VASOGEN INC. 
By
At
The net loss for the second quarter of 2008 was
Corporate Update
- On April 14, 2008, we announced the implementation of a strategic
restructuring plan to significantly reduce our cash burn rate and
focus our efforts on opportunities that the Board and Management
believe are most likely to provide shareholder value. As a result
of this restructuring, our work force was reduced by approximately
85% during the quarter. As a result, we are no longer maintaining
the necessary quality processes or personnel to support European
commercialization or clinical development of Celacade. We also
retained JMP Securities to assist in exploring potential strategic
alternatives with the goal of enhancing shareholder value.
- Subsequent to the end of our second quarter and following an
extensive review of our VP series of drugs program, we announced a
halt to the expenses associated with the VP program, including an
additional reduction in our work force, to further reduce our cash
burn rate as we continue to explore strategic alternatives.
- As part of our restructuring, a new tenant has been secured for
our 37,111 sq. ft. leased facility located at 2505 Meadowvale
Boulevard in Mississauga, Ontario, and we have negotiated a lease
surrender agreement with our landlord. As a result, our lease for
this facility will terminate on September 30, 2008.
- On April 24, 2008, we received a letter from the Listing
Qualifications Department of The NASDAQ Stock Market indicating
that the minimum closing bid price of our common stock had fallen
below $1.00 for 30 consecutive trading days, and therefore, we
were not in compliance with Marketplace Rule 4310(c)(4)
(the "Rule"). In accordance with the NASDAQ Marketplace
Rule 4310(c)(8)(D), we are provided a compliance period of
180 calendar days, or until October 21, 2008, to regain compliance
with this requirement.
Certain statements in this document constitute "forward-looking
statements" within the meaning of the United States Private Securities
Litigation Reform Act of 1995 and/or "forward-looking information" under the
Securities Act (
The unaudited interim consolidated financial statements, accompanying
notes to the unaudited interim consolidated financial statements, and
Management's Discussion and Analysis for the three and six months ended
Summary financial tables are provided below.
VASOGEN INC.
(A DEVELOPMENT STAGE COMPANY)
Interim Consolidated Balance Sheets
(In thousands of Canadian dollars)
-------------------------------------------------------------------------
May 31, November 30,
2008 2007
-------------------------------------------------------------------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 12,389 $ 23,545
Clinical supplies - 1,363
Tax credits recoverable 580 1,565
Prepaid expenses and deposits 500 787
Change in fair value of forward foreign
exchange contracts - 376
-------------------------------------------------------------------------
13,469 27,636
Property and equipment 234 414
-------------------------------------------------------------------------
$ 13,703 $ 28,050
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 349 $ 1,175
Accrued liabilities 2,185 3,519
-------------------------------------------------------------------------
2,534 4,694
Shareholders' equity:
Share capital:
Authorized:
Unlimited common shares, without
par value
Issued and outstanding:
22,391,386 common shares
(November 30, 2007 - 22,391,386) 365,670 365,670
Warrants 16,725 16,725
Contributed surplus 23,295 22,744
Deficit (394,521) (381,783)
-------------------------------------------------------------------------
11,169 23,356
-------------------------------------------------------------------------
$ 13,703 $ 28,050
-------------------------------------------------------------------------
-------------------------------------------------------------------------
VASOGEN INC.
(A DEVELOPMENT STAGE COMPANY)
Interim Consolidated Statements of Operations,
Deficit and Comprehensive Income
(In thousands of Canadian dollars, except per share amounts)
(Unaudited)
-------------------------------------------------------------------------
Period
from
December 1,
Three months ended Six months ended 1987 to
May 31, May 31, May 31,
2008 2007 2008 2007 2008
-------------------------------------------------------------------------
Expenses:
Research and
development $ 4,860 $ 3,736 $ 7,638 $ 6,759 $ 246,555
General and
administration 2,929 4,888 5,610 8,476 122,838
Foreign exchange
loss (gain) (338) 1,092 (135) 958 10,835
-------------------------------------------------------------------------
Loss before the
undernoted (7,451) (9,716) (13,113) (16,193) (380,228)
Interest expense on
senior convertible
notes payable - - - (5) (1,279)
Accretion in carrying
value of senior
convertible notes
payable - (36) - (728) (10,294)
Amortization of
deferred financing
costs - (9) - (154) (3,057)
Loss on extinguishment
of senior
convertible notes
payable - (470) - (1,754) (6,749)
Investment income 33 281 375 633 13,700
Change in fair
value of embedded
derivatives - 256 - 829 829
-------------------------------------------------------------------------
Loss and comprehensive
loss for the period (7,418) (9,694) (12,738) (17,372) (387,078)
Deficit, beginning of
period:
As originally
reported (387,103) (360,684) (381,783) (351,374) (1,510)
Impact of
change in
accounting
for stock-based
compensation - - - - (4,006)
Impact of change
in accounting
for financial
instruments on
December 1,
2006 - - - (1,632) (1,632)
----------------------------------------------------------
As revised (387,103) (360,684) (381,783) (353,006)
Charge for
acceleration
payments on
equity component
of senior
convertible
notes payable - - - - (295)
-------------------------------------------------------------------------
Deficit, end of
period $(394,521) $(370,378) $(394,521) $(370,378) $(394,521)
-------------------------------------------------------------------------
Basic and diluted
loss per common
share $ (0.33) $ (0.54) $ (0.57) $ (1.02) $ -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
VASOGEN INC.
(A DEVELOPMENT STAGE COMPANY)
Interim Consolidated Statements of Cash Flows
(In thousands of Canadian dollars)
(Unaudited)
-------------------------------------------------------------------------
Period
from
December 1,
Three months ended Six months ended 1987 to
May 31, May 31, May 31,
2008 2007 2008 2007 2008
-------------------------------------------------------------------------
Cash provided by
(used in):
Operating
activities:
Loss for the
period $ (7,418) $ (9,694) $ (12,738) $ (17,372) $(387,078)
Items not
involving
cash:
Amortization 125 127 187 253 6,347
Accretion in
carrying value
of senior
convertible
notes payable - 36 - 728 10,294
Amortization of
deferred
financing costs - 9 - 154 3,057
Loss on
extinguishment
of senior
convertible notes
payable - 470 - 1,754 6,749
Change in fair
value of embedded
derivatives - (256) - (829) (829)
Stock-based
compensation 316 890 551 1,453 10,130
Common shares
issued for
services - - - - 2,485
Unrealized gain
on forward
foreign exchange
contract - - - - (376)
Unrealized foreign
exchange loss
(gain) (33) 1,326 159 1,226 11,702
Other - - - - (35)
Change in non-cash
operating working
capital (557) (829) 841 (4,304) 1,792
-------------------------------------------------------------------------
(7,567) (7,921) (11,000) (16,937) (335,762)
Financing activities:
Shares and warrants
issued for cash - 17,345 - 17,345 326,358
Warrants exercised
for cash - - - - 16,941
Options exercised
for cash - - - - 7,669
Share issue costs - (1,443) - (1,440) (24,646)
Issue (repayment)
of senior
convertible
notes payable, net - (289) - (924) 38,512
Cash released
from restriction - 289 - 3,325 -
Paid to related
parties - - - - (234)
-------------------------------------------------------------------------
- 15,902 - 18,306 364,600
Investing activities:
Purchases of property
and equipment (6) (11) (6) (41) (2,471)
Purchases of
acquired technology - - - - (1,283)
Purchases of
marketable securities - - - - (244,846)
Settlement of
forward foreign
exchange contracts - - - 10 (4,824)
Maturities of
marketable securities - - - - 240,677
-------------------------------------------------------------------------
(6) (11) (6) (31) (12,747)
Foreign exchange gain
(loss) on cash
held in foreign
currency 32 (1,349) (150) (1,069) (3,702)
-------------------------------------------------------------------------
Increase (decrease)
in cash and cash
equivalents (7,541) 6,621 (11,156) 269 12,389
Cash and cash
equivalents,
beginning of
period 19,930 24,075 23,545 30,427 -
-------------------------------------------------------------------------
Cash and cash
equivalents,
end of period $ 12,389 $ 30,696 $ 12,389 $ 30,696 $ 12,389
-------------------------------------------------------------------------
-------------------------------------------------------------------------
SOURCE Vasogen Inc.
