractual
    
    Exercise
    
    Expected to
    
    Contractual
    
    Exercise
    
    Number
    
    ExercisePrices
    
    Outstanding
    
    Life (Years)
    
    Price
    
    Vest
    
    Life (Years)
    
    Price
    
    Exercisable
    
    Price$     0.03
    
    
    239,323
    
    
    
    6.68
    
    
    $
    0.03
    
    
    
    239,013
    
    
    
    6.68
    
    
    $
    0.03
    
    
    
    233,127
    
    
    $
    0.03$     0.14
    
    
    102,122
    
    
    
    8.05
    
    
    $
    0.14
    
    
    
    101,452
    
    
    
    8.05
    
    
    $
    0.14
    
    
    
    88,729
    
    
    $
    0.14$     1.70
    
    
    750
    
    
    
    9.86
    
    
    $
    1.70
    
    
    
    713
    
    
    
    9.86
    
    
    $
    1.70
    
    
    
    
    
    
    $
    1.70$     2.19
    
    
    35,000
    
    
    
    9.72
    
    
    $
    2.19
    
    
    
    33,250
    
    
    
    9.72
    
    
    $
    2.19
    
    
    
    
    
    
    $
    2.19$     2.38
    
    
    1,405,650
    
    
    
    9.21
    
    
    $
    2.38
    
    
    
    1,351,432
    
    
    
    9.21
    
    
    $
    2.38
    
    
    
    321,291
    
    
    $
    2.38$     2.90
    
    
    235,000
    
    
    
    9.29
    
    
    $
    2.90
    
    
    
    223,250
    
    
    
    9.29
    
    
    $
    2.90
    
    
    
    
    
    
    $
    2.90$     3.10
    
    
    12,000
    
    
    
    9.48
    
    
    $
    3.10
    
    
    
    11,400
    
    
    
    9.48
    
    
    $
    3.10
    
    
    
    
    
    
    $
    3.10$     3.48
    
    
    391,650
    
    
    
    8.84
    
    
    $
    3.48
    
    
    
    377,372
    
    
    
    8.84
    
    
    $
    3.48
    
    
    
    106,089
    
    
    $
    3.48$     5.10
    
    
    22,300
    
    
    
    8.68
    
    
    $
    5.10
    
    
    
    22,300
    
    
    
    8.68
    
    
    $
    5.10
    
    
    
    22,300
    
    
    $
    5.10$     5.25
    
    
    47
    
    
    
    0.25
    
    
    $
    5.25
    
    
    
    47
    
    
    
    0.25
    
    
    $
    5.25
    
    
    
    47
    
    
    $
    5.25$     5.55
    
    
    37,172
    
    
    
    8.68
    
    
    $
    5.55
    
    
    
    37,172
    
    
    
    8.68
    
    
    $
    5.55
    
    
    
    37,172
    
    
    $
    5.55$11.25-1023.75
    
    
    312,528
    
    
    
    6.15
    
    
    $
    42.36
    
    
    
    312,528
    
    
    
    6.15
    
    
    $
    42.36
    
    
    
    312,528
    
    
    $
    42.362,793,542
    
    
    
    8.56
    
    
    $
    6.83
    
    
    
    2,709,929
    
    
    
    8.56
    
    
    $
    6.96
    
    
    
    1,121,283
    
    
    $
    13.12
  Warrants
     14




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##### Table of Contents



9. RELATED PARTIES
   10. COMMITMENTS
 Operating Leases
  AmountOctober through December 2008
    
    $
    106,2452009
    
    
    429,4172010
    
    
    437,5972011
    
    
    445,7772012
    
    
    362,4682013
    
    
    139,742Total minimum lease payments
    
    $
    1,921,246
 15




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##### Table of Contents



Capital Leases
 11. INCOME TAXES
    12. EMPLOYEE BENEFIT PLANS
  16




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 The following discussion and analysis of the Companys financial condition and results of
operations should be read in conjunction with the Companys financial statements and related notes
appearing elsewhere in this Quarterly Report on Form 10-Q . In addition to historical information,
this discussion and analysis contains forward-looking statements that involve risks, uncertainties
and assumptions. The Companys actual results may differ materially from those anticipated in these
forward-looking statements as a result of risks and uncertainties that exist in our operations,
development efforts and business environment, including but not limited to those set forth under
the Section entitled Risk Factors in our Annual Report on Form 10-K for the year ended December
31, 2007 and elsewhere in this Quarterly Report on Form 10-Q and in other documents we file with
the Securities and Exchange Commission. All forward-looking statements included in this report are
based on information available to us as of the date hereof, and, unless required by law, we assume
no obligation to update any such forward-looking statement.
 Background
  Overview
 Recent Developments
   17




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3 3
   18




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Description of Business and Background
         19




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
    
    terminate or delay clinical trials or studies of VIA-2291;
    
    terminate or delay the pre-clinical development of one or more of its other pre-clinical
candidates;
    
    curtail its licensing activities that are designed to identify molecular targets and
small molecules for treating cardiovascular disease;
    
    relinquish rights to product candidates, development programs, or discovery development
programs that it may otherwise seek to develop or commercialize on its own; and
    
    delay, reduce the scope of, or eliminate one or more of its research and development
programs, or ultimately cease operations.
 Revenue
  Research and Development Expenses
   
    
    compensation of personnel associated with research and development activities, including
consultants, investigators, and contract research organizations (CROs);
    
    in-licensing fees;
    
    laboratory supplies and materials;
    
    costs associated with the manufacture of product candidates for pre-clinical testing and
clinical studies;
    
    pre-clinical costs, including toxicology and carcinogenicity studies;
    
    fees paid to professional service providers for independent monitoring and analysis of
the Companys clinical trials;
    
    depreciation and equipment; and
    
    allocated costs of facilities and infrastructure.
  20




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Period fromJune 14, 2004Three months ended
    
    
    Nine months ended
    
    
    (date of inception) toSeptember 30,2008
    
    
    September 30,2007
    
    
    September 30,2008
    
    
    September 30,2007
    
    
    September 30,2008Externally generated R&D expense
    
    $
    2,322,001
    
    
    $
    1,846,494
    
    
    $
    6,431,574
    
    
    $
    5,648,691
    
    
    $
    23,587,068Internally generated R&D expense
    
    
    833,012
    
    
    
    588,858
    
    
    
    3,161,628
    
    
    
    1,847,988
    
    
    
    9,053,044Total
    
    $
    3,155,013
    
    
    $
    2,435,352
    
    
    $
    9,593,202
    
    
    $
    7,496,679
    
    
    $
    32,640,112
  Period fromJune 14, 2004Three months ended
    
    
    Nine months ended
    
    
    (date of inception) toSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008Externally generated R&D expense:In-licensing expenses
    
    $
    6,250
    
    
    $
    
    
    
    $
    18,750
    
    
    $
    1,635,000
    
    
    $
    4,863,750Clinical Research Organization expenses
    
    
    831,295
    
    
    
    674,964
    
    
    
    2,347,109
    
    
    
    1,548,857
    
    
    
    6,045,784Investigator expenses
    
    
    763,292
    
    
    
    435,014
    
    
    
    1,869,124
    
    
    
    736,398
    
    
    
    2,987,913Consulting expenses
    
    
    263,556
    
    
    
    313,487
    
    
    
    969,023
    
    
    
    818,926
    
    
    
    5,028,114Other
    
    
    457,608
    
    
    
    423,029
    
    
    
    1,227,568
    
    
    
    909,510
    
    
    
    4,661,507Total
    
    $
    2,322,001
    
    
    $
    1,846,494
    
    
    $
    6,431,574
    
    
    $
    5,648,691
    
    
    $
    23,587,068
  Period fromJune 14, 2004Three months ended
    
    
    Nine months ended
    
    
    (date of inception) toSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008Internally generated R&D expense:Payroll and payroll related expenses
    
    $
    650,577
    
    
    $
    421,914
    
    
    $
    2,241,690
    
    
    $
    1,270,597
    
    
    $
    6,283,909Stock-based compensation
    
    
    32,557
    
    
    
    27,202
    
    
    
    280,796
    
    
    
    209,457
    
    
    
    780,006Travel and entertainment expenses
    
    
    53,071
    
    
    
    46,999
    
    
    
    261,654
    
    
    
    127,164
    
    
    
    926,407Other
    
    
    96,807
    
    
    
    92,743
    
    
    
    377,488
    
    
    
    240,770
    
    
    
    1,062,722Total
    
    $
    833,012
    
    
    $
    588,858
    
    
    $
    3,161,628
    
    
    $
    1,847,988
    
    
    $
    9,053,044
    21




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22




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General and Administrative
   Interest Income, Interest Expense and Other Expenses
  Results of Operations
 Comparison of the three months ended September 30, 2008 and 2007
  Three Months EndedSeptember 30,2008
    
    September 30,2007
    
    $ Change
    
    % ChangeRevenue
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    Research and development expense
    
    
    3,155,013
    
    
    
    2,435,352
    
    
    
    719,661
    
    
    
    30
    %General and administrative expense
    
    
    1,869,366
    
    
    
    2,169,659
    
    
    
    (300,293
    )
    
    
    (14
    )%Interest income
    
    
    32,002
    
    
    
    247,992
    
    
    
    (215,990
    )
    
    
    (87
    )%Interest expense
    
    
    3,891
    
    
    
    129
    
    
    
    3,762
    
    
    
    Other income/(expense)
    
    
    28,996
    
    
    
    (3,145
    )
    
    
    32,141
    
    
    
    
 23




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##### Table of Contents



Revenue
 Research and Development Expense.
 General and Administrative Expense.
  Interest Income.
 Interest Expense.
 Other Income/(Expense).
 Income Tax Expense
 Comparison of the nine months ended September 30, 2008 and 2007
  24




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Nine Months EndedSeptember 30,2008
    
    September 30,2007
    
    $ Change
    
    % ChangeRevenue
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    Research and development expense
    
    
    9,593,202
    
    
    
    7,496,679
    
    
    
    2,096,523
    
    
    
    28
    %General and administrative expense
    
    
    6,641,138
    
    
    
    5,630,367
    
    
    
    1,010,771
    
    
    
    18
    %Merger transaction costs
    
    
    
    
    
    
    3,824,090
    
    
    
    (3,824,090
    )
    
    
    (100
    )%Interest income
    
    
    185,195
    
    
    
    361,375
    
    
    
    (176,180
    )
    
    
    (49
    )%Interest expense
    
    
    4,106
    
    
    
    59,873
    
    
    
    (55,767
    )
    
    
    (93
    )%Other income/(expense)
    
    
    5,732
    
    
    
    (11,481
    )
    
    
    17,213
    
    
    
    150
    %
 Revenue
 Research and Development Expense.
 General and Administrative Expense.
  25




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##### Table of Contents



Merger Transaction Costs.
 Interest Income.
 Interest Expense.
 Other Income/(Expense).
 Income Tax Expense
 Liquidity and Capital Resources
     26




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27




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Contractual Obligation and Commitments
  Payments Due by PeriodLess Than
    
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    5 YearsOperating lease obligations(1)
    
    
    1,921,246
    
    
    
    427,456
    
    
    
    879,284
    
    
    
    614,506
    
    
    Stanford license(2)
    
    
    845,000
    
    
    
    25,000
    
    
    
    70,000
    
    
    
    100,000
    
    
    
    650,000Uncertain tax positions(3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,766,246
    
    
    $
    452,456
    
    
    $
    949,284
    
    
    $
    714,506
    
    
    $
    650,000
 
 (1)
    
    Operating lease obligations reflect contractual commitments for the Companys office
facilities for its headquarters in San Francisco, California and its clinical operations
location in Princeton, New Jersey. In January 2008, the Company expanded and extended both
leases to ensure adequate facilities for current activities. The San Francisco headquarters
lease has been extended through May 2013 and has been expanded to a total of 8,180 square
feet. The lease amendment resulted in an increase of approximately $1.5 million in future
rent. The lease amendment to the Princeton, New Jersey facility extends the lease through
March 2012 and has been expanded to a total of 4,979 square feet. The lease amendment resulted
in an increase of approximately $330,000 in future rent.(2)
    
    Agreement with the Board of Trustees of the Leland Stanford Junior University granting the
Company exclusive worldwide rights to any and all patents derived from an invention describing
approaches to identify novel candidate genes implicated in the development of atherosclerosis,
which represent likely targets for future novel diagnostic and therapeutic strategies in
atherosclerosis. The Company, in addition to the $26,000 license fees, net of related
accumulated amortization included in other long-term assets in the balance sheet, has long
term fixed and determinable commitments to remit to Stanford license maintenance fees in the
amount of $25,000 in 2008 and 2009 respectively, $35,000 in 2010 and 2011 respectively, and
$50,000 in 2012 and beyond. The license maintenance fees can be applied to future royalties
the Company will pay to Stanford. The Company has agreed to make certain royalty payments to
Stanford related to the issuance and sublicense of the Stanford license and payments
corresponding to the achievement of certain development and regulatory milestones. The royalty
rate varies from 1% to 6% of net sales depending on the type of product sold and whether the
Company holds an exclusive right to the Stanford license at the time of sale. The Company is
also required, under the agreement, to make milestone payments to Stanford for each of the
Companys licensed products that use the Stanford patent as the product reaches various
development and regulatory milestones. The Stanford license becomes non-exclusive after
October 17, 2011 and terminates upon the expiration of the last licensed patent. As of
September 30, 2008, we are unable to determine or predict the timing and amount of any
potential royalty or milestone payments.(3)
    
    The Company adopted FIN No. 48 on the first day of its 2007 fiscal year. The amount of
unrecognized tax benefits at September 30, 2008 was approximately $1,055,000. This amount has
been excluded from the contractual obligations table because a reasonably reliable estimate of
the timing of future tax settlements cannot be determined. Off-Balance Sheet Arrangements
  Critical Accounting Policies
  28




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Research and Development Accruals
    Stock-based Compensation
 Share-Based Payment,
 29




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Accounting for Stock-Based Compensation Accounting for Stock Issued to Employees.
  Certain Assumptions Used in Valuation Methods  Expected Term
  Period fromJune 14, 2004Three months ended
    
    
    Nine months ended
    
    
    (date of inception) toSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008Research and development expense
    
    $
    32,557
    
    
    $
    27,202
    
    
    $
    280,796
    
    
    $
    209,456
    
    
    $
    780,006General and administrative expense
    
    
    212,667
    
    
    
    95,255
    
    
    
    754,540
    
    
    
    443,006
    
    
    
    1,638,802Total
    
    $
    245,224
    
    
    $
    122,457
    
    
    $
    1,035,336
    
    
    $
    652,462
    
    
    $
    2,418,808
 30




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Forward-looking statements
  
    
    the Companys ability to obtain necessary financing in
the near term;
    
    the Companys ability to control its operating expenses;
    
    the Companys ability to recruit and enroll patients for the FDG-PET clinical trial;
    
    the Companys failure to obtain sufficient data from enrolled patients that can be used
to evaluate VIA-2291, thereby impairing the validity or statistical significance of its
clinical trials;
    
    the Companys ability to successfully complete its clinical trials of VIA-2291 on
expected timetables and the outcomes of such clinical trials;
    
    complexities in designing and implementing current cardiovascular clinical trials using
histological examinations, measurement of biomarkers, medical imaging, and atherosclerotic
plaque bioassays or in designing and implementing future clinical trials measuring the
impact of VIA-2291 on cardiac outcomes;
    
    the results of the Companys clinical trials, including without limitation, with respect
to the safety and efficacy of VIA-2291;
    
    our ability to achieve clinical trial endpoints;
    
    if the results of the ACS and CEA studies, upon further
review, are revised, interpreted differently by regulatory
authorities or negated by later stage clinical trials;
    
    our ability to properly design and conduct additional
clinical trials;
    
    the outcome of any legal proceedings;
    
    the Companys ability to obtain necessary FDA approvals;
    
    the Companys ability to successfully commercialize VIA-2291;
    
    the Companys ability to obtain and protect its intellectual property related to its
product candidates;
    
    the Companys potential for future growth and the development of its product pipeline;
    
    the Companys ability to form and maintain collaborative relationships to develop and
commercialize our product candidates;
    
    general economic and business conditions; and
    
    the other risks described under the heading Risk Factors in the Companys Annual Report
on Form 10-K for the year ended December 31, 2007, as supplemented by the risks described
under Risk Factors in Part II, Item IA of this
Quarterly Report on Form 10-Q.
  31




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Item 4T. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  32




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PART II.  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  Risks Related to the Companys Financial Results
 The Company has experienced significant losses, expects losses in the future, has limited
resources and there is substantial doubt as to the Companys ability to continue as a going
concern.
  The Company will require substantial additional funding in the near term to continue operating its
business, which may not be available to the Company on acceptable terms, or at all, which could
force the Company to delay, scale back or eliminate some or all of its research and development
programs.
  
    
    fund clinical trials and seek regulatory approvals;
    
    pursue the development of additional product candidates;
    
    expand the Companys research and development activities;
    
    access manufacturing and commercialization capabilities;
    
    implement additional internal systems and infrastructure;
    
    maintain, defend and expand the scope of the Companys intellectual property portfolio;
and
    
    hire additional management and research, development and clinical personnel.
  
    
    the scope, cost, rate of progress, and results of the Companys current and future
clinical trials, pre-clinical studies and other discovery, research and development
activities;
    
    the costs associated with establishing manufacturing and commercialization capabilities;
 33




---



##### Table of Contents




    
    the costs of acquiring or investing in product candidates and technologies;
    
    the costs of filing, prosecuting, defending and enforcing any patent claims and other
intellectual property rights;
    
    the costs and timing of seeking and obtaining FDA and other regulatory approvals;
    
    the effect of competing technological and market developments;
    
    the terms and timing of any collaboration, licensing or other arrangements into which the
Company may enter; and
    
    general and industry-specific economic conditions that may affect the Companys research
and development expenditures.
  Raising additional funds by issuing securities or through collaboration and other strategic
arrangements may cause dilution to existing stockholders, restrict operations or require the
Company to relinquish potentially valuable rights.
  34




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Risks Related to the Companys Business
 The Company is at an early stage of development. The Company has never generated and may never
generate revenues from commercial sales of its products and the Company may not have products to
market for several years, if ever.
     Clinical trials are expensive, difficult to design and implement, time-consuming and subject to
delay, particularly in the cardiovascular area due to the large number of patients who must be
enrolled and treated in clinical trials. As a result, there is a high risk that the Companys drug
development activities will not result in regulatory approval, or that such approval will be
delayed, thereby reducing the likelihood of successful commercialization of products.
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
    
    delays in obtaining regulatory approvals to commence a clinical trial;
    
    delays in identifying and reaching agreement on acceptable terms with prospective
clinical research organizations and clinical trial sites;
    
    delays in obtaining institutional review board approval to conduct a clinical trial at a
prospective site;
    
    slower than expected rates of patient recruitment and enrollment for a variety of
reasons, including competition from other clinical trial programs for the treatment of
similar indications, the nature of the protocol, and the eligibility criteria for the trial;
    
    enrolled patients may not remain in or complete clinical trials at the rates we expect;
    
    failure to obtain sufficient data from enrolled patients that can be used to evaluate
VIA-2291, thereby impairing the validity or statistical significance of our clinical trials;
    
    lack of effectiveness during clinical trials;
    
    failure to achieve clinical trial endpoints;
    
    unforeseen safety issues;
    
    uncertain dosing issues;
    
    changes in regulatory requirements causing the Company to amend clinical trial protocols
or add new clinical trials to comply with these changes;
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
    
    lack of adequate funding to continue the clinical development of VIA-2291, including the
incurrence of unforeseen costs due to enrollment delays, requirements to conduct additional
trials and studies and increased expenses associated with the services of the Companys
clinical research organizations and other third parties;
    
    unforeseen difficulties developing the advanced manufacturing techniques, including
adequate process controls, quality controls, and quality assurance testing, required to
scale up production of the Companys product candidates to commercial levels;
    
    inability to monitor patients adequately during or after treatment;
    
    conflicting or negating results, upon further analysis of the data from the clinical
trials;
    
    retaining participants who have enrolled in a clinical trial but may be prone to withdraw
due to the design of the trial, lack of efficacy or personal issues or who fail to return
for follow-up visits for a variety of reasons; and
    
    inability or unwillingness of medical investigators to follow the Companys clinical
trial protocols and follow good clinical practices.
  Failure to recruit and enroll patients for the FDG-PET clinical trial, as well as any future
clinical trials, may cause the development of the Companys product candidates to be delayed.
  The Companys Phase II clinical trials of VIA-2291 primarily target biomarkers, histology and
medical imaging as endpoints, and the results of any Phase II clinical trials may not be
indicative of success in future clinical trials that will target outcomes such as heart attack and
stroke. The results of previous clinical trials may not be predictive of future results, and the
Companys current and future clinical trials may not satisfy the requirements of the FDA or other
non-U.S. regulatory authorities.
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The Companys Phase II FDG-PET clinical trial utilizes new, innovative imaging technology that
does not represent a widely accepted and validated clinical trial methodology for measuring
inflammation in atherosclerosis. The results of this clinical trial may not be predictive of
future results and may not be consistent with the results of the CEA and ACS clinical trials or
future clinical trials.
  If the Company is unable to form and maintain the collaborative relationships that its business
strategy requires, its product development programs will suffer, and the Company may not be able
to develop or commercialize its product candidates, or achieve profitable operations.
  We may be unable to maintain our listing on the NASDAQ Capital Market. Failure to maintain our
listing could adversely affect our business, and the liquidity of our common stock would be
seriously limited.
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Risks Related to the Securities Market and Ownership of the Companys Common Stock
 The Companys stock price could decline significantly based on the results and timing of its
clinical trials.
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Item 6. Exhibits
 Exhibit No.
    
    Description3.1
    
    
    Restated Certificate of Incorporation (filed as Exhibit 3.1 to the Form 10-K filed on March 22, 2005
and incorporated herein by reference)3.2
    
    
    Certificate of Amendment to the Restated Certificate of Incorporation (filed as Exhibit 3.1 to the
Form 10-KSB filed on March 30, 2000 and incorporated herein by reference)3.3
    
    
    Certificate of Amendment to the Restated Certificate of Incorporation (filed as Exhibit 3.3 to the
Form 10-K filed on March 28, 2003 and incorporated herein by reference)3.4
    
    
    Certificate of Amendment to the Restated Certificate of Incorporation (filed as Exhibit 3.4 to the
Form 10-K filed on March 28, 2003 and incorporated herein by reference)3.5
    
    
    Certificate of Amendment to the Restated Certificate of Incorporation (filed as Exhibit 3.5 to the
Form 10-K filed on March 28, 2003 and incorporated herein by reference)3.6
    
    
    Amended and Restated Certificate of Designation of Preferences and Rights of Series C Preferred Stock
(filed as Annex H to the Form S-4/A filed on December 19, 2002 and incorporated herein by reference)3.7
    
    
    Certificate of Amendment to the Restated Certificate of Incorporation (Increase in Authorized Shares)
(filed as Exhibit 3.7 to the Form 10-Q filed on August 14, 2007 and incorporated herein by reference)3.8
    
    
    Certificate of Amendment to the Restated Certificate of Incorporation (Reverse Stock Split) (filed as
Exhibit 3.8 to the Form 10-Q filed on August 14, 2007 and incorporated herein by reference)3.9
    
    
    Certificate of Amendment to the Restated Certificate of Incorporation (Name Change) (filed as Exhibit
3.9 to the Form 10-Q filed on August 14, 2007 and incorporated herein by reference)3.10
    
    
    Fourth Amended and Restated Bylaws of VIA Pharmaceuticals, Inc. (filed as Exhibit 3.1 to the Form 8-K
filed on April 17, 2008 and incorporated herein by reference)31.1
    *
    
    Principal Executive Officers Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    *
    
    Principal Financial Officers Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    *
    
    Certification Pursuant to 18 U.S.C. § 1350 (Section 906 of Sarbanes-Oxley Act of 2002)32.2
    *
    
    Certification Pursuant to 18 U.S.C. § 1350 (Section 906 of Sarbanes-Oxley Act of 2002)
 
 *
    
    Filed herewith 40




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VIA PHARMACEUTICALS, INC.By:
    /s/ James G. StewartJames G. StewartSenior Vice President, Chief Financial Officer
Duly Authorized Officer and Principal Financial Officer 41