VIA Pharmaceuticals, Inc. - FORM 10-K

VIA Pharmaceuticals, Inc. - FORM 10-K - March 24, 2011

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EX-31.2 - EXHIBIT 31.2 - VIA Pharmaceuticals, Inc.	c13894exv31w2.htm
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EX-31.1 - EXHIBIT 31.1 - VIA Pharmaceuticals, Inc.	c13894exv31w1.htm
EX-32.2 - EXHIBIT 32.2 - VIA Pharmaceuticals, Inc.	c13894exv32w2.htm
EX-21.1 - EXHIBIT 21.1 - VIA Pharmaceuticals, Inc.	c13894exv21w1.htm
EX-10.19 - EXHIBIT 10.19 - VIA Pharmaceuticals, Inc.	c13894exv10w19.htm
EX-10.20 - EXHIBIT 10.20 - VIA Pharmaceuticals, Inc.	c13894exv10w20.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-K

(Mark One)


þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2010


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 NO. 0-27264

VIA PHARMACEUTICALS, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


Delaware		33-0687976
(STATE OR OTHER JURISDICTION OF		(I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION)		IDENTIFICATION NO.)

750 Battery Street, Suite 330
San Francisco, California 94111
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)

REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE:
(415) 283-2200

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, Par Value $0.001 Per Share
(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No þ

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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o	Accelerated filer o	Non-accelerated filer o	Smaller reporting companyþ
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of June 30, 2010, the aggregate market value of the registrant’s common stock held by non-affiliates was approximately $973,575 based upon the closing sales price of the registrant’s common stock on the Pink Sheets on such date.

The number of shares of the registrant’s Common Stock outstanding as of March 1, 2011 was 20,558,446.

TABLE OF CONTENTS


	Page
Item No.	No.
PART I

Item 1. BUSINESS		2

EXECUTIVE OFFICERS OF THE REGISTRANT		12

Item 1A. RISK FACTORS		14

Item 2. PROPERTIES		32

Item 3. LEGAL PROCEEDINGS		32

PART II

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES		33

Item 6. SELECTED FINANCIAL DATA		34

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		35

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		50

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE		50

Item 9A. CONTROLS AND PROCEDURES		50

Item 9B. OTHER INFORMATION		51

PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE		52

Item 11. EXECUTIVE COMPENSATION		59

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS		63

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE		65

Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES		67

PART IV

Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES		69

Exhibit 10.19
Exhibit 10.20
Exhibit 21.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

PART I

Forward-looking statements

This Annual Report on Form 10-K contains “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to future events or to the Company’s future financial performance and involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by the use of words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” or the negative of these terms or other comparable terminology. You should not place undue reliance on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond the Company’s control and which could materially affect actual results, levels of activity, performance or achievements. Factors that may cause actual results to differ materially from current expectations include, but are not limited to:

•

the ability and willingness of active market makers in our Company’s common stock to trade the Company’s common stock on the Pink Sheets under a “piggyback qualification”;

•

the Company’s ability to borrow additional amounts under the 2010 loan, as amended, from Bay City Capital, as described in Note 6 in the Notes to the Financial Statements;

•

the Company’s ability to obtain necessary financing in the near term, including amounts necessary to repay the 2009 loan from Bay City Capital following the April 1, 2010 maturity date, and the 2010 loan, as amended, from Bay City Capital by the September 30, 2011 maturity date (or earlier if certain repayment acceleration provisions are triggered);

•

the Company’s ability to control its operating expenses;

•

the Company’s ability to comply with covenants included in the loans with Bay City Capital;

•

the Company’s ability to operate its business following the restructuring, as described in Note 12 in the Notes to the Financial Statements;

•

the Company’s ability to comply with its reporting obligations under the rules and regulations promulgated by the Securities and Exchange Commission following the restructuring;

•

the Company’s ability to timely recruit and enroll patients in any future clinical trials;

•

complexities in designing and implementing cardiometabolic clinical trials using surrogate endpoints in Phase 1 and Phase 2 clinical trials which may differ from the ultimate endpoints required for registration of a candidate drug;

•

if the results of the ACS, CEA and FDG-PET studies, upon further review and analysis, are revised, interpreted differently by regulatory authorities or negated by later stage clinical trials;

•

the Company’s ability to obtain necessary FDA approvals;

•

the Company’s ability to successfully commercialize VIA-2291;

•

the Company’s ability to identify potential clinical candidates from the family of DGAT1 compounds licensed and move them into preclinical development;

•

the Company’s ability to obtain and protect its intellectual property related to its product candidates;

•

the Company’s potential for future growth and the development of its product pipeline, including the THR beta agonist candidate and the other compounds licensed from Roche;

•

the Company’s ability to obtain strategic opportunities to partner and collaborate with large biotechnology or pharmaceutical companies to further develop VIA-2291;

•

the Company’s ability to form and maintain collaborative relationships to develop and commercialize our product candidates;

•

general economic and business conditions; and

•

the other risks described under the heading “Risk Factors” in Part I, Item 1A below.

All forward-looking statements attributable to the Company or persons acting on the Company’s behalf are expressly qualified in their entirety by the cautionary statements set forth above. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of these statements in light of new information or future events.


ITEM 1.		BUSINESS

Corporate History and Description of Merger

On June 5, 2007, privately-held VIA Pharmaceuticals, Inc. completed a reverse merger transaction (the “Merger”) with Corautus Genetics Inc. Until shortly before the Merger, Corautus Genetics Inc. (“Corautus”) was primarily focused on the clinical development of gene therapy products using a vascular growth factor gene. These activities were discontinued in November 2006. Privately-held VIA Pharmaceuticals, Inc. was formed in Delaware and began operations in June 2004. Unless otherwise specified, the “Company,” “VIA,” “we,” “us,” and “our” refers to the business of the combined company after the Merger and the business of privately-held VIA Pharmaceuticals, Inc. prior to the Merger. Unless specifically noted otherwise, “Corautus Genetics Inc.” or “Corautus” refers to the business of Corautus Genetics Inc. prior to the Merger.

Business Overview

VIA Pharmaceuticals, Inc. is a biotechnology company focused on the treatment of cardiovascular and metabolic diseases. VIA is building a pipeline of small-molecule drugs that target cardiovascular and metabolic diseases. Metabolic diseases such as diabetes, obesity and dyslipidemia are highly prevalent world-wide and have both genetic and environmental etiologies. Ultimately, these metabolic diseases progress into more severe forms of diabetes and cardiovascular disease leading to diabetic complications such as blindness, heart attacks and strokes.

VIA’s current drug development pipeline includes (i) VIA-3196, a Phase-1 ready liver-directed thyroid hormone receptor (“THR”) beta agonist that targets dyslipidemia, including high LDL cholesterol, high triglycerides and elevated Lp(a), (ii) a Diacylglycerol Acyl Transferase 1 (“DGAT1”) inhibitor for diabetes, with upside potential in weight control and dyslipidemia, and (iii) VIA’s 5-LO inhibitor, VIA-2291, which targets the treatment of atherosclerotic plaque, an underlying cause of heart attack, stroke and other vascular diseases.

In December 2008, the Company entered into two research, development and commercialization agreements with Hoffman-LaRoche Inc. and Hoffman-LaRoche Ltd. (collectively, “Roche”) to license, on an exclusive, worldwide basis, two sets of compounds (the “Roche Licenses”). The first license is for Roche’s THR beta agonist, a clinically ready candidate for the control of cholesterol, triglyceride levels and potential in insulin sensitization/diabetes. The second license is for multiple compounds from Roche’s preclinical DGAT1 metabolic disorders program.

Liver-directed THR Beta Agonist (VIA-3196)

The liver-directed THR beta agonist, VIA-3196, is a clinically ready candidate for dyslipidemia to lower LDL cholesterol, triglyceride levels and Lp(a). The THR beta agonist is an orally administered, small-molecule beta-selective Thyroid Hormone Receptor agonist designed to specifically target receptors in the liver involved in metabolism and cholesterol regulation, and avoid side effects associated with Thyroid Hormone receptor activation outside the liver. The mechanism by which THR beta lowers cholesterol is distinct from statins and is believed to primarily be mediated by increased cholesterol excretion out of the body through the bile. The compound also reduces triglycerides in the liver by increasing fat metabolism. Preclinical studies demonstrated a rapid reduction of non-HDL cholesterol and the drug was shown to be synergistic with statins in animal studies. VIA will investigate the possibility of using the THR beta agonist alone or in combination with statins for the treatment of hypercholesterolemia in high risk patients whose LDL cholesterol is not controlled by statins alone. In addition, in animal studies, insulin sensitization and glucose lowering were observed making this compound a possible treatment of patients with type 2 diabetes in combination with other diabetes medications. The Phase 1 clinical trials planned for VIA-3196 anticipated in 2011 will provide safety information and demonstrate proof of concept for LDL cholesterol lowering. The Company filed an Investigational New Drug (“IND”) application with the FDA on September 3, 2010 (IND #109408). The IND is required before the Company can proceed with human clinical trials. The IND contains the plans for the clinical studies and gives a complete picture of the drug, including its structural formula, animal test results, and manufacturing information. The IND is currently open to conduct the initial Phase1 clinical study.

DGAT1

The preclinical DGAT1 metabolic disorders program targets the treatment of type 2 diabetes and has potential benefit in dyslipidemia and body weight loss. DGAT1 is an enzyme that catalyzes triglyceride synthesis and fat storage. Triglycerides are the principal component of fat, which is the major repository for storage of metabolic energy in the body. Overweight and obese individuals have significantly greater triglyceride levels, making them more prone to diabetes and its associated metabolic complications. DGAT1 inhibitors are an innovative class of compounds that may modify the way that lipids are absorbed in the intestine leading to elevation of peptides. In studies of obese animals, DGAT1 inhibitors have been shown to induce weight loss and improve insulin sensitization, glucose tolerance and lipid levels. These observations suggest DGAT1 inhibitors may have the potential to treat obesity, diabetes and dyslipidemia. VIA intends to identify potential clinical candidates from the compounds in this program and begin IND-enabling studies.

VIA-2291

In 2005, the Company identified 5-Lipoxygenase (“5LO”) as a key target of interest for treating atherosclerosis. 5LO is a key enzyme in the biosynthesis of leukotrienes, which are important mediators of inflammation and are involved in the development and progression of atherosclerosis. In addition, cardiovascular-related literature has also identified 5LO as a key target of interest for treating atherosclerosis and preventing heart attack and stroke. Following such identification, the Company identified a number of late-stage 5LO inhibitors that had been in clinical trials conducted by large biotechnology and pharmaceutical companies primarily for non-cardiovascular indications, including ABT-761, a compound developed by Abbott Laboratories (“Abbott”) for use in treatment of asthma. Abbott abandoned its ABT-761 clinical program in 1996 after the U.S. Food and Drug Administration (“FDA”) approved a similar Abbott compound for use in asthma patients. Abbott made no further developments to ABT-761 from 1996 to 2005. In August 2005, the Company entered into an exclusive, worldwide license agreement (the “Abbott License”) with Abbott to develop and commercialize ABT-761 for any indication. The Company subsequently renamed the compound VIA-2291.

VIA-2291 is a selective and reversible inhibitor of 5-LO, which is a key enzyme in the biosynthesis of leukotrienes (important mediators of inflammation involved in the development and progression of atherosclerosis). Potentially a complement to current standard of care therapies that treat risk factors, such as statins, antiplatelet and blood pressure medications, VIA-2291 could be beneficial to more than 15 million patients who suffer from atherosclerosis and cardiovascular disease.

VIA-2291 was studied in three Phase 2 clinical trials with novel study designs aimed at providing evidence of plaque modification and systemic anti-inflammatory effects as early as possible in the clinical development process.

VIA completed the Phase 2 ACS Trial in 191 patients at 15 clinical sites in the United States and Canada for patients with Acute Coronary Syndrome (ACS) who experienced a recent heart attack. In addition, the Company has completed the Phase 2 CEA Trial of VIA-2291 at clinical sites in Italy for patients who underwent a carotid endarterectomy (“CEA”).

Results from the CEA and ACS Phase 2 trials were presented at the American Heart Association (AHA) 2008 Scientific Sessions on November 9, 2008. A sub-study of over 85 patients in the ACS Phase 2 trial elected to continue in the study for an additional 12 weeks, receiving either placebo of VIA-2291 on top of standard medical care. Following treatment these patients received a 64 slice multi-detector computed tomography (“MDCT”) scan which was compared to a baseline scan. Results of this sub-study were presented May 2009 at the AHA Arteriosclerosis, Thrombosis and Vascular Biology Annual Conference 2009. The results of the ACS study are published in Circulation Cardiovascular Imaging by lead author and principal investigator Jean-Claude Tardif (2010;3:298-307).

VIA completed its third Phase 2 clinical trial of VIA-2291, the FDG-PET Trial — an experimental non-invasive imaging technique that utilizes Positron Emission Tomography with fluorodeoxyglucose tracer (“FDG-PET”) to measure the impact of VIA-2291 on reducing FDG uptake into vascular beds. The Company enrolled 52 patients following an Acute Coronary Syndrome event, such as heart attack or unstable angina, into the 24 week, randomized, double blind, placebo-controlled study, which was run at clinical sites in the United States and Canada.

Overall, the studies demonstrated potent dose-dependent inhibition of Leukotrienes B4 and E4 by VIA-2291. Systemic and plaque anti-inflammatory effects were observed, including statistically significant inhibition of hsCRP with the 100 mg dose. Inflammatory genes in unstable plaques were down-regulated with VIA-2291 treatment. Serial multi-detector Computed Tomography (“MDCT”) indicated a statistically significant reduction in non-calcified plaque volume and the number of patients developing new coronary lesions with VIA-2291 treatment.

The Phase 3 trial for VIA -2291 will test the ability of the drug to reduce heart attacks and strokes in a high risk cardiovascular patient population. Due to the size and cost of such a trial the Company believes it is best undertaken with a pharmaceutical company partner. To date VIA has been unable to establish such a collaboration. The Company continues to evaluate strategies for partnering the program but currently intends to conduct no further internally funded activities with respect to VIA-2291.

Business Strategy

The Company’s objective is to become a leading biotechnology company focused on discovering, developing and commercializing novel drugs for the treatment of unmet medical needs of cardiovascular and metabolic disease. The key elements of the Company’s business strategy are as follows:

•

Pursue the clinical development of the THR beta agonist compound licensed from Roche. The Company intends to pursue this clinically ready asset and is in the planning phases for its clinical development. The Company has filed an IND application (IND # 109408), and plans to initiate a Phase 1 clinical trials, during the first half of 2011.

•

Pursue the preclinical development of DGAT1 compounds licensed from Roche. The Company intends to pursue the preclinical development of the DGAT1 compounds in order to identify a potential lead candidate for further development in human clinical trials.

•

Pursue the development of VIA-2291. The Company seeks to develop VIA-2291 for the treatment of atherosclerotic plaque and secondary prevention of ACS in patients who have experienced a recent heart attack. The Phase 3 trial for VIA-2291 will test the ability of the drug to reduce heart attacks and strokes in a high risk cardiovascular patient population. Due to the size and cost of such a trial, the Company plans to pursue business collaborations with large biotechnology or pharmaceutical companies to conduct additional clinical trials required for regulatory approval. No further internal clinical studies are currently planned.

•

Expand our portfolio of small molecule product candidates through acquisitions and in-licensing. The Company intends to continue to license and develop preclinical and clinical small molecule compounds for the treatment of cardiovascular and metabolic disease. The Company believes this strategy will enable the Company to build a valuable drug development pipeline.

•

Maximize economic value for our product candidates under development. The Company intends to maximize the value of its product candidates through independent development, licensing and other partnership and collaboration opportunities with large biotechnology or pharmaceutical companies.

•

Enhance and protect our intellectual property portfolio. The Company plans to pursue, license and acquire additional intellectual property protection as required to enhance and protect its existing and future portfolio and to enable the Company to maximize the commercial lifespan of its compounds and technology.

Unmet Needs in Cardiovascular and Metabolic Diseases

Metabolic Syndrome, Dyslipidemia and Diabetes

The American Heart Association currently estimates that more than 50 million Americans suffer from metabolic syndrome and its incidence is high and growing worldwide. Metabolic syndrome is generally considered a group of risk factors, including high blood pressure, insulin resistance or diabetes, unhealthy cholesterol levels, high triglycerides, abdominal fat and a pro-inflammatory state, evidenced by elevated levels of C-reactive protein in the blood. People with metabolic syndrome are at increased risk of atherosclerosis and its complications, including heart attack and stroke. While the biological mechanisms of metabolic syndrome are complex and not fully understood, risk factors considered in the diagnosis include insulin resistance, diabetes, dyslipidemia, obesity (especially abdominal obesity) and unhealthy lifestyle. The Company believes that small molecule drugs targeting a number of these key risk factors will be important in treating metabolic syndrome and reducing patient risk from cardiovascular and metabolic disease, including heart attack, stroke and type 2 diabetes. The Company believes that the compounds in our pipeline licensed from Roche have the potential to be important drugs for the treatment of cardiovascular and metabolic disease.

Atherosclerotic Plaque

Atherosclerosis is the result of chronic inflammation and the build-up of plaque in arterial blood vessel walls. Plaque consists of inflammatory cells, cholesterol and cellular debris. Atherosclerosis, depending on its severity and the location of the artery it affects, may result in blockage in certain vessels and can cause a rupture of inflamed plaque tissue, leading to major adverse cardiovascular event (“MACE”) such as heart attack and stroke. Heart attack and stroke are leading causes of death worldwide. Atherosclerosis in the blood vessels of the heart is called coronary artery disease or heart disease. It is the leading cause of death in the United States, claiming more lives each year than all forms of cancer combined. Recent estimates from the American Heart Association’s “Heart Disease and Stroke Statistics—2009 Update” indicate that approximately 16.8 million Americans were diagnosed with atherosclerosis in 2006. Approximately 1.7 million of these cases were patients with a history of heart attacks and a high risk of MACE. When atherosclerosis becomes severe enough to cause complications, physicians must treat the complications which can include angina, heart attack, abnormal heart rhythms, heart failure, kidney failure, stroke or obstructed peripheral arteries. Many of the patients with established atherosclerosis are treated aggressively for their associated risk factors, which include elevated triglyceride levels, high blood pressure, smoking, diabetes, obesity and physical inactivity. In addition, most patients suffering from atherosclerosis have concomitant high cholesterol, and as a result, the current treatment regime focuses primarily on cholesterol reduction. Additionally, these patients are routinely treated with anti-hypertensives to lower blood pressure and anti-platelet drugs to help prevent the formation of blood clots. There are currently no medications available for physicians to directly treat the underlying chronic inflammation of plaque associated with atherosclerosis.

Abbott Exclusive License Agreement

In August 2005, the Company entered into an exclusive, worldwide license agreement with Abbott for the development and commercialization of a patented compound and related technology, formerly known as ABT-761 and subsequently renamed VIA-2291, claimed in U.S. Patent No. 5,288,751 and EU Patent No. 667,855. In exchange for such license, the Company agreed to make certain payments to Abbott related to: (i) the grant of the license, (ii) the transfer of the licensed technology, (iii) the achievement of certain development milestones (i.e., the first dosing of a Phase 3 clinical trial patient, and regulatory approval to commence sale of a licensed product in United States, Japan or specified European countries), and (iv) the achievement of certain worldwide sales milestones. Abbott will be entitled to an aggregate of $19.0 million in payments if all development milestones are achieved and $27.0 million in payments if all worldwide sales milestones are paid. To date, the Company has paid Abbott $2.0 million for the grant of the license and $1.0 million for the transfer of the licensed technology. However, to date, no development or worldwide sales milestones have been achieved.

The Company is also required to pay Abbott a royalty (subject to certain step-down and offset provisions) during the term of the agreement, ranging from 3% to 6.5% of aggregate worldwide annual net sales. The Company may sublicense its rights under the agreement to third parties, and the agreement continues on a jurisdiction-by-jurisdiction basis until there are no remaining royalty payment obligations in such jurisdiction. Upon completing payment of all royalty obligations due under the agreement, the Company will have a perpetual, irrevocable and fully-paid exclusive license to commercialize VIA-2291 for any indication.

Stanford License Agreement

In March 2005, the Company entered into an exclusive license agreement (the “Stanford License”) with Stanford University (“Stanford”) to use a comprehensive gene expression database and analysis tool to identify novel, and prioritize known, molecular targets for the treatment of vascular inflammation and to study the impact of candidate therapeutic interventions on the molecular mechanisms underlying atherosclerosis (the “Stanford Platform”). One of the Company’s founders, Thomas Quertermous, M.D., who currently serves on the advisory board to the Company, developed the Stanford Platform at Stanford during the course of a four-year, $30.0 million research study (the “Stanford Study”). The Stanford Study initially utilized human tissue samples made available from the Stanford heart transplant program to characterize human plaque at the level of gene expression and identify the inflammatory genes and pathways involved in the development of atherosclerosis and associated complications in humans. To develop the Stanford Platform, the Stanford Study performed similar experiments on vascular tissue samples from mice prone to developing atherosclerosis and identified genes and pathways associated with the development of atherosclerosis that mice and humans have in common (the “Overlap Genes”). The Stanford Platform allowed us to analyze the expression of the Overlap Genes following the administration of candidate drugs to atherosclerotic-prone mice, and thus provided a useful tool for studying the effects of therapeutic intervention in the development of cardiovascular disease. This platform also gave us useful insight into the molecular pathways that we believe to be most relevant to the cardiovascular disease process.

In January 2009, the Company notified Stanford that it was terminating the March 2005 Stanford License to use the Stanford Platform effective February 14, 2009. The Stanford License required 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 varied from 1% to 6% of net sales depending on the type of product sold and whether the Company held an exclusive right to the Stanford License at the time of sale. The Company was also required to make milestone payments to Stanford for each VIA licensed product that used the Stanford License as the product reaches various development and regulatory milestones. The Company does not believe that it owes any amounts under the terminated Stanford License.

Roche Licensed Assets

In December 2008, the Company entered into the Roche Licenses for two sets of compounds that we believe represent novel potential drugs for treatment of cardiovascular and metabolic disease. The first license is for Roche’s THR beta agonist, a clinically ready candidate for the control of cholesterol, triglyceride levels and potential in insulin sensitization/diabetes. The second license is for multiple compounds from Roche’s preclinical DGAT1 metabolic disorders program. Under the terms of the agreements, the Company assumes control of all development and commercialization of the compounds, and will own exclusive worldwide rights for all potential indications.

Roche will receive up to $22.8 million in upfront and milestone payments, the majority of which is tied to the achievement of product development and regulatory milestones. In addition, once products containing the compounds are approved for marketing, Roche will receive single-digit royalties based on net sales, subject to certain reductions.

The Company must use commercially reasonable efforts to conduct clinical and commercial development programs for products containing the compounds. Under the license for the THR beta agonist, if the Company has not completed a Phase 1 single ascending dose clinical trial with respect to a lead product containing this compound by January 5, 2012, then either the Company must commit to developing another of Roche’s compounds or Roche may terminate the license for that compound. The Company plans to begin Phase 1 single ascending dose trials in the first half of 2011.

If the Company determines that it is not reasonable to continue clinical trials or other development of the compounds, it may elect to cease further development and Roche may terminate the licenses. If the Company determines not to pursue the development or commercialization of the compounds in the United States, Japan, the United Kingdom, Germany, France, Spain, or Italy, Roche may terminate the licenses for such territories.

The Roche Licenses will expire, unless earlier terminated pursuant to other provisions of the licenses, on the last to occur of (i) the expiration of the last valid claim of a licensed patent covering the manufacture, use or sale of products containing the compounds, or (ii) ten years after the first sale of a product containing the compounds.

The THR beta agonist is an orally administered, small-molecule beta-selective thyroid hormone receptor agonist designed to specifically target receptors in the liver involved in metabolism and cholesterol regulation, and avoid side effects associated with thyroid hormone receptor activation outside the liver. Roche has completed preclinical studies of the THR beta agonist. These studies demonstrated a rapid reduction of non-HDL cholesterol and the drug was shown to be synergistic with statins in animal studies. The Company will investigate the possibility of using the THR beta agonist in combination with statins for the treatment of hypercholesterolemia. In addition, in animal studies insulin sensitization and glucose lowering were observed making this compound a possible treatment of patients with type 2 diabetes in combination with other diabetes medications.

DGAT1 is an enzyme that catalyzes triglyceride synthesis and fat storage. Triglycerides are the principal component of fat, which is the major repository for storage of metabolic energy in the body. Overweight and obese individuals have significantly greater triglyceride levels, making them more prone to diabetes and its associated metabolic complications. DGAT1 inhibitors are believed to be an innovative class of compounds that modify lipid metabolism. In studies of obese animals, DGAT1 inhibitors have been shown to induce weight loss and improve insulin sensitization, glucose tolerance and lipid levels. These observations suggest DGAT1 inhibitors may have the potential to treat obesity, diabetes and dyslipidemia.

Patents and Intellectual Property

Protection of assets by means of patents and other instruments conferring proprietary rights is an essential element of the Company’s business strategy. The Company primarily relies on patent law, trade secret law and contract law to protect its proprietary information and technology as well as to establish and maintain market exclusivity. In regard to patents, the Company actively seeks patent protection in the United States and other jurisdictions to protect technology, inventions and improvements to inventions that are commercially important to the development of its business. The following table sets forth the status of the patents and patent applications in the United States, the European Union and most other major markets covering our drug candidates that have progressed up to at least Phase 1 clinical trial stage:


			Status of European Union and other Major
		Status of United States Patent Estate (Earliest	Markets Patent Estate (Earliest Anticipated
		Anticipated Expirations, Subject to Potential	Expirations, Subject to Potential Extensions
Drug Candidate (Target)	Patent Type	Extensions and Payment of Maintenance Fees)	and Payment of Maintenance Fees)
VIA-2291 (5-LO)	COM	Granted (2012)	Granted (2013)
VIA-2291 (5-LO)	MOU	Granted (2026)	Applications pending (2026)
VIA-2291 (5-LO)	U	Application pending (2030)	—
VIA-3196 (THRβ)	COM	Granted (2025)	Granted and pending (2025)
VIA-3196 prodrug (THRβ)	COM	Granted (2027)	Applications pending (2027)

COM = composition of matter

MOU = method of use

U = utility

In addition to the patents listed above, several patents have been filed and/or issued in the U.S. and other major markets for the preclinical DGAT1 inhibitor program.

The United States Drug Price Competition and Patent Term Restoration Act of 1984, known as the Hatch-Waxman Act, provides for the restoration of up to five years of patent term for a patent that covers a new product or its use, to compensate for time lost from the effective life of the patent due to the regulatory review process of the FDA. An application for patent term restoration is subject to approval by the U.S. Patent and Trademark Office in conjunction with the FDA. The Hatch-Waxman Act also provides for up to five years of data exclusivity in the United States for new chemical entities (“NCE”) such as VIA-2291 that have not yet been commercially sold in the market.

Other jurisdictions have statutory provisions similar to those of the Hatch-Waxman Act that afford both patent extensions and market exclusivity for drugs that have obtained market authorizations, such as European Supplementary Protection Certificates that extend effective patent life and European data exclusivity rules that create marketing exclusivity for certain time periods following marketing authorization. European data exclusivity is longer than the equivalent NCE marketing exclusivity in the United States, possibly as long as 11 years. The Company believes that if it obtains marketing authorization for VIA-3196 and/or VIA-2291 in Europe or other jurisdictions with similar statutory provisions, the Company may be eligible for patent term extension and marketing exclusivity under these provisions and the Company intends to seek such privileges.

The Company’s commercial success will depend in part on its ability to manufacture, use and sell its product candidates and proposed product candidates without infringing on the patents or other proprietary rights of third parties. The Company may not be aware of all patents or patent applications that may impact its ability to make, use or sell any of its product candidates or proposed product candidates. For example, U.S. patent applications do not publish until 18 months from their effective filing date. Further, the Company may not be aware of published or granted conflicting patent rights. Any conflicts resulting from patent applications and patents of others could significantly affect the validity or enforceability of the Company’s patents and limit the Company’s ability to obtain meaningful patent protection. If others obtain patents with competing claims, the Company may be required to obtain licenses to these patents or to develop or obtain alternative technology. The Company may not be able to obtain any licenses or other rights to patents, technology or know-how necessary to conduct our business as described in this Annual Report. Any failure to obtain such licenses or other rights could delay or prevent the Company from developing or commercializing its product candidates and proposed product candidates, which could materially affect the Company’s business.

Litigation or patent interference proceedings may be necessary to enforce the Company’s patent or other proprietary rights, or to determine the scope and validity or enforceability of the proprietary rights of others. The defense and prosecution of patent and intellectual property claims are both costly and time consuming, even if the outcome is favorable to the Company. Any adverse outcome could subject the Company to significant liabilities, require the Company to license disputed rights from others or to cease selling the Company’s future products.

Trademarks

The Company has not yet applied to register any of its trademarks with the USPTO. The Company will take any and all actions that it deems necessary to protect the trademarks and/or service marks that the Company uses or intends to use in connection with its business.

Clinical Trials

The Company enters into master services agreements with contract research organizations to assist in the conduct of its clinical trials for development of products. The Company used i3 Research, a division of Ingenix Pharmaceutical Services, Inc., to conduct the VIA-2291 ACS and CEA clinical trials. The Company used PharmaNet LLC to conduct the VIA-2291 FDG PET clinical trial.

Manufacturing

The Company enters into manufacturing agreements with third party contract manufacturing organizations that comply with current Good Manufacturing Practice (“cGMP”) guidelines for bulk drug substance and oral formulations of VIA-2291 and the Company’s other product candidates needed to support both ongoing and planned clinical trials, as well as commercial marketing of the product following regulatory approval.

Sales and Marketing

The Company plans to consider business collaborations with large biotechnology or pharmaceutical companies to commercialize approved products that it develops to target patients or prescribing physicians in broad markets. The Company believes that collaborating with large companies that have significant marketing and sales capabilities provides for optimal penetration into broad markets, particularly into those areas that are highly competitive.

Competition

The Company faces intense competition in the development of compounds addressing cardiovascular and metabolic disease particularly from biotechnology and pharmaceutical companies. Certain of these companies may, using other approaches, identify and decide to pursue the discovery and development of new drug targets or disease pathways that the Company has identified through its research. Many of the Company’s competitors, either alone or with collaborative partners, have substantially greater financial resources and larger research and development operations than the Company does. These competitors may discover, characterize or develop important genes, drug targets or drug candidates with respect to treating atherosclerosis, inflammation or other targets to address cardiovascular and metabolic diseases before the Company does or they may obtain regulatory approvals of their drugs more rapidly than the Company does.

In addition, the Company believes that certain companies may have preclinical programs underway targeting atherosclerotic-related inflammation. Many of these entities have substantially greater resources, longer operating histories and greater marketing and financial resources than the Company does. They may, therefore, succeed in commercializing products before the Company does that compete on the basis of efficacy, safety and price.

The Company also faces competition from other biotechnology and pharmaceutical companies focused on alternative treatments for cardiovascular and metabolic disease, such as anti-oxidants, antibodies against oxidized LDL, compounds to raise HDL, and compounds addressing insulin resistance. Any product that the Company successfully develops may compete with these other approaches and may be rendered obsolete or noncompetitive.

The Company’s competitors may obtain patent protection or other intellectual property rights that could limit the Company’s rights to use its technologies or databases, or commercialize its products. In addition, the Company faces, and will continue to face, intense competition from other companies for collaborative arrangements with biotechnology and pharmaceutical companies, for establishing relationships with academic and research institutions and for licenses to proprietary technology.

The Company’s ability to compete successfully will depend, in part, on its ability to: (i) develop proprietary products; (ii) develop and maintain products that reach the market first, and are technologically superior to and more cost effective than other products on the market; (iii) obtain patent or other proprietary protection for its products and technologies; (iv) attract and retain scientific and product development personnel; (v) obtain required regulatory approvals; and (vi) manufacture, market and sell products that the Company develops. Developments by third parties may render our product candidates obsolete or noncompetitive. These competitors, either alone or in collaboration, may succeed in developing technologies or products that are more effective than those developed by the Company.

Governmental Regulation

The Company plans to develop prescription-only drugs for the foreseeable future. Prescription drug products are subject to extensive pre- and post-market regulation by the FDA, including regulations that govern the testing, manufacturing, safety, efficacy, labeling, storage, record keeping, advertising and promotion of such products under the Federal Food Drug and Cosmetic Act (“FDCA”) and its implementing regulations, and by comparable agencies and laws in foreign jurisdictions. The European Union has vested centralized authority in the European Medicines Evaluation Agency and Committee on Proprietary Medicinal Products to standardize review and approval across EU member nations. Failure to comply with applicable FDA, EU or other requirements may result in civil or criminal penalties, recall or seizure of products, partial or total suspension of production or withdrawal of the product from the market.

FDA approval is required before any new unapproved drug or dosage form, including a new use of a previously approved drug, can be marketed in the United States. All applications for FDA approval must contain, among other things, information relating to pharmaceutical formulation, stability, manufacturing, processing, packaging, labeling, and quality control.

New Drug Application

Approval by the FDA of a new drug application (“NDA”) is generally required before a drug may be marketed in the United States. This process generally involves:

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completion of preclinical laboratory and animal testing in compliance with the FDA’s good laboratory practice regulations;

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submission to the FDA of an IND for human clinical testing which must become effective before human clinical trials may begin;

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performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed drug product for each intended use;

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satisfactory completion of an FDA pre-approval inspection of the facility or facilities at which the product is produced to assess compliance with the FDA’s current cGMP guidelines; and

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submission to, and approval by, the FDA of an NDA.

The preclinical and clinical testing and approval process requires substantial time, effort and financial resources, and the Company cannot be certain that the FDA will grant any approvals for its product candidates on a timely basis, if at all.

Preclinical tests include laboratory evaluation of product chemistry, formulation and stability, as well as studies to evaluate toxicity in animals. The results of preclinical tests, together with manufacturing information and analytical data, are submitted as part of an IND to the FDA. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises concerns or questions about the conduct of the clinical trial, including concerns that human research subjects will be exposed to unreasonable health risks. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. The Company’s submission of an IND may not result in FDA authorization to commence a clinical trial. A separate submission to an existing IND must also be made for each successive clinical trial conducted during product development. Further, an independent institutional review board (“IRB”) for each medical center proposing to conduct the clinical trial must review and approve the plan for any clinical trial before it commences at that center and it must monitor the study until completed. The FDA, the IRB, or the sponsor (i.e. VIA) may suspend a clinical trial at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk. Clinical testing also must satisfy extensive GCP, or Good Clinical Practice requirements, including regulations for informed consent.

The Company is also subject to various laws and regulations regarding laboratory practices and the experimental use of animals in connection with its research. In these areas, as elsewhere, the FDA has broad regulatory and enforcement powers, including the ability to levy fines and civil penalties, suspend or delay issuance of approvals, seize or recall products, and withdraw approvals, any one or more of which could have a material adverse effect on the Company.

For purposes of an NDA submission and approval, human clinical trials are typically conducted in the following three sequential phases, which may overlap:

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Phase 1: Studies are initially conducted in a limited population to test the product candidate for safety, dose tolerance, absorption, metabolism, distribution and excretion in healthy humans or, on occasion, in patients, such as cancer patients.

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Phase 2: Studies are generally conducted in a limited patient population to identify possible adverse effects and safety risks, to evaluate the efficacy of the product for specific targeted indications and to determine dose tolerance and optimal dosage. Multiple Phase 2 clinical trials may be conducted by the sponsor to obtain information prior to beginning larger and more expensive Phase 3 clinical trials.

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Phase 3: These are commonly referred to as pivotal studies. When Phase 2 evaluations demonstrate that a dose range of the product may be effective and has an acceptable safety profile, Phase 3 trials are undertaken in large patient populations to further evaluate dosage, to provide substantial evidence of clinical efficacy and to further test for safety in an expanded and diverse patient population at multiple, geographically-dispersed clinical trial sites.

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Phase 4: In some cases, the FDA may condition approval of an NDA for a product candidate on the sponsor’s agreement to conduct additional post-approval clinical trials to further assess the drug’s safety and effectiveness after NDA approval and commercialization. Such post approval trials are typically referred to as Phase 4 studies.

Clinical trials, including the adequate and well-controlled clinical investigations conducted in Phase 3, are designed and conducted in a variety of ways. Phase 3 studies are often randomized, placebo-controlled and double-blinded. A “placebo-controlled” trial is one in which one group of patients, referred to as an “arm” of the trial, receives the drug being tested while another group receives a placebo, which is a substance known not to have pharmacologic or therapeutic activity. In a “double-blind” study, neither the researcher nor the patient knows which arm of the trial is receiving the drug or the placebo. “Randomized” means that upon enrollment patients are placed into one arm or the other at random by computer. Other controls also may be used by which the test drug is evaluated against a comparator. For example, “parallel control” trials generally involve studying a patient population that is not exposed to the study medication (i.e., is either on placebo or standard treatment protocols). In such studies experimental subjects and control subjects are assigned to groups upon admission to the study and remain in those groups for the duration of the study. Not all studies are highly controlled. An “open label” study is one where the researcher and the patient know that the patient is receiving the drug. A trial is said to be “pivotal” if it is designed to meet statistical criteria with respect to pre-determined “endpoints,” or clinical objectives, that the sponsor believes, based usually on its interactions with the relevant regulatory authority, will be sufficient to demonstrate safety and effectiveness meeting regulatory approval standards. In some cases, two “pivotal” clinical trials are necessary for approval.

The results of product development, preclinical studies and clinical trials are submitted to the FDA as part of an NDA. NDAs must also contain extensive manufacturing information. Once the submission has been accepted for filing, by law the FDA has 180 days to review the application and respond to the applicant. In 1992, under the Prescription Drug User Fee Act (“PDUFA”), the FDA agreed to specific goals for improving the drug review time and created a two-tiered system of review times — Standard Review and Priority Review. Standard Review is applied to a drug that offers at most, only minor improvement over existing marketed therapies. The 2002 amendments to PDUFA set a goal that a Standard Review of an NDA be accomplished within ten months. A Priority Review designation is given to drugs that offer major advances in treatment, or provide a treatment where no adequate therapy exists. A Priority Review means that the time it takes the FDA to review an NDA is reduced such that the goal for completing a Priority Review initial review cycle is six months. The review process is often significantly extended by FDA requests for additional information or clarification. The FDA may refer the application to an advisory committee for review, evaluation and recommendation as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendations. The FDA may deny approval of an NDA if the applicable regulatory criteria are not satisfied, or it may require additional clinical data and/or an additional pivotal Phase 3 clinical trial. Even if such data are submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. Data from clinical trials are not always conclusive and the FDA may interpret data differently than the Company does. Once issued, the FDA may withdraw product approval if ongoing regulatory requirements are not met or if safety problems occur after the product reaches the market. In addition, the FDA may require testing, including Phase 4 studies, and surveillance programs to monitor the effect of approved products which have been commercialized, and the FDA has the power to prevent or limit further marketing of a product based on the results of these postmarketing programs. Drugs may be marketed only for the approved indications and in accordance with the provisions of the approved label. Further, if there are any modifications to the drug, including changes in indications, labeling, or manufacturing processes or facilities, the Company may be required to submit and obtain FDA approval of a new or supplemental NDA, which may require the Company to develop additional data or conduct additional preclinical studies and clinical trials.

The FDA has expanded its expedited review process in recognition that certain severe or life-threatening diseases and disorders have only limited treatment options. Fast track designation expedites the development process, but places greater responsibility on a drug company during Phase 4 clinical trials. The drug company may request fast track designation for one or more indications at any time during the IND process, and the FDA must respond within 60 days. Fast track designation allows the drug company to develop product candidates faster based on the ability to request an accelerated approval of the NDA. For accelerated approval the clinical effectiveness is based on a surrogate endpoint in a smaller number of patients. In addition, the drug company may request priority review at the time of the NDA submission. If the FDA accepts the NDA submission as a priority review, the time for review is reduced from one year to six months. The Company plans to request fast track designation and/or priority review, as appropriate, for its product candidates.

PDUFA, which has been reauthorized twice and is likely to be reauthorized again before the Company’s submission of an NDA, requires the payment of user fees with the submission of NDAs. These application fees are substantial ($1,405,500 in the FDA’s Fiscal Year 2010) and will likely increase in future years. If the Company obtains FDA approval for its product candidates, it could obtain five years of Hatch-Waxman marketing exclusivity for product candidates containing no active ingredient (including any ester or salt of the active ingredient) previously approved by the FDA. Under this form of exclusivity, third parties would be precluded from submitting a drug application which refers to the previously approved drug and for which the safety and effectiveness investigations relied upon by the new applicant were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use for a period of five years. This form of exclusivity does not block acceptance and review of stand-alone NDAs supported entirely by data developed by the applicant or to which the applicant has a right of reference.

The Company and its contract manufacturers are required to comply with applicable cGMP guidelines. cGMP guidelines require among other things, quality control, and quality assurance as well as the corresponding maintenance of records and documentation. The manufacturing facilities for the Company’s products must demonstrate that they meet GMP guidelines to the satisfaction of the FDA pursuant to a pre-approval inspection before they can manufacture products. The Company and its third-party manufacturers are also subject to periodic inspections of facilities by the FDA and other authorities, including procedures and operations used in the testing and manufacture of its products to assess its compliance with applicable regulations.

Failure to comply with statutory and regulatory requirements subjects a manufacturer to possible legal or regulatory action, including warning letters, the seizure or recall of products, injunctions, consent decrees placing significant restrictions on or suspending manufacturing operations, and civil and criminal penalties. Adverse experiences with the product must be reported to the FDA and could result in the imposition of market restriction through labeling changes or in product removal. Product approvals may be withdrawn if compliance with regulatory requirements is not maintained or if problems concerning safety or efficacy of the product occur following approval.

Other Regulatory Requirements

Following approval of a drug candidate, the FDA imposes a number of complex regulations on entities that advertise and promote pharmaceuticals, which include, among others, standards for direct-to-consumer advertising, prohibitions on off-label promotion, and restrictions on industry-sponsored scientific and educational activities, and promotional activities involving the internet. The FDA has very broad enforcement authority under the FDCA, and failure to abide by these regulations can result in penalties, including the issuance of a warning letter directing entities to correct deviations from FDA standards, a requirement that future advertising and promotional materials be pre-cleared by the FDA, and state and federal civil and criminal investigations and prosecutions.

Any products the Company manufactures or distributes under FDA approvals are subject to pervasive and continuing regulation by the FDA, including record-keeping requirements and reporting of adverse experiences with the products. Safety issues uncovered by such reporting may result in it having to recall approved products or FDA withdrawing its approval for such products, which could have a material adverse effect on the Company. Failure to make such reports as required by the FDA may result in fines and civil penalties, suspension of approvals, the seizure or recall of products, and the withdrawal of approvals, any one or more of which could have a material adverse effect on the Company.

Outside the United States, the Company’s ability to market a product is contingent upon receiving marketing authorization from the appropriate regulatory authorities. The requirements governing marketing authorization, pricing and reimbursement vary widely from jurisdiction to jurisdiction. At present, foreign marketing authorizations are applied for at a national level, although within the EU registration procedures are available to companies wishing to market a product in more than one EU member state. The regulatory authority generally will grant marketing authorization if it is satisfied that the Company has presented it with adequate evidence of safety, quality and efficacy.

Research and Development

The Company’s research and development expenses were $1.8 million and $6.1 million in the years ended December 31, 2010 and 2009, respectively. The Company will continue to incur significant research and development expenses as it initiates its clinical programs related to VIA-3196, continues planning for clinical trials of its preclinical pipeline assets and evaluates other potential preclinical or clinical compounds that the Company may consider acquiring or licensing.

Employees

As of December 31, 2010, the Company had six full-time employees, including four in research and development. Of these employees, two have Ph.D.s, one has an M.D. and two have Masters degrees.

EXECUTIVE OFFICERS OF THE REGISTRANT

The executive officers of VIA Pharmaceuticals, Inc. as of March 1, 2011 are as follows:

Biographical information relating to each of our executive officers is set forth below.

Lawrence K. Cohen, Ph.D. has served as President, Chief Executive Officer and a director of the Company since the consummation of the Merger on June 5, 2007, and prior to that time served as President, Chief Executive Officer and a director of privately-held VIA Pharmaceuticals, Inc. since its formation in 2004. Previously, he was the Chief Executive Officer of Zyomyx, Inc., a privately-held biotechnology company focused on protein chip technologies. Dr. Cohen joined Zyomyx in 1999 as Chief Operating Officer, where he was responsible for all internal activities, including research and development, business development, financing and operations. Dr. Cohen received a Ph.D. in Microbiology from the University of Illinois and completed his postdoctoral work in Molecular Biology at the Dana-Farber Cancer Institute and the Department of Biological Chemistry at Harvard Medical School.

Karen S. Wright has served as Vice President, Controller of the Company since December 2006 and as a consultant to the Company from December 2005 through November 2006. In April 2010, the Company appointed Ms. Wright as an executive officer to serve as the principal financial officer of the Company following the restructuring of the Company. Prior to joining the Company, Ms. Wright was Vice President Finance, Corporate Controller at Intermune, Inc. from December 2004 through November 2006. Ms. Wright was Senior Director Finance at Cytokinetics, Inc. from November 2001 through December 2004. From 1997 through 2001, Ms. Wright served as the Senior Director of Finance at Elan Pharmaceuticals, Inc. (formerly Athena Neurosciences). Ms. Wright served in various positions at Genentech, Inc. from 1984 through 1997, most recently as Senior Controller for the Research and Development Group. Previous to her biotech experience, Ms. Wright practiced in public accounting from 1977 through 1984. Ms. Wright holds a B.S. in Business from the University of California at Berkeley Business School, with an emphasis in accounting and marketing.

Rebecca Taub, M.D. has served as Senior Vice President, Research and Development of the Company since January 14, 2008, and prior to that time served as Vice President of Research in Metabolic Diseases of Roche Pharmaceuticals, a unit of Roche Holding Ltd. since 2004. While at Roche Dr. Taub oversaw drug discovery programs in diabetes, dyslipidemia and obesity, including target identification, lead optimization and advancement of preclinical candidates into clinical development. From 2000 through 2003, Dr. Taub worked at Bristol-Myers Squibb Co. and DuPont Pharmaceutical Company, which was acquired by Bristol-Myers in 2001, in a variety of positions, including executive director of CNS and obesity research. Before becoming a pharmaceutical executive, Dr. Taub served in a number of academic medicine and biomedical research positions. She was a tenured professor of genetics and medicine at the University of Pennsylvania School of Medicine from 1997 to 2001, and she remains an adjunct professor. Earlier she was an assistant professor at the Joslin Diabetes Center of Harvard Medical School, Harvard University and an associate investigator with the Howard Hughes Medical Institute. She is the author of more than 120 research articles. Dr. Taub received her M.D. from Yale University School of Medicine and B.A. from Yale College.

Advisors

The Company has established an advisory board to provide guidance and counsel on aspects of its business. Members of the board provide input on product research and development strategy, assist in targeting future pathways of interest, provide industry perspectives and background and assist in education and publication plans.

The Company’s advisors are as follows:


		Employment/Current
Name	Specialty	Positions

Peter Libby, MD	Atherosclerosis and cardiovascular disease, including the role of inflammation in the disease process	Mallinckrodt Professor of Medicine, and Chief, Cardiovascular Division, Brigham and Women’s Hospital

Marc Pfeffer, MD, Ph.D.	Pathophysiology and clinical management of progressive cardiac dysfunction following heart attack or hypertension	Dzau Professor of Medicine, Harvard Medical School Senior Physician, Brigham and Women’s Hospital in Boston

Thomas Quertermous, MD	Vascular pathophysiological, genetic and molecular mechanisms of inflammation and atherogenics	William G. Irwin Professor of Cardiovascular Medicine and Chief of Research, Cardiovascular Medicine Division, at Stanford University School of Medicine.

Paul Ridker, MD	Atherosclerosis and cardiovascular disease, including the role of inflammation in the disease process and the role of CRP	Eugene Braunwald Professor of Medicine, Harvard Medical School and Director, Center for Cardiovascular Disease Prevention, Divisions of Cardiovascular Diseases and Preventive Medicine, Brigham and Women’s Hospital

Jean-Claude Tardif, MD	Atherosclerosis and cardiovascular disease	Associate Professor of Medicine, University of Montreal Director of Research, Montreal Heart Institute

Renu Virmani, MD	Cardiovascular pathology	President and Medical Director of CVPath Institute, Inc.

Corporate Information

Our principal executive office is located at 750 Battery Street, Suite 330, San Francisco, CA 94111, and our telephone number is (415) 283-2200. Our website address is: www.viapharmaceuticals.com. The reference to our website address does not constitute incorporation by reference of the information contained on the website, which should not be considered part of this Annual Report on Form 10-K. You may view our financial information, including the information contained in this annual report, and other reports we file with the Securities and Exchange Commission (“SEC”), on the Internet, without charge as soon as reasonably practicable after we file them with the SEC, in the “SEC Filings” page of the Investor Relations section of our website at www.viapharmaceuticals.com. Alternatively, you may view or obtain reports filed with the SEC at the SEC Public Reference Room at 100 F Street, N.E. in Washington, D.C. 20549, or at the SEC’s Internet site at www.sec.gov. You may obtain information on the operation of the SEC Public Reference Room by calling the SEC at 1-800-SEC-0330.


ITEM 1A.		RISK FACTORS

Risks Related to the Company’s Financial Results

The Company has experienced significant losses, expects losses in the future, has limited resources and there is substantial doubt as to the Company’s ability to continue as a going concern.

The Company is a clinical-stage biotechnology company with a limited operating history. The Company is not profitable and its current operating business has incurred losses in each year since the inception of the Company in 2004. The Company currently does not have any products that have been approved for marketing, and the Company will continue to incur significant research and development and general and administrative expenses related to its operations. The Company’s net loss for the years ended December 31, 2010 and 2009 was approximately $9.6 million and $21.0 million, respectively. As of December 31, 2010, the Company had an accumulated deficit of approximately $91.2 million. The Company expects that it will continue to incur significant losses for the foreseeable future, and the Company may never achieve or sustain profitability. If the Company’s product candidates fail in clinical trials or do not gain regulatory approval, or if the Company’s future products do not achieve market acceptance, the Company may never become profitable. Even if the Company achieves profitability in the future, it may not be able to sustain profitability in subsequent periods.

Failure to obtain adequate financing in the near term will adversely affect the Company’s ability to operate as a going concern. The Company’s ability to continue as a going concern is also dependent upon its ability to control its operating expenses and its ability to achieve a level of revenues adequate to support its capital and operating requirements.

The factors described in the auditor’s report and Note 1 and Note 12 in the Notes to the Financial Statements may make it more difficult for the Company to obtain additional financing, and there can be no assurance that the Company will be able to obtain such financing on favorable terms, or at all. As a result of the Company’s losses to date, expected losses in the future, limited capital resources, including cash on hand, and accumulated deficit, the Company’s independent registered public accounting firm concluded that there is substantial doubt as to the Company’s ability to continue as a going concern, and accordingly, included an explanatory paragraph describing conditions that raise substantial doubt about its ability to continue as a going concern in their report on the Company’s December 31, 2010 financial statements.

The Company will require substantial additional funding in the near term to continue operating its business, which may not be available to the Company on acceptable terms, or at all, which could force the Company to delay, scale back or eliminate some or all of its research and development programs, or ultimately cease operations.

As of December 31, 2010, the Company had $84,001 in cash. As described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 below and in Note 6 in the Notes to the Financial Statements, in March 2009, the Company entered into a loan (the “2009 Loan Agreement”) with its principal stockholder, Bay City Capital, and one of Bay City Capital’s affiliates (the “Lenders”) whereby the Lenders agreed to lend to the Company in the aggregate up to $10.0 million, which loan is secured by all of the Company’s assets, including its intellectual property, and accrues interest at the rate of 15% per annum, which increases to 18% per annum following an event of default. As of September 11, 2009, the Company had drawn down the full amount from the debt facility. As described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 below and in Note 6 in the Notes to the Financial Statements, the Company entered into another loan (the “2010 Loan Agreement”) with the Lenders whereby the Lenders agreed to lend to the Company in the aggregate up to $3.0 million, which loan is secured by all of the Company’s assets, including its intellectual property, and accrues interest at the rate of 15% per annum, which increases to 18% per annum following an event of default. As of September 28, 2010, the Company had drawn down the full amount from the debt facility. As described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 below and in Note 6 in the Notes to the Financial Statements, on October 29, 2010, the Company executed a secured promissory note (the “Bridge Note”) in favor of Bay City Capital Fund IV, L.P., a Delaware limited partnership, in the principal sum of $200,000 for general corporate purposes. By the terms of the Bridge Note, upon execution of the 2010 Loan Amendment (as defined below) the unpaid principal amount and accrued and unpaid interest under the Bridge Note automatically converted into obligations of the Company under the 2010 Loan Amendment as advances under the 2010 Loan Amendment. As described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 below and in Note 6 in the Notes to the Financial Statements, in November 2010, the Company entered into an amendment to the 2010 Loan Agreement (the “2010 Loan Amendment”) with the Lenders whereby the Lenders agreed to lend to the Company an additional aggregate principal amount of up to $3.0 million, pursuant to the terms of 2010 Loan Amendment. The 2010 Loan Amendment is secured by all of the Company’s assets, including its intellectual property, and accrues interest at the rate of 15%

per annum, which increases to 18% per annum following an event of default. On November 15, 2010, $201,397 in principal and interest amounts borrowed under the Bridge Note automatically converted into obligations of the Company under the 2010 Loan Amendment as advances. During the three months ended December 31, 2010, the Company borrowed an additional $800,000 on November 22, 2010. On January 14, 2011, the Company entered into an amendment to the 2010 Loan Agreement and 2010 Loan Amendment to extend the maturity date under the 2010 Loan Agreement and 2010 Loan Amendment from December 31, 2010 to June 30, 2011 and on March 24, 2011, the Company entered into a second amendment to further extend the maturity date to September 30, 2011. Management believes that the total amount of cash borrowed under the 2010 Loan Amendment, if fully drawn, will enable the Company to meet its current obligations into the second quarter of 2011. Management does not believe that existing cash resources will be sufficient to enable the Company to meet its ongoing working capital requirements for the next twelve months and the Company will need to raise substantial additional funding in the near term to meet its working capital requirements and to continue its research, development and commercialization activities. Current funds and additional funds raised will be required to:

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fund the business operations of the Company, including general and administrative expenses and the expenses surrounding the restructuring as described in Note 12 in the Notes to the Financial Statements;

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fund clinical trials and seek regulatory approvals;

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pursue and implement strategic partnering transactions;

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pursue the development of additional product candidates;

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conduct and expand the Company’s research and development activities;

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access manufacturing and commercialization capabilities, including seeking collaboration and partnering opportunities;

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implement additional internal systems and infrastructure; and

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maintain, defend and expand the scope of the Company’s intellectual property portfolio.

The Company’s future funding requirements will depend on many factors, including but not limited to:

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the terms and timing of any collaboration, licensing or other strategic arrangements into which the Company may enter;

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the scope, cost, rate of progress, and results of the Company’s current and future clinical trials, preclinical studies and other discovery, research and development activities;

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the costs associated with establishing manufacturing and commercialization capabilities;

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the costs of acquiring or investing in product candidates and technologies;

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

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the costs and timing of seeking and obtaining FDA and other regulatory approvals;

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the potential need to hire additional management and research, development and clinical personnel;

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the effect of competing technological and market developments; and

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general and industry-specific economic conditions that may affect the Company’s research and development expenditures.

Until the Company can establish profitable operations to finance its cash requirements, which the Company may never do, the Company plans to finance future cash needs primarily through public or private equity or debt financings, the establishment of credit or other funding facilities, or entering into collaborative or other strategic arrangements with corporate sources or other sources of financing. Global market and economic conditions have been, and continue to be, disrupted and volatile. Concern about the stability of the markets has led many lenders and institutional investors to reduce, and in some cases, cease to provide credit to businesses and consumers. The Company does not know whether additional financing will be available in the near term when needed, particularly in light of the current economic environment and adverse conditions in the financial markets, or that, if available, financing will be

obtained on terms favorable to the Company or its stockholders. Since August 2007, other than through bridge loans from its largest stockholder, the Company has been unsuccessful in securing additional financing and may not be able to do so in the near term when needed. The delisting of the Company’s common stock from the NASDAQ Capital Market may further adversely affect our ability to obtain additional financing in the near term when needed. Having insufficient funds may require the Company to delay, scale back, or eliminate some or all of its research and development programs, including activities related to its clinical trials, or to relinquish greater or all rights to product candidates at an earlier stage of development or on less favorable terms than the Company would otherwise choose, or ultimately cease operations.

The Company is currently in default under the 2009 Loan Agreement which could lead to a foreclosure on the Company’s assets.

All outstanding principal and accrued interest under the 2009 Loan Agreement was due on April 1, 2010. While the Lenders have not declared an event of default, the Company failed to repay the loan amount on April 1, 2010. As a result, the Lenders may demand immediate payment of all amounts borrowed by the Company and take possession of all collateral securing the 2009 Loan Agreement, which would cause the Company to cease operations. In addition, if the Company raises additional funds through collaborative or other strategic arrangements, it may be required to relinquish potentially valuable rights to its product candidates or grant licenses on terms that are not favorable to the Company.

The Company may not be able to pay third-party vendors and suppliers, which could adversely affect the Company’s business, financial condition and results of operations.

The Company may not be able to pay third-party vendors or suppliers for services performed in the ordinary course of business. This may cause third-party vendors or suppliers to withhold goods and services and may subject the Company to litigation, as well as interest and late charges, which will increase our cost of operations and could adversely affect our business, financial condition and results of operations.

The Company may not be able to satisfy certain covenant restrictions, which could adversely affect the Company’s business, financial condition, results of operations and liquidity.

As described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 below and in Note 6 in the Notes to the Financial Statements, in March 2009, the Company entered into a loan with the Lenders whereby the Lenders agreed to lend to the Company in the aggregate up to $10.0 million, which loan is secured by all of the Company’s assets, including its intellectual property. As of September 11, 2009, the Company had drawn down the full amount from the debt facility. As described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 below and in Note 6 in the Notes to the Financial Statements, the Company entered into the 2010 Loan Agreement with the Lenders whereby the Lenders agreed to lend to the Company in the aggregate up to $3.0 million, which loan is secured by all of the Company’s assets, including its intellectual property. As of September 28, 2010, the Company had drawn down the full amount from the debt facility. As described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 below and in Note 6 in the Notes to the Financial Statements, on October 29, 2010, the Company executed the Bridge Note in favor of Bay City Capital Fund IV, L.P., a Delaware limited partnership, in the principal sum of $200,000 for general corporate purposes. By the terms of the Bridge Note, upon execution of the 2010 Loan Amendment the unpaid principal amount and accrued and unpaid interest under the Bridge Note automatically converted into obligations of the Company under the 2010 Loan Amendment as advances under the amended and restated promissory notes issued under the 2010 Loan Amendment. As described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 below and in Note 6 in the Notes to the Financial Statements, in November 2010, the Company entered into the 2010 Loan Amendment whereby the Lenders agreed to lend to the Company an additional aggregate principal amount of up to $3.0 million, pursuant to the terms of the amended and restated promissory notes issued under the 2010 Loan Amendment. The 2010 Loan Amendment is secured by all of the Company’s assets, including its intellectual property, and accrues interest at the rate of 15% per annum, which increases to 18% per annum following an event of default. On November 15, 2010, $201,397 in principal and interest amounts borrowed under the Bridge Note automatically converted into obligations of the Company under the 2010 Loan Amendment as advances. During the three months ended December 31, 2010, the Company borrowed an additional $800,000 on November 22, 2010. On January 14, 2011, the Company entered into an amendment to the 2010 Loan Agreement and 2010 Loan Amendment to extend the maturity date under the 2010 Loan Agreement and 2010 Loan Amendment from December 31, 2010 to June 30, 2011 and on March 24, 2011, the Company entered into a second amendment to further extend the maturity date to September 30, 2011. In connection with the 2009 Loan Agreement, the 2010 Loan Agreement and the 2010 Loan Amendment, the Company must also satisfy certain conditions and comply with covenants, including covenants relating to the Company’s ability to incur additional indebtedness, make future acquisitions, consummate asset dispositions, grant liens and pledge assets, pay dividends or make other distributions, incur capital expenditures and

make restricted payments. These restrictions may limit the Company’s ability to pursue its business strategies and obtain additional funds. The Company’s ability to meet these financial covenants may be adversely affected by a deterioration in business conditions or its results of operations, adverse regulatory developments, the economic environment and adverse conditions in the financial markets or other events beyond the Company’s control. Failure to comply with these restrictions may result in the occurrence of an event of default. Upon the occurrence of an event of default, the Lenders may terminate the loan, demand immediate payment of all amounts borrowed by the Company and take possession of all collateral securing the loan, which could adversely affect the Company’s ability to repay its debt securities and cause the Company to cease operations. In addition, the loans provide that, subject to certain specified exemptions, the proceeds of any debt or equity offering or asset sale must be used to reduce outstanding indebtedness under the loan or other specified indebtedness. This restriction severely limits the Company’s ability to use the proceeds of any debt or equity offering or asset sale to operate or grow the Company’s business. All outstanding principal and accrued interest under the 2009 Loan Agreement was due on April 1, 2010 and all outstanding principal and accrued interest under the 2010 Loan Agreement was originally due on December 31, 2010. The Company failed to repay the loan amounts on April 1, 2010 and December 31, 2010, respectively. On January 14, 2011, the Company entered into an amendment to the 2010 Loan Agreement and 2010 Loan Amendment to extend the maturity date under the 2010 Loan Agreement and 2010 Loan Amendment from December 31, 2010 to June 30, 2011 and on March 24, 2011, the Company entered into a second amendment to further extend the maturity date to September 30, 2011.

Raising additional funds by issuing securities or through collaboration and other strategic arrangements will likely cause dilution to existing stockholders, restrict operations or require the Company to relinquish potentially valuable rights.

The Company may raise additional capital through private or public equity or debt financings, the establishment of credit or other funding facilities, entering into collaborative or other strategic arrangements with corporate sources or other sources of financing, which may include partnerships for product development and commercialization, merger, sale of assets or other similar transactions. If the Company raises additional capital by issuing equity securities, its existing stockholders’ ownership will be diluted. Given the Company’s current market capitalization and financing needs, it is likely that any financing obtained will result in significant dilution to existing stockholders. Any additional debt financing that the Company enters into may involve covenants that restrict its operations. These restrictive covenants may include limitations on additional borrowing, specific restrictions on the use of its assets as well as prohibitions on its ability to create liens, pay dividends, redeem its stock or make investments. The Company may also be required to pledge all or substantially all of its assets, including intellectual property rights, as collateral to secure any debt obligations.

The 2009 Loan Agreement is secured by all of the Company’s assets, including its intellectual property. In connection with this loan, the Company granted the Lenders warrants to purchase an aggregate of 83,333,333 shares of common stock (“2009 Warrant Shares”) at $0.12 per share. The 2009 Warrant Shares vest based on the amount of borrowings under the loan and the passage of time. For each $2.0 million borrowing, 8,333,333 Warrant Shares vest and are exercisable immediately on the date of grant, and 8,333,333 vest and are exercisable 45 days thereafter as the Company meets certain conditions provided for in the warrants, including that the Company did not complete a $20.0 million financing, as defined in the 2009 Loan Agreement, within 45 days of the borrowing. Based on the $10.0 million of borrowings, 83,333,333 2009 Warrant Shares are vested and are exercisable. The Warrant Shares are exercisable at any time until 5:00 p.m. (Pacific Time) on March 12, 2014, upon the surrender to the Company of the properly endorsed 2009 Warrant Shares, as specified in the warrants. To the extent the 2009 Warrant Shares are exercised by the Lenders, existing stockholders’ ownership in the Company will be significantly diluted.

The 2010 Loan Agreement is secured by all of the Company’s assets, including its intellectual property. In connection with this loan, the Company granted the Lenders warrants to purchase an aggregate of 17,647,059 shares of common stock (“2010 Warrant Shares”) at $0.17 per share. The 2010 Warrant Shares vest based on the amount of borrowings under the loan. Based on the $3.0 million of borrowings, 17,647,059 2010 Warrant Shares are vested and are exercisable. The 2010 Warrant Shares are exercisable at any time until 5:00 p.m. (Pacific Time) on March 26, 2015, upon the surrender to the Company of the properly endorsed 2010 Warrant Shares, as specified in the warrants. To the extent the Warrant Shares are exercised by the Lenders, existing stockholders’ ownership in the Company will be further diluted. In addition, upon a declaration of default of the 2009 Loan Agreement the Lenders will have the right to declare the 2010 Loan Agreement due and payable upon sixty days notice.

The 2010 Loan Amendment is secured by all of the Company’s assets, including its intellectual property. In connection with this loan amendment, the Company granted the Lenders warrants to purchase an aggregate of 42,253,521 shares of common stock (“2010 Additional Warrant Shares”) at $0.071 per share. The 2010 Additional Warrant Shares vest based on the amount of borrowings under the loan. Based on the $1,501,397 million of borrowings, 21,146,437 of the 2010 Warrant Shares are vested and are exercisable as of March 1, 2011. The 2010 Additional Warrant Shares are exercisable at any time until 5:00 p.m. (Pacific Time) on March 26, 2015, upon the surrender to the Company of the properly endorsed 2010 Additional Warrant Shares, as specified in the warrants. To the extent the 2010 Additional Warrant Shares are exercised by the Lenders, existing stockholders’ ownership in the Company will be further diluted. In addition, upon a declaration of default of the 2009 Loan Agreement, the Lenders will have the right to declare the 2010 Loan Agreement and the 2010 Loan Amendment due and payable upon sixty days notice.

Risks Related to the Company’s Business

The Company is at an early stage of development. The Company has never generated and may never generate revenues from commercial sales of its products and the Company may not have products to market for several years, if ever.

Since its inception, the Company has dedicated substantially all its resources to the support and conduct of research and development of compounds for clinical trials, and specifically, toward the development of VIA-2291. Because none of the Company’s current or potential products have been finally approved by any regulatory authority, the Company currently has no products for commercial sale and has not generated any revenues to date. The Company is considering its partnering opportunities with large biotechnology or pharmaceutical companies in connection with its current and future clinical trials and development activities. The Company does not expect to generate any revenues until it successfully partners its current or future programs or until it receives final regulatory approval and launches one of its products for sale.

The Company has conducted three Phase 2 clinical trials for VIA-2291: the CEA study, the ACS study, and the FDG-PET study. While the Company does not currently intend to internally conduct any further clinical trials with respect to VIA-2291, subject to the receipt of substantial additional financing, the Company may at some point in the future initiate clinical development activities with respect to VIA-2291. Such clinical development activities may include one or more additional clinical trials designed to further demonstrate that the drug can be safely administered following an acute coronary syndrome event and link the mechanism of action of VIA-2291 to improved cardiac outcomes. Any future trials will require regulatory approval and the failure to obtain such approval would have a material adverse effect on the Company’s business. Substantial additional investment in future clinical trials will be required and will require significant time.

In December 2008, the Company entered into two license agreements with Roche to develop and commercialize two sets of compounds (the “Metabolic Compounds”). The first license is for Roche’s THR beta agonist, a clinically ready candidate for the control of cholesterol, triglyceride levels and potential in insulin sensitization/diabetes. The second license is for multiple compounds from Roche’s preclinical DGAT1 metabolic disorders program. Subject to the receipt of substantial additional financing, the Company intends to begin Phase 1 single ascending dose trials with respect to THR beta agonist in the first half of 2011. In addition, the Company intends to identify potential clinical candidates from the DGAT1 program and begin IND-enabling studies in 2011. If necessary financing is obtained either through additional investment in the Company or through another vehicle, the Company intends to enter into strategic arrangements to pursue development of the Metabolic Compounds. There can be no assurance that the Company will be able to obtain such financing.

The Company’s ability to generate product revenue will depend heavily on the successful development and regulatory approval of VIA-2291, the Metabolic Compounds or any other product candidates. The Company cannot guarantee that it will be successful in completing any subsequent clinical trials initiated for VIA-2291, or that it will be able to obtain the necessary financing to initiate and/or complete clinical trials for the Metabolic Compounds or any other product candidates. The Company also cannot assure you that it will be able to successfully negotiate a strategic collaboration with a large biotechnology or pharmaceutical company with respect to VIA-2291 or otherwise finance the development of VIA-2291, the Metabolic Compounds or any other product candidates. The Company’s revenues, if any, will be derived from products that the Company does not expect to be commercially available for several years, if ever. The development of VIA-2291, the Metabolic Compounds or any other product candidates may be discontinued at any stage of the clinical trial programs and the Company may never generate revenue from any of its product candidates. Accordingly, there is no assurance that the Company will ever generate revenues.

Clinical trials are expensive, difficult to design and implement, time-consuming and subject to delay, particularly in the cardiovascular area due to the large number of patients who must be enrolled and treated in clinical trials. As a result, there is a high risk that the Company’s drug development activities will not result in regulatory approval, or that such approval will be delayed, thereby reducing the likelihood of successful commercialization of products.

Clinical trials are very expensive and difficult to design and implement. Conducting clinical trials is a complex and uncertain process and involves screening, assessing, testing, treating and monitoring patients at multiple sites, and coordinating with patients and clinical institutions. This is especially true for trials related to the cardiovascular indications, in part because they require a large number of patients and because of the complexities involved in using histology, measurement of biomarkers and medical imaging. The clinical trial process is also time-consuming. The Phase 3 trial for VIA -2291 will test the ability of the drug to reduce heart attacks and strokes in a high risk cardiovascular patient population. Due to the size and cost of such a trial the company believes it is best undertaken with a pharmaceutical company partner. To date VIA has been unable to establish such a collaboration. The company continues to evaluate strategies for partnering the program but currently intends to conduct no further internally funded activities with

respect to VIA-2291. Subject to the receipt of additional financing, the Company intends to pursue clinical development of the THR beta agonist compound and preclinical development of the DGAT1 compounds licensed from Roche, each of which will require significant spending and may require separate sources of funding. Until the Company can generate a sufficient amount of revenue to finance its cash requirements, which the Company may never do, it expects to finance future cash needs primarily through public or private equity offerings, debt financings or strategic collaborations. Global market and economic conditions have been, and continue to be, disrupted and volatile. Concern about the stability of the markets has led many lenders and institutional investors to reduce, and in some cases, cease to provide credit to businesses and consumers. To date the Company has been unsuccessful in securing additional financing and may not be able to do so in the near term when needed, particularly in light of the current economic environment, adverse conditions in the financial markets, and the Company’s inability to secure financing over the past two years other than through bridge financing from its largest stockholder. Further, additional financing, if available, may not be obtained on terms favorable to the Company or its stockholders.

The conduct of the Company’s clinical trial activities, including the commencement, if any, and completion of any future clinical trial activities, could be delayed, prevented or otherwise negatively impacted by several factors, including:

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lack of adequate funding to commence the preclinical and clinical development of the Metabolic Compounds, including the incurrence of unforeseen costs due to enrollment delays, requirements to conduct additional trials and studies and increased expenses associated with the services of the Company’s clinical research organizations (“CROs”) and other third parties;

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failure to enter into strategic partnering transactions or other strategic arrangements for the continued research and development of compounds for clinical trials;

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delays in obtaining regulatory approvals to commence a clinical trial;

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delays in identifying and reaching agreement on acceptable terms with prospective CROs and clinical trial sites;

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delays in obtaining institutional review board approval to conduct a clinical trial at a prospective site;

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slower than expected rates of patient recruitment and enrollment for a variety of reasons, including competition from other clinical trial programs for the treatment of similar indications, the nature of the protocol, and the eligibility criteria for the trial;

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enrolled patients may not remain in or complete clinical trials at the rates we expect;

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lack of effectiveness during clinical trials;

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failure to achieve clinical trial endpoints;

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unforeseen safety issues;

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uncertain dosing issues;

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changes in regulatory requirements causing the Company to amend clinical trial protocols or add new clinical trials to comply with these changes;

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unforeseen difficulties developing the advanced manufacturing techniques, including adequate process controls, quality controls, and quality assurance testing, required to scale up production of the Company’s product candidates to commercial levels;

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inability to monitor patients adequately during or after treatment;

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conflicting or negating results, upon further analysis of the data from the clinical trials;

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retaining participants who have enrolled in a clinical trial but may be prone to withdraw due to the design of the trial, lack of efficacy or personal issues or who fail to return for follow-up visits for a variety of reasons; and

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inability or unwillingness of medical investigators to follow the Company’s clinical trial protocols and follow good clinical practices.

The Company will not know whether any future clinical trials, if any, will begin on time, need to be restructured or be completed on schedule, if at all. Significant delays in clinical trials will impede the Company’s ability to commercialize its product candidates and generate revenue, and could significantly increase its development costs, all of which could have a material adverse effect on the Company’s business.

Failure to timely recruit and enroll patients for any future clinical trials may cause the development of the Company’s product candidates to be delayed.

The Company may encounter delays if it is unable to timely recruit and enroll enough patients to complete any future clinical trials. Clinical trial patient levels depend on many factors, including the eligibility criteria for the trial, assumptions regarding the baseline disease state and the impact of standard medical care, the size of the patient population, the nature of the protocol, the proximity of patients to clinical sites, and competition from other clinical trial programs for the treatment of similar indications. For example, although patient enrollment was completed, the Company experienced slower than expected patient enrollment in its completed CEA clinical trial. Any delays in planned patient enrollment in the future may result in increased costs, delay or prevent regulatory approval or harm the Company’s ability to develop and commercialize current or future product candidates, including in collaboration with biotechnology or pharmaceutical companies.

The Company’s Phase 2 clinical trials of VIA-2291 primarily target biomarkers, histology and medical imaging as endpoints, and the results of any Phase 2 clinical trials may not be indicative of success in future clinical trials that will target outcomes such as heart attack and stroke. The results of previous clinical trials may not be predictive of future results, and the Company’s current and future clinical trials may not satisfy the requirements of the FDA or other non-U.S. regulatory authorities.

The clinical data collected during the (i) prior clinical trials involving VIA-2291 (formerly known as ABT-761) conducted by Abbott prior to the licensing of VIA-2291 from Abbott in August 2005, and (ii) the CEA, ACS, ACS MDCT sub-study and FDG-PET clinical trials for VIA-2291, do not provide evidence of whether VIA-2291 will prove to be an effective treatment to reduce the rate of MACE in the prospective treatment population. In order to prove or disprove the validity of the Company’s assumption about the efficacy of VIA-2291, at least one additional clinical trial will need to be conducted which may include a Phase 2b or Phase 3 clinical trial and which may be 12 to 36 months in duration from the recruitment of the first patient, although this time may increase due to unforeseen circumstances. Such additional clinical trials must ultimately demonstrate that there is a statistically significant reduction in the number of MACE in patients treated with VIA-2291 compared to patients taking a placebo. Due to the size and cost of such additional trials, the Company believes it is best undertaken with a pharmaceutical company partner. To date the Company has been unable to establish such a collaboration and currently intends to conduct no further internally funded activities with respect to VIA-2291. Until data from one or more of these outcome clinical trials can be performed, collected and analyzed, the Company will not know whether VIA-2291 shows clinically significant benefits.

Results of the CEA and ACS clinical trials as described under “Business — VIA-2291 Clinical Trial Results” in Part I, Item 1 above are based on a very limited number of patients and may, upon review and further analysis, be revised, interpreted differently by regulatory authorities or negated by later stage clinical results. For instance, we believe the results of the CEA and ACS clinical trials support further clinical development of VIA-2291 in larger outcome trials based on the fact both trials achieved nearly every key endpoint, although the CEA trial missed its primary endpoint. The results from preclinical testing and Phase 2 clinical trials often have not been predictive of results obtained in later trials. A number of new drugs and therapeutics have shown promising results in initial clinical trials, but later-stage trials may fail to establish sufficient safety and efficacy data to obtain necessary regulatory approvals. Negative or inconclusive results, or adverse medical events during a clinical trial, could cause the termination of a clinical trial or require it to be repeated or a whole new clinical trial conducted. Data obtained from preclinical and clinical studies are subject to varying interpretations, which may delay, limit or prevent regulatory approval.

The Company’s Phase 2 FDG-PET clinical trial utilizes new, innovative imaging technology that does not represent a widely accepted and validated clinical trial methodology 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 the CEA and ACS clinical trials, the ACS MDCT sub-study or future clinical trials.

FDG-PET is a new, innovative imaging technology that does not represent a widely accepted and validated clinical trial methodology for measuring atherosclerotic plaque inflammation. The last patient in the FDG-PET Phase 2 clinical trial was reported in December 2009. In the Company’s FDG-PET study, VIA-2291 was well-tolerated and demonstrated highly significant leukotriene inhibition similar to the other Phase 2 studies. Nonetheless, the results of this clinical trial may not be predictive of future results which may delay or prevent regulatory approval of VIA-2291, may harm the Company’s ability to develop and commercialize VIA- 2291, and may negatively impact the Company’s ability to raise additional capital in the future.

The Company’s clinical trials could be delayed, suspended or stopped.

The Company will not know whether future clinical trials, if any, will begin on time or whether it will complete any of its ongoing clinical trials on schedule or at all. Product development costs to the Company and potential future collaborators or strategic partners will increase if the Company has delays in testing or approvals, or if the Company needs to perform more or larger clinical trials than planned. Significant delays, suspension or termination of clinical trials would adversely affect the Company’s financial results and the commercial prospects for the Company’s products, and would delay or prevent the Company from achieving profitable operations.

The Company relies on third parties to conduct its clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, the Company may be unable to obtain, or may experience delays in obtaining, regulatory approval, or may not be successful in commercializing the Company’s planned and future products.

The Company enters into master service agreements with third-party CROs and depends on independent clinical investigators, medical institutions and contract laboratories to conduct its clinical trials. Similarly, the Company intends to rely on CROs to oversee any clinical trials for the Metabolic Compounds and will depend on independent clinical investigators, medical institutions and contract laboratories to conduct these clinical trials. The Company remains responsible, however, for ensuring that each of its clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA requires the Company to comply with standards, commonly referred to as Good Clinical Practices, for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. The Company’s reliance on third parties that it does not control does not relieve it of these responsibilities and requirements. If the Company’s CROs or independent investigators fail to devote sufficient time and resources to the Company’s drug development programs, if they are unable or unwilling to follow the Company’s clinical protocols, or if their performance is substandard, our clinical trials may not meet regulatory requirements. If our clinical trials do not meet regulatory requirements or if these third parties need to be replaced, our clinical trials may be extended, delayed, suspended or terminated. If any of these events occurs, the clinical development costs for the Company’s product candidates would be expected to rise and the Company may not be able to obtain regulatory approval or commercialize its product candidates.

The Company will need to provide additional information to the FDA regarding preclinical and clinical safety issues raised during prior trials of VIA-2291 that could result in delays in future FDA approvals.

During preclinical animal testing and clinical trials of ABT-761 (now VIA-2291) conducted by Abbott, safety issues with regards to tumors in animals and higher incidence of liver function abnormality in clinical trials in humans were identified. The liver function abnormalities were demonstrated to be reversible with discontinuance of the drug in Abbott’s trials. The FDA requested that the Company provide additional materials and information regarding the incidence of tumors in animals. In the ACS clinical trial, the Company did see generally mild, reversible elevations of normal liver enzymes in the low dose VIA-2291 treated group, but no elevations in the higher dose drug-treated groups. Safety issues could delay the FDA’s approval of any Phase 2b and/or Phase 3 clinical trial, which could have a material adverse effect on the Company’s business.

To date, VIA-2291 is the Company’s only product candidate to be tested in clinical trials. The Company’s efforts to identify, develop and commercialize new product candidates beyond VIA-2291 will be at an early stage and will be subject to a high risk of failure.

The Company’s product candidates are in various stages of development and are prone to the risks of failure inherent in drug development. The Company will need to complete significant additional clinical trials before it can demonstrate that its product candidates are safe and effective to the satisfaction of the FDA and other non-U.S. regulatory authorities. Clinical trials are expensive and uncertain processes that take years to complete. Failure can occur at any stage of the process, and successful early clinical trials do not ensure that later clinical trials will be successful. Current and future preclinical products have increased risk as there is no assurance that products will be identified that will qualify for, and be successful in, clinical trials. Furthermore, the Company may expend significant resources on research or target compounds that ultimately do not qualify for, or are not successful in, clinical trials. For example, in December 2008 the Company entered into two license agreements with Roche to develop and commercialize the Metabolic Compounds for up to $22.8 million in upfront and milestone payments with potential royalty payments in the future. The Company plans to begin Phase 1 single ascending dose trials for the THR beta agonist in the first half of 2011 and to pursue preclinical and clinical development of the DGAT1 compounds. There can be no assurance that the Company will successfully develop and commercialize products containing these compounds. Product candidates may fail to show desired efficacy and safety traits despite having progressed through initial clinical trials. A number of companies in the biotechnology and pharmaceutical industries have suffered significant setbacks in advanced clinical trials where costs of clinical trials are significant, even after obtaining promising results in earlier trials. In addition, a clinical trial may prove successful with respect to a secondary endpoint, but fail to demonstrate clinically significant benefits with respect to a primary endpoint. Failure to satisfy a primary endpoint in a Phase 2b and/or Phase 3 clinical trial would generally mean that a product candidate would not receive regulatory approval without a subsequent successful Phase 2b and/or Phase 3 clinical trial which the Company may not be able to fund, and may be unable to complete.

If the Company is unable to form and maintain the collaborative relationships that its business strategy requires, its product development programs will suffer, and the Company may not be able to develop or commercialize its product candidates and may ultimately have to cease operations.

A key element of the Company’s business strategy with regard to the development and commercialization of VIA-2291 includes collaboration with third parties, particularly leading biotechnology and pharmaceutical companies. If necessary financing is obtained, the Company plans to pursue partnering opportunities with biotechnology and pharmaceutical companies to conduct additional clinical trials required for regulatory approval of VIA-2291. Subject to the receipt of additional financing, the Company expects to consider further collaborations for the development and commercialization of its product candidates in the future. The timing and terms of any collaboration will depend on the evaluation by prospective collaborators of the Company’s clinical trial results and other aspects of the safety and efficacy profiles of its product candidates. If the Company is unable to reach agreements with suitable collaborators for any product candidate, it would be forced to fund the entire development and commercialization of such product candidate, and the Company currently does not have the resources to do so. Even if the Company is able to reach an agreement with a suitable collaborator, the Company may be forced to fund a significant portion of the development and commercialization expenses, and the Company currently does not have the resources to do so. Additionally, if resource constraints require the Company to enter into a collaboration early in the development of a product candidate, the Company may be forced to accept a more limited share of any revenues such product may eventually generate. The Company faces significant competition in seeking appropriate collaborators. Moreover, these collaboration arrangements are complex and time-consuming to negotiate and document. The Company may not be successful in its efforts to establish collaborations or other alternative arrangements for any product candidate, may be unable to raise required capital to fund clinical trials, and therefore, may be unable to continue operations.

Even if the Company receives regulatory approval to market its product candidates, such products may not gain the market acceptance among physicians, patients, healthcare payors and the medical community.

Any products that the Company may develop may not gain market acceptance among physicians, patients, healthcare payors and the medical community even if they ultimately receive regulatory approval. If these products do not achieve an adequate level of acceptance, the Company, or future collaborators, may not be able to generate material product revenues and the Company may not become profitable. The degree of market acceptance of any of the Company’s product candidates, if approved for commercial sale, will depend on a number of factors, including:

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demonstration of efficacy and safety in clinical trials;

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the prevalence and severity of any side effects;

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the introduction and availability of generic substitutes for any of the Company’s products, potentially at lower prices (which, in turn, will depend on the strength of the Company’s intellectual property protection for such products);

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potential or perceived advantages over alternative treatments;

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the timing of market entry relative to competitive treatments;

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the ability to offer the Company’s product candidates for sale at competitive prices;

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relative convenience and ease of administration;

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the strength of marketing and distribution support;

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sufficient third party coverage or reimbursement; and

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the product labeling or product insert (including any warnings) required by the FDA or regulatory authorities in other countries.

The Company will rely on third parties to manufacture and supply its product candidates.

The Company does not own or operate manufacturing facilities for clinical or commercial production of product candidates. The Company will not have any experience in drug formulation or manufacturing, and it will lack the resources and the capability to manufacture any of the Company’s product candidates on a clinical or commercial scale. The Company expects to depend on third-party contract manufacturers for the foreseeable future. Any performance failure on the part of the Company’s contract manufacturers could delay clinical development, regulatory approval or commercialization of the Company’s current or future product candidates, depriving the Company of potential product revenue and resulting in additional losses.

The manufacture of pharmaceutical products requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of pharmaceutical products often encounter difficulties in production, particularly in scaling up initial production. These problems include difficulties with production costs and yields, quality control (including stability of the product candidate and quality assurance testing), shortages of qualified personnel, as well as compliance with strictly enforced federal, state and foreign regulations. If the Company’s third-party contract manufacturers were to encounter any of these difficulties or otherwise fail to comply with their obligations to the Company or under applicable regulations, the Company’s ability to provide product candidates to patients in its clinical trials would be jeopardized. Any delay or interruption in the supply of clinical trial supplies could delay the completion of the Company’s clinical trials, increase the costs associated with maintaining its clinical trial program and, depending upon the period of delay, require the Company to commence new trials at significant additional expense or terminate the trials completely.

The Company may be subject to costly claims related to its clinical trials and may not be able to obtain adequate insurance.

Because the Company currently conducts clinical trials in humans, it faces the risk that the use of its current or future product candidates will result in adverse side effects. During preclinical animal testing and clinical trials of ABT-761 (now VIA-2291) conducted by Abbott, safety issues with regard to tumors in animals and higher incidence of liver function abnormality in clinical trials in humans were identified. The liver function abnormalities were demonstrated to be reversible with discontinuance of the drug in Abbott’s trials. Although the Company currently has, and intends to maintain, clinical trial liability insurance for up to $10.0 million, such insurance may be insufficient to cover any such adverse events. The Company does not know whether it will be able to continue to obtain clinical trial coverage on acceptable terms, or at all. The Company may not have sufficient resources to pay for any liabilities resulting from a claim excluded from, or beyond the limit of, its insurance coverage. There is also a risk that third parties, which the Company has agreed to indemnify, could incur liability. Any litigation arising from the Company’s clinical trials, even if the Company is ultimately successful in its defense, would consume substantial amounts of its financial and managerial resources and may create adverse publicity, which may result in significant damages and may adversely impact the Company’s ability to raise required capital or continue operations.

The Company may be subject to costly claims related to Corautus’ former clinical trials of Vascular Endothelial Growth Factor 2.

Prior to November 1, 2006, Corautus was the sponsor of a Phase 2b clinical trial to study the efficacy of VEGF-2 for the treatment of severe cardiovascular disease, known as the GENASIS trial. In addition, Corautus supported initial clinical trials studying the efficacy of VEGF-2 for the treatment of peripheral artery disease and diabetic neuropathy. On April 10, 2006, Corautus announced the termination of enrollment in the GENASIS trial.

The Company has and intends to maintain, clinical trial liability insurance for up to $10.0 million. Insurance may not adequately cover any such claims and if not, such claims may have a material adverse effect on the Company’s business, financial condition and results of operations. Such insurance may be insufficient to cover any claims unrelated to the GENASIS trial. The Company does not know whether it will be able to continue to obtain clinical trial coverage on acceptable terms, or at all. The Company may not have sufficient resources to pay for any liabilities resulting from a claim excluded from, or beyond the limit of, its insurance coverage. There is also a risk that third parties, which the Company has agreed to indemnify, could incur liability, and the Company may be required to reimburse such third parties for such liability if required pursuant to these indemnification arrangements.

For example, on July 17, 2007, the Company received a letter requesting indemnification from the Company of approximately $1.3 million of legal costs incurred by Tailored Risk Assurance Company, Ltd. in defending Caritas St. Elizabeth’s Medical Center of Boston, Inc. (“CSEMC”) and several physician co-defendants in the matter of Susan Darke, Individually, and as Executrix of the Estate of Roger J. Darke v. Caritas St. Elizabeth’s Medical Center of Boston, Inc., et al. (Suffolk Superior Court, Boston, Massachusetts). Vascular Genetics Inc. (“VGI”), the Company’s wholly-owned subsidiary, was also a defendant in the litigation, but was dismissed from the litigation in March 2007 after entering into a settlement agreement with the plaintiffs. The letter alleged that the Company, as a successor to Corautus Genetics Inc., was required to indemnify CSEMC pursuant to a License Agreement, dated October 31, 1997, between CSEMC and VGI. In August 2008, the parties reached a settlement. The Company’s insurance carrier covered the entire settlement payment. The Company, VGI and the insurance carrier obtained a release of liabilities in connection with the settlement.

Any cost required to be paid out by the Company or any litigation arising from these terminated clinical trials, even if the Company is ultimately successful in its defense, would consume substantial amounts of its financial and managerial resources and may create adverse publicity, which may result in significant damages and may adversely impact the Company’s ability to raise required capital or adversely affect the Company’s business, financial condition or results of operations.

If the Company is unable to retain its management, research, development, clinical teams and scientific advisors or to attract additional qualified personnel, the Company’s product operations and development efforts may be seriously jeopardized.

As described in Note 12 in the Notes to the Financial Statements, the Company’s current financial constraints has caused and may further cause the loss of the services of principal members of our management and research, development and clinical teams which could negatively impact our ability to operate, obtain necessary financing, or pursue strategic partnering opportunities. The employment agreement for Dr. Lawrence K. Cohen, the Company’s Chief Executive Officer, provides that his employment is terminable at will at any time with or without cause or notice by either the Company or Dr. Cohen. The employment agreement for Dr. Rebecca Taub, the Company’s Sr. Vice President, Research & Development, is terminable at will at any time with or without cause or notice by either the Company or Dr. Taub. Competition among biotechnology companies for qualified employees is intense, and the ability to retain and attract qualified individuals is critical to the Company’s success. The Company may be unable to attract and retain key personnel on acceptable terms, if at all. The Company does not maintain “key person” life insurance on any of its officers, employees or consultants.

The Company has relationships with consultants and scientific advisors who will continue to assist the Company in formulating and executing its research, development, regulatory and clinical strategies. The Company’s consulting agreements typically have provisions for hourly billing, non-disclosure of confidential information, and the assignment to the Company of any inventions developed within the scope of services to the Company. The consulting and scientific advisory agreements are typically terminable by either party on 30 days or shorter notice. These consultants and scientific advisors are not the Company’s employees and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability to the Company. The Company will have only limited control over the activities of these consultants and scientific advisors and can generally expect these individuals to devote only limited time to the Company’s activities. The Company relies heavily on these consultants to perform critical functions in key areas of its operations. The Company also relies on these consultants to evaluate potential compounds and products, which may be important in developing a long-term product pipeline for the Company. Consultants also assist the Company in preparing and submitting regulatory filings. The Company’s scientific advisors provide scientific and technical guidance on cardiovascular drug discovery and development. The loss of service of any or all of these consultants may further impact our ability to operate or obtain additional financing needed in the near term. Failure of any of these persons to devote sufficient time and resources to the Company’s programs could harm its business. In addition, these advisors may have arrangements with other companies to assist those companies in developing technologies that may compete with the Company’s products.

If the Company’s competitors develop and market products that are more effective than the Company’s product candidates or others it may develop, or obtain regulatory and marketing approval for similar products before the Company does, the Company’s commercial opportunity may be reduced or eliminated.

The development and commercialization of new pharmaceutical products that target cardiovascular and metabolic disease is competitive, and the Company will face competition from numerous sources, including major biotechnology and pharmaceutical companies worldwide. Many of the Company’s competitors have substantially greater financial and technical resources, and development, production and marketing capabilities than the Company does. In addition, many of these companies have more experience than the Company in preclinical testing, clinical trials and manufacturing of compounds, as well as in obtaining FDA and foreign regulatory approvals. The Company will also compete with academic institutions, governmental agencies and private organizations that are conducting research in the same fields. Competition among these entities to recruit and retain highly qualified scientific, technical and professional personnel and consultants is also intense. As a result, there is a risk that one of the competitors of the Company will develop a more effective product for the same indication for which the Company is developing a product or, alternatively, bring a similar product to market before the Company can do so. Failure of the Company to successfully compete will adversely impact the ability to raise additional capital and continue operations.

The Company may be subject to damages resulting from claims that the Company or its employees, have wrongfully used or disclosed alleged trade secrets of its employees’ former employers.

Many of the Company’s employees were previously employed at biotechnology or pharmaceutical companies, including the Company’s competitors or potential competitors. Although the Company has not received any claim to date, it may be subject to claims that these employees or the Company have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of such employees’ former employers. Litigation may be necessary to defend against these claims. If the Company fails in defending such claims, in addition to paying monetary damages, the Company may lose valuable intellectual property rights or personnel or may be unsuccessful in identifying, developing or commercializing current or future products.

Risks Related to the Company’s Intellectual Property

The Company’s failure to protect adequately or to enforce its intellectual property rights or secure rights to third party patents could materially harm its proprietary position in the marketplace or prevent the commercialization of its products.

The Company’s success will depend in large part on its ability to obtain and maintain protection in the United States and other countries for the intellectual property covering or incorporated into its technologies and products. The patents and patent applications in the Company’s existing patent portfolio are either owned by the Company or licensed to the Company. The Company’s ability to protect its product candidates from unauthorized use or infringement by third parties depends substantially on its ability to obtain and maintain valid and enforceable patents. Due to evolving legal standards relating to the patentability, validity and enforceability of patents covering pharmaceutical inventions and the scope of claims made under these patents, the Company’s ability to obtain and enforce patents is uncertain and involves complex legal and factual questions for which important legal principles are unresolved.

The Company may not be able to obtain patent rights on products, treatment methods or manufacturing processes that it may develop or to which the Company may obtain license or other rights. Even if the Company does obtain patents, rights under any issued patents may not provide it with sufficient protection for the Company’s product candidates or provide sufficient protection to afford the Company a commercial advantage against its competitors or their competitive products or processes. It is possible that no patents will be issued from any pending or future patent applications owned by the Company or licensed to the Company. Others may challenge, seek to invalidate, infringe or circumvent any patents the Company owns or licenses. Alternatively, the Company may in the future be required to initiate litigation against third parties to enforce its intellectual property rights. The cost of this litigation could be substantial and the Company’s efforts could be unsuccessful. Changes in patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of the Company’s intellectual property or narrow the scope of the Company’s patent protection.

The Company’s patents also may not afford protection against competitors with similar technology. The Company may not have identified all patents, published applications or published literature that affect its business either by blocking the Company’s ability to commercialize its product candidates, by preventing the patentability of its products or by covering the same or similar technologies that may affect the Company’s ability to market or license its product candidates. For example, patent applications filed with the United States Patent and Trademark Office (“USPTO”) are maintained in confidence for up to 18 months after their filing. In some cases, however, patent applications filed with the USPTO remain confidential for the entire time prior to issuance as a U.S. patent. Patent applications filed in countries outside the United States are not typically published until at least 18 months from their first filing date. Similarly, publication of discoveries in the scientific or patent literature often lags behind actual discoveries. Therefore, the Company or its licensors might not have been the first to invent, or the first to file, patent applications on the Company’s product candidates or for their use. The laws of some foreign jurisdictions do not protect intellectual property rights to the same extent as in the United States and many companies have encountered significant difficulties in protecting and defending these rights in foreign jurisdictions. If the Company encounters such difficulties in protecting or is otherwise precluded from effectively protecting its intellectual property rights in either the United States or foreign jurisdictions, the Company’s business prospects could be substantially harmed.

Because VIA-2291 is exclusively licensed from Abbott and the Metabolic Compounds are exclusively licensed from Roche, any dispute with Abbott or Roche, respectively, may materially harm the Company’s ability to develop and commercialize VIA-2291 or the Metabolic Compounds, as applicable.

In August 2005, the Company licensed exclusive worldwide rights to its product candidate, VIA-2291, from Abbott (the “Abbott License”) and in 2008, Company entered into two license agreements (the “Roche Licenses”) with Roche to develop and commercialize the Metabolic Compounds. The Company does not have, nor has the Company ever had, any material disputes with Abbott or Roche regarding the Abbott License or the Roche Licenses. However, if there is any future dispute between the Company and Abbott regarding the parties’ rights under the Abbott License agreement, the Company’s ability to develop and commercialize VIA-2291 may be materially harmed. Any uncured, material breach under the Abbott License could result in the Company’s loss of exclusive rights to VIA-2291 and may lead to a complete termination of the Abbott License and force the Company to cease product development efforts for VIA-2291. Similarly, if there is any future dispute between the Company and Roche regarding the parties’ rights under the Roche License agreements, the Company’s ability to develop and commercialize the Metabolic Compounds may be materially harmed. Any uncured, material breach under the Roche License agreements could result in the Company’s loss of exclusive rights to Metabolic Compounds and may lead to a complete termination of the Roche License agreements and force the Company to cease product development efforts for the Metabolic Compounds.

If Abbott or Roche elect to maintain or enforce proprietary rights under the Abbott License or the Roche Licenses, respectively, the Company will depend on Abbott or Roche, as applicable, for the maintenance and enforcement of certain intellectual property rights and will have limited control, if any, over the amount or timing of resources that Abbott or Roche devote on the Company’s behalf.

The Company depends on Abbott to protect certain proprietary rights covering VIA-2291 and Roche to protect certain proprietary rights covering THR beta agonist (the “VIA Rights”) pursuant to the terms of the Abbott License and the Roche Licenses, respectively. Abbott and Roche are responsible for maintaining certain issued patents and prosecuting certain patent applications. Abbott and Roche are also responsible for seeking to obtain all available extensions or restorations of the VIA Rights. Although the Company has limited, if any, control over the amount or timing of resources that Abbott or Roche devote or the priority they place on maintaining these certain patent rights to the Company’s advantage, the Company expects Abbott and Roche to comply with its respective obligations pursuant to the Abbott License and the Roche Licenses and devote resources accordingly. However, if Abbott or Roche decide to no longer maintain any of the patents licensed under the Abbott License or the Roche Licenses, they are required to afford the Company the opportunity to do so at the Company’s expense. If Abbott or Roche elect not to maintain any of these certain licensed patents and if the Company does not assume the maintenance of these certain licensed patents in sufficient time to make required payments or filings with the appropriate governmental agencies, the Company risks losing the benefit of all or some of the VIA Rights.

While the Company currently intends to take actions reasonably necessary to enforce its patent rights, such enforcement depends, in part, on Abbott and Roche, respectively, to protect the VIA Rights. Abbott and Roche each have the first right to bring and pursue a third-party infringement action related to the VIA Rights. The Company has the right to cooperate with Abbott and Roche in third-party infringement suits involving the VIA Rights. If Abbott or Roche decline to prosecute a claim, the Company will have the right but not the obligation to bring suit and/or pursue any such infringement action as it determines, in its discretion, to be appropriate.

Abbott, Roche, and the Company may also be notified of alleged infringement and be sued for infringement of third-party patents or other proprietary rights related to the VIA Rights. Abbott has the right but not the obligation to defend and control the defense of an alleged third-party patent infringement claim or suit asserting that VIA-2291 infringes third-party patent rights directed to the composition of matter or the use of VIA-2291 in the treatment and/or prevention of diseases in humans, if Abbott is made a party to such suit. If Abbott so elects, the Company may have limited, if any, control or involvement over the defense of these claims, and Abbott and the Company could be subject to injunctions and temporary or permanent exclusionary orders in the United States or other countries. The Company has the sole responsibility to defend and control the defense of all other claims of infringement by a third party. If Abbott elects not to defend a claim it has the first right to defend against, or if the claim is one that the Company has the responsibility to defend against, Abbott is required to reasonably assist the Company in its defense. Roche has the right but not the obligation to defend and control the defense of an alleged third-party patent infringement claim or suit against the Metabolic Compounds in which the Company has indemnification rights under the Roche Licenses. The Company has limited, if any, control over the amount or timing of resources, if any, that Abbott or Roche devote, or the priority Abbott or Roche place on the defense of such third-party claims of infringement.

If the Company fails to comply with its obligations and meet certain milestones related to its intellectual property licenses with third parties, the Company could lose license rights that are important to its business.

The Company’s commercial success depends on not infringing the patents and proprietary rights of other parties and not breaching any collaboration, license or other agreements that the Company has entered into with regard to its technologies and product candidates. For example, the Company entered into a license agreement with Abbott pursuant to which the Company is required to use commercially reasonable efforts, at its own expense, to (a) initiate and complete the clinical development of VIA-2291, (b) obtain all required regulatory approvals in major markets, and (c) obtain and carry out subsequent worldwide marketing, distribution and sale of VIA-2291 in such major markets. Prior to the first commercial sale of VIA-2291, the Company is required to furnish Abbott with an annual written report summarizing the progress of its efforts to implement the preclinical/clinical development plan.

In December 2008, the Company entered into the Roche Licenses to develop and commercialize the Metabolic Compounds. The Company must use commercially reasonable efforts to conduct preclinical, clinical and commercial development programs for products containing the Metabolic Compounds. If the Company has not completed a Phase 1 clinical trial with respect to a lead product containing the THR beta agonist compound by January 5, 2012, the Company either must commit to developing another of Roche’s compounds or Roche may terminate the license for that compound. If the Company determines that it is not reasonable to continue clinical trials or other development of the compounds, it may elect to cease further development and Roche may terminate the licenses. If the Company determines not to pursue the development or commercialization of the compounds in the United States, Japan, the United Kingdom, Germany, France, Spain or Italy, Roche may terminate the licenses solely for such territories.

Third parties may own or control intellectual property that the Company may infringe.

If a third party asserts that the Company infringes such third party’s patents, copyrights, trademarks, trade secrets or other proprietary rights, the Company could face a number of issues that could seriously harm the Company’s competitive position, including:

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infringement and other intellectual property claims, which would be costly and time-consuming to litigate, whether or not the claims have merit, and which could delay the regulatory approval process and divert management’s attention from the Company’s business;

•

substantial damages for past infringement, which the Company may have to pay if a court determines that the Company has infringed a third party’s patents, copyrights, trademarks, trade secrets or other proprietary rights;

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a court prohibiting the Company from selling or licensing its technologies or future products unless such third party licenses its patents, copyrights, trademarks, trade secrets or other proprietary rights to the Company, which it is not required to do; and

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if a license is available from a third party, the requirement that the Company pay substantial royalties or grant cross licenses to its patents, copyrights, trademarks, trade secrets or other proprietary rights.

The Company’s commercial success will depend in part on its ability to manufacture, use, sell and offer to sell its products without infringing patents or other proprietary rights of others.

The Company may not be aware of all patents or patent applications that potentially impact its ability to manufacture (or have manufactured by a third party), use or sell any of its product candidates or proposed product candidates. For example, patent applications are filed with the USPTO but not published until 18 months after their effective filing date. Further, the Company may not be aware of published or granted conflicting patent rights. Any conflicts resulting from other patent applications and patents of third parties could significantly reduce the coverage of the Company’s patents and limit the Company’s ability to obtain meaningful patent protection. If others obtain patents with conflicting claims, the Company may be required to obtain licenses to these patents or to develop or obtain alternative technology. The Company may not be able to obtain any licenses or other rights to patents, technology or know-how necessary to conduct the Company’s business. Any failure to obtain such licenses or other rights could delay or prevent the Company from developing or commercializing its product candidates and proposed product candidates, which could materially affect the Company’s business.

Additionally, litigation or patent interference proceedings may be necessary to enforce any of the Company’s patents or other proprietary rights, or to determine the scope and validity or enforceability of the proprietary rights of others. The defense and prosecution of patent and intellectual property claims are both costly and time consuming, even if the outcome is favorable to the Company. Any adverse outcome could subject the Company to significant liabilities, require the Company to license disputed rights from others, or require the Company to cease selling its future products.

Risks Related to the Company’s Industry

The Company’s product candidates are subject to extensive regulation, which can be costly and time-consuming, cause unanticipated delays or prevent the receipt of the required approvals to commercialize such product candidates.

The Company is subject to extensive and rigorous government regulation in the United States and foreign countries. The research, testing, manufacturing, labeling, approval, sale, marketing and distribution of drug products are subject to extensive regulation by the FDA and other regulatory authorities in foreign jurisdictions, which regulations differ from jurisdiction to jurisdiction. The Company will not be permitted to market its product candidates in the United States until it receives approval of an NDA from the FDA, or in any foreign jurisdiction until the Company receives the requisite approval from the applicable regulatory authorities in such jurisdiction. The Company has not submitted an NDA or received marketing approval for VIA-2291 or any of its other product candidates in the United States or any foreign jurisdiction. Obtaining approval of an NDA is a lengthy, expensive and uncertain process. The FDA also has substantial discretion in the drug approval process, including the ability to delay, limit, condition or deny approval of a product candidate for many reasons. For example:

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the FDA may not deem a product candidate safe and effective;

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the FDA may not find the data from preclinical studies and clinical trials sufficient to support approval;

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the FDA may not approve of the Company’s third-party manufacturers’ processes and facilities;

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the FDA may change its approval policies or adopt new regulations; or

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the FDA may condition approval on additional clinical studies, including post-approval clinical studies.

These requirements vary widely from jurisdiction to jurisdiction and make it difficult to estimate when the Company’s product candidates will be commercially available, if at all. If the Company is delayed or fails to obtain required approvals for its product candidates, the Company’s operations and financial condition would be damaged.

The process of obtaining these approvals is expensive, often takes many years, and can vary substantially based upon the type, complexity and novelty of the products involved. Approval policies or regulatory requirements may change in the future and may require the Company to resubmit its clinical trial protocols to institutional review boards for re-examination, which may impact the costs, timing or successful completion of a clinical trial. In addition, although members of the Company’s management have drug development and regulatory experience, as a company, it has not previously filed the applications necessary to gain regulatory approvals for any product. This lack of experience may impede the Company’s ability to obtain regulatory approval in a timely manner, if at all, for its product candidates for which development and commercialization is the Company’s responsibility. The Company will not be able to commercialize its product candidates in the United States until it obtains FDA approval and in other jurisdictions until it obtains approval by comparable governmental authorities. Any delay in obtaining, or inability to obtain, these approvals would prevent the Company from commercializing its product candidates and the Company’s ability to generate revenue will be delayed.

Even if any of the Company’s product candidates receives regulatory approval, it may still face future development and regulatory difficulties.

Even if U.S. regulatory approval is obtained, the FDA may still impose significant restrictions on a product’s indicated uses or marketing or impose ongoing requirements for potentially costly post-approval studies. The Company’s product candidates will also be subject to ongoing FDA requirements governing the labeling, packaging, storage, advertising, promotion, recordkeeping and submission of safety and other post-marketing information. In addition, manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with current good manufacturing practices. If the Company or a regulatory agency discovers problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions on that product, the manufacturer or the Company, including requiring withdrawal of the product from the market or suspension of manufacturing. If the Company or the manufacturing facilities for the Company’s product candidates fail to comply with applicable regulatory requirements, a regulatory agency may:

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issue warning letters or untitled letters;

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impose civil or criminal penalties;

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suspend regulatory approval;

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suspend any ongoing clinical trials;

	•		refuse to approve pending applications or supplements to approved applications filed by the Company or its collaborators;

	•		impose restrictions on operations, including costly new manufacturing requirements; or

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seize or detain products or require a product recall.

The FDA and other regulatory agencies actively enforce regulations prohibiting the promotion of a drug for a use that has not been cleared or approved by the FDA. Use of a drug outside its cleared or approved indications is known as “off-label” use. Physicians may use the Company’s products for off-label uses, as the FDA does not restrict or regulate a physician’s choice of treatment within the practice of medicine. However, if the FDA or another regulatory agency determines that the Company’s promotional materials or training constitutes promotion of an off-label use; it could request that the Company modify its training or promotional materials or subject the Company to regulatory enforcement actions, including the issuance of a warning letter, injunction, seizure, civil fine and criminal penalties.

In order to market any products outside of the United States, the Company and its collaborators must establish and comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy. Approval procedures vary among jurisdictions and can involve additional product testing and additional administrative review periods. The time required to obtain approval in other jurisdictions might differ from that required to obtain FDA approval. The regulatory approval process in other jurisdictions may include all of the risks detailed above regarding FDA approval in the United States. Regulatory approval in one jurisdiction does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one jurisdiction may negatively impact the regulatory process in others. Failure to obtain regulatory approval in other jurisdictions or any delay or setback in obtaining such approval could have the same adverse effects described above regarding FDA approval in the United States, including the risk that product candidates may not be approved for all indications requested, which could limit the uses of product candidates and adversely impact potential royalties and product sales, and that such approval may be subject to limitations on the indicated uses for which the product may be marketed or require costly, post-approval follow-up studies.

If the Company or any of its manufacturers or other partners fails to comply with applicable foreign regulatory requirements, the Company and such other parties may be subject to fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.

Legislative or regulatory reform of the healthcare system may affect the Company’s ability to sell its products profitably.

In both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory changes to the healthcare system in ways that could impact upon the Company’s ability to sell its products profitably. In recent years, new legislation has been enacted in the United States at the federal and state levels that effects major changes in the healthcare system, either nationally or at the state level. These new laws include a prescription drug benefit for Medicare beneficiaries and certain changes in Medicare reimbursement. Given the recent enactment of these laws, it is still too early to determine their impact on the biotechnology and pharmaceutical industries and the Company’s business. Further, federal and state proposals are likely. More recently, administrative proposals are pending and others have become effective that would change the method for calculating the reimbursement of certain drugs. The adoption of these proposals and pending proposals may affect the Company’s ability to raise capital, obtain additional collaborators or profitably market its products. Such proposals may reduce the Company’s revenues, increase its expenses or limit the markets for its products. In particular, the Company expects to experience pricing pressures in connection with the sale of its products due to the trend toward managed health care, the increasing influence of health maintenance organizations and additional legislative proposals.

Risks Related to the Securities Market and Ownership of the Company’s Common Stock

The Company intends to deregister its common stock under the Securities Exchange Act of 1934, as amended, by filing a Form 15 with the Securities and Exchange Commission shortly after the filing of this Annual Report on Form 10-K. Upon the filing of the Form 15, information reported in the past to stockholders will not be available to the same extent or frequency which could result in a decline in our common stock price and may negatively affect the liquidity of our common stock.

Shortly following the filing of this Annual Report on Form 10-K, the Company plans to file a Form 15, Notice of Termination of Registration and Suspension of Duty to File, with the Securities and Exchange Commission to voluntarily terminate its registration under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Once we file the Form 15, our obligation to file reports and other information under the Exchange Act, such as Forms 10-K, 10-Q and 8-K, will be immediately suspended. This will result in less information about the Company being available to stockholders and investors immediately following the filing of the Form 15 and may negatively affect the liquidity, trading volume and trading price of our common stock. It is expected that the deregistration of our common stock under the Exchange Act will become effective ninety (90) days after the date on which the Form 15 is filed.

The Company is presently traded on the Pink Sheets which does not require Exchange Act registration or that the Company meet the reporting requirements of the Exchange Act The Company expects its common stock will continue to trade in the Pink Sheets, so long as market makers demonstrate an interest in trading in the Company’s common stock. There can be no assurance that our common stock will continue to be actively traded on the Pink Sheets or on any other quotation medium.

Our common stock has been delisted from the NASDAQ Capital Market and is not listed on any other national securities exchange. It will likely be more difficult for stockholders and investors to sell our common stock or to obtain accurate quotations of the share price of our common stock.

On December 29, 2009, the Company received written notice from the listing qualifications staff of the NASDAQ Stock Market informing the Company that trading of the Company’s common stock would be suspended from the NASDAQ Capital Market prior to the open of business on January 4, 2010 and that NASDAQ would initiate procedures to delist the Company’s common stock. The Company had notified NASDAQ on December 23, 2009 that the Company would be unable to comply with NASDAQ listing rule 5550(b), which requires a minimum stockholders’ equity requirement of $2.5 million, and NASDAQ listing rule 5605, which requires, among other things, that the Company’s board of directors be comprised of at least a majority of independent directors and that the Company’s audit committee be comprised of at least three independent directors. The Company’s common stock is currently traded on the Pink Sheets, a real-time inter-dealer electronic quotation and trading system in the over-the-counter securities market.

The trading of our common stock on the Pink Sheets entails certain risks. Stocks trading on the over-the-counter market are typically less liquid than stocks that trade on a national securities exchange such as the NASDAQ Capital Market. Liquidity may be impaired not only in the number of shares that are bought and sold, but also through delays in the timing of transactions, and coverage by security analysts and the news media, if any, of the Company. Trading on the over-the-counter market may also negatively impact the market price of our common stock, the number of institutional and other investors that will consider investing in our common stock, the availability of information concerning the trading prices and volume of our common stock, and the number of broker-dealers willing to execute trades in shares of our common stock. In addition, the trading of our common stock on the Pink Sheets may materially and adversely affect our access to the capital markets, and the limited liquidity and reduced price of our common stock could materially and adversely affect our ability to raise capital through alternative financing sources on favorable terms or at all. Trading of securities on an over-the-counter securities market is often more sporadic than the trading of securities listed on a national exchange. The decreased liquidity of securities traded on the Pink Sheets may make it more difficult for holders of the Company’s common stock to sell their securities. There can be no assurance that our common stock will continue to be traded on the Pink Sheets or any trading market.

The Company’s operating results and stock price may fluctuate significantly.

The Company’s results of operations may be expected to be subject to quarterly fluctuations. The Company’s level of revenues, if any, and results of operations at any given time, will be based primarily on the following factors:

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the Company’s ability to obtain additional financing and the terms of such financing;

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the Company’s ability to operate its business following the restructuring, as described in Note 12 in the Notes to the Financial Statements;

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the status of development of VIA-2291, the Metabolic Compounds, and any other product candidates;

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whether or not the Company enters into development and license agreements with strategic partners that provide for payments to the Company, and the timing and accounting treatment of payments to the Company, if any, under those agreements;

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whether or not the Company achieves specified development or commercialization milestones under any agreement that the Company enters into with collaborators and the timely payment by commercial collaborators of any amounts payable to the Company;

	•		the addition or termination of research programs or funding support;

	•		the timing of milestone and other payments that the Company may be required to make to others; and

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variations in the level of expenses related to the Company’s product candidates or potential product candidates during any given period.

These factors may cause the price of the Company’s stock to fluctuate substantially. Additionally, global market and economic conditions have been, and continue to be, disrupted and volatile. The Company believes that quarterly comparisons of its financial results are not necessarily meaningful and should not be relied upon as an indication of the Company’s future performance.

The Company’s stock price could decline significantly based on the results and timing of its clinical trials.

The Company may not be successful in commencing or completing further clinical trials to demonstrate the efficacy of VIA-2291 or in commencing or conducting clinical trials for the Metabolic Compounds. Biotechnology and pharmaceutical company stock prices have declined significantly when clinical trial results were unfavorable or perceived negatively, or when clinical trials were delayed or otherwise did not meet expectations. Failure to initiate or delays in the Company’s clinical trials of any of its product candidates or unfavorable results or negative perceptions regarding the results of any such clinical trials, could cause the Company’s stock price to decline significantly.

Bay City Capital, the Company’s principal stockholder, has significant influence over the Company, and the interests of the Company’s other stockholders may conflict with the interests of Bay City Capital.

Bay City Capital, the Company’s principal stockholder, currently claims beneficial ownership of approximately 93% of the Company’s common stock and holds a security interest in all of the Company’s assets, including its intellectual property, as a Lender under the 2009 Loan Agreement, the 2010 Loan Agreement and the 2010 Loan Amendment. As a result, Bay City Capital, as a stockholder and a secured lender, is able to exert significant influence over the Company’s management and affairs, including any financing transactions, and matters requiring stockholder approval, including the election of directors, any merger, consolidation or sale of all or substantially all of the Company’s assets, and any other significant corporate transaction. The interests of Bay City Capital, may not always coincide with the interests of the Company or its other stockholders. For example, Bay City Capital could delay or prevent a change of control of the Company even if such a change of control would benefit the Company’s other stockholders. The significant concentration of stock ownership may adversely affect the trading price of the Company’s common stock due to investors’ perception that conflicts of interest may exist or arise.

Our change of control agreements with our named executive officers may require us to pay severance benefits to any of those persons who are terminated in connection with a change of control of the Company.

Each of Dr. Lawrence K. Cohen and Dr. Rebecca A. Taub are party to a change of control agreement providing for the payment of severance benefits and acceleration of vesting stock options in the event of a termination of employment in connection with a change of control of the Company. Accelerated vesting of options could result in dilution to our existing stockholders and harm the market price of our common stock. The payment of these severance benefits could harm our financial condition and results. In addition, these potential severance payments under these agreements may discourage or prevent third parties from seeking a business combination with the Company.

As a “smaller reporting company,” the Company has not been subject to the full requirements of Section 404 of the Sarbanes-Oxley Act of 2002. If the Company is unable to favorably assess the effectiveness of its internal controls over financial reporting, the price of the Company’s common stock could be adversely affected.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, the Company’s management is required to report on the effectiveness of its internal control over financial reporting as of December 31, 2010 in this Annual Report on Form 10-K for the fiscal year ending December 31, 2010. Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the Company, as a smaller reporting company, is not required to include an attestation report from its independent auditor in its annual reports filed with the SEC. As a smaller reporting company, the Company has not been subject to the full requirements of Section 404 of SOX. During 2007, the Company installed systems of internal accounting and administrative controls it believes are needed to comply with Section 404 of SOX. Testing of systems installed was performed to enable management to report on the effectiveness of the controls as of December 31, 2010. In addition, any updates to the Company’s finance and accounting systems, procedures and controls, which may be required as a result of the Company’s ongoing analysis of its internal controls, or results of testing by the Company, may require significant time and expense. If the Company fails to have effective internal control over financial reporting, is unable to complete any necessary modifications to its internal control reporting, investors could lose confidence in the accuracy and completeness of the Company’s financial reports and in the reliability of the Company’s internal control over financial reporting, which could lead to a substantial price decline in the Company’s common stock.

The stock price of the Company’s common stock is likely to be volatile and you may lose all, or a substantial portion, of your investment.

The trading price of the Company’s common stock has been and is likely to continue to be volatile and could be subject to wide fluctuations in price in response to various factors, many of which are beyond the Company’s control including, among others, lack of trading volume in the Company’s stock, concentration of stock ownership by Bay City Capital, the Company’s ability to pursue preclinical and clinical development of the Metabolic Compounds, market perception of the results of the Company’s clinical trials, the Company’s ability to control its operating expenses, the Company’s ability to acquire new compounds for the pipeline, and in particular, the Company’s ability to obtain necessary financing in the near term and successfully enter into collaborative or strategic arrangements in the long-term. In addition, global market and economic conditions have been, and continue to be, disrupted and volatile. Continued concerns about the systemic impact of potential long-term and wide-spread recession, energy costs, geopolitical issues, the availability and cost of credit, and the global housing and mortgage markets have contributed to increased market volatility and diminished expectations for western and emerging economies. The stock market in general, and the market for biotechnology and development-stage pharmaceutical companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. These broad market and industry factors have seriously harmed and may continue to harm the market price of the Company’s common stock, regardless of the Company’s actual operating performance. In addition, in the past, following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against the Company, could result in substantial costs and a diversion of management’s attention and resources.

The Company has never paid cash dividends on its common stock, and the Company does not anticipate that it will pay any cash dividends on its common stock in the foreseeable future.

The Company has never declared or paid cash dividends on its common stock. In addition, the payment of cash dividends is restricted by the covenants in the Company’s loan from the Lenders. The Company does not anticipate that it will pay any cash dividends on its common stock in the foreseeable future. The Company intends to retain all available funds and any future earnings to fund the development and growth of its business. Any future determination to pay dividends will be at the discretion of the Company’s board of directors and will depend on the Company’s financial condition, results of operations, capital requirements, restrictions contained in current or future financing instruments and such other factors as the Company’s board of directors deems relevant. As a result, capital appreciation, if any, of the Company’s common stock will be your sole source of gain for the foreseeable future.


ITEM 2.		PROPERTIES

The Company leases its principal executive offices in San Francisco, California, which consist of approximately 8,180 square feet. This lease expires on May 31, 2013. The Company also leased approximately 4,979 square feet in Princeton, New Jersey, where its Senior Vice President, Research and Development, was located. Although this lease expired on April 2, 2012, the Company terminated the lease effective May 31, 2010 and moved to new facilites in Fort Washington, Pennsylvania, where it now leases approximately 500 square feet for offices where its Senior Vice President, Research and Development is now located. This lease expires on May 31, 2011. The Company believes that its current facilities are adequate for its needs for the foreseeable future.


ITEM 3.		LEGAL PROCEEDINGS

The Company is currently not a party to any material legal proceedings.

PART II


ITEM 5.		MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock is currently traded on the Pink Sheets, a real-time inter-dealer electronic quotation and trading system in the over-the-counter securities market, under the symbol “VIAP”. Prior to January 4, 2010, our common stock was traded on The NASDAQ Capital Market under the same ticker symbol. Effective January 4, 2010, trading in our common stock on The NASDAQ Capital Market was suspended and NASDAQ initiated procedures to delist our common stock. As of March 1, 2011, there were approximately 122 registered holders of record of common stock.

The following table shows the high and low sales prices for our common stock on The NASDAQ Capital Market or Pink Sheets, as applicable, during the fiscal year ended 2009 and 2010, respectively:


	High		Low
FISCAL YEAR ENDED December 31, 2009:
First Quarter	$	0.25	$	0.08
Second Quarter	$	0.84	$	0.15
Third Quarter	$	0.74	$	0.21
Fourth Quarter	$	0.60	$	0.20
FISCAL YEAR ENDED December 31, 2010:
First Quarter	$	0.23	$	0.11
Second Quarter	$	0.22	$	0.10
Third Quarter	$	0.13	$	0.06
Fourth Quarter	$	0.10	$	0.02

Shortly following the filing of this Annual Report on Form 10-K, the Company plans to file a Form 15, Notice of Termination of Registration and Suspension of Duty to File, with the SEC to voluntarily terminate its registration under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company has determined that deregistering under the Exchange Act would result in significant time and cost savings to the Company. This will result in less information about the Company being available to shareholders and investors immediately following the filing of the Form 15. It is expected that the deregistration of our common stock under the Exchange Act will become effective ninety (90) days after the date on which the Form 15 is filed. The Company is eligible to deregister under the Exchange Act because its common stock is held of record by fewer than 500 persons and its assets have not exceeded $10 million on the last day of each of its three most recent fiscal years.

The Pink Sheets does not require Exchange Act registration or that the Company meet the reporting requirements of the Exchange Act. The Company expects its common stock will continue to trade in the Pink Sheets, so long as market makers demonstrate an interest in trading in the Company’s common stock. The Company can give no assurance that its common stock will continue to be actively traded on the Pink Sheets or on any other quotation medium.

Dividend Policy

We have never paid any cash dividends on our common stock to date. We currently anticipate that we will retain all future earnings, if any, to fund the development and growth of our business and do not anticipate paying any cash dividends for at least the next five years, if ever.


ITEM 6.		SELECTED FINANCIAL DATA

The information set forth below should be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included elsewhere in this annual report. On June 5, 2007, Corautus completed the Merger with privately-held VIA Pharmaceuticals, Inc. pursuant to which Resurgens Merger Corp., a wholly-owned subsidiary of Corautus, merged with and into privately-held VIA Pharmaceuticals, Inc., with privately-held VIA Pharmaceuticals, Inc. continuing as the surviving corporation and as a wholly-owned subsidiary of Corautus. Immediately following the effectiveness of the Merger, privately-held VIA Pharmaceuticals, Inc. then merged with and into Corautus, pursuant to which Corautus continued as the surviving corporation. For accounting purposes, privately-held VIA Pharmaceuticals, Inc. was considered to be the acquiring company in the Merger, and the Merger was accounted for as a reverse acquisition of assets under the purchase method of accounting for business combinations in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In connection with the Merger, the name of the business was changed from “Corautus Genetics Inc.” to “VIA Pharmaceuticals, Inc.” and retroactively restated its authorized, issued and outstanding shares of common and preferred stock to reflect a 1 to 15 reverse common stock split. The financial data included in this report reflect the historical results of privately-held VIA Pharmaceuticals, Inc. prior to the Merger and that of the combined company following the Merger. The historical results are not necessarily indicative of results to be expected in any future period.


																Period from
																June 14, 2004
																(Date of
	Years Ended December 31,															Inception) to
(In whole dollars)	2010			2009			2008			2007			2006			Dec 31, 2010

Revenue	$	—		$	—		$	—		$	—		$	—		$	—

Loss from continuing operations		(9,601,315	)		(20,978,324	)		(20,274,828	)		(21,835,382	)		(8,626,887	)		(91,205,880	)
Loss from continuing operations per common share		(0.47	)		(1.05	)		(1.03	)		(2.24	)		(19.81	)		—

Total assets		499,971			2,556,094			5,000,803			24,484,941			3,726,420			—

Long-term obligations		8,400			37,450			30,637			3,980			6,827			—

Cash dividends declared per common share		—			—			—			—			—			—


ITEM 7.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition contains certain statements that are not strictly historical and are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 and involve a high degree of risk and uncertainty. Our actual results may differ materially from those projected in the forward-looking statements due to risks and uncertainties that exist in our operations, development efforts and business environment, including those set forth under the Section entitled “Risk Factors” in Item 1A, and other documents we file with the Securities and Exchange Commission. All forward-looking statements included in this report are based on information available to us as of the date hereof, and, unless required by law, we assume no obligation to update any such forward-looking statement.

Corporate History and Description of Merger

Business Overview

Liver-directed THR Beta Agonist (VIA-3196)

DGAT1

VIA-2291

The Phase 3 trial for VIA -2291 will test the ability of the drug to reduce heart attacks and strokes in a high risk cardiovascular patient population. Due to the size and cost of such a trial the company believes it is best undertaken with a pharmaceutical company partner. To date VIA has been unable to establish such a collaboration. The company continues to evaluate strategies for partnering the program but currently intends to conduct no further internally funded activities.

Going Concern Uncertainty

The Company has incurred losses since inception as it has devoted substantially all of its resources to research and development, including early-stage clinical trials. As of December 31, 2010, the Company’s accumulated deficit was approximately $91.2 million. The Company had $84,001 in cash at December 31, 2010. In connection with the loan amendments discussed below, the Company borrowed an additional $500,000 on January 14, 2011 and $1,498,603 on March 24, 2011. Management does not believe that existing cash resources will be sufficient to enable the Company to meet its ongoing working capital requirements for the next twelve months and the Company will need to raise substantial additional funding in the near term to repay amounts owed under the 2009 Loan Agreement, the 2010 Loan Agreement, and the 2010 Loan Amendment (which loan agreements and amendments are described below), and to meet its ongoing working capital requirements. Moreover, in connection with these loans, the Company must also satisfy certain conditions and comply with covenants, including covenants relating to the Company’s ability to incur additional indebtedness, make future acquisitions, consummate asset dispositions, grant liens and pledge assets, pay dividends or make other distributions, incur capital expenditures and make restricted payments. These restrictions may limit the Company’s ability to pursue its business strategies and obtain additional funds. As a result, there are substantial doubts that the Company will be able to continue as a going concern and, therefore, may be unable to realize its assets and discharge its liabilities in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or to amounts and classifications of liabilities that may be necessary should the Company be unable to continue as a going concern.

The Company cannot guarantee to its stockholders that the Company’s efforts to raise additional private or public funding will be successful. If adequate funds are not available in the near term, the Company may be required to:

•

terminate or delay clinical trials or studies of VIA-3196 and the DGAT1 compounds;

•

terminate or delay the preclinical development of one or more of its other preclinical candidates;

•

curtail its licensing activities that are designed to identify molecular targets and small molecules for treating cardiovascular disease;

•

relinquish rights to product candidates, development programs, or discovery development programs that it may otherwise seek to develop or commercialize on its own; and

•

delay, reduce the scope of, or eliminate one or more of its research and development programs, or ultimately cease operations.

On March 26, 2010, the Company’s Board of Directors approved a restructuring of the Company to reduce its workforce and operating costs effective March 31, 2010. The reduction in workforce decreased total employees by approximately 63% to a total of six employees and increased the focus of future operating expense or research and development activities.

The Company has not generated revenue since June 14, 2004, the inception of the Company. The Company does not expect to generate any revenues from licensing, achievement of milestones or product sales until it is able to commercialize product candidates or execute a collaboration arrangement. The Company cannot estimate the actual amounts necessary to successfully complete the successful development and commercialization of its product candidates or whether, or when, it may achieve profitability. The Company expects to incur substantial and increasing losses as it continues to expend substantial resources seeking to successfully research, develop, manufacture, obtain regulatory approval for, and commercialize its product candidates.

Until the Company can establish profitable operations to finance its cash requirements, the Company’s ability to meet its obligations in the ordinary course of business is dependent upon its ability to raise substantial additional capital through public or private equity or debt financings, the establishment of credit or other funding facilities, collaborative or other strategic arrangements with corporate sources or other sources of financing, the availability of which cannot be assured. On June 5, 2007, the Company raised $11.1 million through the Merger with Corautus to cover existing obligations and provide operating cash flows. In July 2007, the Company entered into a securities purchase agreement that provided for issuance of 10,288,065 shares of common stock for approximately $25.0 million in gross proceeds.

As more fully described in Note 6 in the notes to the financial statements, in March 2009, the Company entered into a Note and Warrant Purchase Agreement (the “2009 Loan Agreement”) with its principal stockholder and one of its affiliates (the “Lenders”) whereby the Lenders agreed to lend to the Company in the aggregate up to $10.0 million. The Company secured the loan with all of its assets, including the Company’s intellectual property. On March 12, 2009, the Company borrowed the initial $2.0 million available under the 2009 Loan Agreement. Subsequently, the Company made $2.0 million borrowings under the 2009 Loan Agreement on May 19, 2009, June 29, 2009, August 14, 2009, respectively, and the Company borrowed the final $2.0 million available under the 2009 Loan Agreement on September 11, 2009. According to the terms of the original 2009 Loan Agreement, the aggregate loan amount was due to the Lenders on September 14, 2009. The parties agreed to extend the repayment terms on various dates in 2009, and on February 26, 2010, the Lenders agreed to modify the 2009 Loan Agreement to further extend the repayment terms to April 1, 2010. The Lenders did not modify the interest rate or offer any concessions in the amendments to the 2009 Loan Agreement. The Company failed to repay the debt and all related interest to the Lenders due on April 1, 2010. As a result, the Company is now accruing interest at the higher rate of 18% per annum beginning April 1, 2010.

As more fully described in Note 6 in the notes to the financial statements, in March 2010, the Company entered into a second Note and Warrant Purchase Agreement (the “2010 Loan Agreement”) with the Lenders whereby the Lenders agreed to lend to the Company in the aggregate up to $3.0 million, pursuant to the terms of promissory notes issued under the 2010 Loan Agreement. The Company secured the loan with all of its assets, including the Company’s intellectual property. On March 29, 2010, the Company borrowed the initial $1.25 million available under the 2010 Loan Agreement. Subsequently, the Company made $100,000, $200,000, $300,000, $100,000, and $750,000 borrowings under the 2010 Loan Agreement on May 26, 2010, June 4, 2010, June 29, 2010, July 15, 2010, July 27, 2010, respectively, and the Company borrowed the final $300,000 available under the 2010 Loan Agreement on September 28, 2010. The original 2010 Loan Agreement notes are secured by a lien on all of the assets of the Company. Amounts borrowed under the original 2010 Loan Agreement notes accrue interest at the rate of fifteen percent (15%) per annum, which increases to eighteen percent (18%) per annum following an event of default. Unless earlier paid in accordance with the terms of the original 2010 Loan Agreement notes, all unpaid principal and accrued interest shall become fully due and payable on the earlier to occur of (i) December 31, 2010, (ii) the closing of a debt, equity or combined debt/equity financing resulting in gross proceeds or available credit to the Company of not less than $20,000,000, and (iii) the closing of a transaction in which the Company sells, conveys, licenses or otherwise disposes of a majority of its assets or is acquired by way of a merger, consolidation, reorganization or other transaction or series of transactions pursuant to which stockholders of the Company prior to such acquisition own less than 50% of the voting interests in the surviving or resulting entity. The Company failed to repay the debt and all related interest to the Lenders due on December 31, 2010. On January 14, 2011, the Company entered into an amendment to the 2010 Loan Agreement and 2010 Loan Amendment to extend the maturity date under the 2010 Loan Agreement and 2010 Loan Amendment from December 31, 2010 to June 30, 2011 and on March 24, 2011, the Company entered into a second amendment to further extend the maturity date to September 30, 2011.

As more fully described in Note 6 in the notes to the financial statements, on October 29, 2010, the Company executed a secured promissory note (the “Bridge Note”) in favor of Bay City Capital Fund IV, L.P., a Delaware limited partnership in the principal sum of $200,000 for general corporate purposes. By the terms of the Bridge Note, upon execution of the 2010 Loan Amendment (as defined below) the unpaid principal amount and accrued and unpaid interest under the Bridge Note automatically converted into obligations of the Company under the 2010 Loan Amendment as advances under the amended and restated promissory notes issued under the 2010 Loan Amendment. The Company accrued $1,397 in unpaid interest for the period October 29, 2010 to November 15, 2010, which is included in the Company’s statement of operations.

As more fully described in Note 6 in the notes to the financial statements, on November 15, 2010, the Company entered into an amendment to the 2010 Loan Agreement (“2010 Loan Amendment”) to enable the Company to borrow up to an additional aggregate principal amount of $3,000,000, pursuant to the terms of amended and restated promissory notes issued under the 2010 Loan Amendment. Subject to the Lenders’ approval, as of December 31, 2010, the Company may borrow in the aggregate up to an additional $1,998,603 at subsequent closings pursuant to the terms of the 2010 Loan Amendment and the amended and restated promissory notes issued under the 2010 Loan Amendment. On November 15, 2010, the $201,397 outstanding principal and unpaid interest on the Bridge Note were automatically converted into obligations of the Company under the 2010 Loan Amendment as advances. During the three months ended December 31, 2010, the Company borrowed an additional $800,000 on November 22, 2010. The original 2010 Loan Amendment notes are secured by a lien on all of the assets of the Company. Amounts borrowed under the 2010 Loan Amendment notes accrue interest at the rate of fifteen percent (15%) per annum, which increases to eighteen percent (18%) per annum following an event of default. Unless earlier paid in accordance with the terms of the original 2010 Loan Amendment notes, all unpaid principal and accrued interest shall become fully due and payable on the earlier to occur of (i) December 31, 2010, (ii) the closing of a debt, equity or combined debt/equity financing resulting in gross proceeds or available credit to the Company of not less than $20,000,000, and (iii) the closing of a transaction in which the Company sells, conveys, licenses or otherwise disposes of a majority of its assets or is acquired by way of a merger, consolidation, reorganization or other transaction or series of transactions pursuant to which stockholders of the Company prior to such acquisition own less than 50% of the voting interests in the surviving or resulting entity. On January 14, 2011, the Company entered into an amendment to the 2010 Loan Agreement and 2010 Loan Amendment to extend the maturity date under the 2010 Loan Agreement and 2010 Loan Amendment from December 31, 2010 to June 30, 2011 and on March 24, 2011, the Company entered into a second amendment to further extend the maturity date to September 30, 2011.

In November 2010, the Company was notified by the Internal Revenue Service that it has been awarded $244,479 in grants under the Qualifying Therapeutic Discovery Project (“QTDP”) program established under Section 48D of the Internal Revenue Code as part of the Patient Protection and Affordable Care Act of 2010. The Company submitted the grant application in July 2010 for qualified 2009 and 2010 investments in the VIA-2291 program. The Company received the full amount of the grant on January 19, 2011.

All outstanding principal and accrued interest under the 2009 Loan Agreement was due on April 1, 2010. All outstanding principal and accrued interest under the 2010 Loan Agreement and 2010 Loan Amendment was originally due on December 31, 2010. The Company was not able to repay the loans on the respective due dates. On January 14, 2011, the Company entered into an amendment to the 2010 Loan Agreement and 2010 Loan Amendment to extend the maturity date under the 2010 Loan Agreement and 2010 Loan Amendment from December 31, 2010 to June 30, 2011 and on March 24, 2011, the Company entered into a second amendment to further extend the maturity date to September 30, 2011. The Lenders may terminate the 2009 Loan Agreement, demand immediate payment of all amounts borrowed by the Company and take possession of all collateral securing the loan, which consists of all of our assets, including our intellectual property rights.

Revenue

Research and Development Expenses

The Company is focused on the development of compounds for the treatment of cardiovascular and metabolic disease. The Company’s VIA-2291 compound is a selective and reversible inhibitor of 5-LO, which is a key enzyme in the biosynthesis of leukotrienes (important mediators of inflammation involved in the development and progression of atherosclerosis). Potentially a complement to current standard of care therapies that treat risk factors, such as statins, antiplatelet and blood pressure medications, VIA-2291 could be beneficial to more than 15 million patients who suffer from atherosclerosis and cardiovascular disease. The Company has completed the ACS, CEA and FDG-PET Phase 2 clinical trials for VIA-2291. In November 2008, the Company announced the results of its ACS and CEA Phase 2 clinical trials at the AHA Conference, and the Company reported results from an MDCT sub-study of its ACS Phase 2 clinical trial in May of 2009. In June 2009, the Company announced that it held an end of Phase 2a meeting with the FDA. The Company reviewed safety and biologic activity data from the VIA-2291 CEA and ACS trials with the FDA and received guidance, including suggestions from the FDA on the Company’s potential Phase 3 trial design. In December 2009, the Company announced its last patient visit and as FDG-PET is an experimental technique in vascular disease, currently not validated for image analysis end points, it is not possible to interpret the imaging analysis of the study at this time, nor was it the Company’s intention to use the imaging results of the FDG-PET study in determining the future clinical plans for VIA-2291.

The Company’s THR (VIA-3196) compound is a clinically ready candidate for the control of cholesterol, triglyceride levels and potential in insulin sensitization/diabetes The Company anticipates beginning Phase 1 clinical trials for VIA-3196 in 2011 to provide safety information and demonstrate proof of concept for LDL cholesterol lowering. The Company filed an Investigational New Drug (“IND”) application with the FDA on September 3, 2010 (IND #109408). The IND is required before the Company can proceed with human clinical trials. The IND contains the plans for the clinical studies and gives a complete picture of the drug, including its structural formula, animal test results, and manufacturing information. The IND is currently open to conduct the initial Phase1 clinical study. In preparation for the Phase 1 clinical trials, the Company has made significant progress in drug development and stability testing in 2009 and 2010.

The preclinical DGAT1 metabolic disorders program targets the treatment of type 2 diabetes and has potential benefit in dyslipidemia and body weight loss. VIA intends to identify potential clinical candidates from the compounds in this program and begin IND-enabling studies.

Research and development (“R&D”) expense represented 30% and 46% of total operating expense for the year ended December 31, 2010 and 2009, respectively, and 54% for the period from June 14, 2004 (date of inception) to December 31, 2010. The Company expenses research and development costs as incurred. Research and development expenses are those incurred in identifying, in-licensing, researching, developing and testing product candidates. These expenses primarily consist of the following:

•

compensation of personnel associated with research and development activities, including consultants, investigators, and contract research organizations (“CROs”);

•

in-licensing fees;

•

laboratory supplies and materials;

•

costs associated with the manufacture of product candidates for preclinical testing and clinical studies;

•

preclinical costs, including toxicology and carcinogenicity studies;

•

fees paid to professional service providers for independent monitoring and analysis of the Company’s clinical trials;

•

depreciation and equipment; and

•

allocated costs of facilities and infrastructure.

The following reflects the breakdown of the Company’s research and development expenses generated internally versus externally for the years ended December 31, 2010 and 2009, and for the period from June 14, 2004 (date of inception) to December 31, 2010:


					Period from
					June 14, 2004
	Years Ended				(Date of Inception) to
	December 31,		December 31,		December 31,
	2010		2009		2010

Externally generated research and development expense	$	361,725	$	3,639,215	$	29,066,916
Internally generated research and development expense		1,455,737		2,416,000		13,656,724

Total	$	1,817,462	$	6,055,215	$	42,723,640

Externally generated research and development expenses consist primarily of the following:


						Period from
						June 14, 2004
	Years Ended					(Date of Inception) to
	December 31,			December 31,		December 31,
	2010			2009		2010
Externally generated research and development expense
In-licensing expenses	$	—		$	400,000	$	5,270,000
CRO and investigator expenses		21,068			1,090,115		10,770,407
Consulting expenses		181,088			1,120,131		6,599,757
Qualifying therapeutic discovery grant		(138,640	)		—		(138,640	)
Other		298,209			1,028,969		6,565,392

Total	$	361,725		$	3,639,215	$	29,066,916

Internally generated research and development expenses consist primarily of the following:


						Period from
						June 14, 2004
	Years Ended					(Date of Inception) to
	December 31,			December 31,		December 31,
	2010			2009		2010
Internally generated research and development expense
Personnel and related expenses	$	1,051,915		$	1,693,205	$	9,559,074
Stock-based compensation expense		177,287			275,961		1,273,081
Travel and entertainment expense		63,737			170,249		1,219,356
Qualifying therapeutic discovery grant		(105,839	)		—		(105,839	)
Other		268,637			276,585		1,711,052

Total	$	1,455,737		$	2,416,000	$	13,656,724

The Company does not presently segregate total research and development expenses by individual project because our research is focused on atherosclerosis and cardiometabolic disease as a unitary field of study. Although the Company has a mix of preclinical and clinical research and development, personnel working on the programs are combined, financial expenditures are combined, and reporting has not matured to the point where they are separate and distinct projects. The Company cannot reliably allocate the personnel costs, consulting costs, and other resources dedicated to these efforts to individual projects, as we are conducting our research on an integrated basis.

Assuming the Company is able to raise additional financing, it is expected that there will be significant research and development expenses for the foreseeable future. Clinical trial activity in the CEA, ACS, and FDG-PET Phase 2 clinical trials and related expenses have decreased as a result of completing the studies. The Company began the development of its preclinical metabolic assets in 2009 and the Company expects expenses to increase substantially over the next several years. The ultimate level and timing of research and development spending is difficult to predict due to the uncertainty inherent in the timing of raising additional financing, the timing and extent of progress in our research programs, and initiation and progress of clinical trials. In addition, the results from the Company’s preclinical and clinical research and development activities, as well as the results of trials of similar therapeutics under development by others, will influence the number, size and duration of planned and unplanned trials. As the Company’s research efforts mature, we will continue to review the direction of our research based on an assessment of the value of possible future compounds emerging from these efforts. Based on this continuing review, the Company expects to establish discrete research programs and evaluate the cost and potential for cash inflows from commercializing products, partnering with others in the biotechnology or pharmaceutical industry, or licensing the technologies associated with these programs to third parties.

The Company believes that it is not possible at this time to provide a meaningful estimate of the total cost to complete our ongoing projects and to bring any proposed products to market. The potential use of compounds targeting atherosclerotic plaque inflammation as a therapy is an emerging area. Costs to complete current or future development programs could vary substantially depending upon the projects selected for development, the number of clinical trials required and the number of patients needed for each study. It is possible that the completion of these studies could be delayed for a variety of reasons, including difficulties in enrolling patients, incomplete or inconsistent data from the preclinical or clinical trials, difficulties evaluating the trial results and delays in manufacturing. Any delay in completion of a trial would increase the cost of that trial, which would harm our results of operations. Due to these uncertainties, the Company cannot reasonably estimate the size, nature or timing of the costs to complete, or the amount or timing of the net cash inflows from our current activities. Until the Company obtains further relevant preclinical and clinical data, and progresses further through the FDA regulatory process, the Company will not be able to estimate our future expenses related to these programs or when, if ever, and to what extent we will receive cash inflows from resulting products.

General and Administrative

General and administrative expense consists primarily of personnel costs, including salaries, incentive and other compensation, travel and entertainment expenses, for personnel in executive, finance, accounting, business development, information technology and human resource functions. Other costs include facility costs not otherwise included in research and development expense, professional fees for legal and accounting services, and public company expenses, including investor relations, transfer agent fees and printing expenses.

Interest Income, Interest Expense and Other Expenses

Interest income consists of interest earned on cash and cash equivalents. Interest expense consists primarily of interest due on secured notes payable and on capital leases, and amortization of discount on notes payable — affiliate. Other expenses consist of net realized and unrealized gains and losses associated with foreign currency transactions, and unrealized gains and losses associated with the warrant obligation.

Results of Operations

Comparison of the years ended December 31, 2010 and 2009

The following table summarizes the Company’s results of operations with respect to the items set forth in such table for the years ended December 31, 2010 and 2009 together with the change in such items in dollars and as a percentage:


	For the Years Ended
	December 31,		December 31,
	2010		2009			$ Change			% Change
Revenue	$	—	$	—		$	—			—
Research and development expense		1,817,462		6,055,215			(4,237,753	)		(70	)%
General and administrative expense		4,096,520		7,198,320			(3,101,800	)		(43	)%
Interest expense		3,562,483		7,733,390			(4,170,907	)		(54	)%
Other expense/(income)		17,891		(8,601	)		26,492			308	%

Revenue. The Company did not generate any revenue in the years ended December 31, 2010 and 2009, respectively, and does not expect to generate any revenue from licensing, achievement of milestones or product sales until the Company is able to commercialize product candidates or execute a collaboration arrangement.

Research and Development Expense. Research and development expense decreased 70%, or approximately $4.3 million, from $6.1 million in the year ended December 31, 2009 to $1.8 million in the year ended December 31, 2010. Clinical trial and preclinical related CRO and investigator clinical trial related expenses decreased by approximately $1.0 million from $1.0 million in the year ended December 31, 2009 to approximately $0 in the year ended December 31, 2010. The ACS and CEA Phase 2 clinical trials were completed in 2008. As a result, related CRO and investigator expenses were approximately $0 for each trial in the years ended December 31, 2010 and 2009. FDG-PET CRO and investigator expenses decreased approximately $1.0 million from $1.0 million in the year ended December 31, 2009 to approximately $0 in the year ended December 31, 2010 as last patient visit occurred in 2009. Lab data analysis and other R&D expenses decreased $1.0 million from $1.1 million in the year ended December 31, 2009 to approximately $100,000 in the year ended December 31, 2010 primarily due to an $200,000 decrease in ACS, CEA and FDG-PET Phase 2 clinical trial expenses from $200,000 in the year ended December 31, 2009 to approximately $0 in the year ended December 31, 2010 due to the completion of the studies in 2009, a $200,000 decrease in THR drug development expenses from $400,000 in the year ended December 31, 2009 to $200,000 in the year ended December 31, 2010 due to the timing of work associated with THR drug development, a $500,000 decrease in VIA-2291 general development from $300,000 in the year ended December 31, 2009 to ($200,000) in the year ended December 31, 2010 due to the receipt of a $200,000 QTDP grant from the Internal Revenue Service in November of 2010 and due to the substantial completion of clinical work in the development of VIA-2291 in 2009, and a $100,000 decrease in expenses associated with the DNA isolation and genotyping study that is associated with the development of VIA-2291 from $100,000 in the year ended December 31 2009 to $0 in the year ended December 31, 2010. Employee related expenses including salary, benefits, stock-based compensation, travel and entertainment expense, information technology and facilities expenses, decreased $900,000 from $2.4 million in the year ended December 31, 2009 to $1.5 million in the year ended December 31, 2010 primarily due to the restructuring in March 2010 whereby headcount was reduced to six employees. In-licensing expenses decreased $400,000 from $400,000 in the year ended December 31, 2009 to $0 in the year ended December 31, 2010 due to the in-licensing of THR and DGAT1 in the year ended December 31, 2009 and no in-licensing activities in the year ended December 31, 2010. Consulting expenses decreased $900,000 from $1.1 million in the year ended December 31, 2009 to $200,000 in the year ended December 31, 2010. The Company also incurred $65,000 in expenses associated with the termination of the lease of research and development office space in Princeton, New Jersey in the year ended December 31, 2010.

General and Administrative Expense. General and administrative expense decreased 43%, or approximately $3.1 million, from $7.2 million in the year ended December 31, 2009 to $4.1 million in the year ended December 31, 2010 due primarily to the restructuring in March 2010 whereby headcount was reduced to six employees. Employee related expenses, including salary and benefits, stock-based compensation and travel and entertainment expenses decreased $2.2 million from $4.0 million in the year ended December 31, 2009 to $1.8 million in the year ended December 31, 2010, primarily to the decrease in headcount that resulted from the March 2010 restructuring of the Company. Corporate and facilities general and administrative expenses decreased $900,000 from $2.7 million in the year ended December 31, 2009 to $1.8 million in the year ended December 31, 2010 primarily due to a $500,000 decrease in audit and legal expenses from $1.5 million the year ended December 31, 2009 to $1.0 million in the year ended December 31, 2010, a $200,000 decrease in investor relations and other public company expenses from $400,000 in the year ended December 31, 2009 to $200,000 in the year ended December 31, 2010, and a $200,000 decrease in facilities and IT related expenses from $800,000 in the year ended December 31, 2009 to $600,000 in the year ended December 31, 2010. The Company was able to hold consulting expenses at approximately $500,000 in the years ended December 31, 2010 and 2009.

Interest Expense. Interest expense decreased $4,171,000 from $7,733,000 in the year ended December 31, 2009 to $3,562,000 in the year ended December 31, 2010. Interest on the note payable — affiliate increased $1,215,000 from $789,000 in the year ended December 31, 2009 to $2,004,000 in the year ended December 31, 2010 due to the accumulation of increasing levels of debt over time. Interest expense incurred in the amortization of the discount of the notes payable — affiliate decreased $5,386,000 from $6,944,000 in the year ended December 31, 2009 to $1,558,000 in the year ended December 31, 2010 due to all of the discount associated with the $10.0 million 2009 Loan Agreement being fully amortized in 2009 and due to the reduction in the amount of borrowing year over year.

Other Expense/Income. Other expense increased $27,000 from other income of $9,000 in the year ended December 31, 2009 to other expense of $18,000 in the year ended December 31, 2010. Unrealized losses on foreign exchange transactions decreased $4,000 from $4,000 in the year ended December 31, 2009 to $0 in the year ended December 31, 2010; realized losses on foreign exchange transactions increased $24,000 from realized gains $13,000 in the year ended December 31, 2009 to realized losses of $11,000 in the year ended December 31, 2010. The foreign exchange transactions were incurred primarily in connection with the CEA Phase 2 clinical trial and in patent legal expenses incurred with vendors who invoiced in foreign currency. Losses on the disposal of fixed assets increased $7,000 from approximately $0 in the year ended December 31, 2009 to $7,000 in the year ended December 31, 2010.

Income Tax Expense. There is no income tax provision (benefit) for federal or state income taxes as the Company has incurred operating losses since inception and a full valuation allowance has also been in place since inception.

Liquidity and Capital Resources

The Company does not have commercial products from which to generate cash resources. As a result, from June 14, 2004 (date of inception) to December 31, 2010, the Company has financed its operations primarily through a series of issuances of secured convertible notes, the generation of interest income on the borrowed funds, the Merger with Corautus, a private placement through a public equities transaction, and debt. The Company expects to incur substantial and increasing losses for the next several years as it continues to expend substantial resources seeking to successfully research, develop, manufacture, obtain regulatory approval for, and commercialize its product candidates.

The Company’s ability to meet its obligations in the ordinary course of business is dependent upon its ability to raise substantial additional financing through public or private equity or debt financings, collaborative or other strategic arrangements with corporate sources or other sources of financing, until it is able to establish profitable operations. The Company received approximately $11.1 million in cash through the Merger with Corautus that was consummated on June 5, 2007, and the Company issued 10,288,065 shares of common stock for $25.0 million in gross proceeds in the private placement equity financing which closed in July and August of 2007.

In March 2009, the Company entered into the 2009 Loan Agreement with the Lenders whereby the Lenders agreed to lend to the Company in the aggregate up to $10.0 million as more fully described in Note 6 in the notes to the financial statements. The Company secured the loan with all of its assets, including the Company’s intellectual property. On March 12, 2009, the Company borrowed an initial amount of $2.0 million under the Loan Agreement. During the three months ended June 30, 2009, the Company borrowed $2.0 million on May 19, 2009, and another $2.0 million on June 29, 2009. During the three months ended September 30, 2009, the Company borrowed $2.0 million on August 14, 2009, and borrowed the final $2.0 million on September 11, 2009. According to the terms of the original 2009 Loan Agreement, the debt and related interest was due to the Lenders on September 14, 2009. The parties agreed to extend the repayments terms and, on February 26, 2010, the Lenders agreed to modify the Loan Agreement to further extend the repayment terms to April 1, 2010. The Lenders did not modify the interest rate or offer any concessions in the amended 2009 Loan Agreement. The Company failed to repay the debt and all related interest to the Lenders due on April 1, 2010.

In March 2010, the Company entered into the 2010 Loan Agreement with the Lenders whereby the Lenders agreed to lend to the Company in the aggregate up to $3.0 million as more fully described in Note 6 in the notes to the financial statements. On March 29, 2010, the Company secured the loan with all of its assets, including the Company’s intellectual property. On March 29, 2010, the Company borrowed an initial amount of $1,250,000. During the three months ended June 30, 2010, the Company borrowed $100,000 on May 26, 2010, $200,000 on June 4, 2010, and another $300,000 on June 29, 2010. During the three months ended September 30, 2010, the Company borrowed $100,000 on July 15, 2010, $750,000 on July 27, 2010 and a final $300,000 on September 28, 2010. According to the terms of the original 2010 Loan Agreement, the debt and related interest was due to the Lenders on December 31, 2010. The Company failed to repay the debt and all related interest be such date. As more fully described in Note 6 in the notes to the financial statements, on November 15, 2010, the Company entered into the 2010 Loan Amendment to enable the Company to borrow up to an additional aggregate principal amount of $3.0 million, pursuant to the terms of the amended and restated promissory notes issued under the 2010 Loan Amendment. According to the original terms of the 2010 Loan Amendment, the debt was due to the Lenders on December 31, 2010. As more fully described in Note 14 in the notes to the financial statements, on January 14, 2011, the Lenders agreed to amend the 2010 Loan Agreement and 2010 Loan Amendment to extend the repayment terms of the aggregate $6.0 million borrowings from December 31, 2010 to June 30, 2011 and on March 24, 2011, the Company entered into a second amendment to further extend the maturity date to September 30, 2011. The Lenders did not modify the interest rate or offer any concessions in the January 14, 2011 or March 24, 2011 amendments.

The Company had $84,001 in cash at December 31, 2010. Management believes that, under normal continuing operations, this amount of cash will enable the Company to meet only a small portion of its current obligations. Management does not believe that existing cash resources will be sufficient to enable the Company to meet its ongoing working capital requirements for the next twelve months and the Company will need to raise substantial additional funding in the near term to repay amounts owed under the 2009 Loan Agreement, the 2010 Loan Agreement, and the 2010 Loan Amendment, and to meet its ongoing working capital requirements. Moreover, in connection with these loans, the Company must also satisfy certain conditions and comply with covenants, including covenants relating to the Company’s ability to incur additional indebtedness, make future acquisitions, consummate asset dispositions, grant liens and pledge assets, pay dividends or make other distributions, incur capital expenditures and make restricted payments. These restrictions may limit the Company’s ability to pursue its business strategies and obtain additional funds. As a result, there are substantial doubts that the Company will be able to continue as a going concern and, therefore, may be unable to realize its assets and discharge its liabilities in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or to amounts and classifications of liabilities that may be necessary should the Company be unable to continue as a going concern.

Global market and economic conditions have been, and continue to be, disrupted and volatile. The Company cannot provide assurance that additional financing will be available in the near term when needed, particularly in light of the current economic environment and adverse conditions in the financial markets, or that, if available, financing will be obtained on terms favorable to the Company or to the Company’s stockholders. Having insufficient funds may require the Company to delay, scale back, or eliminate some or all research and development programs, including clinical trial activities, or to relinquish greater or all rights to product candidates at an earlier stage of development or on less favorable terms than the Company would otherwise choose. Failure to obtain adequate financing in the near term will adversely affect the Company’s ability to operate as a going concern and may require the Company to cease operations. If the Company raises additional capital by issuing equity securities, its existing stockholders’ ownership will be diluted. In addition, to the extent the vested warrants granted to the Lenders to purchase an aggregate of 83,333,333 shares of common stock at an exercise price of $0.12 per share are exercised by the Lenders, and to the extent the vested warrants granted to the Lenders in the 2010 Loan Agreement to purchase an aggregate of 17,647,059 shares of common stock at an exercise price of $0.17 per share are exercised by the Lenders, and to the extent the vested warrants granted to the Lenders to purchase an aggregate of 42,253,521 shares of common stock at an exercise price of $0.071 per share are exercised by the Lenders, existing stockholders’ ownership in the Company will be significantly diluted. Any new debt financing the Company enters into may involve covenants that restrict its operations. The 2009 Loan Agreement, the 2010 Loan Agreement and the 2010 Loan Amendment with the Lenders includes restrictive covenants relating to the Company’s ability to incur additional indebtedness, make future acquisitions, consummate asset dispositions, grant liens and pledge assets, pay dividends or make other distributions, incur capital expenditures and make restricted payments. The Company may also be required to pledge all or substantially all of its assets, including intellectual property rights, as collateral to secure any debt obligations. The Company’s obligations under the 2009 Loan Agreement, the 2010 Loan Agreement, and the 2010 Loan Amendment are secured by all of the Company’s assets, including its intellectual property and any additional pledge of its assets would require the consent of the Lenders. In addition, if the Company raises additional funds through collaborative or other strategic arrangements, the Company may be required to relinquish potentially valuable rights to its product candidates or grant licenses on terms that are not favorable to the Company.

Prior to the Merger and the private placement, the Company issued secured convertible notes for a total of $24.4 million from June 14, 2004 (date of inception) to December 31, 2010 to finance its operations. All of the $24.4 million in secured convertible notes have been converted to equity as of December 31, 2007. No convertible notes were issued in the years ended December 31, 2010, 2009 or 2008.

The Company’s cash on hand decreased approximately $2.1 million from $2.2 million at December 31, 2009 to approximately $84,000 at December 31, 2010. In the fiscal year ended December 31, 2010, the Company received $4.0 million in cash inflows and disbursed $6.1 million in cash outflows resulting in the $2.1 million decrease in cash. Cash inflows of $4.0 million consisted of $4.0 million in proceeds from borrowings on the affiliate loan arrangements. Cash outflows of $6.1 million consisted of $2.8 million in payments for payroll and related expenses, $900,000 in payments for research and development related expenses, $800,000 in payments to consultants for consulting services, $400,000 in payments for legal services, $300,000 in payments for corporate expenses, including audit fees, board fees, and public company expenses, and $900,000 in payments for travel reimbursement, facilities and other office related expenses.

The Company used $6.1 million and $11.9 million in net cash from operations in the years ended December 31, 2010 and 2009, respectively, and $71.6 million for the period from June 14, 2004 (date of inception) to December 31, 2010. The $5.8 million decrease in the net cash used in operations was comprised of an $11.4 million decrease in net loss from $21.0 million in the year ended December 31, 2009 to $9.6 million in the year ended December 31, 2010, a $600,000 decrease in the change in net assets, a $400,000 decrease in the change in net liabilities, a $5.4 million decrease in the amortization of the discount on notes payable, a $1.2 million increase in the change in interest payable to affiliate, a decrease of $500,000 in stock-based compensation expense, and a net increase of $100,000 in excess facility lease cost, depreciation expense and net losses on disposals of fixed assets. The $11.4 million decrease in net losses was the result of a decrease of $4.2 million in research and development expenses and a $3.1 million decrease in general and administrative expenses, a $100,000 increase in restructuring expenses, and a $4.2 million decrease in interest expense. For the period from June 14, 2004 (date of inception) to December 31, 2010, the Company used $71.6 million of net cash in operating activities which was comprised of inception-to-date net losses of $91.2 million, net of $14.0 million non-cash expenses, including $4.7 million inception-to-date stock-based compensation expense, $800,000 in excess facility lease cost, depreciation expense and net losses on disposals of fixed assets, $8.5 million in interest expense from the amortization of the discount on notes payable, and net of $1.8 million net increase in the change in net assets and liabilities, and a $3.8 million increase in the change in interest payable to affiliate. The Company cannot be certain if, when or to what extent it will receive cash inflows from the commercialization of its product candidates. The Company expects its clinical, research and development expenses to be substantial and to increase over the next few years as it continues the advancement of its product development programs.

The Company used $0 and $16,000 in net cash from investing activities in the years ended December 31, 2010 and 2009, respectively, and obtained $10.1 million cash from investing activities for the period from June 14, 2004 (date of inception) to December 31, 2010. The Company used $0 and $16,000 in cash for capital expenditures in the years ended December 31, 2010 and 2009, respectively. From June 14, 2004 (date of inception) to December 31, 2010, the Company received $11.1 million in cash from the Merger with Corautus, net of an additional $350,000 in capitalized Merger costs and $664,000 in capital expenditures.

The Company received $4.0 million and $10.0 million in cash from financing activities through loan arrangements with its principal stockholder in the years ended December 31, 2010 and 2009, respectively. There were no equity financings in the years ending December 31, 2010 and 2009. The Company received approximately $1,000 and $2,000 in cash from employee exercises of stock options in the years ended December 31, 2010 and 2009, and repurchased and retired approximately $1,000 and $0 of common stock in the years ended December 31, 2010 and 2009, respectively. From June 14, 2004 (date of inception) to December 31, 2010, the Company received $61.6 million in net cash provided by financing activities, including $14.0 million in notes payable borrowings from the Company’s principal stockholder, $24.4 million of cash received through the issuance of secured convertible debt from the Company’s principal stockholder, $23.1 million of net cash received through the equity financing completed in 2007, and $100,000 of cash received from employee and from exercises of stock options.

In November 2010, the Company was notified by the Internal Revenue Service that it has been awarded $244,479 in grants under the Qualifying Therapeutic Discovery Project (“QTDP”) program established under Section 48D of the Internal Revenue Code as part of the Patient Protection and Affordable Care Act of 2010. The Company submitted the grant application in July 2010 for qualified 2009 and 2010 investments in the VIA-2291 program. The grant is not taxable for federal income tax purposes. The Company received the full amount of the grant in January 2011.

Contractual Obligation and Commitments

The following table describes the Company’s contractual obligations and commitments as of December 31, 2010:


	Payments Due by Period
			Less Than						After
	Total		1 Year		1-3 Years		4-5 Years		5 Years
Operating lease obligations (1)	$	795,505	$	323,792	$	471,713	$	—	$	—
Notes and related interest payable — affiliate (2)		16,793,026		16,793,026		—		—		—
Uncertain tax positions (3)		—		—		—		—		—
Licensing agreements (4)		—		—		—		—		—

	$	17,588,531	$	17,116,818	$	471,713	$	—	$	—


(1)		Operating lease obligations reflect contractual commitments for the Company’s office facilities for its headquarters in San Francisco, California. In 2010, the Company was released from its obligations for its lease of space in Princeton, New Jersey, which formerly was used for its clinical operations. In January 2008, the Company expanded the lease of its headquarters in San Francisco to a total of 8,180 square feet to ensure adequate facilities for current activities, and extended the lease through May 31, 2013.

(2)		As more fully described in Note 6 in the notes to the financial statements, in March 2009, the Company entered into the 2009 Loan Agreement with the Lenders whereby the Lenders agreed to lend to the Company in the aggregate up to $10.0 million, pursuant to the terms of the promissory notes issued under the 2009 Loan Agreement (“2009 Notes). On March 12, 2009, the Company borrowed an initial amount of $2.0 million. During the three months ended September 30, 2009, the Company borrowed $2.0 million on May 19, 2009, and another $2.0 million on June 29, 2009. During the three months ended September 30, 2009, the Company borrowed $2.0 million on August 14, 2009, and a final $2.0 million on September 11, 2009. The 2009 Notes are secured by a first priority lien on all of the assets of the Company, including the Company’s intellectual property. Amounts borrowed under the 2009 Notes accrue interest at the rate of 15% per annum, which increases to 18% per annum following an event of default. As of December 31, 2010, the Company accrued $2,515,068 in interest payable — affiliate for unpaid interest expenses. Unless earlier paid in accordance with the terms of the Notes, all unpaid principal and accrued interest shall become fully due and payable on the earlier to occur of (i) April 1, 2010, (ii) the closing of a debt, equity or combined debt/equity financing resulting in gross proceeds or available credit to the Company of not less than $20,000,000, and (iii) the closing of a transaction in which the Company sells, conveys, licenses or otherwise disposes of a majority of its assets or is acquired by way of a merger, consolidation, reorganization or other transaction or series of transactions pursuant to which stockholders of the Company prior to such acquisition own less than 50% of the voting interests in the surviving or resulting entity. While the Lenders have not declared an event of default, the Company failed to repay the debt and all related interest to the Lenders due on April 1, 2010. As a result, the Company is now accruing interest at the higher 18% per annum beginning April 1, 2010.

		Also as more fully described in Note 6 in the notes to the financial statements, in March 2010, the Company entered into an additional Note and Warrant Purchase Agreement (the “2010 Loan Agreement”) with the Lenders whereby the Lenders agreed to lend to the Company in the aggregate up to $3.0 million, pursuant to the terms of promissory notes issued under the 2010 Loan Agreement. On March 29, 2010, the Company borrowed an initial amount of $1,250,000. During the three months ended June 30, 2010, the Company borrowed $100,000 on May 26, 2010, $200,000 on June 4, 2010, and another $300,000 on June 29, 2010. During the three months ended September 30, 2010, the Company borrowed $100,000 on July 15, 2010, $750,000 on July 27, 2010 and a final $300,000 on September 28, 2010. The 2010 Loan Agreement notes are secured by a lien on all of the assets of the Company. Amounts borrowed under the 2010 Loan Agreement notes accrue interest at the rate of 15% per annum, which increases to 18% per annum following an event of default. As of December 31, 2010, the Company accrued $259,521 in interest payable — affiliate for unpaid interest expenses. Unless earlier paid in accordance with the terms of the original 2010 Loan Agreement, all unpaid principal and accrued interest shall become fully due and payable on the earlier to occur of (i) December 31, 2010, (ii) the closing of a debt, equity or combined debt/equity financing resulting in gross proceeds or available credit to the Company of not less than $20,000,000, and (iii) the closing of a transaction in which the Company sells, conveys, licenses or otherwise disposes of a majority of its assets or is acquired by way of a merger, consolidation, reorganization or other transaction or series of transactions pursuant to which stockholders of the Company prior to such acquisition own less than 50% of the voting interests in the surviving or resulting entity. The Company failed to repay the debt and all related interest to the Lenders due on December 31, 2010. On January 14, 2011, the Company entered into an amendment to the 2010 Loan Agreement and 2010 Loan Amendment to extend the maturity date under the 2010 Loan Agreement and 2010 Loan Amendment from December 31, 2010 to June 30, 2011 and on March 24, 2011, the Company entered into a second amendment to further extend the maturity date to September 30, 2011.


		Also as more fully described in Note 6 in the notes to the financial statements, on November 15, 2010, the Company entered into an amendment to the 2010 Loan Agreement (“2010 Loan Amendment”) to enable the Company to borrow up to an additional aggregate principal amount of $3.0 million, pursuant to the terms of amended and restated promissory notes issued under the 2010 Loan Amendment. On November 15, 2010, $201,397 in principal and interest amounts borrowed under an October 29, 2010 bridge loan with the Lenders automatically converted into obligations of the Company under the 2010 Loan Amendment as advances. During the three months ended December 31, 2010, the Company borrowed an additional $800,000 on November 22, 2010. The 2010 Loan Amendment notes are secured by a lien on all of the assets of the Company. Amounts borrowed under the 2010 Loan Amendment accrue interest at the rate of fifteen percent (15%) per annum, which increases to eighteen percent (18%) per annum following an event of default. As of December 31, 2010, the Company accrued $17,040 in interest payable — affiliate for unpaid interest expenses. Unless earlier paid in accordance with the terms of the original 2010 Loan Amendment, all unpaid principal and accrued interest shall become fully due and payable on the earlier to occur of (i) December 31, 2010, (ii) the closing of a debt, equity or combined debt/equity financing resulting in gross proceeds or available credit to the Company of not less than $20,000,000, and (iii) the closing of a transaction in which the Company sells, conveys, licenses or otherwise disposes of a majority of its assets or is acquired by way of a merger, consolidation, reorganization or other transaction or series of transactions pursuant to which stockholders of the Company prior to such acquisition own less than 50% of the voting interests in the surviving or resulting entity. On January 14, 2011, the Company entered into an amendment to the 2010 Loan Agreement and 2010 Loan Amendment to extend the maturity date under the 2010 Loan Agreement and 2010 Loan Amendment from December 31, 2010 to June 30, 2011 and on March 24, 2011, the Company entered into a second amendment to further extend the maturity date to September 30, 2011.

(3)		The Company adopted new accounting guidance for the accounting for uncertainty in income tax positions on the first day of its 2007 fiscal year. The amount of unrecognized tax benefits at December 31, 2010 was $659,992. This amount has been excluded from the contractual obligations table because a reasonably reliable estimate of the timing of future tax settlements cannot be determined.

(4)		Under certain licensing agreements, Roche may receive up to $22.4 million in milestone payments, the majority of which would be tied to the achievement of product development and regulatory milestones. In addition, once products containing the compounds are approved for marketing, Roche will receive single-digit royalties based on net sales, subject to certain reductions.

Off-Balance Sheet Arrangements

The Company has not engaged in any off-balance sheet activities.

Critical Accounting Policies

The Company’s discussion and analysis of its financial condition and results of operations are based on its financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Note 2 in the notes to the financial statements includes a summary of the Company’s significant accounting policies and methods used in the preparation of the Company’s financial statements. On an ongoing basis, the Company’s management evaluates its estimates and judgments, including those related to accrued expenses and the fair value of its common stock. The Company’s management bases its estimates on historical experience, known trends and events, and various other factors that it believes to be reasonable under the circumstances, which form its basis for management’s judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The Company’s management believes the following accounting policies and estimates are most critical to aid in understanding and evaluating the Company’s reported financial results.

A critical accounting policy is defined as one that is both material to the presentation of our financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations. Specifically, critical accounting estimates have the following attributes: (i) we are required to make assumptions about matters that are uncertain at the time of the estimate; and (ii) different estimates we could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material effect on our financial condition or results of operations.

Estimates and assumptions about future events and their effects cannot be determined with certainty. We base our estimates on historical experience, facts available to date, and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. These changes have historically been minor and have been included in the financial statements as soon as they became known. The estimates are subject to variability in the future due to external economic factors as well as the timing and cost of future events. Based on a critical assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that our financial statements are fairly stated in accordance with GAAP, and present a meaningful presentation of our financial condition and results of operations. We believe the following critical accounting policies reflect our more significant estimates and assumptions used in the preparation of our financial statements.

Research and Development Accruals

As part of the process of preparing its financial statements, the Company is required to estimate expenses that the Company believes it has incurred, but has not yet been billed for. This process involves identifying services and activities that have been performed by third party vendors on the Company’s behalf and estimating the level to which they have been performed and the associated cost incurred for such service as of each balance sheet date in its financial statements. Examples of expenses for which the Company accrues include professional services, such as those provided by certain CROs and investigators in conjunction with clinical trials, and fees owed to contract manufacturers in conjunction with the manufacture of clinical trial materials. The Company makes these estimates based upon progress of activities related to contractual obligations and also information received from vendors.

A substantial portion of our preclinical studies and all of the Company’s clinical trials have been performed by third-party CROs and other vendors. For preclinical studies, the significant factors used in estimating accruals include the percentage of work completed to date and contract milestones achieved. For clinical trial expenses, the significant factors used in estimating accruals include the number of patients enrolled, duration of enrollment and percentage of work completed to date.

The Company monitors patient enrollment levels and related activities to the extent possible through internal reviews, correspondence and status meetings with CROs, and review of contractual terms. The Company’s estimates are dependent on the timeliness and accuracy of data provided by our CROs and other vendors. If we have incomplete or inaccurate data, we may either underestimate or overestimate activity levels associated with various studies or trials at a given point in time. In this event, we could record adjustments to research and development expenses in future periods when the actual activity level become known. No material adjustments to preclinical study and clinical trial expenses have been recognized to date.

Incentive Award Accruals

The Company accrues for liabilities under discretionary employee and executive incentive award plans. These estimated liabilities are based upon progress against corporate objectives approved by the Board of Directors, compensation levels of eligible individuals, and target bonus percentage level of employees. The Board of Directors and the Compensation Committee of the Board of Directors reviews and evaluates the performance against these objectives and ultimately determines what discretionary payments are made. The Company has accrued incentive compensation expenses of $767,185 and $1,308,043 at December 31, 2010 and December 31, 2009, respectively, for liabilities associated with these employee and executive incentive award plans.

Stock-based Compensation

On January 1, 2006, the Company adopted new accounting guidance for accounting for stock-based compensation. Under the fair value recognition provisions of this accounting guidance, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense on a straight-line basis over the requisite service period, which is the vesting period. The Company elected the modified-prospective method, under which prior periods are not revised for comparative purposes. The valuation provisions of the accounting guidance apply to new grants and to grants that were outstanding as of the effective date and are subsequently modified. Estimated compensation for grants that were outstanding as of the effective date of this new guidance are now being recognized over the remaining service period using the compensation cost estimated for the required pro forma disclosures.

The Company uses the Black-Scholes option pricing model to estimate the fair value of stock-based awards. The determination of the fair value of stock-based awards on the date of grant using an option-pricing model is affected by the value of the Company’s stock price as well as assumptions regarding a number of complex and subjective variables. These variables include expected stock price volatility over the term of the awards, actual and projected employee stock option exercise behaviors, risk-free interest rate and expected dividends.

Prior to June 5, 2007, the Company was a privately-held company and its common stock was not publicly traded. The fair value of stock options granted from January 2006 through June 5, 2007 (date of completion of the Merger with Corautus), and related stock-based compensation expense, were determined based upon quoted stock prices of Corautus, the exchange ratio of shares in the Merger, and a private company 10% discount for grants prior to March 31, 2007, as this represented the best estimate of market value to use in measuring compensation. Subsequent to the Merger, the Company, now publicly held, uses the closing stock price of the Company’s common stock on the date the options are granted to determine the fair market value of each option. The Company revalues each non-employee option quarterly based on the closing stock price of the Company’s common stock on the last day of the quarter. The Company also revalues options when there is a change in employment status.

The Company estimates the expected term of options granted by taking the average of the vesting term and the contractual term of the option. As of December 31, 2010, the Company estimates common stock price volatility using a hybrid approach consisting of the weighted-average of actual historical volatility using a look back period of approximately three years, representing the period of time the Company’s stock has been publicly traded, blended with an average of selected peer group volatility for approximately six years, consistent with the expected life from grant date. The volatility for the Company and the selected peer group was approximately 127% and 105%, respectively, as of December 31, 2010, and 130% and 104%, respectively as of December 31, 2009. The blended volatility rate was approximately a range from 115% to 116% as of December 31, 2010 and 114% as of December 31, 2009. The Company will continue to incrementally increase the look back period of the Company’s common stock and percent of actual historical volatility until historical data meets or exceeds the estimated term of the options. Prior to the year ended December 31, 2009, the Company used peer group calculated volatility as the Company is a development stage company with limited stock price history from which to forecast stock price volatility. The risk-free interest rates used in the valuation model are based on U.S. Treasury issues with remaining terms similar to the expected term on the options. The Company does not anticipate paying any dividends in the foreseeable future and therefore used an expected dividend yield of zero.

The Company calculated an annualized forfeiture rate of 4.77% and 2.82% as of December 31, 2010 and 2009, respectively, using the Company’s historical data. These rates were used to exclude future forfeitures in the calculation of stock-based compensation expense as of December 31, 2010 and 2009, respectively.

The assumptions used to value option and restricted stock award grants for the years ended December 31, 2010 and 2009 are as follows:


	Years Ended
	December 31,			December 31,
	2010			2009
Expected life from grant date		6.59 – 6.96			6.08 – 7.96
Expected volatility		115% – 116	%		105% – 114	%
Risk free interest rate		2.56% – 2.70	%		2.89% – 3.07	%
Dividend yield		—			—

The following table summarizes stock-based compensation expenses related to stock options and warrants for the years ended December 31, 2010 and 2009, and for the period from June 14, 2004 (date of inception) to December 31, 2010, which were included in the statements of operations in the following captions:


					Period from
					June 14, 2004
	Years Ended				(Date of Inception) to
	December 31,		December 31,		December 31,
	2010		2009		2010
Research and development expense	$	163,612	$	260,226	$	1,243,038
General and administrative expense		541,606		941,540		3,346,468

Total	$	705,218	$	1,201,766	$	4,589,506

If all of the remaining non-vested and outstanding stock option awards that have been granted became vested, we would recognize approximately $473,000 in compensation expense over a weighted average remaining period of 0.84 years. However, no compensation expense will be recognized for any stock option awards that do not vest.

The following table summarizes stock-based compensation expense related to employee restricted stock awards for the years ended December 31, 2010 and 2009 and for the period from June 14, 2004 (date of inception) to December 31, 2010, which was included in the statements of operations in the following captions:


					Period from
					June 14, 2004
	Years Ended				(Date of Inception) to
	December 31,		December 31,		December 31,
	2010		2009		2010
Research and development expense	$	13,675	$	15,734	$	30,043
General and administrative expense		28,897		47,655		78,445

Total	$	42,572	$	63,389	$	108,488

All of the restricted stock awards that have been granted became fully vested in 2010.


ITEM 8.		FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Item 15. “Exhibits and Financial Statement Schedules.”


ITEM 9.		CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.


ITEM 9A.		CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. As of the end of the period covered by this Annual Report on Form 10-K, an evaluation was carried out under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Principal Financial Officer, of the effectiveness of its disclosure controls and procedures. Based on that evaluation, the Company’s Chief Executive Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures, as of the end of the period covered by this Annual Report on Form 10-K, were effective at the reasonable assurance level to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in United States Securities and Exchange Commission rules and forms and that such information is accumulated and communicated to our management, including the Chief Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Management’s Annual Report on Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting refers to the process designed by, or under the supervision of, the Company’s Chief Executive Officer and Principal Financial Officer, and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:

	1.		Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

	2.		Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

	3.		Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.

Management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the framework set forth in the report entitled “Internal Control—Integrated Framework” published by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management has concluded that the Company’s internal control over financial reporting was effective as of December 31, 2010.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

Changes in Internal Control Over Financial Reporting

As a result of the restructuring, the Company made significant changes in internal control over financial reporting to mitigate the risks associated with a lack of segregation of duties that resulted from the reduction in force. Specifically, the Company increased the use of highly qualified financial consultants to analyze all financial transactions for the fiscal year ended December 31, 2010, prepare bank reconciliations for each month in fiscal year ended December 31, 2010, and prepare and independently review financial statements for external reporting purposes in accordance with GAAP for the review and approval of the Company’s Chief Executive Officer and Principal Financial and Accounting Officer.

The changes in internal control over financial reporting provides management with reasonable assurance that (1) the maintenance of records is in reasonable detail and accurately and fairly reflects the transactions and dispositions of the assets of the Company; (2) transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and receipts and expenditures are being made only in accordance with authorizations of management and directors of the Company; and (3) any unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements will be prevented or timely detected.


ITEM 9B.		OTHER INFORMATION

On January 14, 2011, the Lenders agreed to amend the 2010 Loan Agreement and the 2010 Loan Amendment, as more fully described in Note 6 in the notes to the financial statements, to extend the repayment terms of the aggregate $6.0 million borrowings under both the 2010 Loan Agreement and the 2010 Loan Amendment from December 31, 2010 to June 30, 2011 and on March 24, 2011, the Company entered into a second amendment to further extend the maturity date to September 30, 2011. The Lenders did not modify the interest rate or offer any concessions in the amendments to the 2010 Loan Agreement and the 2010 Loan Amendment.

On January 14, 2011 and March 24, 2011, the Company borrowed an additional $500,000 and $1,498,603, respectively, in principal amounts for general corporate purposes under the 2010 Loan Amendment more fully discussed in Note 6 in the notes to the financial statements. The Company has previously borrowed $1,501,397 in principal amounts and the drawdown on March 24, 2011 was the final drawdown under the terms of the 2010 Loan Amendment. A total of 7,042,254 of the 42,253,521 2010 Additional Warrant Shares vested immediately on January 14, 2011 and a total of 21,107,084 of the 42,253,521 2010 Additional Warrant Shares vested immediately on March 24, 2011, bringing the aggregate vested and exercisable 2010 Additional Warrant Shares held by the Lenders to 42,253,521 shares. The 2010 Additional Warrant Shares, to the extent they are vested and exercisable, are exercisable at any time until November 15, 2015.

PART III


ITEM 10.		DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Board Leadership Structure

The Company separates the roles of Chief Executive Officer, or CEO, and Chairman of the Board in recognition of the differences between the two roles. The CEO is responsible for setting the strategic direction for the Company and the day to day leadership and performance of the Company, while the Chairman of the Board provides guidance to the CEO and sets the agenda for Board meetings and presides over meetings of the full Board. The Board believes separating the roles of Chief Executive Officer and Chairman of the Board is in the best interests of the stockholders and the Company because it provides the appropriate balance between strategy development and oversight and accountability of management. However, no single leadership model is right for all companies and at all times. The Board recognizes that depending on the circumstances, other leadership models might be appropriate. The Company’s Bylaws allow for the Chief Executive Officer and Chairman of the Board positions to be held by the same individual. Accordingly, the Board periodically reviews its leadership structure.

Directors

Set forth below is certain biographical information as of March 1, 2011 regarding our current directors.


Name	Age		Title
Lawrence K. Cohen, Ph.D.		57	Director, Chief Executive Officer & President
Douglass B. Given, M.D., Ph.D., M.B.A.		59	Chairman of the Board of Directors
Mark N.K. Bagnall(1)(2)(3)		54	Director
Fred B. Craves, Ph.D.		65	Director
David T. Howard(1)(2)(3)		61	Director
John R. Larson		64	Director


1.		Member of the Audit Committee.

2.		Member of the Compensation Committee.

3.		Member of the Nominating and Governance Committee.

Lawrence K. Cohen, Ph.D. Lawrence K. Cohen has served as President, Chief Executive Officer and a director of the Company since the consummation of the Merger on June 5, 2007, and prior to that time served as President, Chief Executive Officer and a director of privately-held VIA Pharmaceuticals, Inc. since its formation in 2004. Previously, he was the Chief Executive Officer of Zyomyx, Inc., a privately-held biotechnology company focused on protein chip technologies. Dr. Cohen joined Zyomyx in 1999 as Chief Operating Officer, where he was responsible for all internal activities, including research and development, business development, financing and operations. Dr. Cohen received a Ph.D. in Microbiology from the University of Illinois and completed his postdoctoral work in Molecular Biology at the Dana-Farber Cancer Institute and the Department of Biological Chemistry at Harvard Medical School. The Board selected Dr. Cohen to serve as a director because he is the Company’s Chief Executive Officer, and has served in such capacity since privately-held VIA Pharmaceuticals, Inc. was formed in 2004. He has an expansive knowledge of the biotechnology industry having served in various leadership roles with pharmaceutical companies for more than two decades and he brings a unique and valuable perspective to the Board.

Douglass B. Given, M.D., Ph.D., M.B.A. Douglass B. Given has served as Chairman of the Company’s Board of Directors since the consummation of the Merger on June 5, 2007, and prior to that time served as Chairman of privately-held VIA Pharmaceuticals, Inc.’s Board of Directors since its formation in 2004. Dr. Given is a partner at Bay City Capital LLC, which manages investment funds in the life sciences industry, and was founded in June 1997. From July 2001 to June 2003, Dr. Given served as the Chief Executive Officer and Director of NeoRx Corporation, a cancer therapeutics company. Since 2006, Dr. Given has served as President, Chief Executive Officer and Chairman of Vivaldi Biosciences, an anti-viral and vaccine development company. Dr. Given was Corporate Senior Vice President and Chief Technology Officer of Mallinckrodt, Inc. from August 1999 to October 2000. From 2006 to 2007, Dr. Given served as a member of the board of directors of Aksys, Ltd., a company focused on hemodialysis products and services. From 2001 to 2008, Dr. Given served as a member of the board of directors of SemBioSys Genetics Inc., a Canadian biotechnology company. Dr. Given chairs the advisory board to the University of Chicago Medical Center, serves on the Health Advisory Board of Johns Hopkins Bloomberg School of Public Health, serves on the International Advisory Council of the Harvard School of Public Health, AIDS/HIV Initiative and is a director of Arrowhead Research Corporation. Dr. Given earned his M.D. and Ph.D. from the University of Chicago and his M.B.A. from the Wharton School, University of Pennsylvania. He was a fellow in Internal Medicine and Infectious Diseases at Harvard Medical School and Massachusetts General Hospital. The Board selected Dr. Given to serve as a director because of his extensive executive experience in the biotechnology industry and his many years of experience in the venture capital and private equity field, which is very valuable to the Company in its evaluation of various financing and partnering alternatives presented to the Company.

Mark N.K. Bagnall. Mark N.K. Bagnall has served as a director of the Company since June 5, 2007. Since July 2009, Mr. Bagnall has served as President and a member of the board of directors of GenturaDx, Inc., a privately-held life science and molecular diagnostic company. Mr. Bagnall joined GenturaDx, Inc. in March 2009 as Chief Financial Officer. From April to December 2008, Mr. Bagnall served as Executive Vice President, Chief Financial Officer and a member of the board of directors of ADVENTRX Pharmaceuticals, Inc., a biopharmaceutical research and development company focused on commercializing proprietary product candidates for the treatment of cancer. He continued to serve as a member of the board of ADVENTRX until August 24, 2009. From May 2000 to June 2007, Mr. Bagnall was Senior Vice President and Chief Finance and Operations Officer of Metabolex, Inc., a privately-held pharmaceutical company focused on the development of drugs to treat diabetes and related metabolic disorders. Mr. Bagnall has been in the biotechnology industry for over 20 years. In the 12 years prior to joining Metabolex, Mr. Bagnall held the top financial position at four life science companies: Metrika, Inc., a privately-held diagnostics company, and three public biotechnology companies: Progenitor, Inc., Somatix Therapy Corporation, and Hana Biologics, Inc. During his career in biotechnology, he has managed several private and public financings, merger and acquisition transactions and corporate licensing agreements. Mr. Bagnall received his B.S. in Business Administration from the U.C. Berkeley Business School and is a Certified Public Accountant. The Board selected Mr. Bagnall to serve as a director because it believes he brings valuable management and finance expertise to the Board, as well as biotechnology expertise. He has been in the biotechnology industry for over 20 years. In the 12 years prior to joining Metabolex, Mr. Bagnall held the top financial position at four life science companies: Metrika, Inc., a privately-held diagnostics company, and three public biotechnology companies: Progenitor, Inc., Somatix Therapy Corporation, and Hana Biologics, Inc. During his career in biotechnology, he has managed several private and public financings, merger and acquisition transactions and corporate licensing agreements. Mr. Bagnall provides the Board with a distinguished financial expert for the Audit Committee (of which he serves as Chairman).

Fred B. Craves, Ph.D. Fred B. Craves has served as a director of the Company since the consummation of the Merger on June 5, 2007, and prior to that time served as a director of privately-held VIA Pharmaceuticals, Inc. since January 2005. Dr. Craves is an Investment Partner, Managing Director and founder of Bay City Capital, a manager of investment funds in the life sciences industry, and serves as a member of the board of directors and Chairman of the executive committee. Before founding Bay City Capital, he spent over 25 years leading and managing biotechnology and pharmaceutical companies. Previously, he was Executive Vice President of Schering Berlin, a pharmaceutical company, and Chief Executive Officer and President of Berlex Biosciences, a research, development and manufacturing organization. He founded Burrill & Craves, a merchant bank focused on biotechnology and emerging pharmaceutical companies. He was also the founding Chairman of the Board and Chief Executive Officer of Codon and co-founder of Creative Biomolecules, both biotechnology companies. From 1999 to 2007, Dr. Craves served as a member of the board of directors of Reliant Pharmaceuticals, Inc., a privately-held pharmaceuticals company. From 2002 to 2007, Dr. Craves served as a member of the board of directors of BioSeek Inc., a privately-held drug discovery services company. Dr. Craves is a member of the board of directors of Poniard Pharmaceuticals, a biopharmaceutical company focused on oncology; ProGenTech, a privately-held life science and molecular diagnostic company; and ReSet Therapeutics, Inc., a privately-held biotechnology company. He also serves as a member of The J. David Gladstone Institutes’ Advisory Council and is a member of the Board of Trustees of Loyola Marymount University in Los Angeles. Dr. Craves earned a B.S. in Biology from Georgetown University and a Ph.D. in Pharmacology and Toxicology from the University of California, San Francisco. The Board selected Dr. Craves to serve as a director because of his extensive executive experience in the biotechnology industry and his many years of experience in the venture capital and private equity field, which is very valuable to the Company in its evaluation of various financing and partnering alternatives presented to the Company. His experiences as a co-founder of a number of biotechnology companies and life science merchant banks is valuable to the Company, as a development stage company.

David T. Howard. David T. Howard has served as a director of the Company since the consummation of the Merger on June 5, 2007. Mr. Howard joined the Board of Directors of Angiotech Pharmaceuticals, Inc., a pharmaceutical and medical device company, in March 2000 and became Chairman of the Board of Directors in September 2002. Mr. Howard is a director of MSI Methylation Sciences Inc., a privately-owned biotechnology company located in Vancouver, British Columbia. From May 2000 to July 2003, he was Chair of the Board and Chief Executive Officer of SCOLR, Inc., a biopharmaceutical company located in Redmond, Washington. He continued to serve on the board of directors of SCOLR until 2005. From 2005 to 2009, Mr. Howard served as a member of the board of directors of SemBioSys Genetics, Inc., a Canadian biotechnology company. From 2006 to 2008, Mr. Howard served as a member of the board of directors of JRI International Ltd., a privately-owned agriculture company. Prior to this, Mr. Howard served as President and Chief Operating Officer of two pharmaceutical companies: Novopharm International of Toronto, Ontario and President of Novopharm USA, Inc. Mr. Howard’s industry experience includes operational and strategic positions with Boehringer Mannheim Canada, where he was Vice President Pharmaceuticals Division, and Rhône-Poulenc Pharma in Montreal and Paris, where he was Vice-President Sales and Marketing and International Product Manager, respectively. Mr. Howard is the Chief Executive Officer and President of 159230 Canada Inc., a consulting company for the pharmaceutical, biotechnology and medical devices industries, which he founded in 1986. The Board selected Mr. Howard to serve as a director because he has extensive Board and committee experience at both public and private companies. Through his service on the boards of Angiotech, SCOLR and SemBioSys, among others, he has valuable experience in governance, compensation and audit issues.

John R. Larson. John R. Larson has served as a director of the Company since the consummation of the February 2003 merger between Genstar Therapeutics Corporation and Vascular Genetics Inc. Prior to such merger, he served as a director of Vascular Genetics since 1999. Mr. Larson is a founder of Prolifaron, Inc., an early-stage biotechnology company started in 1997 and sold to Alexion Pharmaceuticals, Inc. in 2000, and a founder of Materia, Inc., a research and development company specializing in new applications of patented polymer products. Mr. Larson served as a director for Prolifaron, Inc. from April 1997 to September 2000, a director of Materia, Inc. from 1997 to 1999, and a director of Northland Securities, Inc. from October 2002 to September 2004. He continues to serves as Senior Vice President and Secretary of Northland Securities, Inc., a position he has held since 2002. Since December 1999, he has served as the Managing Director of Clique Capital, LLC, a venture capital group focused in the healthcare and technology area. Since 2006, Mr. Larson has also served as an officer and director of Armada Media Corporation, a privately held company that owns and operates radio stations in small and mid-sized markets. Mr. Larson holds a B.A. degree from Minnesota State University and a J.D. from William Mitchell College of Law. The Board selected Mr. Howard to serve as a director because he has extensive Board and committee experience at both public and private companies. Additionally, Mr. Larson practiced law for over 30 years concentrating in the areas of securities and finance and since August 2000 has been an “Of Counsel” with the law firm of Messerli & Kramer. Mr. Larson has been a frequent speaker on securities matters, having served as Commissioner of Securities and Chairman of the Commerce Commission for the State of Minnesota. In such capacity, Mr. Larson served on a number of committees for the North American Securities Administrators Association, Inc. and the National Association of Securities Dealers, Inc. With Mr. Larson’s extensive experience, he brings strong securities law and biotechnology expertise to the Board.

There are no family relationships among any of our directors and executive officers.

Executive Officers

The information with respect to our executive officers is set forth in Part I, Item 1 of the 10-K under the caption “Executive Officers of the Registrant.”

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Exchange Act, and regulations of the SEC thereunder require our directors, officers and persons who own more than 10% of our Common Stock, as well as certain affiliates of such persons, to file initial reports of their ownership of our Common Stock and subsequent reports of changes in such ownership with the SEC. Directors, officers and persons owning more than 10% of our Common Stock are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file. Based solely on our review of the copies of such reports and amendments thereto received by us and written representations from these persons that no other reports were required, we believe that during the fiscal year ended December 31, 2010, all of our directors, officers and owners of more than 10% of our Common Stock complied with all applicable filing requirements.

Code of Conduct

On June 5, 2007, we adopted a Code of Business Conduct and Ethics, which applies to all of our officers, directors and employees, and we amended the Code of Business Conduct and Ethics on April 16, 2008. Our Code of Business Conduct and Ethics, as amended, is posted on our website at www.viapharmaceuticals.com under the headings “Investor Relations — Corporate Governance — Other Governance Documents — Code of Business Conduct and Ethics.” We will also provide a copy of the Code of Business Conduct and Ethics to stockholders upon request. Any amendments to our Code of Business Conduct and Ethics will be posted on our website. In addition, any waivers from any provision of our Code of Business Conduct and Ethics for directors or executive officers will be promptly disclosed to our stockholders by filing a report on Form 8-K.

Meetings and Committees of the Board of Directors

The Board of Directors conducts its business through meetings of the full Board and through committees of the Board, consisting of an Audit Committee, a Compensation Committee and a Nominating and Governance Committee. In addition to the standing committees, the Board from time to time establishes special purpose committees.

During the fiscal year ended December 31, 2010, the Company’s Board of Directors held nine meetings, the Audit Committee held five meetings, and there were three Special Committee meetings. The Compensation Committee and the Nominating and Governance Committee did not meet during the fiscal year ended December 31, 2010. The Company’s Corporate Governance Principles provide that Board members are expected to regularly prepare for and attend all meetings of the Board and of each committee that the director is a member, with the understanding that, on occasion, a director may be unable to attend a meeting. The Corporate Governance Principles are posted on our website at www.viapharmaceuticals.com under the headings “Investor Relations — Corporate Governance — Committee Charters — Corporate Governance Principles.”

The Board’s Role in Risk Oversight

The role the Company’s Board of Directors fulfills in risk oversight is set out in the Company’s Corporate Governance Principles. The Board is actively involved in the oversight of risks that could affect the Company. This oversight is conducted primarily through committees of the Board but the full Board has retained responsibility for general oversight of risks. The Board satisfies this responsibility through full reports by each committee chair regarding the committee’s considerations and actions, as well as through regular reports directly from management on areas of material risks to the Company, including operational, financial, liquidity, legal and regulatory, strategic and reputational risks. A fundamental part of risk management is not only understanding the risks a company faces and what steps management is taking to manage those risks, but also understanding what level of risk is appropriate for the Company. Management is responsible for establishing the Company’s business strategy, identifying and assessing the related risks and establishing appropriate risk management practices. The Board oversees the Company’s business strategy and management’s assessment of the related risk, and discusses with management the appropriate level of risk for the Company.

The Audit Committee

On June 5, 2007 following the completion of the Merger, our Board adopted a charter that sets forth the responsibilities of the Audit Committee, and we amended the Audit Committee charter on March 25, 2009. The Audit Committee’s charter, as amended, is posted on our website at www.viapharmaceuticals.com under the headings “Investor Relations — Corporate Governance — Committee Charters — Audit Committee Charter.” The purpose of the Audit Committee is to assist the Board with its oversight responsibilities regarding: (1) the integrity of the Company’s financial statements and its financial reporting and disclosure practices; (2) the soundness of the Company’s system of internal controls regarding finance, accounting and disclosure compliance; (3) the independent auditor’s qualifications, engagement, compensation and independence; (4) the performance of the Company’s internal audit function and independent auditor; (5) the Company’s compliance with legal and regulatory requirements in connection with the foregoing; (6) compliance with the Company’s Code of Business Conduct and Ethics to the extent such Code of Ethics addresses financial and accounting related matters; and (7) addressing certain concerns related to accounting, internal accounting controls and auditing matters as provided in the Company’s Complaint and Investigation Procedures for Accounting, Internal Accounting Controls, Fraud or Other Matters.

The Audit Committee charter provides that such Committee shall consist of two or more members of the Board. The members of the Audit Committee are Mark N.K. Bagnall (chair) and David T. Howard, each of whom has been determined by the Board of Directors to be independent as defined by the rules of the SEC and the applicable NASDAQ Stock Market listing standards. The Board of Directors has also determined that Mr. Bagnall is an “audit committee financial expert,” as defined under Item 407(d) of Regulation S-K.

The Compensation Committee

On June 5, 2007 following the completion of the Merger, our Board adopted a charter that sets forth the responsibilities of the Compensation Committee, and we amended the Compensation Committee charter on April 15, 2009. The Compensation Committee’s charter, as amended, is posted on our website at www.viapharmaceuticals.com under the headings “Investor Relations — Corporate Governance — Committee Charters — Compensation Committee Charter.” The purposes of the Compensation Committee are to discharge the Board’s responsibilities relating to: (1) the establishment and maintenance of compensation and benefit policies designed to attract, motivate and retain personnel with the requisite skills and abilities to enable the Company to achieve superior operating results; (2) the compensation of the Company’s executives and non-management directors; and (3) the issuance of an annual report on executive and chief executive officer compensation for inclusion in the Company’s annual proxy statement or Form 10-K, as applicable.

The Compensation Committee recommends to the Board a compensation structure to compensate all levels of management employees of the Company as well as the Company’s non-management directors. The Compensation Committee reviews and approves the compensation of all executive officers, all merit increases and bonuses, including the establishment of goals and objectives. The Compensation Committee also makes recommendations to the Board as to compensation of non-management directors. The Compensation Committee has the authority to hire compensation consultants, to request management to perform studies and to furnish other information, to obtain advice from external legal, accounting or other advisors, and to make such decisions or recommendations to the Board based thereon as the Compensation Committee deems appropriate. However, since the consummation of the Merger, the Company has not engaged any compensation consultants to assist in determining or recommending the amount or form of executive and director compensation.

The Compensation Committee charter provides that such Committee shall consist of two or more members of the Board. The members of the Compensation Committee are David T. Howard (co-chair) and Mark N.K. Bagnall (co-chair). Each member of the Compensation Committee is an “outside” director as defined in Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and a “non-employee” director within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Board or Directors has determined that each of the members of the Compensation Committee is independent, as defined by the applicable NASDAQ Stock Market listing standards.

The Nominating and Governance Committee

On June 5, 2007 following the completion of the Merger, our Board adopted a charter that sets forth the responsibilities of the Nominating and Governance Committee, and we amended the Nominating and Governance Committee charter on April 15, 2009. The Nominating and Governance Committee’s charter, as amended, is posted on our website at www.viapharmaceuticals.com under the headings “Investor Relations — Corporate Governance — Committee Charters — Nominating and Governance Committee Charter.” The purposes of the Nominating and Governance Committee are to: (1) assist the Board in identifying individuals qualified to become Board members; (2) assist the Board in the selection of nominees for election as directors at the Company’s annual meeting of the stockholders; (3) develop and recommend to the Board a set of corporate governance guidelines applicable to the Company; (4) establish policies and procedures regarding the consideration of director nominations from stockholders; (5) recommend to the Board director nominees for each Board committee; (6) review and make recommendations to the Board concerning Board committee structure, operations and Board reporting; (7) evaluate Board and management performance; and (8) oversee compliance with the Company’s Code of Business Conduct and Ethics other than with respect to financial and accounting related matters.

The Nominating and Governance Committee charter provides that such Committee shall consist of two or more members of the Board. The members of the Nominating and Governance Committee are David T. Howard (chair) and Mark N.K. Bagnall. The Board of Directors has determined that all of the members of the Nominating and Governance Committee are independent, as defined by the applicable NASDAQ Stock Market listing standards.

At an appropriate time prior to each annual meeting of the Company’s stockholders at which directors are to be elected or reelected, and whenever there is otherwise a vacancy on the Board of Directors, the members of the Nominating and Governance Committee will assess the qualifications and effectiveness of the current Board members and, to the extent there is a need, shall actively seek individuals well qualified and available to serve to become Board members. Once a Committee member has identified a potential candidate, the Committee member will recommend the potential candidate to the full Nominating and Governance Committee. Candidates recommended by a stockholder will be evaluated in the same manner as any candidate identified by a Committee member.

The full Nominating and Governance Committee will review each potential candidate’s qualifications and may request such candidate to complete and return a directors and officers questionnaire. If the Committee determines that the potential candidate may be qualified after a preliminary inquiry, the Committee will make an investigation and interview the potential candidate, as necessary, to make an informed final determination.

The Nominating and Governance Committee will select, by majority vote, the most qualified candidate or candidates, as the case may be, to recommend to the Board for selection as a director nominee. Upon selection of one or more director nominees, the Chairman of the Board will extend an invitation to the individual to become a director nominee to be included on the proxy card for election at the next annual meeting.

Nomination of Directors

Recommendations to the Board of Directors for election as directors of VIA at an annual meeting may be made only by the Nominating and Governance Committee or by the Company’s stockholders (through the Nominating and Governance Committee) who comply with the timing, informational, and other requirements of our Bylaws. Stockholders have the right to recommend persons for nomination by submitting such recommendation, in written form, to the Nominating and Governance Committee, and such recommendation will be evaluated pursuant to the policies and procedures adopted by the Board. Such recommendation must be delivered to or mailed to and received by the Secretary of the Company at the principal executive offices not later than 120 calendar days prior to the anniversary of the date the Company’s prior year proxy statement was first made available to stockholders, except that if no annual meeting of stockholders was held in the preceding year or if the date of the annual meeting of stockholders has been changed by more than 30 calendar days from the date contemplated at the time of the preceding year’s proxy statement, the notice shall be received by the Secretary at the Company’s principal executive offices not less than 150 calendar days prior to the date of the contemplated annual meeting or the date that is 10 calendar days after the date of the first public announcement or other notification to stockholders of the date of the contemplated annual meeting, whichever first occurs.

Director Criteria and Diversity

The Nominating and Governance Committee, in accordance with the board’s governance principles, seeks to create a board that has the ability to contribute to the effective oversight and management of the Company, that is as a whole strong in its collective knowledge of and diversity of skills and experience with respect to accounting and finance, management and leadership, vision and strategy, business judgment, biotechnology industry knowledge, corporate governance and global markets. The Nominating and Governance Committee does not have a formal policy with respect to diversity; however, the Board and the Nominating and Governance Committee believe it is essential that the Board members represent diverse viewpoints, professional experience, education, skill and other individual qualities and attributes that contribute to board heterogeneity. When the Committee reviews a potential new candidate, the Committee looks specifically at the candidate’s qualifications in light of the needs of the Board and the Company at that time given the then current mix of director attributes.

General criteria for the nomination and evaluation of director candidates include:

•

loyalty and commitment to promoting the long term interests of the Company’s stockholders;

•

the highest personal and professional ethical standards and integrity;

•

an ability to provide wise, informed and thoughtful counsel to top management on a range of issues;

•

a history of achievement that reflects superior standards for themselves and others;

•

an ability to take tough positions in constructively-challenging the Company’s management while at the same time working as a team player; and

•

individual backgrounds that provide a diverse portfolio of personal and professional experience and knowledge commensurate with the needs of the Company.

The Committee must also ensure that the members of the board as a group maintain the requisite qualifications under the applicable SEC rules and the Company’s Committee Charter requirements for populating the Audit, Compensation and Nominating and Governance Committees.

Written recommendations from a stockholder for a director candidate must include the following information:

•

the stockholder’s name and address, as they appear on our corporate books;

•

the class and number of shares that are beneficially owned by such stockholder;

•

the dates upon which the stockholder acquired such shares; and

•

documentary support for any claim of beneficial ownership.

Additionally, the recommendation needs to include, as to each person whom the stockholder proposes to recommend to the Nominating and Governance Committee for nomination to election or reelection as a director, all information relating to the person that is required pursuant to Regulation 14A under the Exchange Act, as amended, and evidence satisfactory to us that the nominee has no interests that would limit their ability to fulfill their duties of office.

Once the Nominating and Governance Committee receives a recommendation, it will deliver a questionnaire to the director candidate that requests additional information about his or her independence, qualifications and other information that would assist the Nominating and Governance Committee in evaluating the individual, as well as certain information that must be disclosed about the individual in the Company’s proxy statement, if nominated. Individuals must complete and return the questionnaire within the time frame provided to be considered for nomination by the Nominating and Governance Committee.

The Nominating and Governance Committee will review the stockholder recommendations and make recommendations to the Board of Directors that the Committee feels are in the best interests of the Company and its stockholders.

Communications with the Board of Directors

Stockholders may contact an individual director or the Board as a group, or a specified Board committee or group, including the non-employee directors as a group, by the following means:


Mail:		Attn: Board of Directors
		VIA Pharmaceuticals, Inc.
		750 Battery Street, Suite 330
		San Francisco, CA 94111

Email:		AskBoard@viapharmaceuticals.com

Each communication should specify the applicable addressee or addressees to be contacted as well as the general topic of the communication. We will initially receive and process communications before forwarding them to the addressee. We also may refer communications to other departments within the Company. We generally will not forward to the directors a communication that is primarily commercial in nature, relates to an improper or irrelevant topic, or requests the Company’s general information.

Complaint and Investigation Procedures for Accounting, Internal Accounting Controls, Fraud or Auditing Matters

We have created procedures for confidential submission of complaints or concerns relating to accounting or auditing matters and contracted with Shareholder.com to facilitate the gathering, monitoring and delivering reports on any submissions. As of the date of this report, there have been no submissions of complaints or concerns to Shareholder.com. Complaints or concerns about our accounting, internal accounting controls or auditing matters may be submitted to the Audit Committee and our executive officers by contacting Shareholder.com. Shareholder.com provides phone, internet and e-mail access and is available 24 hours per day, seven days per week, 365 days per year. The hotline number is 1-866-713-4532 and the website is www.openboard.info/via/. Any person may submit a written Accounting Complaint to via@openboard.com.

Our Audit Committee under the direction and oversight of the Audit Committee Chair will promptly review all submissions and determine the appropriate course of action. The Audit Committee Chair has the authority, in his discretion, to bring any submission immediately to the attention of other parties or persons, including the full Board, accountants and attorneys. The Audit Committee Chair shall determine the appropriate means of addressing the concerns or complaints and delegate that task to the appropriate member of senior management, or take such other action as it deems necessary or appropriate to address the complaint or concern, including obtaining outside counsel or other advisors to assist the Audit Committee.


ITEM 11.		EXECUTIVE COMPENSATION

Summary Compensation Table

The total compensation paid to the Company’s Principal Executive Officer and its highest compensated executive officers other than the Principal Executive Officer, respectively, for services rendered in 2010 and 2009, as applicable, is summarized as follows:


											All Other
							Stock Awards		Option Awards		Compensation
Name and Principal Position	Year		Salary ($)		Bonus ($)(3)		($)		($)		($)(4)		Total ($)
Lawrence K. Cohen		2010	$	385,000	$	—	$	—	$	—	$	1,215	$	386,215
Principal Executive Officer		2009	$	385,000	$	—	$	—	$	—	$	1,215	$	386,215

James G. Stewart(1)		2010	$	279,390	$	—	$	—	$	—	$	281	$	279,671
Principal Financial Officer		2009	$	325,000	$	—	$	—	$	—	$	1,125	$	326,125

Karen S. Wright(2)		2010	$	244,400	$	—	$	—	$	—	$	675	$	245,075
Vice President, Controller (Principal Financial Officer)		2009	$	—	$	—	$	—	$	—	$	—	$	—

Rebecca. A. Taub		2010	$	300,000	$	—	$	—	$	—	$	1,080	$	301,080
Senior Vice President, Research & Development		2009	$	300,000	$	—	$	—	$	—	$	1,080	$	301,080

Footnotes to Summary Compensation Table


(1)		During 2010, Mr. James G. Stewart served as the principal financial officer from January 1, 2010 through March 31, 2010. Effective March 31, 2010, the employment of Mr. Stewart was terminated in connection with the restructuring and reduction in workforce.

(2)		On April 30, 2010, Karen S. Wright was appointed as an executive officer to serve as the principal financial officer of the Company following the restructuring. As Ms. Wright was not an executive officer of the Company in 2009, the table above does not include compensation amounts for 2009.

(3)		A decision on performance bonus compensation earned in 2009 and 2010 has been deferred and therefore is not calculable as of March 1, 2011. It is expected that a determination will be made on the amount of performance bonus compensation earned in 2009 and 2010, if any, once the Company is able to secure additional financing.

(4)		Represents the dollar value of: (i) any insurance premiums paid by the Company with respect to life insurance in 2009 (and in parenthesis, amounts paid in 2010), (ii) tax gross-up payments made by the Company with respect to the restricted stock awards for 2010, (iii) Company safe harbor contributions to the executive officer’s VIA Pharmaceuticals, Inc. 401(k) Plan for 2010 and (iv) accrued vacation and paid time off time paid by the Company in 2010:


								Accrued Vacation
Name	401(k)		Life Insurance			Tax Gross-Up		and Paid Time off

Lawrence K. Cohen	$	—	$	1,215 (1,215	)	$	—	$	—

James G. Stewart	$	—	$	1,125 (281	)	$	—	$	—

Karen S. Wright	$	7,350	$	— (675	)	$	—	$	—

Rebecca. A. Taub	$	—	$	1,080 (1,080	)	$	—	$	—

Narrative to Summary Compensation Table

Understanding our history is key to the understanding of our compensation structure for 2010 and 2009. After the Merger on June 5, 2007, the executive officers of privately-held VIA Pharmaceuticals, Inc. became our executive officers. On January 14, 2008, the Company hired Dr. Rebecca A. Taub as Senior Vice President, Research & Development. Effective March 31, 2010, the employment of Mr. James G. Stewart was terminated in connection with the restructuring of the Company. On April 30 2010, the Company appointed Karen S. Wright as an executive officer to serve as the principal financial officer of the Company following the restructuring of the Company. Accordingly, the following applies only to our Chief Executive Officer, Dr. Lawrence K. Cohen, our Vice President, Controller (Principal Financial Officer) beginning in 2010, Ms. Karen S. Wright, and our Senior Vice President, Research & Development, Dr. Rebecca A. Taub (collectively, our “NEOs”).

Base Salary

Upon consummation of the Merger, the Compensation Committee increased Dr. Cohen’s annual base salary to $385,000 from $325,000. Ms. Wright’s annual salary is $244,400 and was pro-rated based on her start date as an executive officer of April 30, 2010. Dr. Taub’s annual base salary is $300,000 and was pro-rated based on her start date of January 14, 2008.

Bonuses

For 2009 and 2010, we have not yet paid our NEOs any bonuses. The Compensation Committee elected to defer any decision on bonuses based on our 2009 and 2010 performance until the Company is able to secure additional financing.

Equity Compensation

The NEOs (other than Dr. Taub) received stock option grants at the time they were hired by privately-held VIA Pharmaceuticals, Inc. Such options generally vest over time, with 25% of the options vesting after one year of employment and monthly vesting thereafter with full vesting after four years. Dr. Taub received stock option grants with a similar vesting schedule at the time she was hired by VIA Pharmaceuticals, Inc.

In December 2008, the Compensation Committee granted our NEOs restricted stock awards in the amount set forth on the table below entitled “Outstanding Equity Awards at 2010 Fiscal Year End”. The restricted stock vests equally each month over a two year schedule, subject to earlier vesting in full if in the discretion of the Compensation Committee the Company has entered into a partnering transaction with a pharmaceutical or biotechnology company with respect to conducting follow-on clinical trials which are reasonably expected to result in further progress of VIA-2291 toward ultimate registration with the FDA. The Company also agreed to provide the recipients of the restricted stock awards a tax “gross-up” payment with respect to their applicable income tax expenses incurred upon making an election under Section 83(b) of the Internal Revenue Code in connection with the grant of restricted stock.

All stock options and restricted stock issued to Dr. Cohen and Dr. Taub, respectively, vest and become exercisable upon a change in control.

Severance

Pursuant to the terms of their employment agreements, our NEOs may be entitled to severance in the event that their employment is terminated without cause (or in the case of Dr. Cohen constructively). Such severance is subject to execution of a general release of claims and compliance with a non-compete. The amount of severance is 12 months base salary for Dr. Cohen, three months base salary for Ms. Wright, and six months base salary for Dr. Taub. In addition, we will pay the premiums for them and their dependents for COBRA continuation coverage under our group health plan for the period of severance or, if sooner, the date they are eligible for coverage under another employer’s group health plan.

Change in Control Agreements

On December 21, 2007, the Company entered into a Change in Control Agreement with Dr. Cohen as a means of providing him certain protections in the event his employment were to be terminated following a change in control. On January 14, 2008, the Company entered into a Change in Control Agreement with Dr. Taub. The Compensation Committee considers the Change in Control Agreements to be a retention device, as it removes any uncertainty regarding the executive’s position in the event we were to explore further strategic transactions.

Under the terms of the agreements, if the executive is terminated without cause or constructively within 12 months following a change in control, he or she would be eligible for the following benefits:

•

base salary payable over 24 months for Dr. Cohen and 12 months for Dr. Taub;

•

continued health benefits for the severance period;

•

pro rata bonus for the year of termination; and

•

full vesting in all equity compensation.

In addition, if the executive is subject to the excise tax applicable under Section 4999 of the Internal Revenue Code regarding excess parachute payments then:

•

if the change in control is a result of a hostile transaction or a change in directors in contested election, the executive will be entitled to a tax-gross up to cover such excise tax, as well as any additional income taxes on the tax-gross up; or

•

if the change in control is not hostile or due to a contested election, then the executive will either be subject to the excise tax, or will forfeit payments in an amount that would not subject him to the tax, whichever provides him the greater payment.

Outstanding Equity Awards at 2010 Fiscal Year End


	Option Awards									Stock Awards
	Number of			Number of						Number of
	Securities			Securities						Shares or			Market Value
	Underlying			Underlying						Units of			of Shares or
	Unexercised			Unexercised		Option		Option		Stock that			Units of Stock
	Options			Options		Exercise		Expiration		Have Not			that Have Not
Name	(Exercisable)			(Unexercisable)		Price		Date		Vested			Vested

Lawrence K. Cohen		—			—		—		—		0	(1)		0
		450,000	(2)		150,000	$	2.38		12/17/2017		—			—
		154,166	(3)		30,834	$	3.48		8/2/2017		—			—
		0	(4)		0	$	0.14		9/8/2016		—			—
		111,516	(5)		0	$	0.03		6/29/2015		—			—

Karen S. Wright		30,000	(2)		10,000	$	2.38		12/17/2017		—			—
		7,750	(3)		1,550	$	3.48		8/2/2017		—			—
		6,691	(6)		0	$	0.14		9/8/2016		—			—
		0	(7)		0	$	0.14		11/29/2016		—			—
		—			—		—		—		0	(9)	$	0

Rebecca A. Taub		171,354	(8)		63,646	$	2.90		1/15/2018		—			—
		—			—		—		—		0	(10)	$	0

Footnotes to Outstanding Equity Awards at 2010 Fiscal Year End Table


(1)		Awarded 300,000 shares of restricted stock on December 17, 2008, of which 1/24th of the restricted stock vested on the 17th day of each month starting after December 17, 2008, subject to earlier vesting in full in limited circumstances specified in the award agreement. As of December 31, 2010, all of the shares of restricted stock were vested.

(2)		1/48th of the shares vest on the 17th day of each month starting after December 17, 2007.

(3)		1/48th of the shares vest on the 2nd day of each month starting after August 2, 2007.

(4)		54,875 shares of the Company were acquired upon early exercise of vested options by Dr. Cohen and are subject to repurchase by the Company upon termination of employment. 25% of the shares vested on March 31, 2007 and 1/48th of the shares vest on the 31st day of each month thereafter, subject to Dr. Cohen continuing to be a service provider through each such date. As of December 31, 2010, all shares were vested.

(5)		In connection with the Merger, Dr. Cohen had stock options to purchase 300,000 shares of privately-held VIA Pharmaceuticals, Inc. which became stock options to purchase 111,516 shares of the Company in which 25% of the shares vested on June 29, 2005 and 1/48th of the shares vest on the 29th day of each month thereafter, subject to Dr. Cohen continuing to be a service provider through each such date.


(6)		25% of the shares vested on September 8, 2006 (date of grant) and 1/18th of the shares vest on the 8th day of each month starting after September 8, 2006.

(7)		31,596 shares of the Company were acquired upon early exercise of vested options by Ms. Wright and are subject to repurchase by the Company upon termination of employment. 17,000 shares vested on November 29, 2007 and 1/48th of the remaining shares vest on the last day of each month thereafter, subject to Ms. Wright continuing to be a service provider through each such date. As of December 31, 2010, 25,803 shares were vested.

(8)		25% of the shares vested on January 14, 2009 and 1/48th of the shares vest on the 14th day of each month thereafter.

(9)		Awarded 30,000 shares of restricted stock on December 17, 2008, of which 1/24th of the restricted stock vested on the 17th day of each month starting after December 17, 2008, subject to earlier vesting in full in limited circumstances specified in the award agreement. As of December 31, 2010, all of the shares of restricted stock were vested.

(10)		Awarded 125,000 shares of restricted stock on December 17, 2008, of which 1/24th of the restricted stock vested on the 17th day of each month starting after December 17, 2008, subject to earlier vesting in full in limited circumstances specified in the award agreement. As of December 31, 2010, all of the shares of restricted stock were vested. See footnote (8) to the section entitled “Security Ownership of Certain Beneficial Owners and Management” below for vesting information within 60 days of March 1, 2011.

Compensation of Directors

The following table summarizes the total compensation earned in 2010 for the Company’s non-management directors. Dr. Cohen receives no additional compensation for his service as a director.


	Fees Earned or
Name	Paid in Cash		Option Awards(1)		Total

Mark N.K. Bagnall	$	38,000	$	0	$	38,000
Fred B. Craves	$	0	$	0	$	0
Douglass B. Given	$	0	$	0	$	0
David T. Howard	$	38,500	$	0	$	38,500
John R. Larson	$	25,000	$	0	$	25,000

Footnote to Compensation of Directors Table


(1)		The aggregate number of options held by each director as of December 31, 2010 was as follows: Mr. Bagnall — 35,575; Dr. Craves — 0; Dr. Given — 0; Mr. Howard — 35,575 and Mr. Larson — 50,952. All of these options had vested as of such date. No shares of restricted stock are held by any director.

Narrative to Director Compensation Table

Each independent director is entitled to receive the following annual compensation:

•

a $20,000 annual cash retainer;

•

an initial equity grant of 5,575 options to purchase shares of Common Stock, which options are fully vested on the date of grant and exercisable for ten years from the date of grant;

•

$10,000 for serving as a committee chair;

•

$1,000 for each Board meeting attended in person and $500 for each Board meeting attended telephonically; and

•

$500 for each committee meeting attended, whether in person or telephonically.

Non-independent directors, Drs. Cohen, Craves and Given do not receive any compensation in connection with their director service.


ITEM 12.		SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth information regarding the beneficial ownership of shares of our Common stock as of March 1, 2011 for:

•

each person known to us to be the beneficial owner of more than 5% of our outstanding shares of Common Stock;

•

each of our named executive officers;

•

each of our directors; and

•

all directors and named executive officers as a group.

Information with respect to beneficial ownership has been furnished by each director, executive officer or beneficial owner of more than 5% of our Common Stock. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting and investment power with respect to the securities. Except as otherwise provided by footnote, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned by them. The number of shares of Common Stock used to calculate the percentage ownership of each listed person includes the shares of Common Stock underlying options or warrants held by such persons that are currently exercisable or exercisable within 60 days of March 1, 2011, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

Percentage of beneficial ownership is based on 20,558,446 shares of Common Stock outstanding as of March 1, 2011.

Unless otherwise indicated, the address of each individual listed below is c/o VIA Pharmaceuticals, Inc., 750 Battery Street, Suite 330, San Francisco, California 94111.


				Percentage
				Beneficially
Name of Beneficial Owner	Number of Shares			Owned
5% Stockholders:
Bay City Capital LLC		153,288,359	(1)		93.59	%
Lawrence K. Cohen, Ph.D.		1,200,758	(3)		5.63	%
Directors and Named Executive Officers:
Mark N.K. Bagnall		35,575	(2)		*
Lawrence K. Cohen, Ph.D.		1,200,758	(3)		5.63	%
Fred B. Craves, Ph.D.		—			—
Douglass B. Given, M.D., Ph.D., M.B.A.		122,867	(4)		*
David T. Howard		35,575	(5)		*
John R. Larson		55,345	(6)		*
Karen S. Wright		112,375	(7)		*
Rebecca A. Taub, M.D.		348,437	(8)		1.68	%
All directors and named executive officers as a group (8 persons)		1,910,932	(9)		8.81	%


*		Less than 1%.


(1)		The information included in the beneficial ownership table is based on a Schedule 13D/A filed by Bay City Capital LLC on November 17, 2010. Bay City Capital LLC (“BCC”) is the manager of Bay City Capital Management IV LLC (“Management IV”). Management IV is the general partner of Bay City Capital Fund IV, L.P. (“Fund IV”) and Bay City Capital Fund IV Co-Investment Fund, L.P. (“Co-Investment Fund”), which own of record 9,842,297 and 212,149 shares of Common Stock, respectively. In connection with the 2009 loan transaction entered into between the Company and Fund IV and Co-Investment Fund, as described under “Related Party Transactions — Bay City Capital Relationship,” the Company issued to Fund IV and Co-Investment Fund warrants (the “2009 Warrants”) to purchase up to an aggregate of 81,575,000 and 1,758,333 shares of the Company’s Common Stock, respectively (collectively, the “2009 Warrant Shares”), at an exercise price of $0.12 per share. Based on the $10,000,000 in borrowings by the Company, the aggregate number of Warrant Shares that have vested and become exercisable by Fund IV and Co-Investment Fund are 83,333,333 shares. In connection with the 2010 loan transaction entered into between the Company and Fund IV and Co-Investment Fund, as described under “Related Party Transactions — Bay City Capital Relationship,” the Company issued to Fund IV and Co-Investment Fund warrants (the “2010 Warrants”) to purchase up to an aggregate of 17,274,706 and 372,353 shares of the Company’s Common Stock, respectively (collectively, the “2010 Warrant Shares”), at an exercise price of $0.17 per share. Based on the $3,000,000 in borrowings by the Company, the aggregate number of Warrant Shares that have vested and become exercisable by Fund IV and Co-Investment Fund are 17,647,059 shares. In connection with the 2010 loan amendment entered into between the Company and Fund IV and Co-Investment Fund, as described under “Related Party Transactions — Bay City Capital Relationship,” the Company issued to Fund IV and Co-Investment Fund warrants (the “2010 Additional Warrants”) to purchase up to an aggregate of 41,361,972 and 891,549 shares of the Company’s Common Stock, respectively (collectively, the “2010 Additional Warrant Shares”), at an exercise price of $0.071 per share. The number of 2010 Additional Warrant Shares is equal to the $3,000,000 maximum aggregate principal amount that may be borrowed under the 2010 loan amendment, divided by the $0.071 per share exercise price of the 2010 Additional Warrants. The 2010 Additional Warrant Shares vest based on the amount of borrowings under the amended and restated promissory notes issued under the 2010 Loan Amendment. Based on the $1,001,397 of borrowings, 14,104,183 2010 Additional Warrant Shares are vested and are exercisable as of December 31, 2010. At each subsequent closing, the 2010 Additional Warrants will vest with respect to the additional amount borrowed by the Company. The 2010 Additional Warrant Shares, to the extent they are vested and exercisable, are exercisable at any time until November 15, 2015. BCC has sole voting and investment power over the shares held of record by Fund IV and Co-Investment Fund. BCC is managed by a board of managers currently comprised of four managers, none of whom, acting individually, has voting control or investment discretion with respect to the securities owned. Fred B. Craves, a member of the Company’s Board of Directors, is the founder, chairman of and a manager of BCC. Dr. Craves also owns approximately 22% of the membership interests in BCC. Douglass Given, the chairman of the Company’s Board, is a partner of BCC. Each of Drs. Craves and Given disclaims beneficial ownership of the shares held by Fund IV and Co-Investment Fund, except to the extent of their respective proportionate pecuniary interests therein. The address of BCC is 750 Battery Street, Suite 400, San Francisco, CA 94111.

(2)		Represents options to purchase 35,575 shares of Common Stock which are exercisable within 60 days of March 1, 2011.

(3)		Dr. Cohen was appointed President and Chief Executive Officer of the Company on June 5, 2007 following the consummation of the Merger. The information included in the beneficial ownership table is based in part on a Schedule 13G filed by Dr. Cohen on February 11, 2011. The share number includes options to purchase 781,098 shares of Common Stock which are exercisable within 60 days of March 1, 2011.

(4)		Represents 122,867 shares of Common Stock held of record by the Douglass and Kim Given Revocable Trust, for which Douglass Given serves as trustee.

(5)		Represents options to purchase 35,575 shares of Common Stock which are exercisable within 60 days of March 1, 2011.

(6)		Includes (i) 2,342 shares owned of record by Clique Capital, LLC, for which Mr. Larson serves as Managing Director and (ii) options to purchase 50,952 shares of Common Stock which are exercisable within 60 days of March 1, 2011.

(7)		Ms. Wright was appointed Vice President, Controller (Principal Financial Officer) of the Company on April 30, 2010 following the restructuring. The share number includes options to purchase 48,549 shares of Common Stock which are exercisable within 60 days of March 1, 2011.

(8)		Dr. Taub was hired and appointed Senior Vice President, Research & Development on January 14, 2008. The share number includes options to purchase 190,937 shares of Common Stock which are exercisable within 60 days of March 1, 2011.

(9)		Includes options to purchase 1,142,686 shares of Common Stock which are exercisable within 60 days of March 1, 2011.


ITEM 13.		CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Review and Approval of Related Party Transactions

Pursuant to a written policy adopted on June 5, 2007 following the completion of the Merger, the Company reviews all transactions, arrangements or relationships (or any series of similar transactions, arrangements or relationships) in excess of $50,000 in which the Company (including any of its subsidiaries) was, is or will be a participant and the amount involved exceeds $50,000, and in which any Related Party had, has or will have a direct or indirect interest (each, a “Related Party Transaction”). For purposes of the policy, a “Related Party” means:

any person who is, or at any time since the beginning of the Company’s last fiscal year was, a director or executive officer of the Company or a nominee to become a director of the Company;

any person who is known to be the beneficial owner of more than 5% of any class of the Company’s voting securities;

any immediate family member of any of the foregoing persons; and

any firm, corporation or other entity in which any of the foregoing persons is employed or is a general partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest.

The Audit Committee reviews the relevant facts and circumstances of each Related Party Transaction, including if the transaction is on terms comparable to those that could be obtained in arm’s length dealings with an unrelated third party and the extent of the Related Party’s interest in the transaction, takes into account the conflicts of interest and corporate opportunity provisions of the Company’s Code of Business Conduct and Ethics, and either approves or disapproves the Related Party Transaction.

Management presents to the Audit Committee each proposed Related Party Transaction, including all relevant facts and circumstances relating thereto and updates the Audit Committee as to any material changes to any approved or ratified Related Party Transaction and provides a status report at least annually at a regularly scheduled meeting of the Audit Committee of all then current Related Party Transactions. No director may participate in approval of a Related Party Transaction for which he or she is a Related Party.

Related Party Transactions

Baxter Healthcare Relationship

Baxter Healthcare owns all 2,000 shares of our outstanding Series C Preferred Stock. Each share of Series C Preferred Stock became convertible into common stock on June 13, 2010. The Series C Preferred Stock is convertible into common stock in an amount equal to (a) the quotient of (i) the liquidation preference (adjusted for recapitalizations), divided by (ii) one hundred and ten percent (110%) of the per share “fair market value” (as defined in the Amended and Restated Certificate of Designation of Preferences and Rights of Series C Preferred Stock of the Company) of the Company’s common stock multiplied by (b) the number of shares of converted Series C Preferred Stock. As of December 31, 2010, the Series C Preferred Stock is convertible into 13,986,013 shares of the Company’s Common Stock. As of December 31, 2010, Baxter Healthcare has not initiated the conversion of the Series C Preferred Stock into the Company’s common stock.

Bay City Capital Relationship

From the date of the founding of privately-held VIA Pharmaceuticals, Inc. in June 2004 through February 7, 2007, privately-held VIA Pharmaceuticals, Inc. entered into a number of financing transactions with its principal stockholder, Bay City Capital. On February 7, 2007, privately-held VIA Pharmaceuticals, Inc. received $5,000,000 in additional borrowings pursuant to the terms of a promissory note with Bay City Capital. Immediately following the receipt of such borrowings, privately-held VIA Pharmaceuticals, Inc. fully extinguished all of its outstanding debt obligations to Bay City Capital after converting the previously issued notes and $334,222 of unpaid accrued interest to $13,334,222 of Series A Preferred Stock of privately-held VIA Pharmaceuticals, Inc. All of the Series A Preferred Stock of privately-held VIA Pharmaceuticals, Inc. owned by Bay City Capital was converted into common stock of the Company in connection with the consummation of the Merger on June 5, 2007.

On March 12, 2009, the Company entered into a note and warrant purchase agreement (the “2009 Loan Agreement”) with Bay City Capital (through its Bay City Capital Fund IV, L.P. and affiliate Bay City Capital Fund IV Co-Investment Fund, L.P.) pursuant to which Bay City Capital agreed to lend to the Company in the aggregate up $10,000,000, pursuant to the terms of promissory notes (collectively, the “2009 Notes”) issued under the 2009 Loan Agreement (the “2009 Loan Transaction”). On March 12, 2009, the Company borrowed an initial amount of $2,000,000 and as of September 11, 2009, the Company had drawn down the remaining $8,000,000 from the debt facility. The 2009 Notes are secured by a first priority lien on all of the assets of the Company. Amounts borrowed under the Notes accrue interest at the rate of 15% per annum, which increases to 18% per annum following an event of default. Unless earlier paid in accordance with the terms of the 2009 Notes, all unpaid principal and accrued interest shall become fully due and payable on the earliest to occur of (i) April 1, 2010, (ii) the closing of a debt, equity or combined debt/equity financing resulting in gross proceeds or available credit to the Company of not less than $20,000,000, and (iii) the closing of a transaction in which the Company sells, conveys, licenses or otherwise disposes of a majority of its assets or is acquired by way of a merger,

consolidation, reorganization or other transaction or series of transactions pursuant to which stockholders of the Company prior to such acquisition own less than fifty percent of the voting interests in the surviving or resulting entity. The Company was not able to repay the loan on April 1, 2010 and is currently in default under the 2009 Loan Agreement. Pursuant to the 2009 Loan Agreement, the Company issued to Bay City Capital warrants (the “2009 Warrants”) to purchase up to an aggregate of 83,333,333 shares (the “2009 Warrant Shares”) of Common Stock of the Company, at $0.12 per share. The number of 2009 Warrant Shares is equal to the $10,000,000 aggregate principal amount borrowed under the 2009 Loan Agreement, divided by the $0.12 per share exercise price of the Warrants. As set forth in the 2009 Warrants, the 2009 Warrant Shares vest based on the amount of borrowings under the Notes and the passage of time. Based on the aggregate $10,000,000 of borrowings, 83,333,333 2009 Warrant Shares are vested and are exercisable at any time until 5:00 p.m. (Pacific Time) on March 12, 2014. In connection with the 2009 Loan Transaction and 2009 Warrants, the Company also entered into a Second Amended and Restated Registration Rights Agreement (the “2009 Registration Rights Agreement”) with Bay City Capital and certain stockholders of the Company, pursuant to which the Company has granted certain demand, shelf and “piggyback” registration rights to Bay City Capital and the certain stockholders of the Company to register their shares of Common Stock (including the 2009 Warrant Shares) with the SEC so that such shares become freely tradeable without restriction under the Securities Act of 1933, as amended.

On March 26, 2010, the Company entered into a note and warrant purchase agreement (the “2010 Loan Agreement”) with Bay City Capital (through its Bay City Capital Fund IV, L.P. and affiliate Bay City Capital Fund IV Co-Investment Fund, L.P.) pursuant to which Bay City Capital agreed to lend to the Company in the aggregate up to $3,000,000, pursuant to the terms of promissory notes issued under the 2010 Loan Agreement (the “2010 Loan Transaction”). On March 29, 2010, the Company borrowed an initial amount of $1,250,000 and as of September 28, 2010, the Company had drawn down the remaining $1,750,000 from the debt facility. The 2010 Loan Agreement notes are secured by a lien on all of the assets of the Company. Amounts borrowed under the 2010 Loan Agreement notes accrue interest at the rate of 15% per annum, which increases to 18% per annum following an event of default. Unless earlier paid in accordance with the terms of the original 2010 Loan Agreement, all unpaid principal and accrued interest shall become fully due and payable on the earlier to occur of (i) December 31, 2010, (ii) the closing of a debt, equity or combined debt/equity financing resulting in gross proceeds or available credit to the Company of not less than $20,000,000, and (iii) the closing of a transaction in which the Company sells, conveys, licenses or otherwise disposes of a majority of its assets or is acquired by way of a merger, consolidation, reorganization or other transaction or series of transactions pursuant to which stockholders of the Company prior to such acquisition own less than 50% of the voting interests in the surviving or resulting entity. Pursuant to the 2010 Loan Agreement, the Company issued to the Lenders warrants (the “2010 Warrants”) to purchase an aggregate of 17,647,059 shares (the “2010 Warrant Shares”) of common stock at $0.17 per share. The number of 2010 Warrant Shares is equal to the $3,000,000 maximum aggregate principal amount that may be borrowed under the 2010 Loan Agreement, divided by the $0.17 per share exercise price of the 2010 Warrants. The 2010 Warrant Shares vest based on the amount of borrowings under the 2010 Loan Agreement notes. Based on the aggregate $3,000,000 of borrowings, 17,647,059 2010 Warrant Shares are vested and are exercisable at any time until 5:00 p.m. (Pacific Time) on March 26, 2015. In connection with the 2010 Loan Transaction and 2010 Warrants, the Company also amended the Registration Rights Agreement, pursuant to which the Company has granted certain demand, shelf and “piggyback” registration rights to Bay City Capital and the certain stockholders of the Company to register their shares of Common Stock (including the 2010 Warrant Shares) with the SEC so that such shares become freely tradeable without restriction under the Securities Act of 1933, as amended. On January 14, 2011, the Company entered into an amendment to the 2010 Loan Agreement and 2010 Loan Amendment to extend the maturity date under the 2010 Loan Agreement and 2010 Loan Amendment from December 31, 2010 to June 30, 2011 and on March 24, 2011, the Company entered into a second amendment to further extend the maturity date to September 30, 2011.

On October 29, 2010, the Company executed a secured promissory note (the “Bridge Note”) in favor of Bay City Capital Fund IV, L.P., a Delaware limited partnership in the principal sum of $200,000 for general corporate purposes. By the terms of the Bridge Note, upon execution of the 2010 Loan Amendment (as defined below) the unpaid principal amount and accrued and unpaid interest under the Bridge Note automatically converted into obligations of the Company under the 2010 Loan Amendment as advances under the amended and restated promissory notes issued under the 2010 Loan Amendment The Company accrued $1,397 in unpaid interest for the period October 29, 2010 to November 15, 2010, which is included in the Company’s statement of operations.

On November 15, 2010, the Company entered into an amendment to the 2010 Loan Agreement (“2010 Loan Amendment”) to enable the Company to borrow up to an additional aggregate principal amount of $3,000,000, pursuant to the terms of amended and restated promissory notes issued under the 2010 Loan Amendment. Subject to the Lenders’ approval, as of December 31, 2010, the Company may borrow in the aggregate up to an additional $1,998,603 at subsequent closings pursuant to the terms of the 2010 Loan Amendment. On November 15, 2010, the $201,397 outstanding principal and unpaid interest on the Bridge Note were automatically converted into obligations of the Company under the 2010 Loan Amendment as advances. During the three months ended December 31, 2010, the Company borrowed an additional $800,000 on November 22, 2010. The 2010 Loan Amendment notes are secured by a lien on all of the assets of the Company. Amounts borrowed under the original 2010 Loan Amendment notes accrue interest at the rate of fifteen percent (15%) per annum, which increases to eighteen percent (18%) per annum following an event of default. Unless earlier paid in accordance with the terms of the original 2010 Loan Amendment, all unpaid principal and accrued interest shall become fully due and payable on the earlier to occur of (i) December 31, 2010, (ii) the closing of a debt, equity or combined debt/equity financing resulting in gross proceeds or available credit to the Company of not less than $20,000,000, and (iii) the closing of a transaction in which the Company sells, conveys, licenses or otherwise disposes of a majority of its assets or is acquired by way of a merger, consolidation, reorganization or other transaction or series of transactions pursuant to which stockholders of the Company prior to such acquisition own less than 50% of the voting interests in the surviving or resulting entity. Pursuant to the 2010 Loan Amendment, the Company issued to the Lenders additional warrants (the “2010 Additional Warrants”) to purchase an aggregate of 42,253,521 shares (the “2010 Additional Warrant Shares”) of common stock at $0.071 per share. The number of 2010 Additional Warrant Shares is equal to the $3,000,000 maximum aggregate principal amount that may be borrowed under the 2010 Loan Amendment, divided by the $0.071 per share exercise price of the 2010 Additional Warrants. The 2010 Additional Warrant Shares vest based on the amount of borrowings under the 2010 Loan Amendment notes. Based on the $1,001,397 of borrowings, 14,104,183 2010 Additional Warrant Shares are vested and are exercisable as of December 31, 2010. At each subsequent closing, the 2010 Additional Warrants will vest with respect to the additional amount borrowed by the Company. The 2010 Additional Warrant Shares, to the extent they are vested and exercisable, are exercisable at any time until November 15, 2015. In connection with the 2010 Loan Amendment and 2010 Additional Warrants, the Company also amended the Registration Rights Agreement, pursuant to which the Company has granted certain demand, shelf and “piggyback” registration rights to Bay City Capital and certain stockholders of the Company to register their shares of Common Stock (including the 2010 Additional Warrant Shares) with the SEC so that such shares become freely tradeable without restriction under the Securities Act of 1933, as amended. On January 14, 2011, the Company entered into an amendment to the 2010 Loan Agreement and 2010 Loan Amendment to extend the maturity date under the 2010 Loan Agreement and 2010 Loan Amendment from December 31, 2010 to June 30, 2011 and on March 24, 2011, the Company entered into a second amendment to further extend the maturity date to September 30, 2011.

Fred B. Craves, a member of the Company’s Board of Directors, is the founder, chairman, and a manager of Bay City Capital. Douglass B. Given, the chairman of the Company’s Board of Directors is an investment partner of Bay City Capital.

Director Independence

Although the Company’s common stock is no longer listed on NASDAQ, our Corporate Governance Principles require that at least fifty percent (50%) of the Board of Directors be comprised of directors who qualify as independent directors under the listing standards of The NASDAQ Stock Market. The NASDAQ independence criteria include various objective standards and a subjective test. A member of the Board is not considered independent under the objective standards if, for example, he or she is employed by the Company or if the Company paid his or her family member more than $120,000 during any period of twelve consecutive months within the past three years. For example, Dr. Cohen is not independent because he is employed by the Company. The subjective test requires that each independent director not have a relationship which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, and the subjective test is made in the context of the objective standards. In making its independence determinations, the Board generally considers commercial, financial services, charitable, and other transactions and other relationships between the Company and each director and his or her family members and affiliated entities. For example, with regard to the independence determination for Mr. Bagnall, the Board considered his position with a portfolio company of Bay City Capital, a significant stockholder of the Company, and concluded he is not an affiliated person under applicable SEC and NASDAQ rules. Based on its review, the Board has determined that each of the Company’s directors, except for Drs. Cohen, Craves and Given, are independent as defined by the applicable NASDAQ Stock Market listing standards and under applicable law. As of January 4, 2010, the Company’s common stock is no longer listed on The NASDAQ Stock Market and the Company is no longer subject to the NASDAQ listing standards, including NASDAQ listing rule 5605 which requires, among other things, that the Company’s board of directors be comprised of at least a majority of independent directors and that the Company’s audit committee be comprised of at least three independent directors.


ITEM 14.		PRINCIPAL ACCOUNTANT FEES AND SERVICES

Deloitte & Touche LLP (“Deloitte”) has been the Company’s independent registered public accounting firm since the completion of the Merger in June 2007 and had previously served as privately-held VIA Pharmaceuticals, Inc.’s independent registered public accounting firm since the date of privately-held VIA Pharmaceuticals, Inc.’s formation in 2004. The appointment of Deloitte as the Company’s independent registered public accounting firm was approved by the Audit Committee on June 5, 2007. Deloitte completed its client approval procedures and accepted the appointment as the Company’s independent registered public accounting firm as of June 19, 2007.

The accountant’s report issued by Deloitte on the financial statements of the Company for the fiscal year ended December 31, 2009 expressed an unqualified opinion and included an explanatory paragraph describing conditions that raise substantial doubt about the Company’s ability to continue as a going concern. The accountant’s report issued by Deloitte on the financial statements of the Company for the fiscal year ended December 31, 2010 expressed an unqualified opinion and included an explanatory paragraph describing conditions that raise substantial doubt about the Company’s ability to continue as a going concern. From January 1, 2009 through December 31, 2010, there were no disagreements with Deloitte on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. There were no reportable events, as described in Item 304(a)(1)(v) of Regulation S-K, during the Company’s two most recent fiscal years (ended December 31, 2010 and 2009).

Audit and Non Audit Fees

Aggregate fees for professional services rendered by Deloitte for the fiscal years ended December 31, 2010 and 2009 are set forth below. The aggregate fees included in the Audit Fee category are fees billed for each of these fiscal years for the audit of our annual financial statements and review of financial statements included in the Company’s Quarterly Reports on Form 10-Q and for services provided in connection with statutory and regulatory filings or engagements. The aggregate fees included in each of the other categories are fees billed in the fiscal years.

Aggregate fees incurred by Deloitte for professional services rendered to the Company from January 1, 2009 through December 31, 2010:


	Fiscal Year		Fiscal Year
	2010		2009
Audit Fees	$	246,300	$	207,700
Audit-Related Fees	$	—	$	—
Tax Fees	$	41,690	$	—
All Other Fees	$	—	$	—

*Total*	$	287,990	$	207,700

Audit Fees for the fiscal years ended December 31, 2010 and 2009 were for professional services rendered for the audits of the annual financial statements of the Company included in the Company’s Form 10-K and quarterly review of the financial statements included in the Company’s Quarterly Reports on Form 10-Q. Audit Fees for the fiscal year ended December 31, 2009 also included services provided by Deloitte related to the filing of a Form S-8 in March 2009.

Tax Fees for the fiscal year ended December 31, 2010 consisted of professional services provided by Deloitte related to the Company’s “Qualifying Therapeutic Discovery Project” tax credit application. There were no fees for services rendered by Deloitte that fall into the classification of Tax Fees for the fiscal year ended December 31, 2009.

There were no fees for services rendered by Deloitte that fall into the classification of Audit-Related Fees for the fiscal years ended December 31, 2010 or 2009.

There were no fees for services rendered by Deloitte that fall into the classification of All Other Fees for the fiscal years ended December 31, 2010 or 2009.

Policy on Audit Committee Preapproval of Audit and Permissible Nonaudit Services of the Independent Registered Public Accounting Firm

As specified in the Audit Committee charter, the Audit Committee pre-approves all audit and nonaudit services provided by the independent registered public accounting firm prior to the receipt of such services. Thus, the Audit Committee approved 100% of the services set forth in the above table prior to the receipt of such services and no services were provided under the permitted de minimus threshold provisions.

The Audit Committee of the Board of Directors determined that the provision of such services was compatible with the maintenance of the independence of Deloitte.

PART IV


ITEM 15.		EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

1. Financial Statements and Financial Statement Schedules

The Company’s Financial Statements included in Item 8 include:


Report of Independent Registered Public Accounting Firm		F-1

Balance Sheets as of December 31, 2010 and 2009		F-2

Statements of Operations for the years ended December 31, 2010 and 2009, and for the period from inception (June 14, 2004) to December 31, 2010		F-3

Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2010, 2009, 2008, 2007 and for the period from inception (June 14, 2004) to December 31, 2010		F-4

Statements of Cash Flow for the years ended December 31, 2010 and 2009, and for the period from inception (June 14, 2004) to December 31, 2010		F-5

Notes to the Financial Statements		F-6

2. Financial Statement Schedules

All other schedules not listed above have been omitted, because they are not applicable or not required, or because the required information is included in the financial statements or notes thereto.

3. Exhibits required to be filed by Item 601 of Regulation S-K


Exhibit
Number		Description
	2.1	Agreement and Plan of Merger and Reorganization, dated February 7, 2007, as amended, 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 Exhibit 3.7 to the Form 10-Q filed on August 14, 2007 and incorporated herein by reference)

	3.8	Certificate of Amendment to the Restated Certificate of Incorporation (Reverse Stock Split) (filed as Exhibit 3.8 to the Form 10-Q filed on August 14, 2007 and incorporated herein by reference)

	3.9	Certificate of Amendment to the Restated Certificate of Incorporation (Name Change) (filed as Exhibit 3.9 to the Form 10-Q filed on August 14, 2007 and incorporated herein by reference)

	3.10	Fourth Amended and Restated Bylaws (filed as Exhibit 3.1 to the Form 8-K filed on April 17, 2008 and incorporated herein by reference)

	4.1	Warrant issued to Trout Partners LLC, dated July 31, 2007 (filed as Exhibit 99.1 to the Form 8-K filed on August 6, 2007 and incorporated herein by reference)

	4.2	Warrant issued to Redington, Inc., dated March 1, 2008 (filed as Exhibit 4.2 to the Form 10-K filed on March 28, 2008 and incorporated herein by reference)


Exhibit
Number		Description
	4.3	Warrant to Purchase Common Stock of VIA Pharmaceuticals, Inc. issued to Bay City Capital Fund IV Fund, L.P., dated March 12, 2009 (filed as Exhibit 4.1 to the Form 8-K filed on March 12, 2009 and incorporated herein by reference)

	4.4	Warrant to Purchase Common Stock of VIA Pharmaceuticals, Inc. issued to Bay City Capital Fund IV Co-Investment Fund, L.P., dated March 12, 2009 (filed as Exhibit 4.2 to the Form 8-K filed on March 12, 2009 and incorporated herein by reference)

	4.5	Warrant to Purchase Common Stock of VIA Pharmaceuticals, Inc. issued to Bay City Capital Fund IV Fund, L.P., dated March 26, 2010 (filed as Exhibit 4.5 to the Form 10-K filed on March 31, 2010 and incorporated herein by reference)

	4.6	Warrant to Purchase Common Stock of VIA Pharmaceuticals, Inc. issued to Bay City Capital Fund IV Co-Investment Fund, L.P., dated March 26, 2010 (filed as Exhibit 4.6 to the Form 10-K filed on March 31, 2010 and incorporated herein by reference)

	4.7	Warrant to Purchase Common Stock of VIA Pharmaceuticals, Inc. issued to Bay City Capital Fund IV Fund, L.P., dated November 15, 2010 (filed as Exhibit 4.7 to the Form 10-Q filed on November 15, 2010 and incorporated herein by reference)

	4.8	Warrant to Purchase Common Stock of VIA Pharmaceuticals, Inc. issued to Bay City Capital Fund IV Co-Investment Fund, L.P., dated November 15, 2010 (filed as Exhibit 4.8 to the Form 10-Q filed on November 15, 2010 and incorporated herein by reference)

	4.9	Second Amended and Restated Registration Rights Agreement, dated as of March 12, 2009, by and among VIA Pharmaceuticals, Inc. and the parties named therein (filed as Exhibit 4.3 to the Form 8-K filed on March 12, 2009 and incorporated herein by reference)

	4.10	Amendment No. 1 to the Second Amended and Restated Registration Rights Agreement, dated as of March 26, 2010, by and among VIA Pharmaceuticals, Inc. and the parties named therein (filed as Exhibit 4.8 to the Form 10-K filed on March 31, 2010 and incorporated herein by reference)

	4.11	Amendment No. 2 to the Second Amended and Restated Registration Rights Agreement, dated as of November 15, 2010, by and among VIA Pharmaceuticals, Inc. and the parties named therein (filed as Exhibit 4.11 to the Form 10-Q filed on November 15, 2010 and incorporated herein by reference)

	10.1	Note and Warrant Purchase Agreement, dated as of March 12, 2009 by and among VIA Pharmaceuticals, Inc., Bay City Capital Fund IV, L.P. and Bay City Capital Fund IV Co-Investment Fund, L.P. (filed as Exhibit 10.1 to the Form 8-K filed on March 12, 2009 and incorporated herein by reference)

	10.2	Note and Warrant Purchase Agreement, dated as of March 26, 2010 by and among VIA Pharmaceuticals, Inc., Bay City Capital Fund IV, L.P. and Bay City Capital Fund IV Co-Investment Fund, L.P. (filed as Exhibit 10.2 to the Form 10-K filed on March 31, 2010 and incorporated herein by reference)

	10.3	Promissory Note, dated as of March 12, 2009, by VIA Pharmaceuticals, Inc. and payable to Bay City Capital Fund IV, L.P. (filed as Exhibit 10.2 to the Form 8-K filed on March 12, 2009 and incorporated herein by reference)

	10.4	Promissory Note, dated as of March 12, 2009, by VIA Pharmaceuticals, Inc. and payable to Bay City Capital Fund IV Co-Investment Fund, L.P. (filed as Exhibit 10.3 to the Form 8-K filed on March 12, 2009 and incorporated herein by reference)

	10.5	First Amendment to Promissory Note, dated as of September 11, 2009, by VIA Pharmaceuticals, Inc. and Bay City Capital Fund IV, L.P. (filed as Exhibit 10.1 to the Form 8-K filed on September 11, 2009 and incorporated herein by reference)

	10.6	First Amendment to Promissory Note, dated as of September 11, 2009, by VIA Pharmaceuticals, Inc. and Bay City Capital Fund IV Co-Investment Fund, L.P. (filed as Exhibit 10.2 to the Form 8-K filed on September 11, 2009 and incorporated herein by reference)


	10.7	Second Amendment to Promissory Note, dated as of October 30, 2009, by VIA Pharmaceuticals, Inc. and Bay City Capital Fund IV, L.P. (filed as Exhibit 10.1 to the Form 8-K filed on October 30, 2009 and incorporated herein by reference)

	10.8	Second Amendment to Promissory Note, dated as of October 30, 2009, by VIA Pharmaceuticals, Inc. and Bay City Capital Fund IV Co-Investment Fund, L.P. (filed as Exhibit 10.2 to the Form 8-K filed on October 30, 2009 and incorporated herein by reference)

	10.9	Third Amendment to Promissory Note, dated as of December 22, 2009, by VIA Pharmaceuticals, Inc. and Bay City Capital Fund IV, L.P. (filed as Exhibit 10.1 to the Form 8-K filed on December 22, 2009 and incorporated herein by reference)

	10.10	Third Amendment to Promissory Note, dated as of December 22, 2009, by VIA Pharmaceuticals, Inc. and Bay City Capital Fund IV Co-Investment Fund, L.P. (filed as Exhibit 10.2 to the Form 8-K filed on December 22, 2009 and incorporated herein by reference)


Exhibit
Number			Description
	10.11		Promissory Note, dated as of March 26, 2010, by VIA Pharmaceuticals, Inc. and payable to Bay City Capital Fund IV, L.P. (filed as Exhibit 10.11 to the Form 10-K filed on March 31, 2010 and incorporated herein by reference)

	10.12		Promissory Note, dated as of March 26, 2010, by VIA Pharmaceuticals, Inc. and payable to Bay City Capital Fund IV Co-Investment Fund, L.P. (filed as Exhibit 10.12 to the Form 10-K filed on March 31, 2010 and incorporated herein by reference)

	10.13		Promissory Note, dated as of October 29, 2010, by VIA Pharmaceuticals, Inc. and Bay City Capital Fund IV, L.P. (filed as Exhibit 10.1 to the Form 8-K filed on November 4, 2010 and incorporated herein by reference)

	10.14		Omnibus Amendment, dated as of November 15, 2010 by and among VIA Pharmaceuticals, Inc., Bay City Capital Fund IV, L.P., Bay City Capital Fund IV Co-Investment Fund, L.P., and Bay City Capital LLC (filed as Exhibit 10.2 to the Form 10-Q filed on November 15, 2010 and incorporated herein by reference)

	10.15		Amended and Restated Promissory Note, dated as of November 15, 2010, by VIA Pharmaceuticals, Inc. and payable to Bay City Capital Fund IV, L.P. (filed as Exhibit 10.3 to the Form 10-Q filed on November 15, 2010 and incorporated herein by reference)

	10.16		Amended and Restated Promissory Note, dated as of November 15, 2010, by VIA Pharmaceuticals, Inc. and payable to Bay City Capital Fund IV Co-Investment Fund, L.P. (filed as Exhibit 10.4 to the Form 10-Q filed on November 15, 2010 and incorporated herein by reference)

	10.17		Amendment to Amended and Restated Promissory Note, dated January 14, 2011, by VIA Pharmaceuticals, Inc. and Bay City Capital Fund IV, L.P. (filed as Exhibit 10.1 to the Form 8-K filed on January 18, 2011 and incorporated herein by reference)

	10.18		Amendment to Amended and Restated Promissory Note, dated January 14, 2011, by VIA Pharmaceuticals, Inc. and Bay City Capital Fund IV Co-Investment Fund, L.P. (filed as Exhibit 10.2 to the Form 8-K filed on January 18, 2011 and incorporated herein by reference)

	10.19	*	Second Amendment to Amended and Restated Promissory Note, dated March 24, 2011, by VIA Pharmaceuticals, Inc. and Bay City Capital Fund IV, L.P.

	10.20	*	Second Amendment to Amended and Restated Promissory Note, dated March 24, 2011, by VIA Pharmaceuticals, Inc. and Bay City Capital Fund IV Co-Investment Fund, L.P.

	10.21		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)

	10.22		Exclusive License Agreement, effective August 10, 2005, between VIA Pharmaceuticals, Inc. and Abbott Laboratories (filed as Exhibit 10.4 to the Form 10-Q filed on August 14, 2007 and incorporated herein by reference)

	10.23		Research, Development and Commercialization Agreement, dated as of December 18, 2008, by and between Hoffmann-La Roche Inc., F. Hoffmann-La Roche Ltd and VIA Pharmaceuticals, Inc. (filed as Exhibit 10.1 to the Form 8-K filed on December 23, 2008 and incorporated herein by reference)

	10.24		Research, Development and Commercialization Agreement, dated as of December 18, 2008, by and between Hoffmann-La Roche Inc., F. Hoffmann-La Roche Ltd and VIA Pharmaceuticals, Inc. (filed as Exhibit 10.2 to the Form 8-K filed on December 23, 2008 and incorporated herein by reference)

	10.25		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)

	10.26		Letter Agreement, dated as of October 13, 2006, by and between VIA Pharmaceuticals, Inc. and Karen S. Wright (filed as Exhibit 10.1 to the Form 8-K filed on May 6, 2010 and incorporated herein by reference)

	10.27		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)

	10.28		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)

	10.29		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)

	10.30		Letter Agreement, dated as of December 21, 2007, between VIA Pharmaceuticals, Inc. and Rebecca Taub (filed as Exhibit 10.15 to the Form 10-K filed on March 28, 2008 and incorporated herein by reference)

	10.31		Consulting Agreement, dated as of January 29, 2009, by and between VIA Pharmaceuticals, Inc. and Adeoye Olukotun (filed as Exhibit 10.1 to the Form 8-K filed on February 3, 2009 and incorporated herein by reference)

	10.32		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)

	10.33		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)

	10.34		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)

	10.35		Standard Director Form of Option Agreement (filed as Exhibit 10.18 to the Form 10-Q filed on August 14, 2007 and incorporated herein by reference)


Exhibit
Number			Description
	10.36		Conversion Agreement, dated as of May 11, 2007, between Corautus Genetics Inc. and Boston Scientific Corporation (filed as Exhibit 10.19 to the Form 10-Q filed on August 14, 2007 and incorporated herein by reference)

	10.37		Change in Control Agreement by and between VIA Pharmaceuticals, Inc and Lawrence K. Cohen, Ph.D., dated December 21, 2007 (filed as Exhibit 10.1 to the Form 8-K/A filed on December 21, 2007 and incorporated herein by reference)

	10.38		Change in Control Agreement by and between VIA Pharmaceuticals, Inc and James G. Stewart, dated December 21, 2007 (filed as Exhibit 10.2 to the Form 8-K/A filed on December 21, 2007 and incorporated herein by reference)

	10.39		Change in Control Agreement by and between VIA Pharmaceuticals, Inc and Rebecca Taub, M.D., dated January 14, 2008 (filed as Exhibit 10.25 to the Form 10-K filed on March 28, 2008 and incorporated herein by reference)

	10.40		VIA Pharmaceuticals, Inc. Form of Stock Option Agreement (filed as Exhibit 10.1 to the Form 8-K filed on December 19, 2007 and incorporated herein by reference)

	10.41		VIA Pharmaceuticals, Inc. 2007 Incentive Award Plan (filed as Exhibit A to the Definitive Proxy Statement filed on November 5, 2007 and incorporated herein by reference)

	10.42		Office Lease, dated October 13, 2005, between VIA Pharmaceuticals, Inc. and James P. Edmondson, as amended by Lease Amendment No. One, dated January 15, 2008 (filed as Exhibit 10.28 to the Form 10-K filed on March 28, 2008 and incorporated herein by reference)

	10.43		Lease, dated July 24, 2006, between VIA Pharmaceuticals, Inc. and 100 & RW CRA LLC, as amended by First Extension and Modification of Lease, dated January 15, 2008 (filed as Exhibit 10.29 to the Form 10-K filed on March 28, 2008 and incorporated herein by reference)

	21.1	*	Subsidiaries of VIA Pharmaceuticals, Inc.

	31.1	*	Principal Executive Officer’s Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	31.2	*	Principal Financial Officer’s Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	32.1	*	Certification Pursuant to 18 U.S.C. § 1350 (Section 906 of Sarbanes-Oxley Act of 2002).

	32.2	*	Certification Pursuant to 18 U.S.C. § 1350 (Section 906 of Sarbanes-Oxley Act of 2002).


*		Filed herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.


	VIA PHARMACEUTICALS, INC.
	By:	/s/ Lawrence K. Cohen
		Lawrence K. Cohen
		President, Chief Executive Officer

Date: March 24, 2011

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons, on behalf of the registrant in the capacities indicated.


Signatures	Titles	Date

/s/ Lawrence K. Cohen Lawrence K. Cohen	President, Chief Executive Officer and Director	March 24, 2011

/s/ Karen S. Wright Karen S. Wright	Vice President, Controller	March 24, 2011

/s/ Douglass B. Given Douglass B. Given	Chairman of the Board of Directors	March 24, 2011

/s/ Mark N.K. Bagnall Mark N.K. Bagnall	Director	March 24, 2011

/s/ Fred B. Craves Fred B. Craves	Director	March 24, 2011

/s/ David T. Howard David T. Howard	Director	March 24, 2011

/s/ John R. Larson John R. Larson	Director	March 24, 2011

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
VIA Pharmaceuticals, Inc.
San Francisco, CA

We have audited the accompanying balance sheets of VIA Pharmaceuticals, Inc. (a development stage company) (the “Company”), as of December 31, 2010 and 2009, and the related statements of operations, stockholders’ equity (deficit), and cash flows for each of the two years in the period ended December 31, 2010, and for the period from June 14, 2004 (date of inception) to December 31, 2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2010 and 2009, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2010, and for the period from June 14, 2004 (date of inception) to December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company is a development stage enterprise engaged in the research and development of cardiovascular disease. As discussed in Note 1 to the financial statements, the deficiency in working capital at December 31, 2010 and Company’s operating losses since inception raise substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also discussed in Note 1 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Deloitte & Touche LLP

San Francisco, California
March 24, 2011

F-1

VIA PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)

BALANCE SHEETS


	December 31,			December 31,
	2010			2009
ASSETS
Current assets:
Cash and cash equivalents	$	84,001		$	2,189,742
Prepaid expenses and other current assets		360,324			155,361

Total current assets		444,325			2,345,103
Property and equipment-net		23,357			170,617
Other non-current assets		32,289			40,374

Total	$	499,971		$	2,556,094

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	793,534		$	705,887
Accrued expenses and other liabilities		1,297,838			2,226,720
Accrued restructuring costs		104,675			—
Interest payable — affiliate		2,791,629			789,041
Notes payable — affiliate — net of discount of $0 and $4,374 as of December 31, 2010 and 2009, respectively		14,001,397			9,995,626

Total current liabilities		18,989,073			13,717,274
Deferred rent		8,400			37,450

Total liabilities		18,997,473			13,754,724
Commitments and contingencies
Shareholders’ equity (deficit):
Common stock, $0.001 par value-200,000,000 shares authorized at December 31, 2010 and December 31, 2009, respectively; 20,558,446 and 20,646,374 shares issued and outstanding at December 31, 2010 and December 31, 2009, respectively		20,559			20,646
Preferred stock Series A, $0.001 par value-5,000,000 shares authorized at December 31, 2010 and December 31, 2009, respectively; 0 shares issued and outstanding at December 31, 2010 and December 31, 2009, respectively		—			—
Convertible preferred stock Series C, $0.001 par value-17,000 shares authorized at December 31, 2010 and December 31, 2009, respectively; 2,000 shares issued and outstanding at December 31, 2010 and December 31, 2009, respectively; liquidation preference of $2,000,000		2			2
Additional paid-in capital		72,687,817			70,385,287
Deficit accumulated in the development stage		(91,205,880	)		(81,604,565	)

Total shareholders’ equity (deficit)		(18,497,502	)		(11,198,630	)

Total	$	499,971		$	2,556,094

See accompanying notes

F-2

VIA PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF OPERATIONS


							Period from
							June 14, 2004
	Years Ended						(Date of Inception) to
	December 31,			December 31,			December 31,
	2010			2009			2010
Revenue	$	—		$	—		$	—

Operating expenses:
Research and development		1,817,462			6,055,215			42,723,640
General and administration		4,096,520			7,198,320			33,142,573
Merger transaction costs		—			—			3,824,090
Restructuring costs		106,959			—			106,959

Total operating expenses		6,020,941			13,253,535			79,797,262

Operating loss		(6,020,941	)		(13,253,535	)		(79,797,262	)
Other income (expense):
Interest income		—			—			914,628
Interest expense		(3,562,483	)		(7,733,390	)		(12,300,966	)
Other income (expense)-net		(17,891	)		8,601			(22,280	)

Total other income (expense)		(3,580,374	)		(7,724,789	)		(11,408,618	)

Net Loss	$	(9,601,315	)	$	(20,978,324	)	$	(91,205,880	)

Loss per share of common stock-basic and diluted	$	(0.47	)	$	(1.05	)

Weighted average shares outstanding-basic and diluted		20,398,472			19,939,848

See accompanying notes

F-3

VIA PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

For the Period June 14, 2004 (Date of Inception) To December 31, 2010


																													Deficit
	Preferred						Preferred																						Accumulated			Accumulated
	Series A						Series C				Common Stock						Treasury Stock						Additional			Deferred			in the			Other			Total			Total
	Shares						Shares				Shares						Shares						Paid-in			Stock			Development			Comprehensive			Stockholders’			Comprehensive
	Issued			Amount			Issued		Amount		Issued			Amount			Issued			Amount			Capital			Compensation			Stage			Income			Equity (Deficit)			Income (Loss)
BALANCE — June 14, 2004 (date of inception)		—		$	—			—	$	—		—		$	—			—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Issuance of common stock — net of issuance costs		—			—			—		—		371,721			1,000			—			—			—			—			—			—			1,000			—
Stock-based compensation — net		—			—			—		—		—			—			—			—			6,360			(4,675	)		—			—			1,685			—
Net loss		—			—			—		—		—			—			—			—			—			—			(1,084,924	)		—			(1,084,924	)		—

BALANCE — December 31, 2004		—			—			—		—		371,721			1,000			—			—			6,360			(4,675	)		(1,084,924	)		—			(1,082,239	)		—
Issuance of common stock — net of issuance costs		—			—			—		—		37,172			100			—			—			900			—			—			—			1,000			—
Exercise of common stock options		—			—			—		—		10,965			30			—			—			266			—			—			—			296			—
Stock-based compensation — net		—			—			—		—		—			—			—			—			1,124			4,568			—			—			5,692			—
Net loss		—			—			—		—		—			—			—			—			—			—			(8,804,220	)		—			(8,804,220	)		—

BALANCE — December 31, 2005		—			—			—		—		419,858			1,130			—			—			8,650			(107	)		(9,889,144	)		—			(9,879,471	)		—
Exercise of common stock options		—			—			—		—		25,181			67			—			—			1,360			—			—			—			1,427			—
Issuance of series A preferred stock		3,234,900			8,703			—		—		—			—			—			—			12,174,797			—			—			—			12,183,500			—
Stock-based compensation — net		—			—			—		—		—			—			—			—			—			107			—			—			107			—
Stock based compensation — stock options		—			—			—		—		—			—			—			—			434,837			—			—			—			434,837			—
Unrealized gain from foreign currency hedges		—			—			—		—		—			—			—			—			—			—			—			12,582			12,582			12,582
Net loss		—			—			—		—		—			—			—			—			—			—			(8,626,887	)		—			(8,626,887	)		(8,626,887	)

Total comprehensive loss																																						$	(8,614,305	)

BALANCE — December 31, 2006		3,234,900		$	8,703			—	$	—		445,039		$	1,197			—		$	—		$	12,619,644		$	—		$	(18,516,031	)	$	12,582		$	(5,873,905	)
Issuance of common stock — net of issuance costs		—			—			—		—		10,288,065			10,288			—			—			23,130,072			—			—			—			23,140,360			—
Exercise of common stock options		—			—			—		—		317,369			854			—			—			41,469			—			—			—			42,323			—
Repurchase and retirement of common stock		—			—			—		—		(42,283	)		(95	)		—			—			(5,654	)		—			—			—			(5,749	)		—
Issuance of series A preferred stock		3,540,435			9,524			—		—		—			—			—			—			13,324,698			—			—			—			13,334,222			—
Merger		(6,775,335	)		(18,227	)		2,000		2		8,699,067			7,463			(2,014	)		(10,276	)		10,818,077			—			—			—			10,797,039			—
Stock-based compensation — warrants		—			—			—		—		—			—			—			—			21,954			—			—			—			21,954			—
Stock based compensation — stock options		—			—			—		—		—			—			—			—			926,574			—			—			—			926,574			—
Unrealized gain from foreign currency hedges		—			—			—		—		—			—			—			—			—			—			—			4,302			4,302			4,302
Net loss		—			—			—		—		—			—			—			—			—			—			(21,835,382	)		—			(21,835,382	)		(21,835,382	)

Total comprehensive loss																																						$	(21,831,080	)

BALANCE — December 31, 2007		—		$	—			2,000	$	2		19,707,257		$	19,707			(2,014	)	$	(10,276	)	$	60,876,834		$	—		$	(40,351,413	)	$	16,884		$	20,551,738
Exercise of common stock options		—			—			—		—		32,711			33			—			—			2,247			—			—			—			2,280			—
Repurchase and retirement of treasury stock		—			—			—		—		—			—			2,014			10,276			(10,276	)		—			—			—			—			—
Issuance of restricted common stock		—			—			—		—		852,750			853			—			—			1674			—			—			—			2,527			—
Stock-based compensation — warrants		—			—			—		—		—			—			—			—			47,525			—			—			—			47,525			—
Stock based compensation — stock options		—			—			—		—		—			—			—			—			1,251,526			—			—			—			1,251,526			—
Unrealized gain from foreign currency hedges		—			—			—		—		—			—			—			—			—			—			—			(16,884	)		(16,884	)		(16,884	)
Net loss		—			—			—		—		—			—			—			—			—			—			(20,274,828	)		—			(20,274,828	)		(20,274,828	)

Total comprehensive loss																																						$	(20,291,712	)

BALANCE — December 31, 2008		—		$	—			2,000	$	2		20,592,718		$	20,593			—		$	—		$	62,169,530		$	—		$	(60,626,241	)	$	—		$	1,563,884
Exercise of common stock options		—			—			—		—		57,615			57			—			—			1,875			—			—			—			1,932			—
Retirement of restricted common stock		—			—			—		—		(3,959	)		(4	)		—			—			4			—			—			—			—
Stock-based compensation — restricted stock		—			—			—		—		—			—			—			—			63,389			—			—			—			63,389			—
Stock based compensation — stock options		—			—			—		—		—			—			—			—			1,201,766			—			—			—			1,201,766			—
Issuance of warrants — affiliate		—			—			—		—		—			—			—			—			6,948,723			—			—			—			6,948,723			—
Net loss		—			—			—		—		—			—			—			—			—			—			(20,978,324	)		—			(20,978,324	)		(20,978,324	)

Total comprehensive loss																																						$	(20,978,324	)

BALANCE — December 31, 2009		—		$	—			2,000	$	2		20,646,374		$	20,646			—		$	—		$	70,385,287		$	—		$	(81,604,565	)	$	—		$	(11,198,630	)
Exercise of common stock options		—			—			—		—		43,057			43			—			—			1,249			—			—			—			1,292			—
Purchase & retirement of common stock		—			—			—		—		(5,451	)		(5	)		—			—			(758	)		—			—			—			(763	)		—
Retirement of restricted common stock		—			—			—		—		(125,534	)		(125	)		—			—			125			—			—			—			—			—
Stock-based compensation — restricted stock		—			—			—		—		—			—			—			—			42,572			—			—			—			42,572			—
Stock based compensation — stock options		—			—			—		—		—			—			—			—			705,218			—			—			—			705,218			—
Issuance of warrants — affiliate		—			—			—		—		—			—			—			—			1,554,124			—			—			—			1,554,124			—
Net loss		—			—			—		—		—			—			—			—			—			—			(9,601,315	)		—			(9,601,315	)		(9,601,315	)

Total comprehensive loss																																						$	(9,601,315	)

BALANCE — December 31, 2010		—		$	—			2,000	$	2		20,558,446		$	20,559			—		$	—		$	72,687,817		$	—		$	(91,205,880	)	$	—		$	(18,497,502	)

See accompanying notes

F-4

VIA PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF CASH FLOWS


							Period from
							June 14, 2004
	Years Ended						(Date of Inception) to
	December 31,			December 31,			December 31,
	2010			2009			2010
Cash flows from operating activities:
Net loss	$	(9,601,315	)	$	(20,978,324	)	$	(91,205,880	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		74,882			136,360			604,755
Amortization of discount on notes payable — affiliate		1,558,498			6,944,349			8,502,847
Excess facility lease costs — net		104,675			—			104,675
Disposal of property and equipment		72,378			450			76,991
Stock compensation expense		747,790			1,265,155			4,705,372
Deferred rent		(29,050	)		6,813			8,400
Changes in assets and liabilities:
Prepaid expenses and other assets		(196,878	)		448,719			(417,613	)
Accounts payable		87,647			(47,937	)		790,045
Accrued expenses and other liabilities		(928,882	)		(425,738	)		1,397,839
Interest payable — affiliate		2,003,985			789,041			3,785,748

Net cash used in operating activities		(6,106,270	)		(11,861,112	)		(71,646,821	)

Cash flows from investing activities:
Purchase of property and equipment		—			(16,155	)		(664,175	)
Sale of property and equipment		—			532			532
Cash provided in the Merger		—			—			11,147,160
Capitalized merger transaction costs		—			—			(350,069	)

Net cash provided by (used in) investing activities		—			(15,623	)		10,133,448

Cash flows from financing activities:
Proceeds from convertible promissory notes — affiliate		—			—			24,425,000
Proceeds from notes payable — affiliate		4,000,000			10,000,000			14,000,000
Capital lease payments		—			—			(11,973	)
Issuance of common stock		—			—			23,141,360
Exercise of stock options for the issuance of common stock		1,292			1,932			49,550
Repurchase and retirement of common stock		(763	)		—			(6,563	)

Net cash provided by financing activities		4,000,529			10,001,932			61,597,374

Increase (decrease) in cash and cash equivalents		(2,105,741	)		(1,874,803	)		84,001
Cash and cash equivalents-beginning of period		2,189,742			4,064,545			—

Cash and cash equivalents-end of period	$	84,001		$	2,189,742		$	84,001

Supplemental disclosure of noncash activities:
Issuance of warrant and related discount on notes payable — affiliate	$	1,554,124		$	6,948,723		$	8,502,847

Interest on convertible debt converted to notes payable — affiliate	$	—		$	—		$	992,722

Interest on debt converted to notes payable — affiliate	$	1,397		$	—		$	1,397

Conversion of notes to preferred stock Series A — affiliate	$	—		$	—		$	25,517,722

Accrued compensation converted to notes payable	$	—		$	—		$	100,000

Equipment acquired under capital lease	$	—		$	—		$	—

Stock issuance for license acquisition	$	—		$	—		$	1,000

Supplemental disclosure of cash flow information:
Interest paid	$	—		$	—		$	7,856

Taxes paid (refunded)	$	(548	)	$	(2,834	)	$	36,067

See accompanying notes

F-5

VIA PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS

1. ORGANIZATION

Overview — VIA Pharmaceuticals, Inc. (“VIA,” the “Company,” “we,” “our,” or “us”), incorporated in Delaware in June 2004 and headquartered in San Francisco, California, is a development stage biotechnology company focused on the development of compounds for the treatment of cardiovascular and metabolic disease. The Company is building a pipeline of small molecule drugs that target the underlying causes of cardiovascular and metabolic disease, including vascular inflammation, high cholesterol, high triglycerides and insulin sensitization/diabetes. During 2005, the Company in-licensed a small molecule compound, VIA-2291, which targets an unmet medical need of reducing atherosclerotic plaque inflammation, an underlying cause of atherosclerosis and its complications, including heart attack and stroke. Atherosclerosis, depending on its severity and the location of the artery it affects, may result in major adverse cardiovascular events (“MACE”), such as heart attack and stroke. During 2006, the Company initiated two Phase 2 clinical trials of VIA-2291 in patients undergoing a carotid endarterectomy (“CEA”), and in patients at risk for acute coronary syndrome (“ACS”). During 2007, the Company initiated a third Phase 2 clinical trial where ACS patients undergo Positron Emission Tomography with flurodeoxyglucose tracer (“FDG-PET”), an experimental non-invasive imaging technique to measure the effect of treatment of VIA-2291 on uptake of FDG into the vascular wall. Effective during the first quarter of 2009, the Company licensed from Hoffman-LaRoche Inc. and Hoffmann-LaRoche Ltd. (collectively “Roche”) the exclusive worldwide rights to two sets of compounds. The first license is for Roche’s thyroid hormone receptor beta agonist, a clinically ready candidate for the control of cholesterol, triglyceride levels and potential in insulin sensitization/diabetes. The second license is for multiple compounds from Roche’s preclinical diacylglycerol acyl transferase 1 metabolic disorders program.

Through December 31, 2010, the Company has been primarily engaged in developing initial procedures and product technology, screening and in-licensing of target compounds, clinical trial activity, and raising capital. To fund operations, VIA has been raising cash through debt, a merger and equity financings. The Company is organized and operates as one operating segment.

On March 21, 2006, the Company formed VIA Pharma UK Limited, a private corporation, in the United Kingdom to enable clinical trial activities in Europe. VIA Pharma UK Limited did not engage in operations from June 14, 2004 (date of inception) to December 31, 2010. The Company has a wholly-owned subsidiary Vascular Genetics Inc. (“VGI”) that was involved in Corautus clinical trials. VGI has not been active since the Corautus clinical trials ceased in 2006.

Merger — On June 5, 2007, Corautus completed a merger (the “Merger”) with privately-held VIA Pharmaceuticals, Inc. pursuant to the Agreement and Plan of Merger and Reorganization (the “Merger Agreement”), dated February 7, 2007, by and among Corautus, Resurgens Merger Corp., a Delaware corporation and a wholly owned subsidiary of Corautus (“Resurgens”), and privately-held VIA Pharmaceuticals, Inc. Pursuant to the Merger Agreement, Resurgens merged with and into privately-held VIA Pharmaceuticals, Inc., which continued as the surviving company as a wholly-owned subsidiary of Corautus. Immediately following the effectiveness of the Merger on June 5, 2007, privately-held VIA Pharmaceuticals, Inc. merged (the “Parent-Subsidiary Merger”) with and into Corautus, pursuant to which Corautus continued as the surviving corporation. Immediately following the Parent-Subsidiary Merger, Corautus changed its corporate name from “Corautus Genetics Inc.” to “VIA Pharmaceuticals, Inc.” Unless otherwise specified, as used throughout these financial statements, the “Company,” “we,” “us,” and “our” refers to the business of the combined company after the merger (the “Merger”) with Corautus Genetics Inc. (“Corautus”) on June 5, 2007 and the business of privately-held VIA Pharmaceuticals, Inc. prior to the Merger. Unless specifically noted otherwise, as used throughout these financial statements, “Corautus Genetics Inc.” or “Corautus” refers to the business of Corautus prior to the Merger.

Going Concern Uncertainty — The Company has incurred losses since inception as it has devoted substantially all of its resources to research and development, including early-stage clinical trials. As of December 31, 2010, the Company’s accumulated deficit was approximately $91.2 million. The Company had $84,001 in cash at December 31, 2010. In connection with the loan amendments discussed below, the Company borrowed an additional $500,000 on January 14, 2011 and $1,498,603 on March 24, 2011. Management does not believe that existing cash resources will be sufficient to enable the Company to meet its ongoing working capital requirements for the next twelve months and the Company will need to raise substantial additional funding in the near term to repay amounts owed under the 2009 Loan Agreement, the 2010 Loan Agreement, and the 2010 Loan Amendment (which loan agreements and amendments are described below), and to meet its ongoing working capital requirements. Moreover, in connection with these loans, the Company must also satisfy certain conditions and comply with covenants, including covenants relating to the Company’s ability to incur additional indebtedness, make future acquisitions, consummate asset dispositions, grant liens and pledge assets, pay dividends or make other distributions, incur capital expenditures and make restricted payments. These restrictions may limit the Company’s ability to pursue its business strategies and obtain additional funds. As a result, there are substantial doubts that the Company will be able to continue as a going concern and, therefore, may be unable to realize its assets and discharge its liabilities in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or to amounts and classifications of liabilities that may be necessary should the Company be unable to continue as a going concern.

•

terminate or delay clinical trials or studies of VIA-3196 and the DGAT1 compounds;

•

terminate or delay the preclinical development of one or more of its other preclinical candidates;

•

curtail its licensing activities that are designed to identify molecular targets and small molecules for treating cardiovascular disease;

	•		relinquish rights to product candidates, development programs, or discovery development programs that it may otherwise seek to develop or commercialize on its own; and

	•		delay, reduce the scope of, or eliminate one or more of its research and development programs, or ultimately cease operations.

F-6

As more fully described in Note 6 in the notes to the financial statements, in March 2009, the Company entered into a Note and Warrant Purchase Agreement (the “2009 Loan Agreement”) with its principal stockholder and one of its affiliates (the “Lenders”) whereby the Lenders agreed to lend to the Company in the aggregate up to $10.0 million. The Company secured the 2009 Loan Agreement with all of its assets, including the Company’s intellectual property. On March 12, 2009, the Company borrowed the initial $2.0 million available under the 2009 Loan Agreement. Subsequently, the Company made $2.0 million borrowings under the 2009 Loan Agreement on May 19, 2009, June 29, 2009, August 14, 2009, respectively, and the Company borrowed the final $2.0 million available under the 2009 Loan Agreement on September 11, 2009. According to the terms of the original Loan 2009 Agreement, the aggregate loan amount was due to the Lenders on September 14, 2009. The parties agreed to extend the repayment terms on various dates in 2009, and on February 26, 2010, the Lenders agreed to modify the 2009 Loan Agreement to further extend the repayment terms to April 1, 2010. The Lenders did not modify the interest rate or offer any concessions in the amendments to the 2009 Loan Agreement. The Company failed to repay the debt and all related interest to the Lenders due on April 1, 2010. As a result, the Company is now accruing interest at the higher rate of 18% per annum beginning April 1, 2010.

As more fully described in Note 6 in the notes to the financial statements, in March 2010, the Company entered into a second Note and Warrant Purchase Agreement (the “2010 Loan Agreement”) with the Lenders whereby the Lenders agreed to lend to the Company in the aggregate up to $3.0 million, pursuant to the terms of promissory notes (collectively, the “2010 Loan Agreement notes”) issued under the 2010 Loan Agreement. The Company secured the original 2010 Loan Agreement with all of its assets, including the Company’s intellectual property. On March 29, 2010, the Company borrowed the initial $1.25 million available under the 2010 Loan Agreement. Subsequently, the Company made $100,000, $200,000, $300,000, $100,000, and $750,000 borrowings under the 2010 Loan Agreement on May 26, 2010, June 4, 2010, June 29, 2010, July 15, 2010, July 27, 2010, respectively, and the Company borrowed the final $300,000 available under the 2010 Loan Agreement on September 28, 2010. The original 2010 Loan Agreement notes are secured by a lien on all of the assets of the Company. Amounts borrowed under the original 2010 Loan Agreement notes accrue interest at the rate of fifteen percent (15%) per annum, which increases to eighteen percent (18%) per annum following an event of default. Unless earlier paid in accordance with the terms of the original 2010 Loan Agreement notes, all unpaid principal and accrued interest shall become fully due and payable on the earlier to occur of (i) December 31, 2010, (ii) the closing of a debt, equity or combined debt/equity financing resulting in gross proceeds or available credit to the Company of not less than $20,000,000, and (iii) the closing of a transaction in which the Company sells, conveys, licenses or otherwise disposes of a majority of its assets or is acquired by way of a merger, consolidation, reorganization or other transaction or series of transactions pursuant to which stockholders of the Company prior to such acquisition own less than 50% of the voting interests in the surviving or resulting entity. The Company failed to repay the debt and all related interest to the Lenders due on December 31, 2010. On January 14, 2011, the Company entered into an amendment to the 2010 Loan Agreement and 2010 Loan Amendment to extend the maturity date under the 2010 Loan Agreement and 2010 Loan Amendment from December 31, 2010 to June 30, 2011 and on March 24, 2011, the Company entered into a second amendment to further extend the maturity date to September 30, 2011.

F-7

As more fully described in Note 6 in the notes to the financial statements, on October 29, 2010, the Company executed a secured promissory note (the “Bridge Note”) in favor of Bay City Capital Fund IV, L.P., a Delaware limited partnership in the principal sum of $200,000 for general corporate purposes. By the terms of the Bridge Note, upon execution of the 2010 Loan Amendment (as defined below) the unpaid principal amount and accrued and unpaid interest under the Bridge Note automatically converted into obligations of the Company under the 2010 Loan Amendment as advances under the 2010 Loan Amendment. The Company accrued $1,397 in unpaid interest for the period October 29, 2010 to November 15, 2010, which is included in the Company’s statement of operations.

As more fully described in Note 6 in the notes to the financial statements, on November 15, 2010, the Company entered into an amendment to the 2010 Loan Agreement (“2010 Loan Amendment”) to enable the Company to borrow up to an additional aggregate principal amount of $3,000,000, pursuant to the terms of amended and restated promissory notes issued under the 2010 Loan Amendment. Subject to the Lenders’ approval, as of December 31, 2010, the Company may borrow in the aggregate up to an additional $1,998,603 at subsequent closings pursuant to the terms of the 2010 Loan Amendment notes. On November 15, 2010, the $201,397 outstanding principal and unpaid interest on the Bridge Note were automatically converted into obligations of the Company under the 2010 Loan Amendment as advances. During the three months ended December 31, 2010, the Company borrowed an additional $800,000 on November 22, 2010. The original 2010 Loan Amendment notes are secured by a lien on all of the assets of the Company. Amounts borrowed under the 2010 Loan Amendment notes accrue interest at the rate of fifteen percent (15%) per annum, which increases to eighteen percent (18%) per annum following an event of default. Unless earlier paid in accordance with the terms of the original 2010 Loan Amendment notes, all unpaid principal and accrued interest shall become fully due and payable on the earlier to occur of (i) December 31, 2010, (ii) the closing of a debt, equity or combined debt/equity financing resulting in gross proceeds or available credit to the Company of not less than $20,000,000, and (iii) the closing of a transaction in which the Company sells, conveys, licenses or otherwise disposes of a majority of its assets or is acquired by way of a merger, consolidation, reorganization or other transaction or series of transactions pursuant to which stockholders of the Company prior to such acquisition own less than 50% of the voting interests in the surviving or resulting entity. The Company failed to repay the debt and all related interest to the Lenders due on December 31, 2010. On January 14, 2011, the Company entered into an amendment to the 2010 Loan Agreement and 2010 Loan Amendment to extend the maturity date under the 2010 Loan Agreement and 2010 Loan Amendment from December 31, 2010 to June 30, 2011 and on March 24, 2011, the Company entered into a second amendment to further extend the maturity date to September 30, 2011.

F-8

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates — The preparation of the financial statements in conformity with GAAP requires management to make judgments, assumptions and estimates that affect the amounts reported in our financial statements and accompanying notes. Actual results could differ materially from those estimates.

Cash and Cash Equivalents — Cash equivalents are included with cash and consist of short term, highly liquid investments with original maturities of three months or less.

Property and Equipment — Property and equipment are stated at cost, less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, ranging from three to five years. Computers, lab and office equipment have estimated useful lives of three years; office furniture and equipment have estimated useful lives of five years; and leasehold improvements are amortized using the straight-line method over the shorter of the useful lives or the lease term.

Long-Lived Assets — Long-lived assets include property and equipment and certain purchased licensed patent rights that are included in other assets in the balance sheet. The Company reviews long-lived assets, including property and equipment, for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. As more fully discussed in Note 12 in the notes to the financial statements, on March 31, 2010, the Company wrote-off $110,000 of certain computer equipment and leasehold improvements associated with the March 2010 restructuring resulting in $65,000 in losses on the disposal of property and equipment, which are included in restructuring costs in the Statement of Operations. Through December 31, 2010, there have been no other such impairments.

Incentive Award Accruals — The Company accrues for liabilities under discretionary employee and executive incentive award plans. These estimated liabilities are based upon progress against corporate objectives approved by the Board of Directors, compensation levels of eligible individuals, and target bonus percentage level of employees. The Board of Directors and the Compensation Committee of the Board of Directors review and evaluate the performance against these objectives and ultimately determine what discretionary payments are made. At December 31, 2010 and December 31, 2009, the Company has accrued $767,185 and $1,308,043, respectively, for liabilities associated with these employee and executive incentive award plans. As described in Note 12 in the notes to the financial statements, in March 2010, the Company reversed approximately $531,000 of previously recorded incentive award accruals related to the restructuring of the Company and reduction in workforce.

Research and Development Expenses — Research and development (“R&D”) expenses are charged to operations as incurred in accordance with accounting guidance for the accounting for research and development costs. R&D expenses include salaries, contractor and consultant fees; external clinical trial expenses performed by contract research organizations (“CROs”) and contracted investigators, licensing fees and facility allocations. In addition, the Company funds R&D at third-party research institutions under agreements that are generally cancelable at the Company’s option. Research costs typically consist of applied research, preclinical and toxicology work. Pharmaceutical manufacturing development costs consist of product formulation, chemical analysis and the transfer and scale-up of manufacturing at our contract manufacturers. Clinical costs include the costs of Phase 2 clinical trials. These costs, along with the manufacturing scale-up costs, are a significant component of R&D expenses.

The Company accrues costs for clinical trial activities performed by CROs and other third parties based upon the estimated amount of work completed on each study as provided by the vendors. These estimates may or may not match the actual services performed by the organizations as determined by patient enrollment levels and related activities. The Company monitors patient enrollment levels and related activities using available information; however, if the Company underestimates activity levels associated with various studies at a given point in time, the Company could record significant R&D expenses in future periods when the actual activity level becomes known. The Company charges all such costs to R&D expenses.

F-9

Fair Value of Financial and Derivative Instruments — The Company values its financial instruments in accordance with new accounting guidance on fair value measurements which, for certain financial assets and liabilities, requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

•

Level 1 — Quoted prices in active markets for identical assets or liabilities.

•

Level 2 — Inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

•

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

In March 2009, the Company entered into the 2009 Loan Agreement with the Lenders, as more fully described in Note 6 in the notes to the financial statements. At the date of each borrowing under the 2009 Loan Agreement, the Company valued and reported the freestanding warrants issued in connection with the financing of notes payable to affiliates as paid-in-capital in the Stockholders’ Equity (Deficit) section of the Company’s balance sheets in accordance with the following accounting guidance:

•

Derivative financial instruments indexed to and potentially settled in a company’s own stock;

•

Accounting for derivative instruments and hedging activities; and

•

Accounting for convertible debt and debt issued with stock purchase warrants.

The Company made separate $2.0 million borrowings under the $10.0 million 2009 Loan Agreement on March 12, 2009, May 19, 2009, June 29, 2009, August 14, 2009, and a final borrowing on September 11, 2009, with warrants vesting at the time of each draw as described more fully in Note 6 in the notes to the financial statements. The Company estimated the fair value of the warrants issued on the date of each draw using the Black-Scholes pricing model methodology. This methodology requires significant judgments in the estimation of fair value based on certain assumptions, including the market value and the estimated volatility of the Company’s common stock, a risk-free interest rate applicable to the facts and circumstances of the transaction, and the estimated life of the warrant. The freestanding warrant is classified within Level 3 of the fair value hierarchy.

In March 2010, the Company entered into the 2010 Loan Agreement with the Lenders, as more fully described in Note 6 in the notes to the financial statements, whereby the Lenders agreed to lend to the Company in the aggregate up to $3.0 million. At the date of each borrowing under the 2010 Loan Agreement, the Company valued and reported the freestanding warrants issued in connection with the financing of notes payable to affiliates as paid-in-capital in the Stockholders’ Equity (Deficit) section of the Company’s balance sheets in accordance with the following accounting guidance:

•

Derivative financial instruments indexed to and potentially settled in a company’s own stock;

•

Accounting for derivative instruments and hedging activities; and

•

Accounting for convertible debt and debt issued with stock purchase warrants.

The Company made separate borrowings of $1.25 million on March 29, 2010, $100,000 on May 26, 2010, $200,000 on June 4, 2010, $300,000 on June 29, 2010, $100,000 on July 15, 2010, $750,000 on July 27, 2010, and a final $300,000 borrowing on September 28, 2010 under the 2010 Loan Agreement, with warrants vesting at the time of the draw as described more fully in Note 6 in the notes to the financial statements. The Company estimated the fair value of the warrants issued on the date of each draw using the Black-Scholes pricing model methodology. This methodology requires significant judgments in the estimation of fair value based on certain assumptions, including the market value and the estimated volatility of the Company’s common stock, a risk-free interest rate applicable to the facts and circumstances of the transaction, and the estimated life of the warrant. The freestanding warrant is classified within Level 3 of the fair value hierarchy.

F-10

On November 15, 2010, the Company entered into the 2010 Loan Amendment to enable the Company to borrow up to an additional aggregate principal amount of $3.0 million, pursuant to the terms of the amended and restated promissory notes issued under the 2010 Loan Amendment. At the date of each borrowing under the 2010 Loan Amendment, the Company valued and reported the freestanding warrants issued in connection with the financing of notes payable to affiliates as paid-in-capital in the Stockholders’ Equity (Deficit) section of the Company’s balance sheets in accordance with the following accounting guidance:

•

Derivative financial instruments indexed to and potentially settled in a company’s own stock;

•

Accounting for derivative instruments and hedging activities; and

•

Accounting for convertible debt and debt issued with stock purchase warrants.

The Company made separate borrowings of $201,397 on November 15, 2010 and $800,000 on November 22, 2010, under the 2010 Loan Amendment, with warrants vesting at the time of the draw as described more fully in Note 6 in the notes to the financial statements. The Company estimated the fair value of the warrants issued on the date of each draw using the Black-Scholes pricing model methodology. This methodology requires significant judgments in the estimation of fair value based on certain assumptions, including the market value and the estimated volatility of the Company’s common stock, a risk-free interest rate applicable to the facts and circumstances of the transaction, and the estimated life of the warrant. The freestanding warrant is classified within Level 3 of the fair value hierarchy.

Changes in Level 3 Recurring Fair Value Measurements — The following is a rollforward of balance sheet amounts as of December 31, 2010 (including the change in fair value when applicable), for financial instruments classified as Level 3. The Company has no financial instruments classified as Level 1 and Level 2 as of December 31, 2010. When a determination is made to classify a financial instrument within Level 3, the determination is based upon the significance of the unobservable parameters to the overall fair value measurement. However, Level 3 financial instruments typically include, in addition to the unobservable components, observable components (that is, components that are actively quoted and can be validated to external sources). Accordingly, the gains and losses in the table below include changes in fair value (when applicable) due in part to observable factors that are part of the methodology.


	As of
	December 31,
	2010
Fair value — December 31, 2009	$	6,948,723
Warrants (1)		1,554,124
Change in unrealized gains related to financial instruments at December 31, 2010 (2)		—

Fair value — December 31, 2010	$	8,502,847

Total unrealized gains (losses) (2)	$	—


(1)		The Warrants are included in additional paid in capital in the Stockholders’ Equity section of the Balance Sheet.

(2)		The Warrants are not revalued at the reporting dates and do not result in gains and losses.

Income Taxes — The Company accounts for income taxes using an asset and liability approach. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and operating loss and tax credit carryforwards measured by applying currently enacted tax laws. A valuation allowance is provided to reduce net deferred tax assets to an amount that is more likely than not to be realized. The amount of the valuation allowance is based on the Company’s best estimate of the recoverability of its deferred tax assets. On January 1, 2007, the Company adopted new accounting guidance for the accounting for uncertainty in income tax positions. This guidance seeks to reduce the diversity in practice associated with certain aspects of measurement and recognition in accounting for income taxes and provide guidance on de-recognition, classification, interest and penalties, and accounting in interim periods and requires expanded disclosure with respect to the uncertainty in income taxes. The accounting guidance requires that the Company recognize in its financial statements the impact of a tax position if that position is more likely than not to be sustained on audit, based on the technical merits of the position.

Segment Reporting — Accounting guidance on disclosures about segments of an enterprise and related information requires the use of a management approach in identifying segments of an enterprise. Management has determined that the Company operates in one business segment — scientific research and development activities.

F-11

Earnings (Loss) Per Share of Common Stock — Basic earnings (loss) per share of common stock is computed by dividing net income (loss) by the weighted-average number of common shares outstanding for the period. Diluted earnings (loss) per share of common stock is computed by dividing net income (loss) by the weighted-average number of shares of common stock and potentially dilutive shares of common stock equivalents outstanding during the period.

The following table presents the calculation of basic and diluted net loss per common share for the years ended December 31, 2010 and 2009:


	Years Ended
	December 31,			December 31,
	2010			2009
Net loss	$	(9,601,315	)	$	(20,978,324	)

Basic and diluted net loss per share: Weighted-average shares of common stock outstanding		20,574,957			20,634,380
Less: Weighted-average shares of common stock subject to repurchase		(176,485	)		(694,532	)

Weighted-average shares used in computing basic net loss per share		20,398,472			19,939,848
Dilutive effect of common share equivalents		—			—

Weighted-average shares used in computing diluted net loss per share		20,398,472			19,939,848

Basic and diluted net loss per share	$	(0.47	)	$	(1.05	)

Diluted earnings (loss) per share of common stock reflects the potential dilution that could occur if options or warrants to purchase shares of common stock were exercised, or shares of preferred stock were converted into shares of common stock. The following table details potentially dilutive shares of common stock equivalents that have been excluded from diluted net loss per share for the years ended December 31, 2010 and 2009 because their inclusion would be anti-dilutive:


	As of
	December 31,		December 31,
	2010		2009
Common stock equivalents (in shares):
Shares of common stock subject to outstanding options		1,847,588		2,740,686
Shares of common stock subject to outstanding warrants		143,297,261		83,403,348
Shares of common stock subject to conversion from series C preferred stock		13,986,013		—

Total shares of common stock equivalents		159,130,862		86,144,034

As described in Note 7 in the notes to the financial statements, the Series C Preferred Stock became convertible on June 13, 2010 and shares are convertible upon delivery of notice of conversion. The number of shares of common stock into which Series C Preferred Stock will be converted is based in part on the “fair market value” (as defined in the Amended and Restated Certificate of Designation of Preferences and Rights of Series C Preferred Stock of the Company) of the Company’s common stock on June 13, 2010. Accordingly, we have not included any Series C Preferred Stock in the table above for the years ended December 31, 2009. As of December 31, 2010, the Series C Preferred Stock is convertible into 13,986,013 shares of the Company’s Common Stock. As of December 31, 2010, the Series C Preferred Stock stockholder has not initiated the conversion of the Series C Preferred Stock into the Company’s Common Stock.

Comprehensive Income (Loss) — Comprehensive income (loss) generally represents all changes in stockholders’ equity except those resulting from investments or contributions by stockholders. Amounts reported in other comprehensive income (loss) include derivative financial instruments designated and effective as hedges of underlying foreign currency denominated transactions.

The following table presents the calculation of total comprehensive income (loss) for the years ended December 31, 2010 and 2009:


	Years Ended
	December 31,			December 31,
	2010			2009
Net loss	$	(9,601,315	)	$	(20,978,324	)
Change in unrealized gain on foreign currency cash flow hedges		—			—

Total comprehensive loss	$	(9,601,315	)	$	(20,978,324	)

F-12

Derivative Instruments — From time to time, the Company uses derivatives to manage its market exposure to fluctuations in foreign currencies. The Company records these derivatives on the balance sheet at fair value in accordance with accounting guidance for derivatives. To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge and the hedges must be highly effective in offsetting changes to future cash flows on hedged transactions. For derivative instruments that are designated and qualify as a cash flow hedge (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income (loss) and in the Company’s statement of operations in the same period or periods during which the hedged transaction affects earnings. The gain or loss on the derivative instruments in excess of the cumulative change in the present value of future cash flows of the hedged transaction, if any, is recognized in the Company’s statement of operations during the period of change. The Company does not use derivative instruments for speculative purposes.

As of December 31, 2010 and 2009, the Company does not have any outstanding forward foreign exchange contracts. All foreign currency purchased under forward foreign exchange contracts has been expended in the purchase of clinical trial services and, as a result, the Company does not have any outstanding unrealized gains or losses on forward foreign exchange contracts and also does not have any related accumulated other comprehensive income on the Company’s December 31, 2010 and 2009 Balance Sheets.

New Accounting Pronouncements — In October 2009, the FASB issued ASU No. 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements (a consensus of the FASB Emerging Issues Task Force), which amends ASC 605-25, Revenue Recognition: Multiple-Element Arrangements. ASU No. 2009-13 addresses how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting and how to allocate consideration to each unit of accounting in the arrangement. This ASU replaces all references to fair value as the measurement criteria with the term selling price and establishes a hierarchy for determining the selling price of a deliverable. ASU No. 2009-13 also eliminates the use of the residual value method for determining the allocation of arrangement consideration. Additionally, ASU No. 2009-13 requires expanded disclosures. This ASU will become effective for revenue arrangements entered into or materially modified after the fiscal year 2010. Earlier application is permitted with required transition disclosures based on the period of adoption. The Company is currently evaluating the application date and does not believe this standard will have a material impact on our financial statements.

On April 29, 2010, the FASB issued ASU 2010-17, which establishes a revenue recognition model for contingent consideration that is payable upon the achievement of an uncertain future event, referred to as a milestone. The scope of the ASU is limited to research or development arrangements and requires an entity to record the milestone payment in its entirety in the period received if the milestone meets all the necessary criteria to be considered substantive. However, entities would not be precluded from making an accounting policy election to apply another appropriate accounting policy that results in the deferral of some portion of the arrangement consideration. The ASU is effective for fiscal years (and interim periods within those fiscal years) beginning on or after June 15, 2010. Early application is permitted. Entities can apply this guidance prospectively to milestones achieved after adoption. However, retrospective application to all prior periods is also permitted. The Company does not believe this standard will have in immediate impact on our financial statements.

3. STOCK-BASED COMPENSATION

F-13

The assumptions used to value option and restricted stock award grants for the years ended December 31, 2010 and 2009 are as follows:


	Years Ended
	December 31,			December 31,
	2010			2009
Expected life from grant date		6.59 – 6.96			6.08 – 7.96
Expected volatility		115% – 116	%		105% – 114	%
Risk free interest rate		2.56% – 2.70	%		2.89% – 3.07	%
Dividend yield		—			—


					Period from
					June 14, 2004
	Years Ended				(Date of Inception) to
	December 31,		December 31,		December 31,
	2010		2009		2010
Research and development expense	$	163,612	$	260,226	$	1,243,038
General and administrative expense		541,606		941,540		3,346,468

Total	$	705,218	$	1,201,766	$	4,589,506

F-14

The following table summarizes stock-based compensation expense related to employee restricted stock awards for the years ended December 31, 2010 and 2009, and for the period from June 14, 2004 (date of inception) to December 31, 2010, which was included in the statements of operations in the following captions:


					Period from
					June 14, 2004
	Years Ended				(Date of Inception) to
	December 31,		December 31,		December 31,
	2010		2009		2010
Research and development expense	$	13,675	$	15,734	$	30,043
General and administrative expense		28,897		47,655		78,445

Total	$	42,572	$	63,389	$	108,488

All of the restricted stock awards that have been granted became fully vested in 2010.

4. RESEARCH AND DEVELOPMENT

The Company’s research and development expenses include expenses related to Phase 2 clinical development of the Company’s lead compound VIA-2291, regulatory activities, and preclinical development costs for additional assets in the Company’s product pipeline. R&D expenses include salaries, contractor and consultant fees, external clinical trial expenses performed by CROs and contracted investigators, licensing fees and facility allocations. In addition, the Company funds R&D at third-party research institutions under agreements that are generally cancelable at the Company’s option. Research costs typically consist of applied research, preclinical and toxicology work. Pharmaceutical manufacturing development costs consist of product formulation, chemical analysis and the transfer and scale-up of manufacturing at our contract manufacturers. Clinical costs include the costs of Phase 2 clinical trials. These costs, along with the manufacturing scale-up costs, are a significant component of research and development expenses.


					Period from
					June 14, 2004
	Years Ended				(Date of Inception) to
	December 31,		December 31,		December 31,
	2010		2009		2010
Externally generated research and development expense	$	361,725	$	3,639,215	$	29,066,916
Internally generated research and development expense		1,455,737		2,416,000		13,656,724

Total	$	1,817,462	$	6,055,215	$	42,723,640

Externally generated research and development expenses consist primarily of the following:


						Period from
						June 14, 2004
	Years Ended					(Date of Inception) to
	December 31,			December 31,		December 31,
	2010			2009		2010
Externally generated research and development expense
In-licensing expenses	$	—		$	400,000	$	5,270,000
CRO and investigator expenses		21,068			1,090,115		10,770,407
Consulting expenses		181,088			1,120,131		6,599,757
Qualifying therapeutic discovery grant		(138,640	)		—		(138,640	)
Other		298,209			1,028,969		6,565,392

Total	$	361,725		$	3,639,215	$	29,066,916

F-15

Internally generated research and development expenses consist primarily of the following:


						Period from
						June 14, 2004
	Years Ended					(Date of Inception) to
	December 31,			December 31,		December 31,
	2010			2009		2010
Internally generated research and development expense
Personnel and related expenses	$	1,051,915		$	1,693,205	$	9,559,074
Stock-based compensation expense		177,287			275,961		1,273,081
Travel and entertainment expense		63,737			170,249		1,219,356
Qualifying therapeutic discovery grant		(105,839	)		—		(105,839	)
Other		268,637			276,585		1,711,052

Total	$	1,455,737		$	2,416,000	$	13,656,724

5. PROPERTY AND EQUIPMENT

Property and equipment — net, at December 31, 2010 and 2009 consisted of the following:


	Years Ended
	December 31,			December 31,
	2010			2009
Property and equipment at cost:
Computer equipment and software	$	281,822		$	308,467
Furniture and fixtures		113,363			113,363
Office equipment		21,048			38,282
Leasehold Improvements		24,794			129,740

Total property and equipment at cost		441,027			589,852
Less: accumulated depreciation		(417,670	)		(419,235	)

Total	$	23,357		$	170,617

Depreciation expense on property and equipment was $74,882 and $136,360 in the years ended December 31, 2010 and 2009, respectively, and $578,755 for the period from June 14, 2004 (date of inception) to December 31, 2010, and was included in the statements of operations as follows:


					Period from
					June 14, 2004
	Years Ended				(Date of Inception) to
	December 31,		December 31,		December 31,
	2010		2009		2010
Research and development expense	$	12,980	$	22,292	$	144,908
General and administrative expense		61,902		114,068		433,847

Total	$	74,882	$	136,360	$	578,755

6. NOTES PAYABLE — AFFILIATES

Notes Payable — Affiliates consisted of the following:


	December 31,		December 31,
	2010		2009
Issued March 12, 2009 — 18% — due April 1, 2010 (2009 Loan Agreement)	$	10,000,000	$	10,000,000
Less: Unamortized discount		—		(4,374	)

Balance	$	10,000,000	$	9,995,626

Issued March 26, 2010 — 15% — due December 31, 2010 (2010 Loan Agreement)	$	3,000,000	$	—
Less: Unamortized discount		—		—

Balance	$	3,000,000	$	—

Issued November 15, 2010 — 15% — due December 31, 2010 (2010 Loan Amendment)	$	1,001,397	$	—
Less: Unamortized discount		—		—

Balance	$	1,001,397	$	—

Total	$	14,001,397	$	9,995,626

F-16

Notes Payable Issued March 12, 2009 — due April 1, 2010 (2009 Loan Agreement)

In March 2009, the Company entered into the 2009 Loan Agreement whereby the Lenders agreed to lend to the Company in the aggregate up to $10.0 million, pursuant to the terms of promissory notes (collectively, the “2009 Notes”) issued under the Loan Agreement.

On March 12, 2009, the Company borrowed an initial amount of $2.0 million under the 2009 Loan Agreement. During the three months ended June 30, 2009, the Company borrowed $2.0 million on May 19, 2009, and another $2.0 million on June 29, 2009. During the three months ended September 30, 2009, the Company borrowed $2.0 million on August 14, 2009, and borrowed the final $2.0 million on September 11, 2009. The 2009 Notes are secured by a first priority lien on all of the assets of the Company, including the Company’s intellectual property. Amounts borrowed under the 2009 Notes accrue interest at the rate of 15% per annum, which increases to 18% per annum following an event of default. Unless earlier paid in accordance with the terms of the 2009 Notes, all unpaid principal and accrued interest became fully due and payable on April 1, 2010. While the Lenders have not declared an event of default, the Company failed to repay the aggregate loan amount and all related interest to the Lenders due on April 1, 2010. As a result, the Company is now accruing interest at the higher 18% per annum beginning April 1, 2010. On September 11, 2009, the Lenders agreed to extend the repayment terms from September 14, 2009 to October 31, 2009; on October 30, 2009, the Lenders agreed to further extend the repayment terms from October 31, 2009 to December 31, 2009; on December 22, 2009, the Lenders agreed to again further extend the repayment terms from December 31, 2009 to February 28, 2010; and on February 26, 2010, the Lenders agreed to further extend the repayment terms from February 28, 2010 to April 1, 2010. There were no other significant changes to any of the terms and conditions of the original 2009 Notes in the September 11, 2009, October 30, 2009, December 22, 2009 or February 26, 2010 amendments and the Lenders did not give any loan concessions. As a result of the loan amendments, and because the Company did not repay the debt on April 1, 2010, total interest expense on the note and the note discount amortization increased $2,135,343 from anticipated interest expense based on the original due date of the 2009 Notes of $7,328,449 to actual interest after the loan amendments of $9,463,792 from the inception of the 2009 Notes to December 31, 2010.

Pursuant to the terms of the Loan Agreement, the Company issued to the Lenders warrants (the “2009 Warrants”) to purchase an aggregate of up to 83,333,333 shares (the “2009 Warrant Shares”) of common stock at $0.12 per share as more fully described below. The number of 2009 Warrant Shares is equal to the $10.0 million maximum aggregate principal amount that may be borrowed under the 2009 Loan Agreement, divided by the $0.12 per share exercise price of the 2009 Warrants. The 2009 Warrant Shares vest based on the amount of borrowings under the 2009 Notes and based on the passage of time. For each $2.0 million borrowing, 8,333,333 2009 Warrant Shares vested and became exercisable immediately on the date of grant, and 8,333,333 vested and became exercisable 45 days thereafter as the Company meets certain conditions provided for in the 2009 Warrants, including that the Company did not complete a $20.0 million financing, as defined in the 2009 Loan Agreement, within 45 days of the borrowing. Based on the aggregate $10.0 million of borrowings at December 31, 2010, all 83,333,333 2009 Warrant Shares are vested and are exercisable at December 31, 2010. The 2009 Warrant Shares are exercisable at any time until March 12, 2014.

On March 12, 2009, the fair value of the note and of the 16,666,666 2009 Warrant Shares related to the $2.0 million borrowed under the 2009 Loan Agreement was $2.0 million and approximately $1.6 million, respectively. This resulted in the Company allocating the relative fair value of approximately $1.1 million of the $2.0 million in proceeds to the note and approximately $900,000 to the 2009 Warrants. The Company has recorded the $900,000 freestanding 2009 Warrants as permanent equity under accounting guidance for accounting for derivative financial instruments indexed to, and potentially settled in, a company’s own stock, and accounting guidance for determining whether an instrument (or embedded feature) is indexed to an entity’s own stock. The $900,000 discount on the note payable — affiliate is netted against the $2.0 million note and is being amortized to interest expense using the interest method from March 12, 2009 through April 1, 2010, the maturity date of the note payable. At December 31, 2010, the balance of notes payable — affiliate net of discount was $2,000,000 and the unamortized discount was $0. At December 31, 2009, the balance of notes payable — affiliate net of discount was $1,999,964 and the unamortized discount was $36.

Interest expenses on the $2.0 million March 12, 2009 borrowing for the years ended December 31, 2010 and 2009, and for the period from inception (June 14, 2004) to December 31, 2010 were included in the statement of operations as follows:


					Period from
					June 14, 2004
	Years Ended				(date of inception) to
	December 31,		December 31,		December 31,
March 12, 2009 Borrowing	2010		2009		2010
Interest expense	$	345,206	$	242,466	$	587,672
Discount amortization		36		900,008		900,044

Total	$	345,242	$	1,142,474	$	1,487,716

F-17

The Company estimated the fair value of the 2009 Warrants of approximately $1.6 million at March 12, 2009 using the Black-Scholes pricing model methodology with assumptions outlined below. The assumptions used to value the 2009 Warrants at March 12, 2009 (date of inception) are:


	March 12, 2009
Expected life from grant date — in years		5.0
Expected volatility		116.79	%
Risk free interest rate		2.10	%
Dividend yield		—

On May 19, 2009, the Company borrowed an additional $2.0 million under the 2009 Loan Agreement and the fair value of the note and of the 16,666,666 2009 Warrant Shares related was $2.0 million and approximately $6.6 million, respectively. This resulted in the Company allocating the relative fair value of approximately $500,000 of the $2.0 million in proceeds to the note and approximately $1.5 million to the 2009 Warrants. The Company has recorded the $1.5 million freestanding 2009 Warrants as permanent equity under accounting guidance for accounting for derivative financial instruments indexed to, and potentially settled in, a company’s own stock, and accounting guidance for determining whether an instrument (or embedded feature) is indexed to an entity’s own stock. The $1.5 million discount on the note payable — affiliate is netted against the $2.0 million note and is being amortized to interest expense using the interest method from May 19, 2009 through April 1, 2010, the maturity date of the note payable. At December 31, 2010, the balance of notes payable — affiliate net of discount was $2,000,000 and the unamortized discount was $0. At December 31, 2009, the balance of notes payable — affiliate net of discount was $1,999,904 and the unamortized discount was $96.

Interest expenses on the $2.0 million May 19, 2009 borrowing for the years ended December 31, 2010 and 2009, and for the period from inception (June 14, 2004) to December 31, 2010 were included in the statement of operations as follows:


					Period from
					June 14, 2004
	Years Ended				(date of inception) to
	December 31,		December 31,		December 31,
May 19, 2009 Borrowing	2010		2009		2010
Interest expense	$	345,206	$	186,575	$	531,781
Discount amortization		96		1,532,796		1,532,892

Total	$	345,302	$	1,719,371	$	2,064,673

The Company estimated the fair value of the 2009 Warrants of approximately $1.5 million at May 19, 2009 using the Black-Scholes pricing model methodology with assumptions outlined below. The assumptions used to value the 2009 Warrants at May 19, 2009 (date of inception) are:


	May 19, 2009
Expected life from grant date — in years		4.81
Expected volatility		108.63	%
Risk free interest rate		2.05	%
Dividend yield		—

On June 29, 2009, the Company borrowed an additional $2.0 million under the 2009 Loan Agreement and the fair value of the note and of the 16,666,666 2009 Warrant Shares related was $2.0 million and approximately $8.7 million, respectively. This resulted in the Company allocating the relative fair value of approximately $400,000 of the $2.0 million in proceeds to the note and approximately $1.6 million to the 2009 Warrants. The Company has recorded the $1.6 million freestanding 2009 Warrants as permanent equity under accounting guidance for accounting for derivative financial instruments indexed to, and potentially settled in, a company’s own stock, and accounting guidance for determining whether an instrument (or embedded feature) is indexed to an entity’s own stock. The $1.6 million discount on the note payable — affiliate is netted against the $2.0 million note and is being amortized to interest expense using the interest method from June 29, 2009 through April 1, 2010, the maturity date of the note payable. At December 31, 2010, the balance of notes payable — affiliate net of discount was $2,000,000 and the unamortized discount was $0. At December 31, 2009, the balance of notes payable — affiliate net of discount was $1,999,843 and the unamortized discount was $157.

F-18

Interest expenses on the $2.0 million June 29, 2009 borrowing for the years ended December 31, 2010 and 2009, and for the period from inception (June 14, 2004) to December 31, 2010 were included in the statement of operations as follows:


					Period from
					June 14, 2004
	Years Ended				(date of inception) to
	December 31,		December 31,		December 31,
June 29, 2009 Borrowing	2010		2009		2010
Interest expense	$	345,205	$	152,877	$	498,082
Discount amortization		157		1,625,778		1,625,935

Total	$	345,362	$	1,778,655	$	2,124,017

The Company estimated the fair value of the 2009 Warrants of approximately $1.6 million at June 29, 2009 using the Black-Scholes pricing model methodology with assumptions outlined below. The assumptions used to value the 2009 Warrants at June 29, 2009 (date of inception) are:


	June 29, 2009
Expected life from grant date — in years		4.7
Expected volatility		112.03	%
Risk free interest rate		2.40	%
Dividend yield		—

On August 14, 2009, the Company borrowed an additional $2.0 million under the 2009 Loan Agreement and the fair value of the note and of the 16,666,666 2009 Warrant Shares related was $2.0 million and approximately $4.4 million, respectively. This resulted in the Company allocating the relative fair value of approximately $600,000 of the $2.0 million in proceeds to the note and approximately $1.4 million to the 2009 Warrants. The Company has recorded the $1.4 million freestanding 2009 Warrants as permanent equity under accounting guidance for accounting for derivative financial instruments indexed to, and potentially settled in, a company’s own stock, and accounting guidance for determining whether an instrument (or embedded feature) is indexed to an entity’s own stock. The $1.4 million discount on the note payable — affiliate is netted against the $2.0 million note and is being amortized to interest expense using the interest method from August 14, 2009 through April 1, 2010, the maturity date of the note payable. At December 31, 2010 and 2009, the balance of notes payable — affiliate net of discount was $2,000,000 and the unamortized discount was $0. At December 31, 2009, the balance of notes payable — affiliate net of discount was $1,999,671 and the unamortized discount was $329.

Interest expenses on the $2.0 million August 14, 2009 borrowing for the years ended December 31, 2010 and 2009, and for the period from inception (June 14, 2004) to December 31, 2010 were included in the statement of operations as follows:


					Period from
					June 14, 2004
	Years Ended				(date of inception) to
	December 31,		December 31,		December 31,
August 14, 2009 Borrowing	2010		2009		2010
Interest expense	$	345,205	$	115,069	$	460,274
Discount amortization		329		1,372,712		1,373,041

Total	$	345,534	$	1,487,781	$	1,833,315

The Company estimated the fair value of the 2009 Warrants of approximately $1.4 million at August 14, 2009 using the Black-Scholes pricing model methodology with assumptions outlined below. The assumptions used to value the 2009 Warrants at August 14, 2009 (date of inception) are:


	August 14, 2009
Expected life from grant date — in years		4.58
Expected volatility		115.22	%
Risk free interest rate		2.32	%
Dividend yield		—

F-19

On September 11, 2009, the Company borrowed the final $2.0 million under the 2009 Loan Agreement and the fair value of the note and of the 16,666,666 2009 Warrant Shares related was $2.0 million and approximately $6.3 million, respectively. This resulted in the Company allocating the relative fair value of approximately $500,000 of the $2.0 million in proceeds to the note and approximately $1.5 million to the 2009 Warrants. The Company has recorded the $1.5 million freestanding 2009 Warrants as permanent equity under accounting guidance for accounting for derivative financial instruments indexed to, and potentially settled in, a company’s own stock, and accounting guidance for determining whether an instrument (or embedded feature) is indexed to an entity’s own stock. The $1.5 million discount on the note payable — affiliate is netted against the $2.0 million note and is being amortized to interest expense using the interest method from September 11, 2009 through April 1, 2010, the maturity date of the note payable. At December 31, 2010, the balance of notes payable — affiliate net of discount was $2,000,000 and the unamortized discount was $0. At December 31, 2009, the balance of notes payable — affiliate net of discount was $1,996,244 and the unamortized discount was $3,756.

Interest expenses on the $2.0 million September 11, 2009 borrowing for the years ended December 31, 2010 and 2009, and for the period from inception (June 14, 2004) to December 31, 2010 were included in the statement of operations as follows:


					Period from
					June 14, 2004
	Years Ended				(date of inception) to
	December 31,		December 31,		December 31,
September 11, 2009 Borrowing	2010		2009		2010
Interest expense	$	345,205	$	92,054	$	437,259
Discount amortization		3,756		1,513,055		1,516,811

Total	$	348,961	$	1,605,109	$	1,954,070

The Company estimated the fair value of the 2009 Warrants of approximately $1.5 million at September 11, 2009 using the Black-Scholes pricing model methodology with assumptions outlined below. The assumptions used to value the 2009 Warrants at September 11, 2009 (date of inception) are:


	September 11, 2009
Expected life from grant date — in years		4.50
Expected volatility		115.41	%
Risk free interest rate		2.07	%
Dividend yield		—

Interest expenses on the aggregate $10.0 million 2009 Loan Agreement for the years ended December 31, 2010 and 2009, and for the period from inception (June 14, 2004) to December 31, 2010 were included in the statement of operations as follows:


					Period from
					June 14, 2004
	Years Ended				(date of inception) to
	December 31,		December 31,		December 31,
	2010		2009		2010
Interest expense	$	1,726,027	$	789,041	$	2,515,068
Discount amortization		4,374		6,944,349		6,948,723

Total	$	1,730,401	$	7,733,390	$	9,463,791

At December 31, 2010 the aggregate balance of the notes payable — affiliate net of discount was $10,000,000 and the aggregate unamortized discount was $0. At December 31, 2009 the aggregate balance of the notes payable — affiliate net of discount was $9,995,626 and the aggregate unamortized discount was $4,374. The Company had accrued interest of $2,515,068 and $789,041 as of December 31, 2010 and December 31, 2009, respectively, which is included in the Balance Sheet.

Notes Payable Issued March 26, 2010 — 15% — due December 31, 2010 (2010 Loan Agreement)

In March 2010, the Company entered into the 2010 Loan Agreement whereby the Lenders agreed to lend to the Company in the aggregate up to $3.0 million, pursuant to the terms of the 2010 Loan Agreement notes.

On March 29, 2010, the Company borrowed an initial amount of $1,250,000. During the three months ended June 30, 2010, the Company borrowed $100,000 on May 26, 2010, $200,000 on June 4, 2010, and another $300,000 on June 29, 2010. During the three months ended September 30, 2010, the Company borrowed $100,000 on July 15, 2010, $750,000 on July 27, 2010 and a final $300,000 on September 28, 2010. The original 2010 Loan Agreement notes are secured by a lien on all of the assets of the Company. Amounts borrowed under the 2010 Loan Agreement notes accrue interest at the rate of 15% per annum, which increases to 18% per annum following an event of default. Unless earlier paid in accordance with the terms of the 2010 Loan Agreement notes, all unpaid principal and accrued interest shall become fully due and payable on the earlier to occur of (i) December 31, 2010, (ii) the closing of a debt, equity or combined debt/equity financing resulting in gross proceeds or available credit to the Company of not less than $20,000,000, and (iii) the closing of a transaction in which the Company sells, conveys, licenses or otherwise disposes of a majority of its assets or is acquired by way of a merger, consolidation, reorganization or other transaction or series of transactions pursuant to which stockholders of the Company prior to such acquisition own less than 50% of the voting interests in the surviving or resulting entity. On January 14, 2011, as more fully described in Note 14 in the notes to the financial statements, the Company entered into amendments to the 2010 Loan Agreement and the 2010 Loan Amendment to extend the maturity date under the 2010 Loan Agreement and 2010 Loan Amendment from December 31, 2010 to June 30, 2011 and on March 24, 2011, the Company entered into a second amendment to further extend the maturity date to September 30, 2011.

F-20

Pursuant to the 2010 Loan Agreement, the Company issued to the Lenders warrants (the “2010 Warrants”) to purchase an aggregate of 17,647,059 shares (the “2010 Warrant Shares”) of common stock at $0.17 per share. The number of 2010 Warrant Shares is equal to the $3,000,000 maximum aggregate principal amount that may be borrowed under the 2010 Loan Agreement, divided by the $0.17 per share exercise price of the 2010 Warrants. The 2010 Warrant Shares vest based on the amount of borrowings under the 2010 Loan Agreement notes. Based on the $3,000,000 borrowings as of December 31, 2010, all 17,647,059 of the 2010 Warrant Shares are vested and are exercisable at December 31, 2010. The Warrant Shares are exercisable at any time until March 26, 2015.

On March 29, 2010, the fair value of the 2010 Loan Agreement notes and of the 7,352,941 2010 Warrant Shares related to the $1.25 million borrowed under the 2010 Loan Agreement was $1.25 million and approximately $904,000, respectively. This resulted in the Company allocating the relative fair value of approximately $726,000 of the $1.25 million in proceeds to the 2010 Loan Agreement notes and approximately $524,000 to the 2010 Warrants. The Company has recorded the $524,000 freestanding 2010 Warrants as permanent equity under accounting guidance for accounting for derivative financial instruments indexed to, and potentially settled in, a company’s own stock, and accounting guidance for determining whether an instrument (or embedded feature) is indexed to an entity’s own stock. The $524,000 discount on the note payable — affiliate is netted against the $1.25 million 2010 Loan Agreement notes and is being amortized to interest expense using the interest method from March 29, 2010 through December 31, 2010, the maturity date of the note payable. At December 31, 2010, the balance of notes payable — affiliate net of discount was $1,250,000 and the unamortized discount was $0.

Interest expenses on the $1.25 million March 29, 2010 borrowing for the years ended December 31, 2010 and 2009, and for the period from inception (June 14, 2004) to December 31, 2010 were included in the statement of operations as follows:


					Period from
					June 14, 2004
	Years Ended				(date of inception) to
	December 31,		December 31,		December 31,
March 29, 2010 Borrowing	2010		2009		2010
Interest expense	$	142,808	$	—	$	142,808
Discount amortization		524,496		—		524,496

Total	$	667,304	$	—	$	667,304

The Company estimated the fair value of the 2010 Warrants of approximately $524,000 at March 29, 2010 using the Black-Scholes pricing model methodology with assumptions outlined below. The assumptions used to value the 2010 Warrants at March 29, 2010 (date of inception) are:


	March 29, 2010
Expected life from grant date — in years		4.99
Expected volatility		119.82	%
Risk free interest rate		2.60	%
Dividend yield		—

On May 26, 2010, the Company borrowed an additional $100,000 under the 2010 Loan Agreement and the fair value of the note and of the 588,235 2010 Warrant Shares related was $100,000 and approximately $71,000, respectively. This resulted in the Company allocating the relative fair value of approximately $58,000 of the $100,000 in proceeds to the 2010 Loan Agreement notes and approximately $42,000 to the 2010 Warrants. The Company has recorded the $42,000 freestanding 2010 Warrants as permanent equity under accounting guidance for accounting for derivative financial instruments indexed to, and potentially settled in, a company’s own stock, and accounting guidance for determining whether an instrument (or embedded feature) is indexed to an entity’s own stock. The $42,000 discount on the note payable — affiliate is netted against the $100,000 note and is being amortized to interest expense using the interest method from May 26, 2010 through December 31, 2010, the maturity date of the note payable. At December 31, 2010, the balance of notes payable — affiliate net of discount was $100,000 and the unamortized discount was $0.

F-21

Interest expenses on the $100,000 May 26, 2010 borrowing for the years ended December 31, 2010 and 2009, and for the period from inception (June 14, 2004) to December 31, 2010 were included in the statement of operations as follows:


					Period from
					June 14, 2004
	Years Ended				(date of inception) to
	December 31,		December 31,		December 31,
May 26, 2010 Borrowing	2010		2009		2010
Interest expense	$	9,041	$	—	$	9,041
Discount amortization		41,621		—		41,621

Total	$	50,662	$	—	$	50,662

The Company estimated the fair value of the 2010 Warrants of approximately $42,000 at May 26, 2010 using the Black-Scholes pricing model methodology with assumptions outlined below. The assumptions used to value the 2010 Warrants at May 26, 2010 (date of inception) are:


	May 26, 2010
Expected life from grant date — in years		4.83
Expected volatility		119.48	%
Risk free interest rate		1.99	%
Dividend yield		—

On June 4, 2010, the Company borrowed an additional $200,000 under the 2010 Loan Agreement and the fair value of the note and of the 1,176,471 2010 Warrant Shares related was $200,000 and approximately $101,000, respectively. This resulted in the Company allocating the relative fair value of approximately $133,000 of the $200,000 in proceeds to the 2010 Loan Agreement notes and approximately $67,000 to the 2010 Warrants. The Company has recorded the $67,000 freestanding 2010 Warrants as permanent equity under accounting guidance for accounting for derivative financial instruments indexed to, and potentially settled in, a company’s own stock, and accounting guidance for determining whether an instrument (or embedded feature) is indexed to an entity’s own stock. The $67,000 discount on the note payable — affiliate is netted against the $200,000 note and is being amortized to interest expense using the interest method from June 4, 2010 through December 31, 2010, the maturity date of the note payable. At December 31, 2010, the balance of notes payable — affiliate net of discount was $200,000 and the unamortized discount was $0.

Interest expenses on the $200,000 June 4, 2010 borrowing for the years ended December 31, 2010 and 2009, and for the period from inception (June 14, 2004) to December 31, 2010 were included in the statement of operations as follows:


					Period from
					June 14, 2004
	Years Ended				(date of inception) to
	December 31,		December 31,		December 31,
June 4, 2010 Borrowing	2010		2009		2010
Interest expense	$	17,343	$	—	$	17,343
Discount amortization		66,928		—		66,928

Total	$	84,271	$	—	$	84,271

The Company estimated the fair value of the 2010 Warrants of approximately $67,000 at June 4, 2010 using the Black-Scholes pricing model methodology with assumptions outlined below. The assumptions used to value the 2010 Warrants at June 4, 2010 (date of inception) are:


	June 4, 2010
Expected life from grant date — in years		4.81
Expected volatility		119.88	%
Risk free interest rate		1.90	%
Dividend yield		—

On June 29, 2010, the Company borrowed an additional $300,000 under the 2010 Loan Agreement and the fair value of the note and of the 1,764,706 2010 Warrant Shares related was $300,000 and approximately $135,000, respectively. This resulted in the Company allocating the relative fair value of approximately $207,000 of the $300,000 in proceeds to the 2010 Loan Agreement notes and approximately $93,000 to the 2010 Warrants. The Company has recorded the $93,000 freestanding 2010 Warrants as permanent equity under accounting guidance for accounting for derivative financial instruments indexed to, and potentially settled in, a company’s own stock, and accounting guidance for determining whether an instrument (or embedded feature) is indexed to an entity’s own stock. The $93,000 discount on the note payable — affiliate is netted against the $300,000 note and is being amortized to interest expense using the interest method from June 29, 2010 through December 31, 2010, the maturity date of the note payable. At December 31, 2010, the balance of notes payable — affiliate net of discount was $300,000 and the unamortized discount was $0.

F-22

Interest expenses on the $300,000 June 29, 2010 borrowing for the years ended December 31, 2010 and 2009, and for the period from inception (June 14, 2004) to December 31, 2010 were included in the statement of operations as follows:


					Period from
					June 14, 2004
	Years Ended				(date of inception) to
	December 31,		December 31,		December 31,
June 29, 2010 Borrowing	2010		2009		2010
Interest expense	$	22,932	$	—	$	22,932
Discount amortization		92,935		—		92,935

Total	$	115,867	$	—	$	115,867

The Company estimated the fair value of the 2010 Warrants of approximately $93,000 at June 29, 2010 using the Black-Scholes pricing model methodology with assumptions outlined below. The assumptions used to value the 2010 Warrants at June 29, 2010 (date of inception) are:


	June 29, 2010
Expected life from grant date — in years		4.74
Expected volatility		120.12	%
Risk free interest rate		1.68	%
Dividend yield		—

On July 15, 2010, the Company borrowed an additional $100,000 under the 2010 Loan Agreement and the fair value of the note and of the 588,235 2010 Warrant Shares related was $100,000 and approximately $30,000, respectively. This resulted in the Company allocating the relative fair value of approximately $77,000 of the $100,000 in proceeds to the 2010 Loan Agreement notes and approximately $23,000 to the 2010 Warrants. The Company has recorded the $23,000 freestanding 2010 Warrants as permanent equity under accounting guidance for accounting for derivative financial instruments indexed to, and potentially settled in, a company’s own stock, and accounting guidance for determining whether an instrument (or embedded feature) is indexed to an entity’s own stock. The $23,000 discount on the note payable — affiliate is netted against the $100,000 note and is being amortized to interest expense using the interest method from July 15, 2010 through December 31, 2010, the maturity date of the note payable. At December 31, 2010, the balance of notes payable — affiliate net of discount was $100,000 and the unamortized discount was $0.

Interest expenses on the $100,000 July 15, 2010 borrowing for the years ended December 31, 2010 and 2009, and for the period from inception (June 14, 2004) to December 31, 2010 were included in the statement of operations as follows:


					Period from
					June 14, 2004
	Years Ended				(date of inception) to
	December 31,		December 31,		December 31,
July 15, 2010 Borrowing	2010		2009		2010
Interest expense	$	6,986	$	—	$	6,986
Discount amortization		22,902		—		22,902

Total	$	29,888	$	—	$	29,888

The Company estimated the fair value of the 2010 Warrants of approximately $23,000 at July 15, 2010 using the Black-Scholes pricing model methodology with assumptions outlined below. The assumptions used to value the 2010 Warrants at July 15, 2010 (date of inception) are:


	July 15, 2010
Expected life from grant date — in years		4.70
Expected volatility		120.71	%
Risk free interest rate		1.64	%
Dividend yield		—

F-23

On July 27, 2010, the Company borrowed an additional $750,000 under the 2010 Loan Agreement and the fair value of the note and of the 4,411,765 2010 Warrant Shares related was $750,000 and approximately $259,000, respectively. This resulted in the Company allocating the relative fair value of approximately $557,000 of the $750,000 in proceeds to the 2010 Loan Agreement notes and approximately $193,000 to the 2010 Warrants. The Company has recorded the $193,000 freestanding 2010 Warrants as permanent equity under accounting guidance for accounting for derivative financial instruments indexed to, and potentially settled in, a company’s own stock, and accounting guidance for determining whether an instrument (or embedded feature) is indexed to an entity’s own stock. The $193,000 discount on the note payable — affiliate is netted against the $750,000 note and is being amortized to interest expense using the interest method from July 27, 2010 through December 31, 2010, the maturity date of the note payable. At December 31, 2010, the balance of notes payable — affiliate net of discount was $750,000 and the unamortized discount was $0.

Interest expenses on the $750,000 July 27, 2010 borrowing for the years ended December 31, 2010 and 2009, and for the period from inception (June 14, 2004) to December 31, 2010 were included in the statement of operations as follows:


					Period from
					June 14, 2004
	Years Ended				(date of inception) to
	December 31,		December 31,		December 31,
July 27, 2010 Borrowing	2010		2009		2010
Interest expense	$	48,699	$	—	$	48,699
Discount amortization		192,745		—		192,745

Total	$	241,444	$	—	$	241,444

The Company estimated the fair value of the 2010 Warrants of approximately $193,000 at July 27, 2010 using the Black-Scholes pricing model methodology with assumptions outlined below. The assumptions used to value the 2010 Warrants at July 27, 2010 (date of inception) are:


	July 27, 2010
Expected life from grant date — in years		4.66
Expected volatility		120.64	%
Risk free interest rate		1.69	%
Dividend yield		—

On September 28, 2010, the Company borrowed the final $300,000 under the 2010 Loan Agreement and the fair value of the note and of the 1,764,706 2010 Warrant Shares related was $300,000 and approximately $165,000, respectively. This resulted in the Company allocating the relative fair value of approximately $193,000 of the $300,000 in proceeds to the 2010 Loan Agreement notes and approximately $107,000 to the 2010 Warrants. The Company has recorded the $107,000 freestanding 2010 Warrants as permanent equity under accounting guidance for accounting for derivative financial instruments indexed to, and potentially settled in, a company’s own stock, and accounting guidance for determining whether an instrument (or embedded feature) is indexed to an entity’s own stock. The $107,000 discount on the note payable — affiliate is netted against the $300,000 note and is being amortized to interest expense using the interest method from September 28, 2010 through December 31, 2010, the maturity date of the note payable. At September 30, 2010, the balance of notes payable — affiliate net of discount was $300,000 and the unamortized discount was $0.

Interest expenses on the $300,000 September 28, 2010 borrowing for the years ended December 31, 2010 and 2009, and for the period from inception (June 14, 2004) to December 31, 2010 were included in the statement of operations as follows:


					Period from
					June 14, 2004
	Years Ended				(date of inception) to
	December 31,		December 31,		December 31,
September 28, 2010 Borrowing	2010		2009		2010
Interest expense	$	11,712	$	—	$	11,712
Discount amortization		106,599		—		106,599

Total	$	118,311	$	—	$	118,311

F-24

The Company estimated the fair value of the 2010 Warrants of approximately $107,000 at September 28, 2010 using the Black-Scholes pricing model methodology with assumptions outlined below. The assumptions used to value the 2010 Warrants at September 28, 2010 (date of inception) are:


	September 28, 2010
Expected life from grant date — in years		4.49
Expected volatility		123.90	%
Risk free interest rate		1.09	%
Dividend yield		—

Aggregate interest expenses on the $3,000,000 2010 Loan Agreement debt for the years ended December 31, 2010 and 2009, and for the period from inception (June 14, 2004) to December 31, 2010 were included in the statement of operations as follows:


					Period from
					June 14, 2004
	Years Ended				(date of inception) to
	December 31,		December 31,		December 31,
	2010		2009		2010
Interest expense	$	259,521	$	—	$	259,521
Discount amortization		1,048,226		—		1,048,226

Total	$	1,307,747	$	—	$	1,307,747

At December 31, 2010 the aggregate balance of the 2010 Loan Agreement notes payable — affiliate net of discount was $3,000,000 and the aggregate unamortized discount was $0. The Company has accrued interest of $259,521 as of December 31, 2010, which is included in the Balance Sheet.

Notes Payable Issued November 15, 2010 — 15% — due December 31, 2010 (2010 Loan Amendment)

On October 29, 2010, the Company executed a secured promissory note (the “Bridge Note”) in favor of Bay City Capital Fund IV, L.P., a Delaware limited partnership in the principal sum of $200,000 for general corporate purposes. By the terms of the Bridge Note, upon execution of the 2010 Loan Amendment (as defined below) the unpaid principal amount and accrued and unpaid interest under the Bridge Note automatically converted into obligations of the Company under the 2010 Loan Amendment as advances under the amended and restated promissory notes issued under the 2010 Loan Amendment. The Company accrued $1,397 in unpaid interest for the period October 29, 2010 to November 15, 2010, which is included in the Company’s statement of operations.

Pursuant to the 2010 Loan Amendment, the Company issued to the Lenders additional warrants (the “2010 Additional Warrants”) to purchase an aggregate of 42,253,521 shares (the “2010 Additional Warrant Shares”) of common stock at $0.071 per share. The number of 2010 Additional Warrant Shares is equal to the $3,000,000 maximum aggregate principal amount that may be borrowed under the 2010 Loan Amendment, divided by the $0.071 per share exercise price of the 2010 Additional Warrants. The 2010 Additional Warrant Shares vest based on the amount of borrowings under the 2010 Loan Amendment notes. Based on the $1,001,397 of borrowings, 14,104,183 2010 Additional Warrant Shares are vested and are exercisable as of December 31, 2010. At each subsequent closing, the 2010 Additional Warrants will vest with respect to the additional amount borrowed by the Company. The 2010 Additional Warrant Shares, to the extent they are vested and exercisable, are exercisable at any time until November 15, 2015.

F-25

On November 15, 2010, the fair value of the $201,397 of bridge loans converted under the terms of the 2010 Loan Amendment and of the 2,836,577 2010 Additional Warrant Shares related to the $201,397 borrowed under the 2010 Loan Amendment was $201,397 and approximately $165,000, respectively. This resulted in the Company allocating the relative fair value of approximately $110,000 of the $201,397 in proceeds to the 2010 Loan Amendment notes and approximately $91,000 to the 2010 Additional Warrants. The Company has recorded the $91,000 freestanding 2010 Additional Warrants as permanent equity under accounting guidance for accounting for derivative financial instruments indexed to, and potentially settled in, a company’s own stock, and accounting guidance for determining whether an instrument (or embedded feature) is indexed to an entity’s own stock. The $91,000 discount on the note payable — affiliate is netted against the $201,397 2010 Loan Amendment notes and is being amortized to interest expense using the interest method from November 15, 2010 through December 31, 2010, the maturity date of the note payable. At December 31, 2010, the balance of notes payable — affiliate net of discount was $201,397 and the unamortized discount was $0.

Interest expenses on the $201,397 November 15, 2010 borrowing for the years ended December 31, 2010 and 2009, and for the period from inception (June 14, 2004) to December 31, 2010 were included in the statement of operations as follows:


					Period from
					June 14, 2004
	Years Ended				(date of inception) to
	December 31,		December 31,		December 31,
November 15, 2010 Borrowing	2010		2009		2010
Interest expense	$	3,889	$	—	$	3,889
Discount amortization		90,722		—		90,722

Total	$	94,611	$	—	$	94,611

The Company estimated the fair value of the 2010 Additional Warrants of approximately $91,000 at November 15, 2010 using the Black-Scholes pricing model methodology with assumptions outlined below. The assumptions used to value the 2010 Additional Warrants at November 15, 2010 (date of inception) are:


	November 15, 2010
Expected life from grant date — in years		5.00
Expected volatility		121.67	%
Risk free interest rate		1.51	%
Dividend yield		—

On November 22, 2010, the Company borrowed an additional $800,000 under the 2010 Loan Amendment and the fair value of the note and of the 11,267,606 2010 Additional Warrant Shares related was $800,000 and approximately $863,000, respectively. This resulted in the Company allocating the relative fair value of approximately $385,000 of the $800,000 in proceeds to the 2010 Loan Amendment notes and approximately $415,000 to the 2010 Additional Warrants. The Company has recorded the $415,000 freestanding 2010 Additional Warrants as permanent equity under accounting guidance for accounting for derivative financial instruments indexed to, and potentially settled in, a company’s own stock, and accounting guidance for determining whether an instrument (or embedded feature) is indexed to an entity’s own stock. The $415,000 discount on the note payable — affiliate is netted against the $800,000 note and is being amortized to interest expense using the interest method from November 22, 2010 through December 31, 2010, the maturity date of the note payable. At December 31, 2010, the balance of notes payable — affiliate net of discount was $800,000 and the unamortized discount was $0.

Interest expenses on the $800,000 November 22, 2010 borrowing for the years ended December 31, 2010 and 2009, and for the period from inception (June 14, 2004) to December 31, 2010 were included in the statement of operations as follows:


					Period from
					June 14, 2004
	Years Ended				(date of inception) to
	December 31,		December 31,		December 31,
November 22, 2010 Borrowing	2010		2009		2010
Interest expense	$	13,151	$	—	$	13,151
Discount amortization		415,176		—		415,176

Total	$	428,327	$	—	$	428,327

F-26

The Company estimated the fair value of the 2010 Additional Warrants of approximately $415,000 at November 22, 2010 using the Black-Scholes pricing model methodology with assumptions outlined below. The assumptions used to value the 2010 Additional Warrants at November 22, 2010 (date of inception) are:


	November 22, 2010
Expected life from grant date — in years		4.98
Expected volatility		121.57	%
Risk free interest rate		1.43	%
Dividend yield		—

Aggregate interest expenses on the $1,001,397 2010 Loan Amendment debt for the years ended December 31, 2010 and 2009, and for the period from inception (June 14, 2004) to December 31, 2010 were included in the statement of operations as follows:


					Period from
					June 14, 2004
	Years Ended				(date of inception) to
	December 31,		December 31,		December 31,
	2010		2009		2010
Interest expense	$	17,040	$	—	$	17,040
Discount amortization		505,898		—		505,898

Total	$	522,938	$	—	$	522,938

At December 31, 2010 the aggregate balance of the 2010 amended notes payable — affiliate net of discount was $1,001,397 and the aggregate unamortized discount was $0. The Company has accrued interest of $17,040 as of December 31, 2010, which is included in the Balance Sheet.

Interest expenses in aggregate on the outstanding $14,001,397 debt, including interest on the Bridge Note, for the years ended December 31, 2010 and 2009, and for the period from inception (June 14, 2004) to December 31, 2010 were included in the statement of operations as follows:


					Period from
					June 14, 2004
	Years Ended				(date of inception) to
	December 31,		December 31,		December 31,
	2010		2009		2010
Interest expense	$	2,003,985	$	789,041	$	2,793,026
Discount amortization		1,558,498		6,944,349		8,502,847

Total	$	3,562,483	$	7,733,390	$	11,295,873

At December 31, 2010 the aggregate balance of the notes payable — affiliate net of discount was $14,001,397 and the aggregate unamortized discount was $0. The Company has accrued interest payable of $2,791,629 and $789,041 at December 31, 2010 and 2009, respectively, which is included in the Balance Sheet.

7. EQUITY

On June 5, 2007, in connection with the Merger, the Certificate of Incorporation of Corautus became the Certificate of Incorporation of the Company, and the Company further amended and restated its Certificate of Incorporation to increase the number of authorized shares of common stock from 100,000,000 shares to 200,000,000 shares. The Certificate of Incorporation of the Company provides that the total number of authorized shares of preferred stock of the Company is 5,000,000 shares. Significant components of the Company’s stock are as follows:

Common Stock — The Company’s authorized common stock was 200,000,000 shares at December 31, 2010 and 2009. Common stockholders are entitled to dividends if and when declared by the Board of Directors, subject to preferred stockholder dividend rights.

F-27

At December 31, 2010 and 2009, the Company had reserved the following shares of common stock for issuance:


	December 31,		December 31,
	2010		2009
2007 Incentive Award Plan — outstanding and available to grant		3,916,326		3,328,398
Shares of common stock subject to outstanding warrants		143,297,261		83,403,348

Shares of common stock subject to conversion from series C preferred stock		13,986,013		—


Total shares of common stock equivalents		161,199,600		86,731,746

As noted below, the Series C Preferred Stock became convertible on June 13, 2010 and shares are convertible upon delivery of notice of conversion. The number of shares of common stock into which Series C Preferred Stock will be converted is based in part on the “fair market value” (as defined in the Amended and Restated Certificate of Designation of Preferences and Rights of Series C Preferred Stock of the Company) of the Company’s common stock. Accordingly, we have not included any Series C Preferred Stock in the table above for the period ended December 31, 2009.

Preferred Stock — The Company’s authorized Series A Preferred Stock was 5,000,000 shares at December 31, 2010 and 2009. There were no issued and outstanding shares of Series A Preferred Stock at December 31, 2010 and 2009.

The Company’s authorized Series C Preferred Stock was 17,000 shares at December 31, 2010 and 2009. There were 2,000 shares of Series C Preferred Stock issued and outstanding at December 31, 2010 and 2009. The Series C Preferred Stock is not entitled to receive dividends, has a liquidation preference amount of one thousand dollars ($1,000.00) per share, and has no voting rights, except as to the issuance of additional Series C Preferred Stock. Each share of Series C Preferred Stock became convertible into common stock on June 13, 2010. The Series C Preferred Stock is convertible into common stock in an amount equal to (a) the quotient of (i) the liquidation preference (adjusted for recapitalizations), divided by (ii) one hundred and ten percent (110%) of the per share “fair market value” (as defined in the Amended and Restated Certificate of Designation of Preferences and Rights of Series C Preferred Stock of the Company) of the Company’s common stock multiplied by (b) the number of shares of converted Series C Preferred Stock. As of December 31, 2010, the Series C Preferred Stock is convertible into 13,986,013 shares of the Company’s Common Stock. As of December 31, 2010, the Series C Preferred Stock stockholder has not initiated the conversion of the Series C Preferred Stock into the Company’s Common Stock

2002 Stock Option Plans — In November 2002, the Corautus Board of Directors adopted the 2002 Stock Plan, which was approved by Corautus stockholders in February 2003 and was amended by Corautus stockholder approval in May 2004. Under the 2002 Stock Plan, the Board of Directors or a committee of the Board of Directors has the authority to grant options and rights to purchase common stock to officers, key employees, consultants and certain advisors to the Company. Options granted under the 2002 Stock Plan may be either incentive stock options or non-qualified stock options, as determined by the Board of Directors or a committee. The 2002 Stock Plan, as amended in May 2004, reserved an additional 233,333 shares for issuance under the 2002 Stock Plan plus (a) any shares of common stock which have been reserved but not issued under the 1999 Stock Plan, the 1995 Stock Plan and the 1995 Directors’ Option Plan as of the date of stockholder approval of the 2002 Stock Plan, (b) any shares of common stock returned to the 1999 Stock Plan, the 1995 Stock Plan and the 1995 Directors’ Option Plan as a result of the termination of options or repurchase of shares of common stock issued under those plans and (c) an annual increase on the first day of each year by the lesser of (i) 20,000 shares, (ii) the number of shares equal to two percent of the total outstanding common shares or (iii) a lesser amount determined by the Board of Directors. Generally, options are granted with vesting periods from one to two years and expire ten years from date of grant or three months after termination of employment or service, if sooner. Under the 2002 Stock Plan, the Company had 0 shares available for future grant as of December 31, 2007. In December 2007, the Company incorporated the outstanding options and shares available for grant into the 2007 Incentive Award Plan.

2004 Stock Option Plans — In 2004, the Company’s Board of Directors adopted the 2004 Stock Plan. Under the 2004 Stock Plan, up to 427,479 shares of the Company’s common stock, in the form of both incentive and non-qualified stock options, may be granted to eligible employees, directors, and consultants. In September 2006, the Company’s Board of Directors authorized an increase of 743,442 shares to the 2004 Stock Plan for a total of 1,170,921 authorized shares available for grant from the 2004 Stock Plan. The 2004 Stock Plan provides that grants of incentive stock options will be made at no less than the estimated fair value of the Company’s common stock, as determined by the Board of Directors at the date of grant. If, at the time the Company grants an option, the holder owns more than ten percent of the total combined voting power of all the classes of stock of the Company, the option price shall be at least 110% of the fair value. Vesting and exercise provisions are determined by the Board of Directors at the time of grant. Option vesting ranges from immediate and full vesting to five year vesting (twenty percent of the shares one year after the options’ vesting commencement date and the remainder vesting ratably each month). Options granted under the 2004 Stock Plan have a maximum term of ten years. Options can only be exercised upon vesting, unless the option specifies that the shares can be early exercised. The Company retains the right to repurchase exercised and unvested shares. Under the 2004 Stock Plan, the Company had 0 shares available for future grant as of December 31, 2007. In December of 2007, the Company incorporated the outstanding options and shares available for grant into the 2007 Incentive Award Plan.

F-28

2007 Incentive Award Plan — In December 2007, the Company’s Board of Directors adopted the 2007 Incentive Award Plan. The Company combined the 2002 and 2004 Stock Plan into the 2007 Incentive Award Plan, and added 2.0 million shares available for grant in the form of both incentive and non-qualified stock options which may be granted to eligible employees, directors, and consultants. Only employees are entitled to receive grants of incentive stock options. The 2007 Incentive Award Plan provides that grants of incentive stock options will be made at no less than the estimated fair market value of the Company’s common stock on the date of grant. If, at the time the Company grants an option, the holder owns more than ten percent of the total combined voting power of all the classes of stock of the Company, the option price shall be at least 110% of the fair value. Vesting and exercise provisions are determined by the Board of Directors at the time of grant. Option vesting ranges from immediate and full vesting to five year vesting (twenty percent of the shares one year after the options’ vesting commencement date and the remainder vesting ratably each month). Options granted under the 2007 Incentive Award Plan have a maximum term of ten years. Options can only be exercised upon vesting, unless the option specifies that the shares can be early exercised. The Company retains the right to repurchase exercised and unvested shares. Under the 2007 Incentive Award Plan, the Company had 2,068,738 and 587,712 shares available for future grant at December 31, 2010 and 2009, respectively. Under the 2007 Incentive Award Plan, there is an annual “evergreen” provision which provides that the plan shares are increased by the lesser of 500,000 shares or 3% of total common shares outstanding at the Company’s year-end. Effective January 1, 2010 and 2009, the Company added an additional 500,000 shares to the plan pursuant to this provision of the plan.

A summary of stock option award activity from December 31, 2007 to December 31, 2010 follows:


				Weighted
				Average
	Option Shares			Exercise
Stock Option Awards	Outstanding			Price
2007 Incentive Award Plan Options Outstanding — December 31, 2007		2,642,110		$	7.02
Granted		332,750		$	2.42
Exercised		(32,711	)	$	0.07
Canceled		(134,222	)	$	2.72

2007 Incentive Award Plan Options Outstanding — December 31, 2008		2,807,927		$	6.77
Granted		11,000		$	0.18
Exercised		(57,615	)	$	0.03
Canceled		(20,626	)	$	3.79

2007 Incentive Award Plan Options Outstanding — December 31, 2009		2,740,686		$	6.90
Granted		—			—
Exercised		(43,057	)	$	0.03
Canceled		(850,041	)	$	2.52

2007 Incentive Award Plan Options Outstanding — December 31, 2010		1,847,588		$	8.91

As of December 31, 2010, a total of 229,955 shares of stock options were early exercised before the shares were vested pursuant to provisions of the share grants under the 2007 Incentive Award Plan, of which 5,793 shares remain unvested and subject to repurchase by the Company in the event of employee termination.

F-29

The following table summarizes information concerning outstanding and exercisable options outstanding at December 31, 2010:


	Options Outstanding						Options Vested or Expected to Vest						Options Exercisable
			Average		Weighted		Number		Average		Weighted				Weighted
Range of	Number of		Remaining		Average		Exercisable or		Remaining		Average				Average
Exercise	Options		Contractual		Exercise		Expected to		Contractual		Exercise		Number		Exercise
Prices	Outstanding		Life (Years)		Price		Vest		Life (Years)		Price		Exercisable		Price
$0.03		124,897		4.41	$	0.03		124,897		4.41	$	0.03		124,897	$	0.03
$0.14		70,992		5.78	$	0.14		70,992		5.78	$	0.14		70,992	$	0.14
$0.15		40,000		7.96	$	0.15		40,000		7.96	$	0.15		40,000	$	0.15
$2.38		810,000		6.96	$	2.38		801,056		6.96	$	2.38		622,500	$	2.38
$2.90		235,000		7.04	$	2.90		231,964		7.04	$	2.90		171,354	$	2.90
$3.48		219,400		6.59	$	3.48		217,656		6.59	$	3.48		182,832	$	3.48
$5.10		16,725		6.43	$	5.10		16,725		6.43	$	5.10		16,725	$	5.10
$5.55		18,586		6.42	$	5.55		18,586		6.42	$	5.55		18,586	$	5.55
$11.25—$1023.75		311,988		3.90	$	42.36		311,988		4.90	$	42.36		311,988	$	42.36

		1,847,588		6.20	$	8.91		1,833,864		6.20	$	8.96		1,559,874	$	10.07

The weighted-average fair value of options granted was $0.15 in the year ended December 31, 2009. No options were granted in the year ended December 31, 2010. The total intrinsic value of stock options exercised was $897 and $11,865 for the years ended December 31, 2010 and 2009, respectively.

See also Note 8 for stock options with Related Parties.

Restricted Stock — In December 2008, under the provisions of the 2007 Incentive Award Plan, the Company granted employees restricted stock awards for 852,750 shares of the Company’s common stock with a weighted-average fair value of $0.15 per share that vest monthly over a two year period, with acceleration of vesting in the event of a defined partnering transaction related to the development of VIA-2291. The Company recognized $42,572 and $63,389 in stock-based compensation expense in the years ended December 31, 2010 and 2009, respectively, and $108,488 in stock-based compensation expense in the period from June 14, 2004 (date of inception) to December 31, 2010. As the restricted stock awards vested through 2010, the Company recognized the related stock-based compensation expense over the vesting period. Restricted stock awards are shares of common stock which are forfeited if the employee leaves the Company prior to vesting. These stock awards offer employees the opportunity to earn shares of our stock over time. In contrast, stock options give the employee the right to purchase stock at a set price.

A summary of restricted stock activity from December 31, 2007 to December 31, 2010 follows:


				Weighted
				Average
				Grant Date
Restricted Stock Awards	Shares			Fair Value
Unvested at December 31, 2007		—			—
Granted		852,750		$	0.15
Vested		—			—
Forfeited		—			—

Unvested at December 31, 2008		852,750		$	0.15
Granted		—			—
Vested		(424,916	)	$	0.15
Forfeited		(3,959	)	$	0.15

Unvested at December 31, 2009		423,875		$	0.15
Granted		—			—
Vested		(298,341	)	$	0.15
Forfeited		(125,534	)	$	0.15

Unvested at December 31, 2010		—

F-30

Warrants — Affiliates — Pursuant to the terms of the 2009 Loan Agreement as more fully discussed in Note 6 in the notes to the financial statements, the Company issued to the Lenders the 2009 Warrants to purchase an aggregate of up to 83,333,333 shares of common stock at $0.12 per share, which will become fully exercisable to the extent that the entire $10.0 million is drawn. The number of 2009 Warrant Shares is equal to the $10.0 million maximum aggregate principal amount that may be borrowed under the 2009 Loan Agreement, divided by the $0.12 per share exercise price of the 2009 Warrants, which is fixed on the date of the 2009 Loan Agreement. The 2009 Warrant Shares vest based on the amount of borrowings under the 2009 Notes and based on the passage of time. For each $2.0 million borrowing, 8,333,333 2009 Warrant Shares vested and are exercisable immediately on the date of grant, and 8,333,333 vested and are exercisable 45 days thereafter as the Company had met certain conditions provided for in the 2009 Warrant, including that the Company did not complete a $20.0 million financing, as defined in the 2009 Loan Agreement, within 45 days of the borrowing. At each subsequent closing, the 2009 Warrants will vest with respect to additional shares in proportion to the additional amount borrowed by the Company at the same coverage ratio as the initial closing and at the same vesting schedule, such that one-half of such additional shares will vest on the date of the subsequent closing and the remaining one-half of such shares will vest 45 days after such closing if certain conditions are met as provided for in the 2009 Warrants. The 2009 Warrant Shares, to the extent they are vested and exercisable, are exercisable at any time until March 12, 2014. Based on the $10.0 million of borrowings, all 83,333,333 2009 Warrant Shares are vested and are exercisable on December 31, 2010.

As described more fully in Note 6 in the notes to the financial statements, at December 31, 2009, the Company computed the fair value of the 83,333,333 2009 Warrant Shares related to the aggregate $10.0 million of borrowings under the 2009 Loan Agreement utilizing the Black-Scholes pricing model. In accordance with the provisions of derivative financial instruments indexed to and potentially settled in a Company’s own stock, accounting for derivative instruments and hedging activities, and accounting for convertible debt and debt issued with stock purchase warrants, the relative fair value assigned to the 2009 Warrants of approximately $6.9 million was recorded as permanent equity in additional paid-in capital in the Stockholders’ Equity (Deficit) section of the Balance Sheet.

Pursuant to the terms of the 2010 Loan Agreement as more fully discussed in Note 6 in the notes to the financial statements, the Company issued to the Lenders the 2010 Warrants to purchase an aggregate of up to 17,647,059 shares of common stock at $0.17 per share, which will become fully exercisable to the extent that the entire $3.0 million is drawn. The number of 2010 Warrant Shares is equal to the $3.0 million maximum aggregate principal amount that may be borrowed under the 2010 Loan Agreement, divided by the $0.17 per share exercise price of the 2010 Warrants, which is fixed on the date of the 2010 Loan Agreement. The 2010 Warrant Shares vest based on the amount of borrowings under the 2010 Loan Agreement notes. The 2010 Warrant Shares, to the extent they are vested and exercisable, are exercisable at any time until March 26, 2015. Based on the $3.0 million of borrowings, 17,647,059 2010 Warrant Shares are vested and are exercisable on December 31, 2010.

As described more fully in Note 6 in the notes to the financial statements, at December 31, 2010, the Company computed the fair value of the 17,647,059 2010 Warrant Shares related to the $3.0 million of borrowings under the 2010 Loan Agreement utilizing the Black-Scholes pricing model. In accordance with the provisions of derivative financial instruments indexed to and potentially settled in a Company’s own stock, accounting for derivative instruments and hedging activities, and accounting for convertible debt and debt issued with stock purchase warrants, the relative fair value assigned to the 2010 Warrants of approximately $1,048,226 was recorded as permanent equity in additional paid-in capital in the Stockholders’ Equity (Deficit) section of the Balance Sheet.

Pursuant to the terms of the 2010 Loan Amendment as more fully discussed in Note 6 in the notes to the financial statements, the Company issued to the Lenders the 2010 Additional Warrants to purchase an aggregate of up to 42,253,521 shares of common stock at $0.071 per share, which will become fully exercisable to the extent that the entire additional $3.0 million is drawn. The number of 2010 Additional Warrant Shares is equal to the additional $3.0 million maximum aggregate principal amount that may be borrowed under the 2010 Loan Amendment, divided by the $0.071 per share exercise price of the 2010 Additional Warrants, which is fixed on the date of the 2010 Loan Amendment. The 2010 Additional Warrant Shares vest based on the amount of borrowings under the 2010 Loan Agreement notes. The 2010 Additional Warrant Shares, to the extent they are vested and exercisable, are exercisable at any time until November 15, 2015. Based on the $1,001,397 of borrowings, 14,104,183 2010 Additional Warrant Shares are vested and are exercisable on December 31, 2010.

As described more fully in Note 6 in the notes to the financial statements, at December 31, 2010, the Company computed the fair value of the 14,104,183 2010 Additional Warrant Shares related to the additional $1,001,397 of borrowings under the 2010 Loan Amendment utilizing the Black-Scholes pricing model. In accordance with the provisions of derivative financial instruments indexed to and potentially settled in a Company’s own stock, accounting for derivative instruments and hedging activities, and accounting for convertible debt and debt issued with stock purchase warrants, the relative fair value assigned to the 2010 Additional Warrants of approximately $505,898 was recorded as permanent equity in additional paid-in capital in the Stockholders’ Equity (Deficit) section of the Balance Sheet.

F-31

Warrants — Other — The Company assumed obligations for certain warrants issued by Corautus in connection with previous financings and consulting engagements. As of December 31, 2010, outstanding warrants to purchase approximately 9,762 shares of common stock at exercise prices of $10.05-$19.50 will expire at various dates through February 2013.

In July 2007 the Company granted warrants to its investor relations firm to purchase 18,586 shares of the Company’s common stock at a fixed purchase price of $3.95 per share. The warrants began vesting 30 days after the issuance date and vested over a twelve month contracted service period. The warrant expires July 31, 2017. The warrants are expensed as stock-based compensation expense over the vesting period in the statements of operations. The warrants were fully expensed in 2008.

In December 2007, the Company granted warrants to a management consultant to purchase 10,000 shares of the Company’s common stock at a fixed purchase price of $2.38 per share. The warrants are expensed as stock-based compensation expense over the vesting period in the statements of operations. The warrants were fully expensed in 2007.

In March 2008, the Company granted warrants to a financial communications and investor relations firm to purchase 125,000 shares of the Company’s common stock at a fixed purchase price of $3.00 per share. As of March 1, 2008, 25,000 shares immediately vested, 50,000 will vest immediately upon attaining a Share Price Goal (as defined in the warrant) of $5.00, 25,000 shares will vest immediately upon attaining a Share Price Goal of $7.50, and 25,000 shares will vest immediately upon attaining a Share Price Goal of $10.00. The contractual service period and vesting period within which to attain the performance vesting ended December 31, 2008 and June 30, 2009, respectively. The 100,000 performance based warrants expired unvested on June 30, 2009. The remaining vested 25,000 shares expire August 31, 2013. The warrants are expensed as stock-based compensation expense over the service vesting period in the statements of operations. The warrants were fully expensed in 2008.

8. RELATED PARTIES

As more fully described in Note 6 in the notes to the financial statements, in March 2009, the Company entered into the 2009 Loan Agreement with its principal stockholder and one of its affiliates, as the Lenders, whereby the Lenders agreed to lend to the Company in the aggregate up to $10.0 million. In March 2010, the Company entered into the 2010 Loan Agreement with its principal stockholder and one of its affiliates, as the Lenders, whereby the Lenders agreed to lend to the Company in the aggregate up to $3.0 million. In November 2010, the Company entered into the 2010 Loan Amendment to enable the Company to borrow up to an additional aggregate principal amount of $3.0 million.

The Company terminated its licensing agreement with Leland Stanford Junior University (“Stanford”) effective February 2009. The Company’s founding Chief Scientific Officer (“Founder”) was an affiliate of Stanford and is a stockholder of the Company. The Company paid consulting fees to the Founder of $0 and $7,500 in the years ended December 31, 2010 and 2009, respectively. While the Company did not issue any stock options in years ended December 31, 2010 and 2009, the Company did issue 10,000 and 42,300 stock options to the Founder in the years ended December 31, 2008 and 2007, respectively. Using the Black-Scholes pricing model, the Company valued the 10,000 option shares granted in 2008 at a fair value of $0.0973 per share or $973 using an expected life of 5.0 years, a 1.5% risk free interest rate, an 81% volatility rate, and the grant date fair market value of $0.15 per share. The options were fully vested at the grant date, December 17, 2008, and expire December 17, 2018. Using the Black-Scholes pricing model, the Company valued the 42,300 option shares granted in 2007 as of December 31, 2010 at fair values ranging from $0.159 per share to $0.188 per share or an aggregate of $731 using an expected life ranging from 6.59 to 6.96 years, a risk free interest rate ranging from 2.56% to 2.70%, a volatility rate ranging from 115% to 116%, and the fair market value stock price at December 31, 2010 of $0.04 per share. The options become fully vested in the period from August 2, 2011 through December 17, 2011 and expire in the period from August 2, 2017 through December 17, 2017. The Company expensed the options as stock-based compensation expense over the vesting period in the statements of operations, resulting in expense of ($2,622) and $2,706 in the years ended December 31, 2010 and 2009, respectively. The Company revalues non-employee options quarterly based on the closing stock price of the Company’s common stock on the last day of the quarter, and does a final valuation on the last option vesting date based on the closing stock price of the Company’s common stock on the last vesting date.

During 2006, the Company used the services of an employee of the Company’s primary investor to act as Chief Financial Officer (“CFO”) and granted 18,586 stock option shares to the acting CFO as compensation for services rendered. The options were fully vested on March 8, 2008, and expire September 8, 2016. The Company expensed the option as stock-based compensation expense over the vesting period in the statements of operations.

F-32

From the Company’s inception through February 4, 2010, the Company’s Chief Development Officer (“Officer”) was also an employee of the Company’s primary investor. The Company paid the Officer compensation of $44,384 and $60,000 in the years ended December 31, 2010 and 2009, respectively. The Company did not grant any options to the Officer in fiscal years ended December 31, 2010 and 2009. However, the Company granted 26,921, 35,685, and 15,611 shares of stock options to the CDO in 2007, 2006, and 2005, respectively. The options granted in 2005 became fully vested in the period from June 1, 2005 through June 1, 2006 and expire on June 29, 2015. The Company expensed the options as stock-based compensation expense over the vesting period in the statements of operations. The options granted in 2006 became fully vested in the period from November 29, 2006 through November 29, 2007 and expire on November 29, 2016. The Company expensed the options as stock-based compensation expense over the vesting period in the statements of operations. Using the Black-Scholes pricing model, the Company valued the 2007 options at fair values ranging from $2.43 to $5.78 per share or an aggregate fair value of $95,284 using an expected life of from 5.27 to 6.02 years, a 4.20% to 4.639% risk-free interest rate, a 67% to 77% volatility rate and the fair market value stock prices of the Company’s common stock on the grant dates ranging from $3.48 to $5.89 per share. The options become fully vested in the period from November 29, 2007 through August 2, 2011 and expire in the period from January 23, 2017 through August 2, 2017. The Company expensed the options as stock-based compensation expense over the vesting period in the statements of operations resulting in expense of $1,135 and $11,195 in the years ended December 31, 2010 and 2009, respectively.

Effective July 1, 2009, the Company sub-leased property in the Company’s office facilities in its headquarters in San Francisco, California on a month-to-month basis to an affiliate of the Company’s primary investor for $279 per month. Effective May 17, 2010, the Company sub-leased additional space within the same premises to the affiliate and the lease was amended to increase the rent to $907 per month through June 30, 2010 and $930 from July 1, 2010 through June 30, 2011. The Company received rent from the tenant in the amount of $8,186 and $1,674 in the years ended December 31, 2010 and 2009, respectively, which were included as a reduction to rent expenses in the statement of operations for the year ended December 31, 2010.

Effective September 15, 2010, the Company sub-leased property in the Company’s office facilities in its headquarters in San Francisco, California for one year to an additional affiliate of the Company’s primary investor for $5,241 per month. The Company received rent from the tenant in the amount of $18,517 in the year ended December 31, 2010, which was included as a reduction to rent expenses in the statement of operations for the year ended December 31, 2010.

9. COMMITMENTS

Operating Leases — The Company leases its office facilities for various terms under long-term, non-cancelable operating lease agreements. The leases expire at various dates through 2013. The Company recognizes rent expense on a straight-line basis over the lease period, and accrues for rent expense incurred but not paid. As more fully discussed in Note 13 in the notes to the financial statements, on June 1, 2010, the Company abandoned its office space leased in Princeton, New Jersey. As a result, the Company recorded rent expense of $65,000, which reflects the cost incurred by the Company, in settlement with the landlord, to vacate the lease for which the Company will no longer receive any economic benefit.

Rent expense, including lease settlement costs, for the years ended December 31, 2010 and 2009, respectively, and for the period from June 14, 2004 (date of inception) to December 31, 2010, was included in the statements of operations as follows:


					Period from
					June 14, 2004
	Years Ended				(Date of Inception) to
	December 31,		December 31,		December 31,
	2010		2009		2010
Research and development expense	$	142,365	$	121,986	$	660,089
General and administrative expense		204,390		312,570		1,121,750

Total	$	346,755	$	434,556	$	1,781,839

Future minimum lease payments under non-cancelable operating leases, including lease commitments entered into subsequent to December 31, 2010 are as follows:


	Amount
2011	$	323,792
2012		331,971
2013		139,742

Total minimum lease payments	$	795,505

Operating lease obligations reflect contractual commitments for the Company’s office facilities for its headquarters in San Francisco, California.

F-33

10. INCOME TAXES

There is no income tax provision (benefit) for federal or state income taxes as the Company has incurred operating losses since inception. Deferred income taxes reflect the net tax effects of net operating loss and tax credit carryovers and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

The following table reconciles the amount of income taxes computed at the federal statutory rate of 34% for all periods presented, to the amount reflected in the Company’s statement of operations for the years ended December 31, 2010 and 2009:


	Year Ended			Year Ended
	December 31,			December 31,
	2010			2009
Tax provision (benefit) at federal statutory income tax rate		(34	)%		(34	)%
State income taxes, net of federal income tax effect		(4	)		(6	)
Adjustments of deferred tax assets		4			—
Other		—			1
Valuation allowance		34			39

Income tax expense (benefit)		0	%		0	%

The tax effect of temporary differences related to various assets, liabilities and carryforwards that give rise to deferred tax assets and liabilities at December 31, 2010 and 2009 are comprised of the following:


	2010			2009
Deferred tax assets and liabilities:
Net operating loss carryforwards	$	8,588,541		$	6,214,313
Tax credit carryforwards		131,200			115,393
Property and equipment and intangibles		12,189,197			10,953,858
Other		1,294,510			1,638,641

		22,203,448			18,922,205
Less valuation allowance		(22,203,448	)		(18,922,205	)

Net deferred tax assets and liabilities	$	—		$	—

The net valuation allowance increased by $3,281,243 and $8,271,398 during the periods ended December 31, 2010 and 2009, respectively, principally related to increased net operating loss carryforwards.

The Company has federal net operating loss carryforwards of approximately $22,070,552 as of December 31, 2010 that expire beginning in 2026. The Company has California state net operating loss carryforwards of approximately $15,693,647 as of December 31, 2010 that expire beginning 2016. The Company has New Jersey state net operating loss carryforwards of approximately $19,992,088 as of December 31, 2010 that expire beginning 2013. The Company has Pennsylvania state net operating loss carryforwards of approximately $1,086,788 that expire beginning 2030. The Company also has federal, California state, and New Jersey state research and development tax credits of approximately $327,953, $290,757, and $206,282, respectively. Federal research credits will expire beginning 2026, California state credits can be carried forward indefinitely, and New Jersey state credits will expire beginning in the year 2022.

Utilization of the net operating loss and tax credit carryforwards were subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The Company experienced a change of control which resulted in a substantial reduction to the previously reported net operating losses at December 31, 2008. As of December 31, 2010, the net operating loss carryforwards continue to be fully reserved and any reduction in such amounts as a result of this study would also reduce the related valuation allowances resulting in no net impact to the financial results of the Company.

At December 31, 2010, the Company had unrecognized tax benefits of $659,992, all of which would not currently affect the Company’s effective tax rate if recognized due to the Company’s deferred tax assets being fully offset by a valuation allowance.

F-34

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:


	Amount
Balance at January 1, 2009	$	274,130
Additions based on tax positions related to current year		310,580
Additions for tax positions of prior year		—
Reductions for tax positions of current year		—
Reductions for tax positions of prior year		—
Settlements		—

Balance at December 31, 2009	$	584,710
Additions based on tax positions related to current year		104,122
Additions for tax positions of prior year		—
Reductions for tax positions of current year		—
Reductions for tax positions of prior year		(28,840	)
Settlements		—

Balance at December 31, 2010	$	659,992

The Company would classify interest and penalties related to uncertain tax positions in income tax expense, if applicable. There was no interest expense or penalties related to unrecognized tax benefits recorded through December 31, 2010. The tax years 2006 through 2010 remain open to examination by one or more major taxing jurisdictions to which the Company is subject.

The Company does not anticipate that total unrecognized net tax benefits will significantly change prior to the end of 2011.

11. EMPLOYEE BENEFIT PLANS

The Company established a defined contribution plan qualified under Section 401(k) of the Internal Revenue Code. Employees of the Company are eligible to participate in the Company’s 401(k) plan. Employees participating in the plan are permitted to contribute up to the maximum amount allowable by law. Company contributions are discretionary and only safe-harbor contributions were made in 2010 and 2009. The Company made safe-harbor contributions to certain plan participants in the aggregate amount of $58,869 and $94,529 in the years ended December 31, 2010 and 2009, respectively, and $208,523 for the period from June 14, 2004 (date of inception) to December 31, 2010.

12. RESTRUCTURING COSTS

On March 26, 2010 the Company’s Board of Directors approved a restructuring of the Company to reduce its workforce and operating costs effective March 31, 2010. The reduction in workforce decreased total employees by approximately 63% to a total of six employees and increased the focus of future operating expense on research and development activities. This decision resulted in recording a charge to operating expenses of approximately $106,959 and $0 in the years ended December 31, 2010 and 2009, respectively. This charge includes cash costs of restructuring, principally related to severance and related medical costs for terminated employees, of approximately $411,000, and non-cash charges of $227,000 primarily related to costs associated with excess facilities at the Company’s corporate headquarters, offset by approximately $531,000 related to the reversal of previously recorded incentive award accruals recorded as of December 31, 2009. In addition to this restructuring charge, the Company paid terminated employees $178,000 for amounts accrued for unused vacation and sick pay. The total cash cost of the restructuring costs, and amounts for accrued COBRA, vacation and sick pay, was $589,000, all of which was paid as of December 31, 2010. As of December 31, 2010, the Company had a balance of $104,675 in accrued non-cash restructuring costs, all of which consisted of excess facility lease costs, which is included as a current obligation on the balance sheet.

13. LEASE ABANDONMENT COSTS

On June 1, 2010, the Company abandoned its office space leased in Princeton, New Jersey. Previously, the Company had leased approximately 4,979 square feet in Princeton, New Jersey, where its Senior Vice President, Research and Development, was located. This lease was to have expired on April 2, 2012. The sublease was to have expired on January 15, 2012. In November 2010, the Company and the landlord agreed to a settlement whereby the Company paid $65,000 to the landlord in exchange for vacating the lease. The Company has no other obligations under the settlement agreement. The Company recorded the $65,000 in research and development operating expense in the statement of operations in the year ended December 31, 2010.

F-35

14. SUBSEQUENT EVENTS

On January 14, 2011, the Lenders agreed to modify the 2010 Loan Agreement and the 2010 Loan Amendment to extend the repayment terms of the aggregate $6.0 million borrowings under the 2010 Loan Agreement and the 2010 Loan Amendment from December 31, 2010 to June 30, 2011. On this date the Company borrowed an additional $500,000 in principal amounts under the 2010 Loan Amendment. Refer to Note 6.

On March 24, 2011, the Company entered into a second amendment to further extend the maturity date to September 30, 2011. On this date the Company borrowed an additional $1,498,603 which is the final drawdown on the 2010 Loan Amendment. Refer to Note 6.

15. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)


	First			Second			Third			Fourth
	Quarter			Quarter			Quarter			Quarter
2010
Net service revenues	$	—		$	—		$	—		$	—
Gross profit		—			—			—			—
Net loss before extraordinary items and cumulative effect of any accounting change		(2,919,753	)		(2,092,638	)		(2,118,323	)		(2,470,601	)
Net loss per share — Basic and diluted		(0.14	)		(0.11	)		(0.10	)		(0.12	)
Net loss		(2,919,753	)		(2,092,638	)		(2,118,323	)		(2,470,601	)

2009
Net service revenues	$	—		$	—		$	—		$	—
Gross profit		—			—			—			—
Net loss before extraordinary items and cumulative effect of any accounting change		(4,302,138	)		(4,391,189	)		(8,038,046	)		(4,246,951	)
Net loss per share — Basic and diluted		(0.22	)		(0.22	)		(0.40	)		(0.21	)
Net loss		(4,302,138	)		(4,391,189	)		(8,038,046	)		(4,246,951	)

F-36

Position

Lawrence K. Cohen

Director, President and Chief Executive Officer

Karen S. Wright

Vice President, Controller

Rebecca A. Taub

Senior Vice President, Research and Development