##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
 
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2007
 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 
incorporation or organization)
    
    (I.R.S. Employer
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 þ
 o þ




---



##### 



Page No.PART I.  FINANCIAL INFORMATION
    
    
    1Item 1.
    
    Condensed Financial Statements
    
    
    1Unaudited Condensed Balance Sheets as of September 30, 2007 and December 31, 2006
    
    
    1Unaudited Condensed Statements of Operations for the Three and Nine Month Periods Ended September 30, 2007 and 2006, and for the Period from June 14, 2004 (date of inception) to September 30, 2007
    
    
    2Unaudited Condensed Statements of Cash Flows for the Nine
Month Periods Ended September 30, 2007 and 2006, and for the Period from June 14, 2004
(date of inception) to September 30, 2007
    
    
    3Notes to the Unaudited Condensed Financial Statements
    
    
    4Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    26Item 4T.
    
    Controls and Procedures
    
    
    27PART II.  OTHER INFORMATION
    
    
    28Item 1A.
    
    Risk Factors
    
    
    28Item 6.
    
    Exhibits
    
    
    28SIGNATURE
    
    
    31EXHIBITSEXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  i




---



##### Table of Contents



PART I.  FINANCIAL INFORMATION
 
 Item 1. Condensed Financial Statements
 VIA PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
 
 UNAUDITED CONDENSED BALANCE SHEETS
 SEPTEMBER 30,
    
    
    DECEMBER 31,2007
    
    
    2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    27,526,069
    
    
    $
    3,337,360Prepaid expenses and other current assets
    
    
    977,988
    
    
    
    111,107Total current assets
    
    
    28,504,,057
    
    
    
    3,448,467Property and equipmentnet
    
    
    344,167
    
    
    
    182,309Other non-current assets
    
    
    92,726
    
    
    
    95,644Total
    
    $
    28,940,950
    
    
    $
    3,726,420LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)Current liabilities:Accounts payable
    
    $
    126,593
    
    
    $
    150,384Accrued expenses and other liabilities
    
    
    3,338,115
    
    
    
    1,161,307Accrued merger transaction costs
    
    
    36,265
    
    
    
    Interest payable
    
    
    
    
    
    
    279,111Capital lease obligationcurrent portion
    
    
    2,766
    
    
    
    2,696Short term convertible notes payable
    
    
    
    
    
    
    8,000,000Total current liabilities
    
    
    3,503,739
    
    
    
    9,593,498Capital lease obligationnet of current portion
    
    
    
    
    
    
    2,051Deferred rent
    
    
    4,776
    
    
    
    4,776Total liabilities
    
    
    3,508,515
    
    
    
    9,600,325Commitments and contingenciesShareholders equity (deficit):Common stock, $0.001 par value200,000,000
and 55,758,150 shares authorized at
September 30, 2007 and December 31, 2006,
respectively; 19,718,408 and 445,043 shares
issued and outstanding at September 30,
2007 and December 31, 2006, respectively
    
    
    19,718
    
    
    
    1,197Preferred stock Series A, $0.001 par
value5,000,000 and 18,586,050 shares
authorized at September 30, 2007 and
December 31, 2006, respectively; 0 and
3,234,900 shares issued and outstanding at
September 30, 2007 and December 31, 2006,
respectively
    
    
    
    
    
    
    8,703Convertible preferred stock Series C,
$0.001 par value17,000 and 0 shares
authorized at September 30, 2007 and
December 31, 2006, respectively; 2,000 and
0 shares issued and outstanding at
September 30, 2007 and December 31, 2006,
respectively; liquidation preference of $2,000,000
    
    
    2
    
    
    
    Additional paid-in capital
    
    
    60,582,318
    
    
    
    12,619,644Treasury stock 2,014 and 0 shares at
September 30, 2007 and December 31, 2006,
respectively
    
    
    (10,276
    )
    
    
    Accumulated other comprehensive income
    
    
    17,819
    
    
    
    12,582Deficit accumulated in the development stage
    
    
    (35,177,146
    )
    
    
    (18,516,031
    )Total shareholders equity (deficit)
    
    
    25,432,435
    
    
    
    (5,873,905
    )Total
    
    $
    28,940,950
    
    
    $
    3,726,420
  1




---



##### Table of Contents



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 30,2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007Revenue
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Operating expenses:Research and development
    
    
    2,435,352
    
    
    
    1,355,997
    
    
    
    7,496,679
    
    
    
    4,205,148
    
    
    
    19,875,879General and administration
    
    
    2,169,659
    
    
    
    603,555
    
    
    
    5,630,367
    
    
    
    1,842,583
    
    
    
    10,963,746Merger transaction costs
    
    
    
    
    
    
    
    
    
    
    3,824,090
    
    
    
    
    
    
    
    3,824,090Total operating expenses
    
    
    4,605,011
    
    
    
    1,959,552
    
    
    
    16,951,136
    
    
    
    6,047,731
    
    
    
    34,663,715Operating loss
    
    
    (4,605,011
    )
    
    
    (1,959,552
    )
    
    
    (16,951,136
    )
    
    
    (6,047,731
    )
    
    
    (34,663,715
    )Other income (expense):Interest income
    
    
    247,992
    
    
    
    18,679
    
    
    
    361,375
    
    
    
    51,039
    
    
    
    498,173Interest expense
    
    
    (129
    )
    
    
    (75,273
    )
    
    
    (59,873
    )
    
    
    (338,624
    )
    
    
    (998,744
    )Other (expense) income-net
    
    
    (3,145
    )
    
    
    
    
    
    
    (11,481
    )
    
    
    
    
    
    
    (12,860
    )Total other income
(expense)
    
    
    244,718
    
    
    
    (56,596
    )
    
    
    290,021
    
    
    
    (287,585
    )
    
    
    (513,431
    )Net Loss
    
    $
    (4,360,293
    )
    
    $
    (2,016,146
    )
    
    $
    (16,661,115
    )
    
    $
    (6,335,316
    )
    
    $
    (35,177,146
    )Loss per share of common
stockbasic and diluted
    
    $
    (0.27
    )
    
    $
    (4.60
    )
    
    $
    (2.58
    )
    
    $
    (14.60
    )Weighted average shares
outstandingbasic and
diluted
    
    
    15,907,161
    
    
    
    438,073
    
    
    
    6,468,872
    
    
    
    434,004
  2




---



##### Table of Contents



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 30,2007
    
    
    2006
    
    
    2007Cash flows from operating activities:Net loss
    
    $
    (16,661,115
    )
    
    $
    (6,335,316
    )
    
    $
    (35,177,146
    )Adjustments to reconcile net loss to net cash used in
operating activities:Depreciation and amortization
    
    
    80,033
    
    
    
    38,512
    
    
    
    148,341Change in unrealized gain on foreign currency hedge
    
    
    5,237
    
    
    
    
    
    
    
    17,819Stock compensation expense
    
    
    652,462
    
    
    
    153,964
    
    
    
    1,094,783Deferred rent
    
    
    
    
    
    
    
    
    
    
    4,776Changes in assets and liabilities:Prepaid expenses and other assets
    
    
    (864,938
    )
    
    
    (63,377
    )
    
    
    (1,073,072
    )Accounts payable
    
    
    (23,791
    )
    
    
    (143,600
    )
    
    
    126,593Accrued expenses and other liabilities
    
    
    2,152,478
    
    
    
    (698,973
    )
    
    
    3,413,785Accrued merger transaction costs
    
    
    36,265
    
    
    
    
    
    
    
    36,265Interest payable
    
    
    55,111
    
    
    
    337,795
    
    
    
    992,722Net cash used in operating activities
    
    
    (14,568,258
    )
    
    
    (6,710,995
    )
    
    
    (30,415,134
    )Cash flows from investing activities:Purchase of property and equipment
    
    
    (216,586
    )
    
    
    (132,005
    )
    
    
    (452,847
    )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
    
    
    10,580,505
    
    
    
    (132,005
    )
    
    
    10,344,244Cash flows from financing activities:Proceeds from convertible promissory notes
    
    
    5,000,000
    
    
    
    11,200,000
    
    
    
    24,425,000Capital lease payments
    
    
    (1,982
    )
    
    
    (2,089
    )
    
    
    (9,208
    )Issuance of common stock
    
    
    23,140,360
    
    
    
    
    
    
    
    23,141,360Exercise of stock options for the issuance of common stock
    
    
    42,323
    
    
    
    490
    
    
    
    44,046Repurchase and retirement of common stock
    
    
    (4,239
    )
    
    
    
    
    
    
    (4,239
    )Net cash provided by financing activities
    
    
    28,176,462
    
    
    
    11,198,401
    
    
    
    47,596,959Increase in cash and cash equivalents
    
    
    24,188,709
    
    
    
    4,355,401
    
    
    
    27,526,069Cash and cash equivalents-beginning of period
    
    
    3,337,360
    
    
    
    442,867
    
    
    
    Cash and cash equivalents-end of period
    
    $
    27,526,069
    
    
    $
    4,798,268
    
    
    $
    27,526,069Supplemental disclosure of noncash activities:Interest on convertible debt converted to notes payable
    
    $
    334,222
    
    
    $
    366,588Conversion of notes to preferred stock Series A
    
    $
    13,334,222
    
    
    $
    12,183,500
  3




---



##### Table of Contents



VIA PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
 
 NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
 1. ORGANIZATION
 Overview
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation Accounting and Reporting by Development Stage Enterprises
    Significant Risks and Uncertainty
 4




---



##### Table of Contents



Use of estimates 
  Research and Development Expenses Accounting for Research and Development Costs
  Accounting For Uncertainty in Income Taxes  Accounting for Uncertainty in Income Taxes  an
Interpretation of FASB Statement No. 109
 Earnings (Loss) Per Share of Common Stock
 5




---



##### Table of Contents



Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net loss
    
    $
    (4,360,293
    )
    
    $
    (2,016,146
    )
    
    $
    (16,661,115
    )
    
    $
    (6,335,316
    )Basic and diluted net loss per share:Weighted-average shares of common stock
outstanding
    
    
    16,135,802
    
    
    
    438,073
    
    
    
    6,708,009
    
    
    
    434,004Less: Weighted-average shares of common
stock subject to repurchase
    
    
    (228,641
    )
    
    
    
    
    
    
    (239,137
    )
    
    
    Weighted-average shares used in computing
basic net loss per share
    
    
    15,907,161
    
    
    
    438,073
    
    
    
    6,468,872
    
    
    
    434,004Dilutive effect of common share equivalents
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted-average shares used in computing
diluted net loss per share
    
    
    15,907,161
    
    
    
    438,073
    
    
    
    6,468,872
    
    
    
    434,004Basic net loss per share
    
    $
    (0.27
    )
    
    $
    (4.60
    )
    
    $
    (2.58
    )
    
    $
    (14.60
    )Diluted net loss per share
    
    $
    (0.27
    )
    
    $
    (4.60
    )
    
    $
    (2.58
    )
    
    $
    (14.60
    )
  Nine months endedSeptember 30, 2007
    
    September 30, 2006Common stock equivalents (in shares):Shares of common stock subject to outstanding options
    
    
    1,171,298
    
    
    
    431,977Shares of common stock subject to outstanding warrants
    
    
    96,520
    
    
    
    Shares of common stock subject to conversion from Series A preferred stock
    
    
    
    
    
    
    3,234,900Total shares of common stock equivalents
    
    
    1,267,548
    
    
    
    3,666,877
  Comprehensive Income (Loss)
 Three months
    
    
    Three months
    
    
    Nine months
    
    
    Nine monthsended
    
    
    ended
    
    
    ended
    
    
    endedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net loss
    
    $
    (4,360,293
    )
    
    $
    (2,016,146
    )
    
    $
    (16,661,115
    )
    
    $
    (6,335,316
    )Change in unrealized
gain on foreign
currency cash flow
hedges
    
    
    (781
    )
    
    
    
    
    
    
    5,237
    
    
    
    Total comprehensive loss
    
    $
    (4,361,074
    )
    
    $
    (2,016,146
    )
    
    $
    (16,655,878
    )
    
    $
    (6,335,316
    )
 6




---



##### Table of Contents



Derivative Instruments Accounting for Derivative
Instruments and Hedging Activities
  New Accounting Pronouncements Fair Value Measurements
 The Fair Value Option for Financial Assets
and Financial Liabilities
 Accounting for Nonrefundable Advance Payments for Goods or Services
Received for Use in Future Research and Development Activities.
 3. EQUITY FINANCING  PRIVATE INVESTMENT IN PUBLIC EQUITIES
  7




---



##### Table of Contents



4. STOCK-BASED COMPENSATION
 Share-Based Payment Accounting for Stock-Based Compensation Accounting for Stock Issued to Employees
      Three months ended
    
    Nine months endedSeptember 30, 2007
    
    September 30, 2006
    
    September 30, 2007
    
    September 30, 2006Expected life from grant date
    
    
    5.276.25
    
    
    
    5.306.08
    
    
    
    5.006.25
    
    
    
    5.306.08Expected volatility
    
    
    7477
    %
    
    
    6769
    %
    
    
    68%77
    %
    
    
    67%75
    %Risk free interest rate
    
    
    4.205.03
    %
    
    
    4.64
    %
    
    
    4.205.03
    %
    
    
    4.64
    %Dividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 8




---



##### Table of Contents



Period fromJune 14, 2004Three months ended
    
    
    Nine months ended
    
    
    (date of inception) toSept 30, 2007
    
    
    Sept 30, 2006
    
    
    Sept 30, 2007
    
    
    Sept 30, 2006
    
    
    Sept 30, 2007Research and development expense
    
    $
    27,202
    
    
    $
    37,425
    
    
    $
    209,456
    
    
    $
    68,173
    
    
    $
    457,423General and administrative expense
    
    
    95,255
    
    
    
    65,172
    
    
    
    443,006
    
    
    
    85,791
    
    
    
    629,983Total
    
    $
    122,457
    
    
    $
    102,597
    
    
    $
    652,462
    
    
    $
    153,964
    
    
    $
    1,087,406
  5. RESEARCH AND DEVELOPMENT
  Period fromJune 14, 2004Three months ended
    
    
    Nine months ended
    
    
    (date of inception) toSept 30, 2007
    
    
    Sept 30, 2006
    
    
    Sept 30, 2007
    
    
    Sept 30, 2006
    
    
    Sept 30, 2007Externally
generated research
and development
expense
    
    $
    1,846,494
    
    
    $
    809,847
    
    
    $
    5,648,691
    
    
    $
    2,804,353
    
    
    $
    14,936,391Internally
generated research
and development
expense
    
    
    588,858
    
    
    
    546,150
    
    
    
    1,847,988
    
    
    
    1,400,795
    
    
    
    4,939,488Total
    
    $
    2,435,352
    
    
    $
    1,355,997
    
    
    $
    7,496,679
    
    
    $
    4,205,148
    
    
    $
    19,875,879
  Period fromJune 14, 2004Three months ended
    
    
    Nine months ended
    
    
    (date of inception) toSept 30, 2007
    
    
    Sept 30, 2006
    
    
    Sept 30, 2007
    
    
    Sept 30, 2006
    
    
    Sept 30, 2007Externally generated research and
development expense:In-licensing expenses
    
    $
    
    
    
    $
    
    
    
    $
    1,635,000
    
    
    $
    10,000
    
    
    $
    4,645,000CRO and investigator expenses
    
    
    1,109,978
    
    
    
    246,194
    
    
    
    2,285,256
    
    
    
    728,372
    
    
    
    3,494,242Consulting expenses
    
    
    313,487
    
    
    
    303,293
    
    
    
    818,926
    
    
    
    1,231.653
    
    
    
    3,693,976Other
    
    
    423,029
    
    
    
    260,360
    
    
    
    909,509
    
    
    
    834,328
    
    
    
    3,103,173Total
    
    $
    1,846,494
    
    
    $
    809,847
    
    
    $
    5,648,691
    
    
    $
    2,804,353
    
    
    $
    14,936,391
  Period fromJune 14, 2004Three months ended
    
    
    Nine months ended
    
    
    (date of inception) toSept 30, 2007
    
    
    Sept 30, 2006
    
    
    Sept 30, 2007
    
    
    Sept 30, 2006
    
    
    Sept 30, 2007Internally generated research and
development expense:Payroll and related expenses
    
    $
    421,914
    
    
    $
    328,873
    
    
    $
    1,270,597
    
    
    $
    874,316
    
    
    $
    3,344,245Stock-based compensation
    
    
    27,202
    
    
    
    37,425
    
    
    
    209,457
    
    
    
    68,173
    
    
    
    457,423Travel and entertainment
expenses
    
    
    46,999
    
    
    
    98,883
    
    
    
    127,164
    
    
    
    254,445
    
    
    
    546,702Other
    
    
    92,743
    
    
    
    80,969
    
    
    
    240,770
    
    
    
    203,861
    
    
    
    591,118Total
    
    $
    588,858
    
    
    $
    546,150
    
    
    $
    1,847,988
    
    
    $
    1,400,795
    
    
    $
    4,939,488
 9




---



##### Table of Contents



6. FINANCING ARRANGEMENTS
   Debtors Accounting for a Modification or Exchange of Debt
Instruments
 7. EQUITY
  Common Stock
 (in shares)
    
    September 30, 2007
    
    December 31, 2006Convertible preferred stock and convertible notes
    
    
    
    
    
    
    18,586,0502002 Stock Planoutstanding and available to grant
    
    
    407,920
    
    
    
    387,9202004 Stock Planoutstanding and available to grant
    
    
    848,538
    
    
    
    1,134,775Common stock warrants
    
    
    96,520
    
    
    
    Total
    
    
    1,352,978
    
    
    
    20,108,745
 Preferred Stock
  10




---



##### Table of Contents



Stock Option Plans
  WeightedAverageNumber of
    
    
    ExerciseShares
    
    
    PriceOutstandingDecember 31, 2006
    
    
    361,291
    
    
    $
    46.05Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Canceled and expired
    
    
    (35,385
    )
    
    $
    76.73OutstandingSeptember 30, 2007
    
    
    325,906
    
    
    $
    42.68
  Options Outstanding, Vested and ExercisableAverage
    
    WeightedRange of
    
    Number
    
    Remaining
    
    AverageExercise
    
    of Options
    
    Contractual
    
    ExercisePrices
    
    Outstanding
    
    Life (Years)
    
    Price$5.25-$12.75
    
    
    108,065
    
    
    
    9.37
    
    
    $
    12.38$19.50
    
    
    81,368
    
    
    
    6.33
    
    
    $
    19.50$33.60-$44.10
    
    
    2,496
    
    
    
    6.31
    
    
    $
    41.73$59.70-$72.45
    
    
    25,642
    
    
    
    7.40
    
    
    $
    64.78$75.15-$113.40
    
    
    107,672
    
    
    
    7.33
    
    
    $
    81.68$215.25-$1,023.75
    
    
    663
    
    
    
    4.38
    
    
    $
    641.78325,906
    
    
    
    7.75
    
    
    $
    42.68
  11




---



##### Table of Contents



WeightedAverageNumber of
    
    
    ExerciseShares
    
    
    PriceOutstandingDecember 31, 2006
    
    
    652,124
    
    
    $
    0.09Granted
    
    
    510,637
    
    
    $
    3.47Exercised
    
    
    (317,369
    )
    
    
    0.14Canceled
    
    
    
    
    
    
    OutstandingSeptember 30, 2007
    
    
    845,392
    
    
    $
    2.12
   Options Outstanding
    
    Options Vested or Expected to Vest
    
    Options ExercisableAverage
    
    Weighted
    
    Number
    
    Average
    
    Weighted
    
    
    
    
    
    WeightedRange of
    
    Number
    
    Remaining
    
    Average
    
    Exercisable or
    
    Remaining
    
    Average
    
    
    
    
    
    AverageExercise
    
    of Options
    
    Contractual
    
    Exercise
    
    Expected to
    
    Contractual
    
    Exercise
    
    Number
    
    ExercisePrices
    
    Outstanding
    
    Life (Years)
    
    Price
    
    Vest
    
    Life (Years)
    
    Price
    
    Exercisable
    
    Price$0.03
    
    
    267,202
    
    
    
    7.69
    
    
    $
    0.03
    
    
    
    264,122
    
    
    
    7.69
    
    
    $
    0.03
    
    
    
    205,594
    
    
    $
    0.03$0.14
    
    
    102,493
    
    
    
    9.05
    
    
    $
    0.14
    
    
    
    89,163
    
    
    
    9.05
    
    
    $
    0.14
    
    
    
    59,771
    
    
    $
    0.14$3.48
    
    
    416,225
    
    
    
    9.84
    
    
    $
    3.48
    
    
    
    394,118
    
    
    
    9.84
    
    
    $
    3.48
    
    
    
    8,656
    
    
    $
    3.48$5.10
    
    
    22,300
    
    
    
    9.68
    
    
    $
    5.10
    
    
    
    22,300
    
    
    
    9.68
    
    
    $
    5.10
    
    
    
    22,300
    
    
    $
    5.10$5.55
    
    
    37,172
    
    
    
    9.68
    
    
    $
    5.55
    
    
    
    35,313
    
    
    
    9.68
    
    
    $
    5.55
    
    
    
    37,172
    
    
    $
    5.55845,392
    
    
    
    9.05
    
    
    $
    2.12
    
    
    
    805,016
    
    
    
    9.05
    
    
    $
    2.12
    
    
    
    333,493
    
    
    $
    1.09
  Warrants
   8. INCOME TAXES
  12




---



##### Table of Contents



9. CONTINGENCIES
  10. SUBSEQUENT EVENT
  13




---



##### 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 certain factors, including but not limited to those set
forth under Risk Factors in Part II and elsewhere in this Quarterly Report on Form 10-Q .
 Overview
 Description of Business and Background
        14




---



##### Table of Contents




    
    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 discovery programs that are designed to identify molecular targets and
small molecules for treating cardiovascular disease; and
    
    relinquish rights to product candidates, development programs, or discovery
development programs that it may otherwise seek to develop or commercialize on its own.
 Revenue
  Research and Development Expenses
   
    
    Compensation of personnel associated with research and development activities,
including consultants, investigators, and clinical 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.
  Period fromJune 14, 2004Three months ended
    
    
    Nine months ended
    
    
    (date of inception) toSept 30, 2007
    
    
    Sept 30, 2006
    
    
    Sept 30, 2007
    
    
    Sept 30, 2006
    
    
    Sept 30, 2007Externally
generated research
and development
expense
    
    $
    1,846,494
    
    
    $
    809,847
    
    
    $
    5,648,691
    
    
    $
    2,804,353
    
    
    $
    14,936,391Internally
generated research
and development
expense
    
    
    588,858
    
    
    
    546,150
    
    
    
    1,847,988
    
    
    
    1,400,795
    
    
    
    4,939,488Total
    
    $
    2,435,352
    
    
    $
    1,355,997
    
    
    $
    7,496,679
    
    
    $
    4,205,148
    
    
    $
    19,875,879
 15




---



##### Table of Contents



Period fromJune 14, 2004Three months ended
    
    
    Nine months ended
    
    
    (date of inception) toSept 30, 2007
    
    
    Sept 30, 2006
    
    
    Sept 30, 2007
    
    
    Sept 30, 2006
    
    
    Sept 30, 2007Externally generated research and
development expense:In-licensing expenses
    
    $
    
    
    
    $
    
    
    
    $
    1,635,000
    
    
    $
    10,000
    
    
    $
    4,645,000CRO and investigator expenses
    
    
    1,109,978
    
    
    
    246,194
    
    
    
    2,285,256
    
    
    
    728,372
    
    
    
    3,494,242Consulting expenses
    
    
    313,487
    
    
    
    303,293
    
    
    
    818,926
    
    
    
    1,231.653
    
    
    
    3,693,976Other
    
    
    423,029
    
    
    
    260,360
    
    
    
    909,509
    
    
    
    834,328
    
    
    
    3,103,173Total
    
    $
    1,846,494
    
    
    $
    809,847
    
    
    $
    5,648,691
    
    
    $
    2,804,353
    
    
    $
    14,936,391
  Period fromJune 14, 2004Three months ended
    
    
    Nine months ended
    
    
    (date of inception) toSept 30, 2007
    
    
    Sept 30, 2006
    
    
    Sept 30, 2007
    
    
    Sept 30, 2006
    
    
    Sept 30, 2007Internally generated research and
development expense:Payroll and related expenses
    
    $
    421,914
    
    
    $
    328,873
    
    
    $
    1,270,597
    
    
    $
    874,316
    
    
    $
    3,344,245Stock-based compensation
    
    
    27,202
    
    
    
    37,425
    
    
    
    209,457
    
    
    
    68,173
    
    
    
    457,423Travel and entertainment
expenses
    
    
    46,999
    
    
    
    98,883
    
    
    
    127,164
    
    
    
    254,445
    
    
    
    546,702Other
    
    
    92,743
    
    
    
    80,969
    
    
    
    240,770
    
    
    
    203,861
    
    
    
    591,118Total
    
    $
    588,858
    
    
    $
    546,150
    
    
    $
    1,847,988
    
    
    $
    1,400,795
    
    
    $
    4,939,488
     16




---



##### Table of Contents



17




---



##### Table of Contents



General and Administrative
   Interest Income, Interest Expense and Other Expenses
  Results of Operations
 Comparison of the three months ended September 30, 2007 and 2006
  For the three months endedSept 30, 2007
    
    Sept 30, 2006
    
    $ Change
    
    % ChangeRevenue
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    Research and development expense
    
    
    2,435,352
    
    
    
    1,355,997
    
    
    
    1,079,355
    
    
    
    80
    %General and administrative expense
    
    
    2,169,659
    
    
    
    603,555
    
    
    
    1,566,104
    
    
    
    259
    %Interest income
    
    
    247,992
    
    
    
    18,679
    
    
    
    229,313
    
    
    
    1,228
    %Interest expense
    
    
    129
    
    
    
    75,273
    
    
    
    (75,144
    )
    
    
    (100
    )%Other expense
    
    
    3,145
    
    
    
    
    
    
    
    3,145
    
    
    
    
 Revenue
 Research and Development Expense
 18




---



##### Table of Contents



General and Administrative Expense
 Interest Income
 Interest Expense
 Other Expense
 Comparison of the nine months ended September 30, 2007 and 2006
  For the nine months endedSept 30, 2007
    
    Sept 30, 2006
    
    $ Change
    
    % ChangeRevenue
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    Research and development expense
    
    
    7,496,679
    
    
    
    4,205,148
    
    
    
    3,291,531
    
    
    
    78
    %General and administrative expense
    
    
    5,630,367
    
    
    
    1,842,583
    
    
    
    3,787,784
    
    
    
    206
    %Merger transaction costs
    
    
    3,824,090
    
    
    
    
    
    
    
    3,824,090
    
    
    
    Interest income
    
    
    361,375
    
    
    
    51,039
    
    
    
    310,336
    
    
    
    608
    %Interest expense
    
    
    59,873
    
    
    
    338,624
    
    
    
    (278,751
    )
    
    
    (82
    )%Other expense
    
    
    11,481
    
    
    
    
    
    
    
    11,481
    
    
    
    
 19




---



##### Table of Contents



Revenue
 Research and Development Expense
 General and Administrative Expense
 Merger Transaction Costs.
 Interest Income
 Interest Expense
 20




---



##### Table of Contents



Other Expense
 Liquidity and Capital Resources
       21




---



##### Table of Contents



Contractual Obligation and Commitments
  Payments Due By PeriodLess Than
    
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    5 YearsLong-term capital lease obligations (1)
    
    $
    2,766
    
    
    $
    2,766
    
    
    $
    
    
    
    $
    
    
    
    $
    Operating lease obligations (2)
    
    
    322,915
    
    
    
    171,478
    
    
    
    106,970
    
    
    
    44,467
    
    
    
    Stanford license (3)
    
    
    870,000
    
    
    
    25,000
    
    
    
    60,000
    
    
    
    85,000
    
    
    
    700,000Abbott license (4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,195,681
    
    
    $
    199,244
    
    
    $
    166,970
    
    
    $
    129,467
    
    
    $
    700,000
 
 (1)
    
    Long-term capital lease of a copier.(2)
    
    On September 1, 2005, the Company entered into a five-year operating lease for 1,980 square
feet of office space for clinical offices in Princeton, New Jersey. On November 1, 2005, the
Company entered into a three-year operating lease for 4,776 square feet of office space for
the headquarters offices in San Francisco, California. Future minimum lease payments under the
operating leases total $203,588, $148,010, $48,510, $48,510, and $32,340 for the years ending
December 31, 2007, 2008, 2009, 2010 and 2011, respectively.(3)
    
    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 $10,000 in 2006 and 2007 respectively, $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 uses 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, 2007, we are unable to determine or predict the timing
and amount of any potential royalty or milestone payments.(4)
    
    In August 2005, the Company entered into an exclusive license agreement with Abbott
Laboratories for the development and commercialization of a patented compound and related
technology, formerly known as ABT-761 and subsequently renamed VIA-2291. In exchange, the
Company agreed to make certain payments to Abbott, including $2.0 million for the grant of the
license which was expensed in the year ending December 31, 2005, $1.0 million for the transfer
of the licensed technology expensed in the year ending December 31, 2005, and is committed to
make payments of various specified amounts upon the achievement of certain development
milestones and the achievement of certain worldwide sales milestones. These include $1.0
million upon the first dosing of a patient in a Phase III clinical trial, $3.0 million upon
the acceptance of the filing of the first NDA in the United States, $2.0 million upon the
acceptance of the first filing of an Marketing Authorization Application in Europe, $6.0
million upon regulatory
approval in the US, and $4.0 million upon first regulatory approval in either the UK, France,
Italy, Germany or Spain, and $3.0 million upon the first regulatory approval in Japan. As of
December 31, 2006, we are not able to determine 22




---



##### Table of Contents



with any certainty that these milestones will
be attained. Beyond the aforementioned milestones, the Company has also agreed to pay Abbott
various sales related milestone payments based upon the volume of future sales. At June 30,
2007, the Company is also not able to determine with any certainty that these milestones will
be attained.  Off-Balance Sheet Arrangements
  Critical Accounting Policies
     Research and Development Accruals
   23




---



##### Table of Contents



Stock-based Compensation
    24




---



##### Table of Contents



Period fromJune 14, 2004Three months ended
    
    
    Nine months ended
    
    
    (date of inception) toSept 30, 2007
    
    
    Sept 30, 2006
    
    
    Sept 30, 2007
    
    
    Sept 30, 2006
    
    
    Sept 30, 2007Research and development expense
    
    $
    27,202
    
    
    $
    37,425
    
    
    $
    209,457
    
    
    $
    68,173
    
    
    $
    457,423General and administrative expense
    
    
    95,255
    
    
    
    65,172
    
    
    
    443,006
    
    
    
    85,791
    
    
    
    629,983Total
    
    $
    122,457
    
    
    $
    102,597
    
    
    $
    652,462
    
    
    $
    153,964
    
    
    $
    1,087,406
  Forward-looking statements
  
    
    the Companys ability to obtain necessary financing;
    
    the Companys ability to control its operating expenses;
    
    the Companys ability to recruit and enroll patients for the CEA, ACS and FTD-PET
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;
    
    the results of the Companys clinical trials, including without limitation, with
respect to the safety and efficacy of VIA-2291;
    
    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; and
    
    general economic and business conditions
    
    the other risks described under the heading Risk Factors in our Quarterly Report on
Form 10-Q for the quarter ended June 30, 2007 on file with the SEC and in Part II, Item 1A
below.
  25




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Interest Rate Risk
  Foreign Currency Exchange Rate Risk
  26




---



##### Table of Contents



Item 4T. Controls and Procedures
   27




---



##### Table of Contents



PART II.  OTHER INFORMATION
 
 Item 1A. Risk Factors
 This Form 10-Q contains forward-looking information based on our current expectations. Because
our actual results may differ materially from any forward-looking statements that we make or that
are made on our behalf, this section includes a discussion of important factors that could affect
our actual future results, including, but not limited to operating expenses, net income, and
earnings per share
  Our Phase II clinical trial of VIA-2291 utilizing Positron Emission Tomography with
fluorodeoxyglucose tracer, or FDG-PET, utilizes new, innovative imaging technology that does not
represent a widely accepted and validated clinical trial endpoint 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 our other current ongoing clinical trials.
  
 Item 6. Exhibits
 Exhibit No.
    
    Description2.1
    
    Agreement and Plan of Merger and Reorganization, dated February 7, 2007, by and among Corautus
Genetics Inc., Resurgens Merger Corp., and VIA Pharmaceuticals, Inc. (filed as Exhibit 2.1 to the
Form 8-K filed on February 8, 2007 and incorporated herein by reference)3.1
    
    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 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
3.8 to the Form 10-Q filed on August 14, 2007 and incorporated herein by reference)
 28




---



##### Table of Contents



Exhibit No.
    
    Description3.9
    
    Certificate of Amendment to the Restated Certificate of Incorporation (Name Change) (filed as 3.9 to
the Form 10-Q filed on August 14, 2007 and incorporated herein by reference)3.10
    
    Third Amended and Restated Bylaws (filed as Exhibit 3.1 to the Form 8-K filed on June 11, 2007 and
incorporated herein by reference)10.1
    
    Amended and Restated Registration Rights Agreement, dated June 5, 2007, by and among VIA
Pharmaceuticals, Inc. and the stockholders named therein (filed as Exhibit 10.11 to the Form 8-K
filed on June 11, 2007 and incorporated herein by reference)10.2
    
    Form of Securities Purchase Agreement, dated June 29, 2007, by and among VIA Pharmaceuticals, Inc.
and the Investors named therein (filed as Exhibit 10.1 to the Form 8-K filed on July 3, 2007 and
incorporated herein by reference)10.3
    
    Exclusive Agreement, effective February 28, 2005, between the Board of Trustees of the Leland
Stanford Junior University and VIA Pharmaceuticals, Inc. (filed as 10.3 to the Form 10-Q filed on
August 14, 2007 and incorporated herein by reference)10.4
    
    Exclusive License Agreement, effective August 10, 2005, between VIA Pharmaceuticals, Inc. and Abbott
Laboratories (filed as 10.4 to the Form 10-Q filed on August 14, 2007 and incorporated herein by
reference)10.5
    
    Research Agreement, effective September 25, 2006, between University of Liverpool and VIA
Pharmaceuticals, Inc. (filed as 10.5 to the Form 10-Q filed on August 14, 2007 and incorporated
herein by reference)10.6
    
    Patent Rights and Related Assets Purchase Agreement, dated as of January 25, 2007, by and between VIA
Pharmaceuticals, Inc. and Neuro3D, S.A. (filed as 10.6 to the Form 10-Q filed on August 14, 2007 and
incorporated herein by reference)10.7
    
    Amendment No. 1 to Patent Rights and Related Assets Purchase Agreement, dated as of February 23,
2007, by and between VIA Pharmaceuticals, Inc. and Neuro3D, S.A. (filed as 10.7 to the Form 10-Q
filed on August 14, 2007 and incorporated herein by reference)10.8
    
    Exclusive Option Agreement, dated as of March 27, 2007, between Santen Pharmaceutical Co., Ltd. and
VIA Pharmaceuticals, Inc. (filed as 10.8 to the Form 10-Q filed on August 14, 2007 and incorporated
herein by reference)10.9
    
    Employment Agreement, dated as of August 10, 2004, by and between VIA Pharmaceuticals, Inc. and
Lawrence K. Cohen (filed as Exhibit 10.2 to the Form 8-K filed on June 11, 2007 and incorporated
herein by reference)10.10
    
    Amendment to Employment Agreement, dated as of June 4, 2007, by and between VIA Pharmaceuticals, Inc.
and Lawrence K. Cohen (filed as Exhibit 10.3 to the Form 8-K filed on June 11, 2007 and incorporated
herein by reference)10.11
    
    Employment Agreement, dated as of August 12, 2004, by and between VIA Pharmaceuticals, Inc. and
Adeoye Olukotun (filed as Exhibit 10.4 to the Form 8-K filed on June 11, 2007 and incorporated herein
by reference)10.12
    
    Amendment to Employment Agreement, dated as of June 4, 2007, by and between VIA Pharmaceuticals, Inc.
and Adeoye Olukotun (filed as Exhibit 10.5 to the Form 8-K filed on June 11, 2007 and incorporated
herein by reference)10.13
    
    Letter Agreement, dated as of October 3, 2006, between VIA Pharmaceuticals, Inc. and James G. Stewart
(filed as Exhibit 10.6 to the Form 8-K filed on June 11, 2007 and incorporated herein by reference)10.14
    
    Amendment to Letter Agreement, dated as of June 4, 2007, by and between VIA Pharmaceuticals, Inc. and
James G. Stewart (filed as Exhibit 10.7 to the Form 8-K filed on June 11, 2007 and incorporated
herein by reference)10.15
    
    VIA Pharmaceuticals, Inc. 2004 Stock Plan (filed as Exhibit 10.8 to the Form 8-K filed on June 11,
2007 and incorporated herein by reference)
 29




---



##### Table of Contents



Exhibit No.
    
    Description10.16
    
    VIA Pharmaceuticals, Inc. standard form of stock option agreement (filed as Exhibit 10.9 to the Form
8-K filed on June 11, 2007 and incorporated herein by reference)10.17
    
    VIA Pharmaceuticals, Inc. early exercise form of stock option agreement (filed as Exhibit 10.10 to
the Form 8-K filed on June 11, 2007 and incorporated herein by reference)10.18
    
    Standard Director Form of Option Agreement (filed as 10.18 to the Form 10-Q filed on August 14, 2007
and incorporated herein by reference)10.19
    
    Conversion Agreement, dated as of May 11, 2007, between Corautus Genetics Inc. and Boston Scientific
Corporation (filed as 10.19 to the Form 10-Q filed on August 14, 2007 and incorporated herein by
reference)10.20
    
    Form of Lock-Up Agreement, attached as Exhibit E to the Agreement and Plan of Merger and
Reorganization, dated February 7, 2007, by and among Corautus Genetics Inc., Resurgens Merger Corp.,
and VIA Pharmaceuticals, Inc. (filed as Exhibit 2.1 to the Form 8-K filed on February 8, 2007 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)
 30




---



##### Table of Contents



VIA PHARMACEUTICALS, INC.By:
    /s/ James G. StewartJames G. StewartSenior Vice President, Chief
Financial Officer
Duly Authorized Officer and
Principal Financial Officer 31