SECURITIES AND EXCHANGE COMMISSION            WASHINGTON, D.C. 20549            _________________            FORM 10-Q            ___________            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE            SECURITIES EXCHANGE ACT OF 1934            For the quarterly period ended June 30, 2002      Commission File No. 0-31261

**ATHEROGENICS, INC.**(Exact name of registrant as specified in its charter)      

| **Georgia**              | **58-210832**                                        |
|--------------------------|------------------------------------------------------|
| (State of incorporation) | (I.R.S. Employer Identification              Number) |

**8995 Westside Parkway, Alpharetta, Georgia 30004**(Address of registrant's principal executive      offices, including zip code)            _______________________            (Registrant's telephone number, including area code):      **(678) 336-2500**      Indicate by check mark whether the registrant:  (1) has      filed all reports required to be filed by Section 13 or 15(d)      of the Securities Exchange Act of 1934 during the preceding      12 months (or for such shorter period that the registrant was      required to file such reports), and (2) has been subject to      such filing requirements for the past 90 days. Yes [ X ]         No [   ]

As of August 12, 2002, there were 27,970,669      shares of the registrant's            common stock outstanding.            _________________________      

****ATHEROGENICS, INC.            FORM 10-Q            INDEX**       **

**PART I. FINANCIAL INFORMATION**

**Page No.**

Item 1.  Financial Statements (unaudited)

Condensed Balance Sheets

June 30, 2002 and December 31, 2001

3

Condensed Statements of Operations

Three and six months ended June 30, 2002 and            2001

4

Condensed Statements of Cash Flows

Six months ended June 30, 2002 and 2001

5

Notes to Condensed Financial Statements

6

Item 2.  Management's Discussion and            Analysis of Financial Condition

and Results of Operations

7

Item 3.  Quantitative and Qualitative            Disclosures About Market Risk

10

**PART II. OTHER INFORMATION**

Item 2.  Changes in Securities and Use of            Proceeds

11

Item 4.  Submission of Matters to a Vote of            Security Holders

11

Item 6.  Exhibits and Reports on Form 8-K

12

**SIGNATURES**

13

2

**PART I - FINANCIAL INFORMATION**

**Item 1.  Financial Statements**

****

**ATHEROGENICS, INC.****  CONDENSED BALANCE SHEETS**

**June 30,**

**December 31,**

**2002**

**2001**

**ASSETS**

(Unaudited)

(Audited)

Current assets:

Cash and cash equivalents

$ 28,517,229

$ 28,682,050

Short-term investments

18,081,797

29,757,945

Prepaid expenses, notes receivable and other current            assets

515,777

576,734

Total current assets

47,114,803

59,016,729

Fixed assets, net of accumulated depreciation

2,951,741

2,915,512

Notes receivable, net of current portion

451,351

323,037

Total assets

$ 50,517,895

$ 62,255,278

**LIABILITIES AND SHAREHOLDERS'            EQUITY**

Current liabilities:

Accounts payable 

$                 701,499

$   1,121,550

Accrued research and development costs

1,511,418

1,307,435

Accrued liabilities

677,531

541,809

Accrued compensation

565,155

902,571

Current portion of equipment loan facility and

capitalized lease obligation

364,898

87,101

Total current liabilities

3,820,501

3,960,466

Equipment loan facility, net of current portion

532,143

--

Shareholders' equity:

Preferred stock, no par value:  Authorized -            5,000,000 shares

--

--

Common stock, no par value:  Authorized -            100,000,000

shares; issued and outstanding - 27,932,351 and

27,834,773 shares at June 30, 2002 and

December 31, 2001, respectively

121,931,045

121,723,102

Warrants

769,306

771,713

Deferred stock compensation

(2,123,683

)

(2,975,314

)

Accumulated deficit

(74,414,196

)

(61,277,987

)

Accumulated other comprehensive income

2,779

53,298

Total shareholders' equity

46,165,251

58,294,812

Total liabilities and shareholders' equity

$ 50,517,895

$ 62,255,278

      The accompanying notes are an integral part of these      condensed financial statements.

3

**ATHEROGENICS, INC.            CONDENSED STATEMENTS OF OPERATIONS            (Unaudited)**

****

**Three months ended**

**Six months ended**

**June 30,**

**June 30,**

**2002**

**2001**

**2002**

**2001**

Revenues:

License fees

$                                       --

$     277,778

            $                             --

$  1,111,111

Research and development

--

203,467

--

800,556

Total revenues

--

481,245

--

1,911,667

Operating expenses:

Research and development

5,317,582

3,846,895

10,703,196

7,418,783

General and administrative

1,024,849

946,621

2,008,195

1,895,272

Amortization of deferred stock

compensation

499,323

225,576

998,646

1,020,393

Total operating expenses

6,841,754

5,019,092

13,710,037

10,334,448

Operating loss

(6,841,754

)

(4,537,847

)

(13,710,037

)

(8,422,781

)

Net interest income

269,260

588,570

573,828

1,372,876

Net loss

$ (6,572,494

)

$ (3,949,277

)

$ (13,136,209

)

$ (7,049,905

)

Net loss per share -

basic and diluted

            $                     (0.24

)

            $                     (0.16

)

            $                       (0.47

)

            $                     (0.29

)

Weighted average shares outstanding -

basic and diluted

27,925,386

24,483,242

27,900,963

24,212,963

      The accompanying notes are an integral part of these      condensed financial statements.      
4

**ATHEROGENICS, INC            CONDENSED STATEMENTS OF CASH FLOWS            (Unaudited)**

****

**Six months ended**

**June 30,**

**2002**

**2001**

**Operating activities:**

Net loss

$ (13,136,209

)

$ (7,049,905

)

Adjustments to reconcile net loss to net cash used            in

operating activities:

Depreciation and amortization

359,113

224,215

Amortization of deferred stock compensation

998,646

1,020,393

Stock issued for services

--

29,778

Changes in operating assets and liabilities:

Accounts receivable

--

885,086

Prepaid expenses, notes receivable and other            assets

(67,357

)

(102,206

)

Accounts payable 

(420,051

)

(219,592

)

Accrued liabilities

2,289

363,887

Deferred revenues

--

(1,111,111

)

Net cash used in operating activities

(12,263,569

)

(5,959,455

)

**Investing activities:**

Purchases of equipment and leasehold            improvements

(395,342

)

(556,358

)

Sales of short-term investments

11,625,629

22,958,316

Net cash provided by investing activities

11,230,287

22,401,958

**Financing activities:**

Proceeds from equipment loan facility

936,851

--

Payments on capital lease and equipment loan            facility

(126,911

)

(79,930

)

Proceeds from the issuance of common stock in a            private placement

--

20,613,750

Proceeds from the exercise of common stock            options

58,521

69,450

Net cash provided by financing activities

868,461

20,603,270

(Decrease) increase in cash and cash equivalents

(164,821

)

37,045,773

Cash and cash equivalents at beginning of period

28,682,050

26,463,070

Cash and cash equivalents at end of period

$ 28,517,229

$ 63,508,843

**Supplemental disclosures of cash flow            information:**

Interest paid

            $        17,255

$                  17,157

Valuation adjustment for variable options and            warrants issued

for technology license agreement

147,015

--

      The accompanying notes are an integral part of these      condensed financial statements.
****
5

**ATHEROGENICS, INC.             NOTES TO CONDENSED FINANCIAL STATEMENTS              (Unaudited)**

**1.   Basis of Presentation**      The accompanying unaudited condensed financial statements      reflect all adjustments (consisting solely of normal      recurring adjustments) which management considers necessary      for a fair presentation of the financial position, results of      operations and cash flows of AtheroGenics for the interim      periods presented.  Certain footnote disclosures      normally included in financial statements prepared in      accordance with accounting principles generally accepted in      the United States have been condensed or omitted from the      interim financial statements as permitted by the rules and      regulations of the Securities and Exchange Commission.       Interim results are not necessarily indicative of results for      the full year.             The interim results should be read in conjunction with the      financial statements and notes thereto included in      AtheroGenics' Annual Report on Form 10-K for the year      ended December 31, 2001.  Shareholders are encouraged to      review the Form 10-K for a broader discussion of      AtheroGenics' opportunities and risks inherent in the      business.  Copies of the Form 10-K are available on      request.      **2.   Recently Issued Accounting Standards**      In July 2001, the Financial Accounting Standards Board      ("FASB") issued Statement of Financial Accounting      Standards ("SFAS") Nos. 141, *Business      Combinations* and SFAS 142, *Accounting for Goodwill and      Other Intangibles* ("SFAS 141" and "SFAS      142").  SFAS 141 requires that the purchase method      of accounting be used for all business combinations initiated      after June 30, 2001, and provides new criteria for      determining whether an acquired intangible asset should be      recognized separately from goodwill.  SFAS 142 requires      that goodwill and intangible assets with indefinite useful      lives no longer be amortized, but instead be tested for      impairment at least annually.  Intangible assets that      have finite lives will continue to be amortized over their      useful lives.  The adoption of SFAS 141 and SFAS 142 has      had no impact on AtheroGenics' financial statements.            In October 2001, the FASB issued SFAS No. 144, *Accounting      for the Impairment or Disposal of Long-lived Assets*,      ("SFAS 144") which is applicable to financial      statements issued for fiscal years beginning after December      15, 2001.  SFAS 144 establishes a new method of      accounting and reporting for the impairment of long-lived      assets other than goodwill and intangible assets.  The      statement provides a single accounting model for long-lived      assets to be disposed of and changes the criteria required to      classify an asset as held-for-sale.  The adoption of      SFAS 144 has had no impact on AtheroGenics' financial      statements.      ****3.   Net Loss per Share****      SFAS No. 128, *Earnings per Share,* requires      presentation of both basic and diluted earnings per      share.  Basic earnings per share is computed by dividing      net income (loss) by the weighted average number of shares of      common stock outstanding during the period.  Diluted      earnings per share is computed in the same manner as basic      earnings per share except that diluted earnings per share      reflects the potential dilution that would occur if      outstanding options and warrants were exercised.       Because AtheroGenics reported a net loss for all periods      presented, shares associated with stock options and warrants      are not included because they are antidilutive.  Basic      and diluted net loss per share amounts are the same for these      periods.      ****4.   Deferred Stock      Compensation****      During 2000 and 1999, in connection with the grant of certain      options to employees and directors, AtheroGenics recorded      non-cash deferred stock compensation of $12,093,928 and      $1,895,160, respectively, representing the difference between      the exercise price and the deemed fair value of      AtheroGenics' common stock on the dates these stock      options were granted.  These amounts are included as a      reduction of shareholders' equity and are being amortized      over the vesting periods of the individual options, generally      four years, using the graded vesting method.  The graded      vesting method provides for vesting of portions of the      overall award at interim dates and results in higher vesting      in earlier years than straight-line vesting.  The fair      value of AtheroGenics' common stock for purposes of this      calculation was determined based on the business factors      underlying the value of common stock on the date such option      grants were made.  During the six months ended June 30,      2002, AtheroGenics recorded a total of $784,020 of
6
      amortization of deferred stock compensation, as compared to      $911,193 during the same period in 2001.  Through June      30, 2002, the deferred stock compensation has been decreased      by $1,395,735 for options that were forfeited.            During 2001, in connection with the grant of certain warrants      as part of a licensing agreement with National Jewish Medical      and Research Center regarding MEK kinases technology and      options granted for the addition of new members to our      Scientific Advisory Board, AtheroGenics recorded non-cash      deferred stock compensation of $1,092,000.  The fair      value of the warrants and options for purposes of this      calculation was determined by using the Black Scholes      model.  These amounts are included as a reduction of      shareholders' equity and are being amortized over the      vesting periods of the individual warrants and options,      generally four years, using the graded vesting method.       At March 31, 2002, AtheroGenics recorded an additional      $147,015 in deferred stock compensation to properly reflect      the current fair market value of these warrants and      options.  During the six months ended June 30, 2002,      AtheroGenics recorded a total of $214,626 of amortization of      deferred stock compensation, as compared to $109,200 during      the same period in 2001 for these warrants and options.            At June 30, 2002, AtheroGenics had a total of $2,123,683      remaining to be amortized over the vesting periods of all      stock options and warrants.      **5.  Bank Credit Agreements**      In March 2002, AtheroGenics entered into a revolving credit      facility with Silicon Valley Bank for up to a maximum amount      of $5,000,000 to be used for working capital      requirements.  Under the terms of the facility, interest      on advances is charged at the Bank's prime rate plus      1.50% per year, provided that certain liquidity levels are      maintained; otherwise interest will be charged at prime rate      plus 2.0% per year.  Amounts borrowed under the      revolving credit facility may be repaid and reborrowed at any      time and from time to time during the term of the      facility.  The revolving line of credit terminates on      September 5, 2004 and all outstanding amounts and accrued      interest will be due and payable on that date.  As of      June 30, 2002, there were no outstanding balances under the      revolving credit facility.            In addition, in March 2002, AtheroGenics entered into an      equipment loan facility with Silicon Valley Bank for up to a      maximum amount of $2,500,000 to be used to finance existing      and new equipment purchases.  Under the terms of the      facility, AtheroGenics may request up to six equipment      advances until September 6, 2002.  The interest rate on      the equipment advances will be equal to the greater of (1)      the Bank's prime rate plus 3.0% or (2) 7.5% per year and      will be fixed at the time of each advance.  Amounts      borrowed under the equipment loan facility will be repaid in      33 equal installments of principal and interest beginning on      the first business day of the month following an      advance.  As of June 30, 2002, there was an outstanding      balance of $854,150 under the equipment loan facility.            As collateral for the revolving credit facility and for the      equipment loan facility, AtheroGenics granted to Silicon      Valley Bank a security interest in all of its assets other      than its intellectual property, and granted a negative pledge      on its intellectual property.      **Item 2.   Management's Discussion and      Analysis of Financial Condition and Results of      Operations**
      The following should be read with the financial statements      and related footnotes and Management's Discussion and      Analysis of Financial Condition and Results of Operations      included in AtheroGenics' Annual Report on Form      10-K.  The results discussed below are not necessarily      indicative of the results to be expected in any future      periods.  The following discussion contains      forward-looking statements that are subject to risks and      uncertainties which could cause actual results to differ from      the statements made.      **OVERVIEW**      Since our operations began in 1994, we have focused on the      discovery, development and commercialization of novel drugs      for the treatment of chronic inflammatory diseases, such as      atherosclerosis, rheumatoid arthritis and asthma.  Based      on our proprietary vascular protectant technology platform,      we have advanced three drug candidates into development, and      are progressing on a number of other pre-clinical      programs.  Our lead drug candidate, AGI-1067, is      currently in a Phase IIb clinical trial for atherosclerosis      and post-angioplasty restenosis.  We are currently      working in cooperation with the Food and Drug Administration      to define the Phase III clinical development program for      AGI-1067 as an oral therapy for atherosclerosis in patients      with established coronary artery disease.  Our second      drug candidate, AGIX-4207, has completed initial Phase I      clinical trials in both oral and intravenous formulations      which
7
      assessed the safety and tolerability for the treatment      of rheumatoid arthritis, and we are preparing for Phase II      clinical trials.  Our third drug candidate, AGI-1096, is      in Phase I clinical trials to assess the safety and      tolerability of this compound, which is being developed for      the prevention of transplant rejection.
      To date, we have devoted substantially all of our resources      to research and development.  We have not received any      commercial revenues from product sales.  Revenues have      been derived from certain license fees of a non-recurring      nature received in connection with entering into an exclusive      license agreement.  We terminated this exclusive license      agreement in October 2001.  We expect to incur      significant losses in most years prior to deriving any      product revenue as we continue to increase research and      development costs.  We have incurred significant losses      since we began operations in 1994 and as of June 30, 2002, we      had an accumulated deficit of $74.4 million.  We cannot      assure you that we will become profitable.  We expect      that losses will fluctuate from quarter to quarter and that      these fluctuations may be substantial.  Our ability to      achieve profitability depends upon a variety of factors,      including our ability, alone or with others, to complete the      successful development of our product candidates, to obtain      required regulatory clearances, and to manufacture and market      our future products.      **RESULTS OF OPERATIONS****Comparison of the Three and Six Month Periods Ended June 30,      2002 and 2001***Revenues*      There were no revenues during the three and six months ended      June 30, 2002, compared to $481,245 and $1.9 million,      respectively, during the same periods in 2001.  Last      year's revenues reflected the amortization of a $5.0      million license fee payment and research and development      revenue attributable to a license agreement that we      terminated in October 2001.      *Expenses**Research and Development.*  Research and      development expenses increased 38% to $5.3 million for the      quarter ended June 30, 2002, from $3.8 million for the      comparable period in 2001, and 44% to $10.7 million for the      six months ended June 30, 2002 from $7.4 million in the      comparable period in 2001.  The increase in research and      development expenses for the three and six months ended June      30, 2002, was primarily due to higher costs associated with      conducting clinical trials for AGI-1067 and AGIX-4207 I.V.      *General and Administrative.*  General and      administrative expenses increased 8% to $1.0 million for the      quarter ended June 30, 2002, from $946,621 for the      comparable period in 2001, and 6% to $2.0 million for the six      months ended June 30, 2002 from $1.9 million in the      comparable period in 2001.  The increase in general and      administrative expenses for the three and six months ended      June 30, 2002, was due to increased recruiting and relocation      costs in addition to the impact of ordinary increases in      compensation and administrative operating costs.      *Amortization of Deferred Stock Compensation.*  In      2000 and 1999, we recorded non-cash deferred stock      compensation totaling approximately $14.0 million for options      granted with exercise prices below the deemed fair value for      financial reporting purposes of our common stock on their      respective grant dates.  In June 2001, we recorded      non-cash deferred stock compensation totaling approximately      $1.1 million for certain warrants granted in connection with      a licensing agreement with National Jewish Medical and      Research Center and options granted to new members of our      Scientific Advisory Board.  Amortization of deferred      stock compensation was $499,323 for the quarter ended June      30, 2002, compared to $255,576 for the same period in 2001,      and $998,646 for the six months ended June 30, 2002 compared      to $1.0 million for the same period in 2001.  The      increase in the quarter ended June 30, 2002 is due to the      additional deferred stock compensation related to the      National Jewish options and warrants.  The decrease in      the six months ended June 30, 2002 is due to the deferred      stock compensation being amortized using the graded vesting      method, which results in higher amortization in the earlier      years.      *Net Interest Income*      Net interest income decreased 54% from $588,750 for the      quarter ended June 30, 2001 to $269,260 for the quarter ended      June 30, 2002.  Net interest income decreased 58% from      $1.4 million six months ended June 30, 2001 to $573,828      for the six months ended June 30, 2002.  The decrease in      net interest income is a reflection of lower average interest      rates and lower investment balances.
8
**LIQUIDITY AND CAPITAL RESOURCES**      Since inception, we have financed our operations primarily      through private placements of our stock and our initial      public offering in August 2000 that raised net proceeds of      $49.4 million.  At June 30, 2002, we had cash, cash      equivalents and short-term investments of $46.6 million,      compared with $58.4 million at December 31, 2001.       Working capital at June 30, 2002 was $43.3 million, compared      to $55.1 million at December 31, 2001.  The decrease in      cash, cash equivalents, short-term investments and working      capital is primarily due to the use of funds for operating      purposes and purchases of equipment.            Net cash used in operating activities was $12.3 million for      the six months ended June 30, 2002, compared to $6.0 million      for the six months ended June 30, 2001.  The increase in      the use of cash in operating activities is principally due to      increased expenditures for the CART-2 Phase IIb study for      AGI-1067 and Phase I clinical trials for AGIX-4207 I.V.            Net cash provided by investing activities was $11.2 million      for the six months ended June 30, 2002, compared to $22.4      million provided by investing activities for the six months      ended June 30, 2001.  Net cash provided by investing      activities during the six months ended June 30, 2002 and 2001      consisted primarily of the sales of short-term investments,      with the proceeds reinvested in interest bearing cash      equivalents, partially offset by the purchase of equipment      and leasehold improvements.            Net cash provided by financing activities was $868,461 for      the six months ended June 30, 2002, compared to $20.6 million      provided by financing activities for the same period in      2001.  Net cash provided by financing activities in the      six months ended June 30, 2002 consisted primarily of      proceeds from the equipment loan facility and exercise of      common stock options offset by capital lease payments.       Net cash provided by financing activities in the six months      ended June 30, 2001 consisted of proceeds of $20.6 million      from the private placement of 3.6 million shares of our      common stock.  In March 2002, we entered into a      revolving credit facility with Silicon Valley Bank in the      amount of up to $5.0 million to be used for working capital      requirements.  In addition, we entered into an equipment      loan facility with Silicon Valley Bank in the amount of up to      $2.5 million to be used to finance existing and new equipment      purchases.  At June 30, 2002 there was no outstanding      balance on the revolving credit facility and an outstanding      balance of $854,150 on the equipment loan facility.            Based upon the current status of our product development and      commercialization plans, we believe that our existing cash      and cash equivalents, along with our revolving credit      facility and equipment loan facility with Silicon Valley      Bank, will be adequate to satisfy our capital needs for at      least the next 12 months.  However, our actual capital      requirements will depend on many factors, including:      
**-  **

the status of product development;

**-  **

the time and cost involved in conducting clinical            trials and obtaining regulatory approvals;

**-  **

the costs of filing, prosecuting and enforcing            patent  and other intellectual property            claims;

**-  **

competing technological and market developments;            and

**-  **

our ability to market and distribute our future            products and establish new licensing agreements.

**FORWARD-LOOKING STATEMENTS**      The Private Securities Litigation Reform Act of 1995 (the      "Reform Act") provides a safe harbor for      forward-looking statements made by or on behalf of      AtheroGenics.  AtheroGenics and its representatives may      from time to time make written or verbal forward-looking      statements, including statements contained in this report and      our other filings with the Securities and Exchange Commission      and in our reports to our shareholders.  Generally, the      words "believe," "expect,"      "intend," "estimate,"      "anticipate," "will" and similar      expressions identify forward-looking statements.  All      statements which address operating performance, events or      developments that we expect or anticipate will occur in the      future, such as projections about our future results of      operations or our financial condition, research, development      and commercialization of our product candidates and      anticipated trends in our business, are forward-looking      statements within the meaning of the Reform Act.  The      forward-looking statements are and will be based on
9
      management's then current views and assumptions regarding      future events and operating performance, and speak only as of      their dates.  AtheroGenics undertakes no obligation to      publicly update or revise any forward-looking statements,      whether as a result of new information, future events or      otherwise.            The following are some of the factors that could affect our      financial performance or could cause actual results to differ      materially from those expressed or implied in our      forward-looking statements:      
**-  **

AGI-1067, AGIX-4207, AGIX-4207 I.V. and AGI-1096 may            fail in clinical trials;

**-  **

our ability to generate positive cash flow in light            of our history of operating losses;

**-  **

our ability to successfully develop our other            product candidates;

**-  **

our ability to commercialize our product candidates            if we fail to demonstrate adequately their safety

and efficacy;

**-  **

possible delays in our clinical trials;

**-  **

our inability to predict whether or when we will            obtain regulatory approval to commercialize our

product candidates or the timing of any future            revenue from these product candidates;

**-  **

our need to comply with applicable regulatory            requirements in the manufacture and distribution of

our products to avoid incurring penalties that may            inhibit our ability to commercialize our products;

**-  **

our ability to protect adequately or enforce our            intellectual property rights or secure rights to            third

party patents;

**-  **

the ability of our competitors to develop and market            anti-inflammatory products that are more

effective, have fewer side effects or are less            expensive than our current or future product            candidates;

**-  **

third parties' failure to synthesize and            manufacture our product candidates could delay our            clinical

trials or hinder our commercialization            prospects;

**-  **

our ability to create sales, marketing and            distribution capabilities or enter into agreements with            third

parties to perform these functions;

**-  **

our ability to attract, retain and motivate skilled            personnel and cultivate key academic            collaborations;

**-  **

our inability to obtain additional financing on            satisfactory terms, which could preclude us from

developing or marketing our products;

**-  **

our ability to obtain an adequate level of            reimbursement or acceptable prices for our products;            and

**-  **

if plaintiffs bring product liability lawsuits            against us, we may incur substantial financial loss or            may

be unable to obtain future product liability            insurance at reasonable prices, if at all, either of            which

could diminish our ability to commercialize our            future products.

      The foregoing list of important factors is not exclusive.      **Item 3. Quantitative And Qualitative Disclosures About      Market Risk**      Market risk represents the risk of loss that may impact our      financial position, operating results or cash flows due to      changes in U.S. interest rates.  This exposure is      directly related to our normal operating activities.       Our cash, cash equivalents and short-term investments are      invested with high quality issuers and are generally of a      short-term nature.  Interest rates payable on our lease      obligations are generally fixed.  As a result, we do not      believe that near-term changes in interest rates will have a      material effect on our future results of operations.      

10

**PART II - OTHER INFORMATION**

**Item 2.  Changes in Securities and Use of      Proceeds**      The Securities and Exchange Commission declared our      Registration Statement on Form S-1 (File No. 333-31140)      effective August 8, 2000.  The net proceeds from the      sale of the 6,900,000 shares of common stock registered      pursuant to the Registration Statement (including the      exercise of the underwriters’ over-allotment option)      were $49.4 million after deducting underwriting discounts of      $3.9 million and offering expenses of $1.9 million.            We expect to use the proceeds from our initial public      offering for research and development activities, including      clinical trials, process development and manufacturing      support, and for general corporate purposes, including      working capital.  A portion of the proceeds may be used      to acquire or invest in complementary businesses, products or      technologies.  As of June 30, 2002, the proceeds have      been applied toward:

**-  **

purchases of fixed assets and leasehold            improvements, $2.0 million;

**-  **

operating activities, $25.0 million; and

**-  **

investments in highly liquid, interest bearing,            investment grade securities, $22.4 million.

**Item 4.  Submission of Matters to a Vote of      Security Holders**Our annual meeting of shareholders was held on April 24,      2002.  At the annual meeting, the shareholders of      AtheroGenics (1) elected three Class II directors to serve      until the 2005 Annual Meeting of Shareholders and (2) ratified      the appointment of Ernst & Young LLP as our      independent auditors for the fiscal year ending      December 31, 2002.            We had 27,891,756 shares of common stock outstanding as of      March 1, 2002, the record date of the annual meeting.       At the annual meeting, we had 21,748,228 share of common      stock present in person or represented by proxy for the two      proposals indicated above.  The following sets forth      detailed information regarding the results of the voting at      the annual meeting:      

Proposal 1. 

Election of three Class II directors

**Name of Nominee**

**No. of Votes For**

**No. of Votes Withheld**

R. Wayne Alexander

21,719,628

28,600

William A. Scott

21,719,028

29,200

Stephen A. Sudovar

21,708,063

40,165

Proposal 2. 

Ratifications of the appointment of independent            auditors

**No. of Votes For**

**No. of Votes Against**

**Abstention**

21,735,560

6,500

6,168

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**Item 6.  Exhibits and Reports on Form 8-K**      (a) Exhibits      
Exhibit No.

10.21* 

Promissory Note and Stock Pledge Agreement dated as            of April 15, 2002 between

AtheroGenics, Inc. and Mark P. Colonnese.

__________

*  Filed herewith.            

      (b) Reports on Form 8-K      

None.      
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**SIGNATURES**
      Pursuant to the requirements of the Securities Exchange Act      of 1934, the registrant has duly caused this report to be      signed on its behalf by the undersigned, thereunto duly      authorized.      

                                                                               

**ATHEROGENICS, INC.**

Date:  August 13,            2002                              

By:  /s/MARK P. COLONNESE

                                                                                           

MARK P. COLONNESE

                                                                               

Senior Vice President of Finance and Administration            and

                                                                               

Chief Financial Officer (Principal Accounting            and

                                                                               

Financial Officer)

13