##### 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 June 30, 2010
 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
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 Yes o No þ




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##### 



Page No.PART I.  FINANCIAL INFORMATIONItem 1. Condensed Financial StatementsUnaudited Condensed Balance Sheets as of June 30, 2010 and December 31, 2009
    
    
    1Unaudited Condensed Statements of Operations for the Three and Six Month Periods Ended
June 30, 2010 and 2009, and for the Period from June 14, 2004 (date of inception) to June
30, 2010
    
    
    2Unaudited Condensed Statements of Cash Flows for the Six Month Periods Ended June 30,
2010 and 2009, and for the Period from June 14, 2004 (date of inception) to June 30, 2010
    
    
    3Notes to the Unaudited Condensed Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    28Item 4T. Controls and Procedures
    
    
    46PART II.  OTHER INFORMATION
    
    
    46Item 1A. Risk Factors
    
    
    46Item 6. Exhibits
    
    
    47SIGNATURE
    
    
    49Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   i




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##### Table of Contents



PART I.  FINANCIAL INFORMATION
 
 Item 1.
    
    Condensed Financial Statements
 VIA PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
 
 UNAUDITED CONDENSED BALANCE SHEETS
 June 30,
    
    
    December 31,2010
    
    
    2009ASSETSCurrent assets:Cash and cash equivalents
    
    $
    158,347
    
    
    $
    2,189,742Prepaid expenses and other current assets
    
    
    139,458
    
    
    
    155,361Total current assets
    
    
    297,805
    
    
    
    2,345,103Property and equipment-net
    
    
    46,686
    
    
    
    170,617Other non-current assets
    
    
    32,289
    
    
    
    40,374Total
    
    $
    376,780
    
    
    $
    2,556,094LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)Current liabilities:Accounts payable
    
    $
    826,250
    
    
    $
    705,887Accrued expenses and other liabilities
    
    
    1,372,802
    
    
    
    2,226,720Accrued restructuring costs
    
    
    122,661
    
    
    
    Interest payable  affiliate
    
    
    1,659,904
    
    
    
    789,041Notes payable  affiliate  net of discount of
$531,541 at June 30, 2010 and $4,374 at December
31, 2009
    
    
    11,318,459
    
    
    
    9,995,626Total current liabilities
    
    
    15,300,076
    
    
    
    13,717,274Accrued expenses and other liabilities  long-term
    
    
    75,724
    
    
    
    Accrued restructuring costs  net of current portion
    
    
    44,004
    
    
    
    Deferred rent
    
    
    12,246
    
    
    
    37,450Total liabilities
    
    
    15,432,050
    
    
    
    13,754,724Commitments and contingenciesStockholders equity (deficit):Common stock, $0.001 par value  200,000,000 shares
authorized at June 30, 2010 and December 31, 2009,
respectively; 20,558,446 and 20,646,374 shares
issued and outstanding at June 30, 2010 and
December 31, 2009, respectively
    
    
    20,559
    
    
    
    20,646Preferred stock Series A, $0.001 par
value  5,000,000 shares authorized at June 30, 2010
and December 31, 2009, respectively; 0 shares
issued and outstanding at June 30, 2010 and
December 31, 2009, respectively
    
    
    
    
    
    
    Convertible preferred stock Series C, $0.001 par
value  17,000 shares authorized at June 30, 2010 and
December 31, 2009, respectively; 2,000 shares
issued and outstanding at June 30, 2010 and
December 31, 2009, respectively; liquidation
preference of $2,000,000
    
    
    2
    
    
    
    2Additional paid-in capital
    
    
    71,541,125
    
    
    
    70,385,287Deficit accumulated in the development stage
    
    
    (86,616,956
    )
    
    
    (81,604,565
    )Total stockholders equity (deficit)
    
    
    (15,055,270
    )
    
    
    (11,198,630
    )Total
    
    $
    376,780
    
    
    $
    2,556,094
   1




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##### Table of Contents



VIA PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
 
 UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
 Period FromJune 14, 2004(Date ofThree Months Ended
    
    
    Six Months Ended
    
    
    Inception) toJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010Revenue
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Operating costs and expenses:Research and development
    
    
    576,996
    
    
    
    1,508,053
    
    
    
    1,368,691
    
    
    
    3,642,809
    
    
    
    42,274,869General and administration
    
    
    812,509
    
    
    
    1,729,884
    
    
    
    2,451,951
    
    
    
    3,793,904
    
    
    
    31,498,004Merger transaction costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,824,090Restructuring costs
    
    
    
    
    
    
    
    
    
    
    106,959
    
    
    
    
    
    
    
    106,959Total operating costs and expenses
    
    
    1,389,505
    
    
    
    3,237,937
    
    
    
    3,927,601
    
    
    
    7,436,713
    
    
    
    77,703,922Operating loss
    
    
    (1,389,505
    )
    
    
    (3,237,937
    )
    
    
    (3,927,601
    )
    
    
    (7,436,713
    )
    
    
    (77,703,922
    )Other income (expense):Interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    914,628Interest expense
    
    
    (696,973
    )
    
    
    (1,152,953
    )
    
    
    (1,078,432
    )
    
    
    (1,266,170
    )
    
    
    (9,816,915
    )Other income (expense)-net
    
    
    (6,160
    )
    
    
    (299
    )
    
    
    (6,358
    )
    
    
    9,556
    
    
    
    (10,747
    )Total other income (expense)
    
    
    (703,133
    )
    
    
    (1,153,252
    )
    
    
    (1,084,790
    )
    
    
    (1,256,614
    )
    
    
    (8,913,034
    )Net Loss
    
    $
    (2,092,638
    )
    
    $
    (4,391,189
    )
    
    $
    (5,012,391
    )
    
    $
    (8,693,327
    )
    
    $
    (86,616,956
    )Loss per share of common
stockbasic and diluted
    
    $
    (0.11
    )
    
    $
    (0.22
    )
    
    $
    (0.25
    )
    
    $
    (0.44
    )Weighted average shares
outstandingbasic and diluted
    
    
    20,372,690
    
    
    
    19,894,804
    
    
    
    20,311,361
    
    
    
    19,805,994
   2




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VIA PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
 
 UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
 Period fromJune 14, 2004(Date ofSix Months Ended
    
    
    Inception) toJune 30,
    
    
    June 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010Cash flows from operating activities:Net loss
    
    $
    (5,012,391
    )
    
    $
    (8,693,327
    )
    
    $
    (86,616,956
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    52,361
    
    
    
    69,495
    
    
    
    582,234Amortization of discount on notes payable affiliate
    
    
    198,813
    
    
    
    1,137,951
    
    
    
    7,143,162Excess facility lease costs
    
    
    160,725
    
    
    
    
    
    
    
    160,725Lease abandonment costs
    
    
    165,904
    
    
    
    
    
    
    
    165,904Disposal of property and equipment
    
    
    71,570
    
    
    
    
    
    
    
    76,183Stock compensation expense
    
    
    429,242
    
    
    
    713,366
    
    
    
    4,386,824Deferred rent
    
    
    (25,204
    )
    
    
    5,111
    
    
    
    12,246Changes in assets and liabilities:Prepaid expenses and other assets
    
    
    23,988
    
    
    
    316,785
    
    
    
    (196,747
    )Accounts payable
    
    
    120,363
    
    
    
    (463,678
    )
    
    
    822,761Accrued expenses and other liabilities
    
    
    (944,098
    )
    
    
    (357,491
    )
    
    
    1,382,623Accrued restructuring costs
    
    
    5,940
    
    
    
    
    
    
    
    5,940Interest payable affiliate
    
    
    870,863
    
    
    
    128,219
    
    
    
    2,652,626Net cash used in operating activities
    
    
    (3,881,924
    )
    
    
    (7,143,569
    )
    
    
    (69,422,475
    )Cash flows from investing activities:Purchase of property and equipment
    
    
    
    
    
    
    (7,251
    )
    
    
    (664,175
    )Sale of property and equipment
    
    
    
    
    
    
    532
    
    
    
    532Cash provided in the Merger
    
    
    
    
    
    
    
    
    
    
    11,147,160Capitalized merger transaction costs
    
    
    
    
    
    
    
    
    
    
    (350,069
    )Net cash provided by (used in) investing activities
    
    
    
    
    
    
    (6,719
    )
    
    
    10,133,448Cash flows from financing activities:Proceeds from convertible promissory notes affiliate
    
    
    
    
    
    
    
    
    
    
    24,425,000Proceeds from notes payable affiliate
    
    
    1,850,000
    
    
    
    6,000,000
    
    
    
    11,850,000Capital lease payments
    
    
    
    
    
    
    
    
    
    
    (11,973
    )Issuance of common stock
    
    
    
    
    
    
    
    
    
    
    23,141,360Exercise of stock options for the issuance of common stock
    
    
    1,292
    
    
    
    1,933
    
    
    
    49,550Repurchase and retirement of common stock
    
    
    (763
    )
    
    
    
    
    
    
    (6,563
    )Net cash provided by financing activities
    
    
    1,850,529
    
    
    
    6,001,933
    
    
    
    59,447,374Increase (decrease) in cash and cash equivalents
    
    
    (2,031,395
    )
    
    
    (1,148,355
    )
    
    
    158,347Cash and cash equivalents-beginning of period
    
    
    2,189,742
    
    
    
    4,064,545
    
    
    
    Cash and cash equivalents-end of period
    
    $
    158,347
    
    
    $
    2,916,190
    
    
    $
    158,347Supplemental disclosure of noncash activities:Issuance of warrant and related discount on notes payable affiliate
    
    $
    725,980
    
    
    $
    4,058,871
    
    
    $
    7,674,703Interest on convertible debt converted to notes payable affiliate
    
    $
    
    
    
    $
    
    
    
    $
    992,722Conversion of notes to preferred stock Series A affiliate
    
    $
    
    
    
    $
    
    
    
    $
    25,517,722Accrued compensation converted to notes payable
    
    $
    
    
    
    $
    
    
    
    $
    100,000Stock issuance for license acquisition
    
    $
    
    
    
    $
    
    
    
    $
    1,000Supplemental disclosure of cash flow information:Interest paid
    
    $
    
    
    
    $
    
    
    
    $
    7,856Taxes paid
    
    $
    770
    
    
    $
    1,716
    
    
    $
    37,385
   3




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VIA PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
 
 NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
 1. ORGANIZATION
 Overview 
  Merger
 Going Concern 
  4




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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation 
  5




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Use of Estimates 
 Cash and Cash Equivalents 
 Property and Equipment 
 Long-Lived Assets 
 Incentive Award Accruals 
 Research and Development Expenses 
   6




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Fair Value of Financial and Derivative Instruments 
 
    
    Level 1  Quoted prices in active markets for identical assets or liabilities.
 
    
    Level 2  Inputs other than quoted prices included in Level 1, such as quoted prices for
similar assets and liabilities in active markets; quoted prices for identical or similar
assets and liabilities in markets that are not active; or other inputs that are observable
or can be corroborated by observable market data.
 
    
    Level 3  Unobservable inputs that are supported by little or no market activity and that
are significant to the fair value of the assets or liabilities. This includes certain
pricing models, discounted cash flow methodologies and similar techniques that use
significant unobservable inputs.
  
    
    Derivative financial instruments indexed to and potentially settled in a Companys own
stock;
 
    
    Accounting for derivative instruments and hedging activities; and
 
    
    Accounting for convertible debt and debt issued with stock purchase warrants.
   
    
    Derivative financial instruments indexed to and potentially settled in a Companys own
stock;
 
    
    Accounting for derivative instruments and hedging activities; and
 
    
    Accounting for convertible debt and debt issued with stock purchase warrants.
   7




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Changes in Level 3 Recurring Fair Value Measurements 
 As ofJune 30,2010Fair value  December 31, 2009
    
    $
    6,948,723Warrants (1)
    
    
    725,980Change in unrealized gains related to financial instruments at June 30, 2010 (2)
    
    
    Fair value  June 30, 2010
    
    $
    7,674,703Total unrealized gains (losses) (2)
    
    $
    
 
 (1)
    
    The Warrants are included in additional paid in capital in the Stockholders Equity section
of the Balance Sheet.(2)
    
    The Warrants are not revalued at the reporting dates and do not result in gains and losses. Income Taxes 
 Segment Reporting 
 Earnings (Loss) Per Share of Common Stock 
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net loss
    
    $
    (2,092,638
    )
    
    $
    (4,391,189
    )
    
    $
    (5,012,391
    )
    
    $
    (8,693,327
    )Basic and diluted net loss per share:Weighted-average shares of common stock outstanding
    
    
    20,544,999
    
    
    
    20,647,205
    
    
    
    20,591,468
    
    
    
    20,622,386Less: Weighted-average shares of common stock
subject to repurchase
    
    
    (172,309
    )
    
    
    (752,401
    )
    
    
    (280,107
    )
    
    
    (816,392
    )Weighted-average shares used in computing basic
net loss per share
    
    
    20,372,690
    
    
    
    19,894,804
    
    
    
    20,311,361
    
    
    
    19,805,994Dilutive effect of common share equivalents
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted-average shares used in computing diluted
net loss per share
    
    
    20,372,690
    
    
    
    19,894,804
    
    
    
    20,311,361
    
    
    
    19,805,994Basic and diluted net loss per share
    
    $
    (0.11
    )
    
    $
    (0.22
    )
    
    $
    (0.25
    )
    
    $
    (0.44
    )
  8




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As ofJune 30,
    
    
    June 30,2010
    
    
    2009Common stock equivalents (in shares):Shares of common stock subject to outstanding options
    
    
    1,848,404
    
    
    
    2,743,689Shares of common stock subject to outstanding warrants
    
    
    101,050,407
    
    
    
    83,539,559Shares of common stock subject to conversion from series C preferred stock
    
    
    13,986,013
    
    
    
    Total shares of common stock equivalents
    
    
    116,884,824
    
    
    
    86,283,248
  Comprehensive Income (Loss) 
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net loss
    
    $
    (2,092,638
    )
    
    $
    (4,391,189
    )
    
    $
    (5,012,391
    )
    
    $
    (8,693,327
    )Changes in unrealized gain (loss)
on foreign currency cash flow
hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Basic and diluted net loss per share
    
    $
    (2,092,638
    )
    
    $
    (4,391,189
    )
    
    $
    (5,012,391
    )
    
    $
    (8,693,327
    )
 Derivative Instruments 
  New Accounting Pronouncements 
  9




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3. STOCK-BASED COMPENSATION
       10




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Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Expected life from grant date
    
    
    6.427.47
    
    
    
    6.08
    
    
    
    6.427.47
    
    
    
    6.08Expected volatility
    
    
    112%114
    %
    
    
    105
    %
    
    
    112%114
    %
    
    
    105
    %Risk free interest rate
    
    
    2.23%2.50
    %
    
    
    2.89
    %
    
    
    2.23%2.50
    %
    
    
    2.89
    %Dividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  Period fromJune 14, 2004Three Months Ended
    
    
    Six Months Ended
    
    
    (date of inception) toJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010Research and development expense
    
    $
    32,107
    
    
    $
    111,778
    
    
    $
    78,797
    
    
    $
    208,995
    
    
    $
    1,158,223General and administrative expense
    
    
    104,682
    
    
    
    231,250
    
    
    
    326,001
    
    
    
    473,085
    
    
    
    3,130,863Total
    
    $
    136,789
    
    
    $
    343,028
    
    
    $
    404,798
    
    
    $
    682,080
    
    
    $
    4,289,086
   Period fromJune 14, 2004Three Months Ended
    
    
    Six Months Ended
    
    
    (date of inception) toJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010Research and development expense
    
    $
    3,526
    
    
    $
    3,926
    
    
    $
    7,107
    
    
    $
    7,820
    
    
    $
    23,475General and administrative expense
    
    
    6,209
    
    
    
    11,845
    
    
    
    17,337
    
    
    
    23,466
    
    
    
    66,885Total
    
    $
    9,735
    
    
    $
    15,771
    
    
    $
    24,444
    
    
    $
    31,286
    
    
    $
    90,360
  4. RESEARCH AND DEVELOPMENT
   11




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Period fromJune 14, 2004Three Months Ended
    
    
    Six Months Ended
    
    
    (date of inception) toJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010Externally generated R&D expense
    
    $
    68,741
    
    
    $
    817,598
    
    
    $
    388,637
    
    
    $
    2,253,473
    
    
    $
    29,093,828Internally generated R&D expense
    
    
    508,255
    
    
    
    690,455
    
    
    
    980,054
    
    
    
    1,389,336
    
    
    
    13,181,041Total
    
    $
    576,996
    
    
    $
    1,508,053
    
    
    $
    1,368,691
    
    
    $
    3,642,809
    
    
    $
    42,274,869
  Period fromJune 14, 2004Three Months Ended
    
    
    Six Months Ended
    
    
    (date of inception) toJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010In-licensing expenses
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    400,000
    
    
    $
    5,270,000CRO and investigator expenses
    
    
    1,485
    
    
    
    157,512
    
    
    
    18,664
    
    
    
    688,266
    
    
    
    10,768,003Consulting expenses
    
    
    15,108
    
    
    
    435,075
    
    
    
    122,721
    
    
    
    704,204
    
    
    
    6,541,390Other
    
    
    52,148
    
    
    
    225,011
    
    
    
    247,252
    
    
    
    461,003
    
    
    
    6,514,435Total
    
    $
    68,741
    
    
    $
    817,598
    
    
    $
    388,637
    
    
    $
    2,253,473
    
    
    $
    29,093,828
  Period fromJune 14, 2004Three Months Ended
    
    
    Six Months Ended
    
    
    (date of inception) toJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010Payroll and payroll related expenses
    
    $
    243,473
    
    
    $
    438,439
    
    
    $
    568,820
    
    
    $
    921,015
    
    
    $
    9,075,979Stock-based compensation
    
    
    35,633
    
    
    
    115,703
    
    
    
    85,904
    
    
    
    216,814
    
    
    
    1,181,698Travel and entertainment expenses
    
    
    13,860
    
    
    
    66,231
    
    
    
    43,281
    
    
    
    105,016
    
    
    
    1,198,900Other
    
    
    215,289
    
    
    
    70,082
    
    
    
    282,049
    
    
    
    146,491
    
    
    
    1,724,464Total
    
    $
    508,255
    
    
    $
    690,455
    
    
    $
    980,054
    
    
    $
    1,389,336
    
    
    $
    13,181,041
 5. PROPERTY AND EQUIPMENT
  As ofJune 30,
    
    
    December 31,2010
    
    
    2009Property and equipment at cost:Computer equipment and software
    
    $
    285,985
    
    
    $
    308,467Furniture and fixtures
    
    
    113,363
    
    
    
    113,363Office equipment
    
    
    21,048
    
    
    
    38,282Leasehold Improvements
    
    
    24,794
    
    
    
    129,740Total property and equipment at cost
    
    
    445,190
    
    
    
    589,852Less: accumulated depreciation
    
    
    (398,504
    )
    
    
    (419,235
    )Total
    
    $
    46,686
    
    
    $
    170,617
  12




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##### Table of Contents



Period fromJune 14, 2004Three Months Ended
    
    
    Six Months Ended
    
    
    (date of inception) toJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010Research and development expense
    
    $
    3,860
    
    
    $
    6,009
    
    
    $
    8,194
    
    
    $
    11,865
    
    
    $
    140,122General and administrative expense
    
    
    16,619
    
    
    
    28,561
    
    
    
    44,167
    
    
    
    57,630
    
    
    
    416,112Total
    
    $
    20,479
    
    
    $
    34,570
    
    
    $
    52,361
    
    
    $
    69,495
    
    
    $
    556,234
 6. NOTES PAYABLE AFFILIATES
  June 30,
    
    
    December 31,2010
    
    
    2009Issued March 12, 2009  18%  due April 1, 2010 (Loan Agreement)
    
    $
    10,000,000
    
    
    $
    10,000,000Less: Unamortized discount
    
    
    
    
    
    
    (4,374
    )Balance
    
    $
    10,000,000
    
    
    $
    9,995,626Issued March 26, 2010  15%  due December 31, 2010 (2010 Loan Agreement)
    
    
    1,850,000
    
    
    
    Less: Unamortized discount
    
    
    (531,541
    )
    
    
    Balance
    
    $
    1,318,459
    
    
    $
    Total
    
    $
    11,318,459
    
    
    $
    9,995,626
 Notes Payable Issued March 12, 2009   due April 1, 2010 (Loan Agreement)
     13




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##### Table of Contents



.
  Period fromJune 14, 2004Three Months Ended
    
    
    Six Months Ended
    
    
    (date of inception) toJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,March 12, 2009 Borrowing
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010Interest expense
    
    $
    89,753
    
    
    $
    74,795
    
    
    $
    163,726
    
    
    $
    91,233
    
    
    $
    406,192Discount amortization
    
    
    
    
    
    
    440,344
    
    
    
    36
    
    
    
    537,123
    
    
    
    900,044Total
    
    $
    89,753
    
    
    $
    515,139
    
    
    $
    163,762
    
    
    $
    628,356
    
    
    $
    1,306,236
  March 12, 2009Expected life from grant date  in years
    
    
    5.0Expected volatility
    
    
    116.79
    %Risk free interest rate
    
    
    2.10
    %Dividend yield
    
    
    
   Period fromJune 14, 2004Three Months Ended
    
    
    Six Months Ended
    
    
    (date of inception) toJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,May 19, 2009 Borrowing
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010Interest expense
    
    $
    89,753
    
    
    $
    35,342
    
    
    $
    163,726
    
    
    $
    35,342
    
    
    $
    350,301Discount amortization
    
    
    
    
    
    
    558,596
    
    
    
    96
    
    
    
    558,596
    
    
    
    1,532,892Total
    
    $
    89,753
    
    
    $
    593,938
    
    
    $
    163,822
    
    
    $
    593,938
    
    
    $
    1,883,193
  14




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##### Table of Contents



May 19, 2009Expected life from grant date  in years
    
    
    4.81Expected volatility
    
    
    108.63
    %Risk free interest rate
    
    
    2.05
    %Dividend yield
    
    
    
   Period fromJune 14, 2004Three Months Ended
    
    
    Six Months Ended
    
    
    (date of inception) toJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,June 29, 2009 Borrowing
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010Interest expense
    
    $
    89,753
    
    
    $
    1,644
    
    
    $
    163,726
    
    
    $
    1,644
    
    
    $
    316,603Discount amortization
    
    
    
    
    
    
    42,232
    
    
    
    157
    
    
    
    42,232
    
    
    
    1,625,935Total
    
    $
    89,753
    
    
    $
    43,876
    
    
    $
    163,883
    
    
    $
    43,876
    
    
    $
    1,942,538
  June 29, 2009Expected life from grant date  in years
    
    
    4.7Expected volatility
    
    
    112.03
    %Risk free interest rate
    
    
    2.40
    %Dividend yield
    
    
    
   15




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##### Table of Contents



Period fromJune 14, 2004Three Months Ended
    
    
    Six Months Ended
    
    
    (date of inception) toJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,August 14, 2009 Borrowing
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010Interest expense
    
    $
    89,754
    
    
    $
    
    
    
    $
    163,726
    
    
    $
    
    
    
    $
    278,794Discount amortization
    
    
    
    
    
    
    
    
    
    
    329
    
    
    
    
    
    
    
    1,373,041Total
    
    $
    89,754
    
    
    $
    
    
    
    $
    164,055
    
    
    $
    
    
    
    $
    1,651,835
  August 14, 2009Expected life from grant date  in years
    
    
    4.58Expected volatility
    
    
    115.22
    %Risk free interest rate
    
    
    2.32
    %Dividend yield
    
    
    
 .
  Period fromJune 14, 2004Three Months Ended
    
    
    Six Months Ended
    
    
    (date of inception) toJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,September 11, 2009 Borrowing
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010Interest expense
    
    $
    89,754
    
    
    $
    
    
    
    $
    163,726
    
    
    $
    
    
    
    $
    255,781Discount amortization
    
    
    
    
    
    
    
    
    
    
    3,756
    
    
    
    
    
    
    
    1,516,811Total
    
    $
    89,754
    
    
    $
    
    
    
    $
    167,482
    
    
    $
    
    
    
    $
    1,772,592
  September 11, 2009Expected life from grant date  in years
    
    
    4.50Expected volatility
    
    
    115.41
    %Risk free interest rate
    
    
    2.07
    %Dividend yield
    
    
    
  16




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##### Table of Contents



Period fromJune 14, 2004Three Months Ended
    
    
    Six Months Ended
    
    
    (date of inception) toJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010Interest expense
    
    $
    448,767
    
    
    $
    111,781
    
    
    $
    818,630
    
    
    $
    128,219
    
    
    $
    1,607,671Discount amortization
    
    
    
    
    
    
    1,041,172
    
    
    
    4,374
    
    
    
    1,137,951
    
    
    
    6,948,723Total
    
    $
    448,767
    
    
    $
    1,152,953
    
    
    $
    823,004
    
    
    $
    1,266,170
    
    
    $
    8,556,394
  Notes Payable Issued March 26, 2010  15%  due December 31, 2010 (2010 Loan Agreement)
    .
  17




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##### Table of Contents



Period fromJune 14, 2004Three Months Ended
    
    
    Six Months Ended
    
    
    (date of inception) toJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,March 29, 2010 Borrowing
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010Interest expense
    
    $
    46,747
    
    
    $
    
    
    
    $
    48,288
    
    
    $
    
    
    
    $
    48,288Discount amortization
    
    
    172,308
    
    
    
    
    
    
    
    177,988
    
    
    
    
    
    
    
    177,988Total
    
    $
    219,055
    
    
    $
    
    
    
    $
    226,276
    
    
    $
    
    
    
    $
    226,276
  March 29, 2010Expected life from grant date  in years
    
    
    4.99Expected volatility
    
    
    119.82
    %Risk free interest rate
    
    
    2.60
    %Dividend yield
    
    
    
   Period fromJune 14, 2004Three Months Ended
    
    
    Six Months Ended
    
    
    (date of inception) toJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,May 26, 2010 Borrowing
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010Interest expense
    
    $
    1,479
    
    
    $
    
    
    
    $
    1,479
    
    
    $
    
    
    
    $
    1,479Discount amortization
    
    
    6,842
    
    
    
    
    
    
    
    6,842
    
    
    
    
    
    
    
    6,842Total
    
    $
    8,321
    
    
    $
    
    
    
    $
    8,321
    
    
    $
    
    
    
    $
    8,321
  May 26, 2010Expected life from grant date  in years
    
    
    4.83Expected volatility
    
    
    119.48
    %Risk free interest rate
    
    
    1.99
    %Dividend yield
    
    
    
   18




---



##### Table of Contents



Period fromJune 14, 2004Three Months Ended
    
    
    Six Months Ended
    
    
    (date of inception) toJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,June 4, 2010 Borrowing
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010Interest expense
    
    $
    2,219
    
    
    $
    
    
    
    $
    2,219
    
    
    $
    
    
    
    $
    2,219Discount amortization
    
    
    8,605
    
    
    
    
    
    
    
    8,605
    
    
    
    
    
    
    
    8,605Total
    
    $
    10,824
    
    
    $
    
    
    
    $
    10,824
    
    
    $
    
    
    
    $
    10,824
  June 4, 2010Expected life from grant date  in years
    
    
    4.81Expected volatility
    
    
    119.88
    %Risk free interest rate
    
    
    1.90
    %Dividend yield
    
    
    
   Period fromJune 14, 2004Three Months Ended
    
    
    Six Months Ended
    
    
    (date of inception) toJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,June 29, 2010 Borrowing
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010Interest expense
    
    $
    247
    
    
    $
    
    
    
    $
    247
    
    
    $
    
    
    
    $
    247Discount amortization
    
    
    1,004
    
    
    
    
    
    
    
    1,004
    
    
    
    
    
    
    
    1,004Total
    
    $
    1,251
    
    
    $
    
    
    
    $
    1,251
    
    
    $
    
    
    
    $
    1,251
  June 29, 2010Expected life from grant date  in years
    
    
    4.74Expected volatility
    
    
    120.12
    %Risk free interest rate
    
    
    1.68
    %Dividend yield
    
    
    
  19




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##### Table of Contents



Period fromJune 14, 2004Three Months Ended
    
    
    Six Months Ended
    
    
    (date of inception) toJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010Interest expense
    
    $
    50,692
    
    
    $
    
    
    
    $
    52,233
    
    
    $
    
    
    
    $
    52,233Discount amortization
    
    
    188,759
    
    
    
    
    
    
    
    194,439
    
    
    
    
    
    
    
    194,439Total
    
    $
    239,451
    
    
    $
    
    
    
    $
    246,672
    
    
    $
    
    
    
    $
    246,672
   Period fromJune 14, 2004Three Months Ended
    
    
    Six Months Ended
    
    
    (date of inception) toJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010Interest expense
    
    $
    499,459
    
    
    $
    111,781
    
    
    $
    870,863
    
    
    $
    128,219
    
    
    $
    1,659,904Discount amortization
    
    
    188,759
    
    
    
    1,041,172
    
    
    
    198,813
    
    
    
    1,137,951
    
    
    
    7,143,162Total
    
    $
    688,218
    
    
    $
    1,152,953
    
    
    $
    1,069,676
    
    
    $
    1,266,170
    
    
    $
    8,803,066
  7. EQUITY
  Common Stock 
  June 30,
    
    
    December 31,2010
    
    
    20092007 Incentive Award Plan  outstanding and available to grant
    
    
    3,916,326
    
    
    
    3,328,398Shares of common stock subject to outstanding warrants
    
    
    101,050,407
    
    
    
    83,403,348Shares of common stock subject to conversion from series C preferred stock
    
    
    13,986,013
    
    
    
    Total shares of common stock equivalents
    
    
    118,952,746
    
    
    
    86,731,746
   20




---



##### Table of Contents



Preferred Stock 
  2002 Stock Option Plans 
 2004 Stock Option Plans 
 2007 Incentive Award Plan 
  21




---



##### Table of Contents



WeightedAverageOption Shares
    
    
    ExerciseStock Option Awards
    
    Outstanding
    
    
    Price2007 Incentive Award Plan Options Outstanding  December 31, 2009
    
    
    2,740,686
    
    
    $
    6.90Granted
    
    
    
    
    
    
    Exercised
    
    
    (43,057
    )
    
    $
    0.03Canceled
    
    
    (849,225
    )
    
    $
    2.162007 Incentive Award Plan Options Outstanding  June 30, 2010
    
    
    1,848,404
    
    
    $
    9.10
   Options Outstanding
    
    
    Options Vested or Expected to Vest
    
    
    Options ExercisableAverage
    
    
    Weighted
    
    
    Number
    
    
    Average
    
    
    Weighted
    
    
    
    
    
    
    WeightedRange of
    
    Number of
    
    
    Remaining
    
    
    Average
    
    
    Exercisable or
    
    
    Remaining
    
    
    Average
    
    
    
    
    
    
    AverageExercise
    
    Options
    
    
    Contractual
    
    
    Exercise
    
    
    Expected to
    
    
    Contractual
    
    
    Exercise
    
    
    Number
    
    
    ExercisePrices
    
    Outstanding
    
    
    Life (Years)
    
    
    Price
    
    
    Vest
    
    
    Life (Years)
    
    
    Price
    
    
    Exercisable
    
    
    Price$0.03
    
    
    124,897
    
    
    
    4.91
    
    
    $
    0.03
    
    
    
    124,897
    
    
    
    4.91
    
    
    $
    0.03
    
    
    
    124,897
    
    
    $
    0.03$0.14
    
    
    70,992
    
    
    
    6.28
    
    
    $
    0.14
    
    
    
    70,964
    
    
    
    6.28
    
    
    $
    0.14
    
    
    
    70,411
    
    
    $
    0.14$0.15
    
    
    40,000
    
    
    
    8.47
    
    
    $
    0.15
    
    
    
    40,000
    
    
    
    8.47
    
    
    $
    0.15
    
    
    
    40,000
    
    
    $
    0.15$2.38
    
    
    810,437
    
    
    
    7.47
    
    
    $
    2.38
    
    
    
    796,993
    
    
    
    7.47
    
    
    $
    2.38
    
    
    
    529,187
    
    
    $
    2.38$2.90
    
    
    235,000
    
    
    
    7.55
    
    
    $
    2.90
    
    
    
    230,554
    
    
    
    7.55
    
    
    $
    2.90
    
    
    
    141,979
    
    
    $
    2.90$3.48
    
    
    219,400
    
    
    
    7.09
    
    
    $
    3.48
    
    
    
    216,341
    
    
    
    7.09
    
    
    $
    3.48
    
    
    
    155,406
    
    
    $
    3.48$5.10
    
    
    16,725
    
    
    
    6.93
    
    
    $
    5.10
    
    
    
    16,725
    
    
    
    6.93
    
    
    $
    5.10
    
    
    
    16,725
    
    
    $
    5.10$5.55
    
    
    18,586
    
    
    
    6.93
    
    
    $
    5.55
    
    
    
    18,586
    
    
    
    6.93
    
    
    $
    5.55
    
    
    
    18,586
    
    
    $
    5.55$11.25$1023.75
    
    
    312,367
    
    
    
    4.40
    
    
    $
    42.36
    
    
    
    312,367
    
    
    
    4.40
    
    
    $
    42.36
    
    
    
    312,367
    
    
    $
    42.361,848,404
    
    
    
    6.71
    
    
    $
    9.10
    
    
    
    1,827,427
    
    
    
    6.71
    
    
    $
    9.17
    
    
    
    1,409,558
    
    
    $
    11.10
   Restricted Stock 
  22




---



##### Table of Contents



WeightedAverageGrant DateRestricted Stock Awards
    
    Shares
    
    
    Fair ValueUnvested at December 31, 2009
    
    
    423,875
    
    
    $
    0.15Granted
    
    
    
    
    
    
    Vested
    
    
    (168,848
    )
    
    $
    0.15Forfeited
    
    
    (125,534
    )
    
    $
    0.15Unvested at June 30, 2010
    
    
    129,493
    
    
    $
    0.15
 Warrants  Affiliates 
    Warrants  Other 
  23




---



##### Table of Contents



8. RELATED PARTIES
      24




---



##### Table of Contents



9. COMMITMENTS
 Operating Leases 
  Period fromJune 14, 2004Three months ended
    
    
    Six months ended
    
    
    (date of inception) toJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010Research and development expense
    
    $
    183,334
    
    
    $
    30,496
    
    
    $
    213,830
    
    
    $
    60,993
    
    
    $
    731,554General and administrative expense
    
    
    43,587
    
    
    
    78,561
    
    
    
    121,939
    
    
    
    157,122
    
    
    
    1,039,299Total
    
    $
    226,921
    
    
    $
    109,057
    
    
    $
    335,769
    
    
    $
    218,115
    
    
    $
    1,770,853
  AmountJuly through December 2010
    
    $
    220,5032011
    
    
    445,7772012
    
    
    362,4682013
    
    
    139,742Total minimum lease payments
    
    $
    1,168,490
   25




---



##### Table of Contents



10. INCOME TAXES
    11. EMPLOYEE BENEFIT PLANS
  12. RESTRUCTURING COSTS
  13. LEASE ABANDONMENT COSTS
   26




---



##### Table of Contents



14. SUBSEQUENT EVENTS
 2010 Loan Agreement Borrowings
  Leased Property
   27




---



##### Table of Contents



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, 2009 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.
 Management Overview
    Treatment with 5-Lipoxygenase Inhibitor VIA-2291 (Atreleuton) in Patients with Recent Acute
Coronary Syndrome Circ
Cardiovasc Imaging . 2010;3:298-307
   28




---



##### Table of Contents



Background
  VIA-2291
     29




---



##### Table of Contents



Treatment with 5-Lipoxygenase
Inhibitor VIA-2291 (Atreleuton) in Patients with Recent Acute Coronary Syndrome Circ Cardiovasc Imaging . 2010;3:298-307
  Roche Licensed Assets
   30




---



##### Table of Contents



Going Concern
      31




---



##### Table of Contents




    
    terminate or delay clinical trials or studies of VIA-2291;
    
    terminate or delay the preclinical development of one or more of its other preclinical
candidates;
  32




---



##### Table of Contents




    
    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 preclinical testing and
clinical studies;
  33




---



##### Table of Contents




    
    preclinical 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.
  Period fromJune 14, 2004Three Months Ended
    
    
    Six Months Ended
    
    
    (date of inception) toJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010Externally generated R&D expense
    
    $
    68,741
    
    
    $
    817,598
    
    
    $
    388,637
    
    
    $
    2,253,473
    
    
    $
    29,093,828Internally generated R&D expense
    
    
    508,255
    
    
    
    690,455
    
    
    
    980,054
    
    
    
    1,389,336
    
    
    
    13,181,041Total
    
    $
    576,996
    
    
    $
    1,508,053
    
    
    $
    1,368,691
    
    
    $
    3,642,809
    
    
    $
    42,274,869
  Period fromJune 14, 2004Three Months Ended
    
    
    Six Months Ended
    
    
    (date of inception) toJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010In-licensing expenses
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    400,000
    
    
    $
    5,270,000CRO and investigator expenses
    
    
    1,485
    
    
    
    157,512
    
    
    
    18,664
    
    
    
    688,266
    
    
    
    10,768,003Consulting expenses
    
    
    15,108
    
    
    
    435,075
    
    
    
    122,721
    
    
    
    704,204
    
    
    
    6,541,390Other
    
    
    52,148
    
    
    
    225,011
    
    
    
    247,252
    
    
    
    461,003
    
    
    
    6,514,435Total
    
    $
    68,741
    
    
    $
    817,598
    
    
    $
    388,637
    
    
    $
    2,253,473
    
    
    $
    29,093,828
  Period fromJune 14, 2004Three Months Ended
    
    
    Six Months Ended
    
    
    (date of inception) toJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010Payroll and payroll related expenses
    
    $
    243,473
    
    
    $
    438,439
    
    
    $
    568,820
    
    
    $
    921,015
    
    
    $
    9,075,979Stock-based compensation
    
    
    35,633
    
    
    
    115,703
    
    
    
    85,904
    
    
    
    216,814
    
    
    
    1,181,698Travel and entertainment expenses
    
    
    13,860
    
    
    
    66,231
    
    
    
    43,281
    
    
    
    105,016
    
    
    
    1,198,900Other
    
    
    215,289
    
    
    
    70,082
    
    
    
    282,049
    
    
    
    146,491
    
    
    
    1,724,464Total
    
    $
    508,255
    
    
    $
    690,455
    
    
    $
    980,054
    
    
    $
    1,389,336
    
    
    $
    13,181,041
   34




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##### Table of Contents



General and Administrative
  Interest Income, Interest Expense and Other Expenses
  Results of Operations
 Comparison of the three months ended June 30, 2010 and 2009
  For the Three Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    $ Change
    
    
    % ChangeRevenue
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    Research and development expense
    
    
    576,996
    
    
    
    1,508,053
    
    
    
    (931,057
    )
    
    
    (62
    )%General and administrative expense
    
    
    812,509
    
    
    
    1,729,884
    
    
    
    (917,375
    )
    
    
    (53
    )%Interest expense
    
    
    696,973
    
    
    
    1,152,953
    
    
    
    (455,980
    )
    
    
    (40
    )%Other expense
    
    
    6,160
    
    
    
    299
    
    
    
    5,861
    
    
    
    1,960
    %
 Revenue.
  35




---



##### Table of Contents



Research and Development Expense.
 General and Administrative Expense.
 Interest Expense.
 Other Expense.
 Income Tax Expense.
  36




---



##### Table of Contents



Comparison of the six months ended June 30, 2010 and 2009
  For the Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    $ Change
    
    
    % ChangeRevenue
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    Research and development expense
    
    
    1,368,691
    
    
    
    3,642,809
    
    
    
    (2,274,118
    )
    
    
    (62
    )%General and administrative expense
    
    
    2,451,951
    
    
    
    3,793,904
    
    
    
    (1,341,953
    )
    
    
    (35
    )%Restructuring costs
    
    
    106,959
    
    
    
    
    
    
    
    106,959
    
    
    
    Interest expense
    
    
    1,078,432
    
    
    
    1,266,170
    
    
    
    (187,738
    )
    
    
    (15
    )%Other income/(expense)
    
    
    (6,358
    )
    
    
    9,556
    
    
    
    (15,914
    )
    
    
    (167
    )%
 Revenue.
 Research and Development Expense.
 General and Administrative Expense.
 Restructuring Costs.
  37




---



##### Table of Contents



Interest Expense.
 Other Income/(Expense).
 Income Tax Expense.
 Liquidity and Capital Resources
     38




---



##### Table of Contents



39




---



##### Table of Contents



Contractual Obligation and Commitments
  Payments Due by PeriodLess Than
    
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    5 YearsOperating lease obligations (1)
    
    $
    1,168,490
    
    
    $
    441,687
    
    
    $
    726,803
    
    
    $
    
    
    
    $
    Notes and related interest payable  affiliate (2)
    
    
    13,509,904
    
    
    
    13,509,904
    
    
    
    
    
    
    
    
    
    
    
    Uncertain tax positions (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Licensing agreements (4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    14,678,394
    
    
    $
    13,951,591
    
    
    $
    726,803
    
    
    $
    
    
    
    $
    
 
 (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 31, 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 April 2, 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. As more fully
described in Note 13 to the unaudited condensed financial statements,
on June 1, 2010, the Company abandoned its office space leased in
Princeton, New Jersey.  40




---



##### Table of Contents



(2)
    
    As more fully described in Note 6 in the notes to the unaudited
condensed financial statements, in March 2009, the Company entered
into the Loan Agreement with the Lenders whereby the Lenders agreed to
lend to the Company in the aggregate up to $10.0 million, pursuant to
the terms of the Notes delivered under the Loan Agreement. On March
12, 2009, the Company borrowed an initial amount of $2.0 million.
During the three months ended June 30, 2009, the Company borrowed $2.0
million on May 19, 2009, and another $2.0 million on June 29, 2009.
During the three months ended September 30, 2009, the Company borrowed
$2.0 million on August 14, 2009, and a final $2.0 million on September
11, 2009. The Notes are secured by a first priority lien on all of the
assets of the Company, including the Companys intellectual property.
Amounts borrowed under the Notes accrue interest at the rate of 15%
per annum, which increases to 18% per annum following an event of
default. As of June 30, 2010, the Company accrued $1,607,671 in
interest payable  affiliate for unpaid interest expenses. Unless
earlier paid in accordance with the terms of the Notes, all unpaid
principal and accrued interest shall become fully due and payable on
the earlier to occur of (i) April 1, 2010, (ii) the closing of a debt,
equity or combined debt/equity financing resulting in gross proceeds
or available credit to the Company of not less than $20,000,000, and
(iii) the closing of a transaction in which the Company sells,
conveys, licenses or otherwise disposes of a majority of its assets or
is acquired by way of a merger, consolidation, reorganization or other
transaction or series of transactions pursuant to which stockholders
of the Company prior to such acquisition own less than 50% of the
voting interests in the surviving or resulting entity. While the
Lenders have not declared an event of default, the Company failed to
repay the debt and all related interest to the Lenders due on April 1,
2010. As a result, the Company is now accruing interest at the higher
18% per annum beginning April 1, 2010.Also as more fully described in Note 6 in the notes to the unaudited
condensed financial statements, in March 2010, the Company entered
into an additional Note and Warrant Purchase Agreement (the 2010 Loan
Agreement) with the Lenders whereby the Lenders agreed to lend to the
Company in the aggregate up to $3,000,000, pursuant to the terms of
promissory notes (collectively, the 2010 Notes) delivered under the
2010 Loan Agreement. On March 29, 2010, the Company borrowed an
initial amount of $1,250,000. During the three months ended June 30,
2010, the Company borrowed $100,000 on May 26, 2010, $200,000 on June
4, 2010, and another $300,000 on June 29, 2010. As discussed in Note
14 in the notes to the unaudited financial statements, the Company
borrowed an additional $850,000 in subsequent borrowings in July 2010.
Subject to the Lenders approval, the Company may borrow in the
aggregate up to an additional $300,000 at subsequent closings pursuant
to the terms of the 2010 Loan Agreement and 2010 Notes. The 2010 Notes
are secured by a lien on all of the assets of the Company. Amounts
borrowed under the 2010 Notes accrue interest at the rate of 15% per
annum, which increases to 18% per annum following an event of default.
As of June 30, 2010, the Company accrued $52,233 in interest payable
- affiliate for unpaid interest expenses. Unless earlier paid in
accordance with the terms of the 2010 Notes, all unpaid principal and
accrued interest shall become fully due and payable on the earlier to
occur of (i) December 31, 2010, (ii) the closing of a debt, equity or
combined debt/equity financing resulting in gross proceeds or
available credit to the Company of not less than $20,000,000, and
(iii) the closing of a transaction in which the Company sells,
conveys, licenses or otherwise disposes of a majority of its assets or
is acquired by way of a merger, consolidation, reorganization or other
transaction or series of transactions pursuant to which stockholders
of the Company prior to such acquisition own less than 50% of the
voting interests in the surviving or resulting entity.(3)
    
    The Company adopted new accounting guidance for the accounting for
uncertainty in income tax positions on the first day of its 2007
fiscal year. The amount of unrecognized tax benefits at December 31,
2009 was $584,710. 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.(4)
    
    Under certain licensing agreements, Roche may receive up to $22.4
million in milestone payments, the majority of which would be tied to
the achievement of product development and regulatory milestones. In
addition, once products containing the compounds are approved for
marketing, Roche will receive single-digit royalties based on net
sales, subject to certain reductions. Off-Balance Sheet Arrangements
  Critical Accounting Policies
   41




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##### Table of Contents



Research and Development Accruals
    Incentive Award Accruals
   42




---



##### Table of Contents



Stock-based Compensation
       Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,
    
    June 30,
    
    June 30,2010
    
    2009
    
    2010
    
    2009Expected life from grant date
    
    6.427.47
    
    6.08
    
    6.427.47
    
    
    6.08Expected volatility
    
    112%114%
    
    105
    %
    112%114%
    
    
    105
    %Risk free interest rate
    
    2.23%2.50%
    
    2.89
    %
    2.23%2.50%
    
    
    2.89
    %Dividend yield
    
    
    
    
    
    
    
    
    
  43




---



##### Table of Contents



Period fromJune 14, 2004Three Months Ended
    
    
    Six Months Ended
    
    
    (date of inception) toJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010Research and development expense
    
    $
    32,107
    
    
    $
    111,778
    
    
    $
    78,797
    
    
    $
    208,995
    
    
    $
    1,158,223General and administrative expense
    
    
    104,682
    
    
    
    231,250
    
    
    
    326,001
    
    
    
    473,085
    
    
    
    3,130,863Total
    
    $
    136,789
    
    
    $
    343,028
    
    
    $
    404,798
    
    
    $
    682,080
    
    
    $
    4,289,086
   Period fromJune 14, 2004Three Months Ended
    
    
    Six Months Ended
    
    
    (date of inception) toJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010Research and development expense
    
    $
    3,526
    
    
    $
    3,926
    
    
    $
    7,107
    
    
    $
    7,820
    
    
    $
    23,475General and administrative expense
    
    
    6,209
    
    
    
    11,845
    
    
    
    17,337
    
    
    
    23,466
    
    
    
    66,885Total
    
    $
    9,735
    
    
    $
    15,771
    
    
    $
    24,444
    
    
    $
    31,286
    
    
    $
    90,360
  Forward-looking statements
  
    
    the Companys ability to find a market maker to apply and be cleared by the Financial
Industry Regulatory Authority to quote the Companys common stock on the OTC Bulletin Board;
 
    
    ability and willingness of active market makers in our Companys common stock to trade
the Companys common stock on the Pink Sheets under a piggyback qualification;
 
    
    the Companys ability to borrow additional amounts under the new loan from Bay City
Capital, as described in Note 6 in the notes to the unaudited condensed financial
statements;
 
    
    the Companys ability to obtain necessary financing in the near term, including amounts
necessary to repay the previous loan from Bay City Capital following the April 1, 2010
maturity date;
 
    
    the Companys ability to control its operating expenses;
  44




---



##### Table of Contents




    
    the Companys ability to comply with covenants included in the loans with Bay City
Capital;
 
    
    the Companys ability to operate its business following the restructuring, as described
in Note 12 in the notes to the unaudited condensed financial statements;
 
    
    the Companys ability to comply with its reporting obligations under the rules and
regulations promulgated by the Securities and Exchange Commission following the
restructuring;
 
    
    the Companys ability to timely recruit and enroll patients in any future clinical
trials;
 
    
    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 cardiometabolic clinical trials using
surrogate endpoints in Phase 1 and Phase 2 clinical trials which may differ from the
ultimate endpoints required for registration of a candidate drug;
 
    
    the results of any future clinical trials of the Company;
 
    
    if the results of the ACS and CEA studies, upon further review and analysis, are revised,
interpreted differently by regulatory authorities or negated by later stage clinical trials;
 
    
    the Companys ability to obtain necessary FDA approvals;
 
    
    the Companys ability to successfully commercialize VIA-2291;
 
    
    the Companys ability to identify potential clinical candidates from the family of DGAT1
compounds licensed and move them into preclinical development;
 
    
    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,
including the THR beta agonist candidate and the other compounds licensed from Roche;
 
    
    the Companys ability to obtain strategic opportunities to partner and collaborate with
large biotechnology or pharmaceutical companies to further develop VIA-2291;
 
    
    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 fiscal year ended December 31, 2009 as supplemented by the risks
described under Risk Factors in Part II, Item 1A of this Quarterly Report on Form 10-Q.
   45




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##### Table of Contents



Item 4T.
    
    Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
    
 PART II.  OTHER INFORMATION
 
 Item 1A.
    
    Risk Factors
  Risks Related to the Companys Financial Results
 The Company is in default under the Loan Agreement, which could lead to a foreclosure on the
Companys assets.
   46




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##### Table of Contents



The Company may not be able to pay third-party vendors and suppliers, which could adversely affect
the Companys business, financial condition and results of operations.
  
 Item 6.
    
    Exhibits
 ExhibitNumber
    
    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 (filed as Exhibit 3.1 to the Form 8-K filed on April 17, 2008 and
incorporated herein by reference)4.1
    
    
    Warrant issued to Trout Partners LLC, dated July 31, 2007 (filed as Exhibit 99.1 to the Form 8-K filed
on August 6, 2007 and incorporated herein by reference)4.2
    
    
    Warrant issued to Redington, Inc., dated March 1, 2008 (filed as Exhibit 4.2 to the Form 10-K filed on
March 28, 2008 and incorporated herein by reference)4.3
    
    
    Warrant to Purchase Common Stock of VIA Pharmaceuticals, Inc. issued to Bay City Capital Fund IV Fund,
L.P., dated March 12, 2009 (filed as Exhibit 4.1 to the Form 8-K filed on March 12, 2009 and
incorporated herein by reference)4.4
    
    
    Warrant to Purchase Common Stock of VIA Pharmaceuticals, Inc. issued to Bay City Capital Fund IV
Co-Investment Fund, L.P., dated March 12, 2009 (filed as Exhibit 4.2 to the Form 8-K filed on March
12, 2009 and incorporated herein by reference)4.5
    
    
    Warrant to Purchase Common Stock of VIA Pharmaceuticals, Inc. issued to Bay City Capital Fund IV Fund,
L.P., dated March 26, 2010 (filed as Exhibit 4.5 to the Form 10-K filed on March 31, 2010 and
incorporated herein by reference)4.6
    
    
    Warrant to Purchase Common Stock of VIA Pharmaceuticals, Inc. issued to Bay City Capital Fund IV
Co-Investment Fund, L.P., dated March 26, 2010 (filed as Exhibit 4.6 to the Form 10-K filed on March
31, 2010 and incorporated herein by reference)4.7
    
    
    Second Amended and Restated Registration Rights Agreement, dated as of March 12, 2009, by and among
VIA Pharmaceuticals, Inc. and the parties named therein (filed as Exhibit 4.3 to the Form 8-K filed on
March 12, 2009 and incorporated herein by reference)
  47




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##### Table of Contents



ExhibitNumber
    
    Description4.8
    
    
    Amendment No. 1 to the Second Amended and Restated Registration Rights Agreement, dated as of March
26, 2010, by and among VIA Pharmaceuticals, Inc. and the parties named therein (filed as Exhibit 4.8
to the Form 10-K filed on March 31, 2010 and incorporated herein by reference)10.1
    
    
    Note and Warrant Purchase Agreement, dated as of March 26, 2010 by and among VIA Pharmaceuticals,
Inc., Bay City Capital Fund IV, L.P. and Bay City Capital Fund IV Co-Investment Fund, L.P. (filed as
Exhibit 10.2 to the Form 10-K filed on March 31, 2010 and incorporated herein by reference)10.2
    
    
    Promissory Note, dated as of March 26, 2010, by VIA Pharmaceuticals, Inc. and payable to Bay City
Capital Fund IV, L.P. (filed as Exhibit 10.11 to the Form 10-K filed on March 31, 2010 and
incorporated herein by reference)10.3
    
    
    Promissory Note, dated as of March 26, 2010, by VIA Pharmaceuticals, Inc. and payable to Bay City
Capital Fund IV Co-Investment Fund, L.P. (filed as Exhibit 10.12 to the Form 10-K filed on March 31,
2010 and incorporated herein by reference)31.1
    *
    
    Principal Executive Officers Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    *
    
    Principal Financial Officers Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    *
    
    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  48




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##### Table of Contents



VIA PHARMACEUTICALS, INC.By:
    /s/ Karen S. WrightKaren S. WrightVice President, Controller
Duly Authorized Officer and Principal Financial
Officer  49