VASOGEN INC. 
By
At
The net loss for the third quarter of 2008 was
A key driver of our decreased loss in both these periods was lower salary and benefit costs, reduced stock compensation expense, lower infrastructure and other support costs driven by lower employee numbers in 2008, and a decrease in the foreign exchange loss that was incurred in the prior periods. In addition, during the nine months ended
Corporate Update
- On July 3, 2008, we announced the implementation of additional
restructuring plans to further reduce our cash burn rate while we
continued to explore strategic corporate alternatives with the goal
of enhancing shareholder value. As part of this restructuring, we
reduced the number of full-time employees to six and materially
reduced expenses associated with the VP series of drugs.
- As at August 31, 2008, Vasogen had cash and cash equivalents of
$9.8 million and had 22.4 million shares outstanding. Our net cash
used in operating activities for the three months ended August 31,
2008, was $2.7 million, which included restructuring costs of
$1.4 million. Other than our accounts payable and accrued liabilities
we do not have any debt.
- During the quarter, our Board of Directors reviewed a number of
nonbinding proposals that were submitted to the Company as part of
our ongoing strategic review process. We are undertaking a review and
due diligence process to finalize which of these options, if any, to
proceed with. Concurrent with this assessment, the Board is
continuing to consider other strategic alternatives including the
monetization of certain tangible and/or intangible assets of the
Company, as well as the out-licensing of assets, potential asset
divestiture, winding up, or liquidation of the Company.
- During the quarter, we had further communications with the FDA
regarding the use of a Bayesian approach for ACCLAIM II and while we
feel that we have addressed the issues raised by the agency, they
have given no indication that they are considering changing their
view. As a result, pending the outcome of our current strategic
review process we are not planning any additional communications with
the FDA regarding the design of ACCLAIM II.
- 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 completed a lease surrender
agreement with our landlord. As a result, our lease for this facility
terminated on September 30, 2008 and our new corporate address is
4 Robert Speck Parkway, 15th Floor, Mississauga, Ontario, L4Z 1S1.
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 nine months ended
Summary financial tables are provided below.
VASOGEN INC.
(A DEVELOPMENT STAGE COMPANY)
Interim Consolidated Balance Sheets
(In thousands of Canadian dollars)
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August 31, November 30,
2008 2007
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(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 9,788 $ 23,545
Clinical supplies - 1,363
Tax credits recoverable 577 1,565
Prepaid expenses and deposits 261 787
Change in fair value of forward
foreign exchange contracts - 376
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10,626 27,636
Property and equipment 42 414
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$ 10,668 $ 28,050
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 617 $ 1,175
Accrued liabilities 1,327 3,519
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1,944 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 23,436 22,744
Deficit (397,107) (381,783)
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8,724 23,356
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$ 10,668 $ 28,050
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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)
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Period from
December 1,
Three months ended Nine months ended 1987 to
August 31, August 31, August 31,
2008 2007 2008 2007 2008
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Expenses:
Research and
development $ 1,096 $ 2,588 $ 8,734 $ 9,347 $ 247,651
General and
administration 1,627 2,887 7,237 11,363 124,465
Foreign exchange
loss (gain) (59) 242 (194) 1,200 10,776
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Loss before the
undernoted (2,664) (5,717) (15,777) (21,910) (382,892)
Interest expense on
senior convertible
notes payable - - - (5) (1,279)
Accretion in
carrying value of
senior convertible
notes payable - - - (728) (10,294)
Amortization of
deferred financing
costs - - - (154) (3,057)
Loss on extinguishment
of senior convertible
notes payable - - - (1,754) (6,749)
Investment income 78 370 453 1,003 13,778
Change in fair value
of embedded
derivatives - - - 829 829
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Loss and
comprehensive loss
for the period (2,586) (5,347) (15,324) (22,719) (389,664)
Deficit, beginning of period:
As originally
reported (394,521) (370,378) (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)
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As revised (394,521) (370,378) (381,783) (353,006) (7,148)
Charge for acceleration
payments on equity
component of senior
convertible notes
payable - - - - (295)
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Deficit, end of
period $(397,107) $(375,725) $(397,107) $(375,725) $(397,107)
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Basic and diluted
loss per share $ (0.12) $ (0.24) $ (0.68) $ (1.21) $ -
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VASOGEN INC.
(A DEVELOPMENT STAGE COMPANY)
Interim Consolidated Statements of Cash Flows
(In thousands of Canadian dollars)
(Unaudited)
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Period from
December 1,
Three months ended Nine months ended 1987 to
August 31, August 31, August 31,
2008 2007 2008 2007 2008
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Cash provided by
(used in):
Operating activities:
Loss for the
period $ (2,586) $ (5,347) $ (15,324) $ (22,719) $(389,664)
Items not
involving cash:
Amortization 191 125 378 378 6,536
Accretion in
carrying value
of senior
convertible
notes payable - - - 728 10,294
Amortization of
deferred
financing costs - - - 154 3,057
Loss on
extinguishment
of senior
convertible
notes payable - - - 1,754 6,749
Change in fair
value of
embedded
derivatives - - - (829) (829)
Stock-based
compensation 141 164 692 1,615 10,271
Common shares
issued for
services - - - - 2,485
Unrealized gain
on forward
foreign
exchange
contract - - - - (376)
Unrealized
foreign
exchange
loss (gain) (98) 227 61 1,454 11,604
Other - - - - (35)
Change in non-cash
operating working
capital (348) 413 493 (3,890) 1,446
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(2,700) (4,418) (13,700) (21,355) (338,462)
Financing activities:
Shares and warrants
issued for cash - - - 17,345 326,358
Warrants exercised
for cash - - - - 16,941
Options exercised
for cash - - - - 7,669
Share issue costs - - - (1,440) (24,646)
Issue (repayment) of
senior convertible
notes payable, - - - (924) 38,512
Cash released from
restriction - 3,078 - 6,403 -
Paid to related
parties - - - - (234)
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- 3,078 - 21,384 364,600
Investing activities:
Purchases of property
and equipment - (8) (6) (49) (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
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- (8) (6) (39) (12,747)
Foreign exchange gain
(loss) on cash held
in foreign currency 99 (227) (51) (1,296) (3,603)
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Increase (decrease)
in cash and cash
equivalents (2,601) (1,575) (13,757) (1,306) 9,788
Cash and cash
equivalents,
beginning of period 12,389 30,696 23,545 30,427 -
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Cash and cash
equivalents,
end of period $ 9,788 $ 29,121 $ 9,788 $ 29,121 $ 9,788
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SOURCE Vasogen Inc.
