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Vasogen Announces 2008 Year-End Results

MISSISSAUGA, ON, Feb. 27 /PRNewswire-FirstCall/ - Vasogen Inc. (NASDAQ: VSGN; TSX:VAS) today reported the results of operations for the fiscal year ended November 30, 2008. All dollar amounts referenced herein are in Canadian dollars unless otherwise noted.

At November 30, 2008, our cash and cash equivalents totaled $8.6 million, compared with $23.5 million at November 30, 2007 and $9.8 million at August 31, 2008. As of January 31, 2009, our cash balance was $8.5 million.

The net loss for the fourth quarter of 2008 was $0.8 million, or $0.03 per common share. We incurred a net loss for the year ended November 30, 2008 of $16.1 million, or $0.72 per common share, compared with a net loss of $28.8 million, or $1.46 per common share for the same period in 2007. A key driver of this decrease was lower compensation costs, reduced stock compensation expense, lower infrastructure and other support costs driven by lower employee numbers in 2008, and a decrease in the foreign exchange loss that was incurred in the prior period. In addition, the decrease was impacted by a reduction in expenses resulting from the repayment of the senior convertible notes in April 2007.

    Corporate Update

    -   During 2008, we implemented our restructuring plan to significantly
        reduce the rate at which we use our cash and to focus our efforts on
        opportunities that the Board and Management believe are most likely
        to provide shareholder value. As a result, we discontinued
        maintaining the necessary quality processes and personnel to support
        European commercialization and any clinical development of our
        Celacade technology, materially reduced expenses associated with the
        VP series of drugs, and reduced the number of full-time employees
        from 104 to six. We also retained JMP Securities LLC to assist in
        exploring potential strategic alternatives. To further reduce the
        rate at which we use our cash during our strategic review process, in
        February 2009, we further reduced our number of full-time employees
        to two. As part of this restructuring, Chris Waddick, our President
        and CEO, will be terminated effective March 1, 2009. Mr. Waddick has
        agreed to fulfill the role of CEO, in a consulting capacity at a
        substantially reduced compensation, to assist the Board in bringing
        closure to the ongoing strategic review process.

    -   Pursuant to our restructuring plan, our Board of Directors and
        Management has been actively involved in a process of screening,
        reviewing, and short-listing potential opportunities including the
        sale of the Company, or a merger or acquisition, and exploring the
        monetization of certain tangible and intangible assets. The process
        has also included a review of the potential out-licensing of assets,
        lapsing of patents and patent applications, asset divestiture, or
        liquidation of the Company. At this time, we have significantly
        narrowed down the number of third party proposals under
        consideration. If a definitive agreement that the Board believes is
        in the best interest of our shareholders cannot be reached in the
        near future, the Board will consider the other alternatives that it
        has been evaluating. These alternatives include the potential to
        realize value from the monetization of certain intangible assets
        either alone or potentially in combination with a strategic
        transaction. The Board will continue to assess the merits of these
        options relative to liquidating the Company and distributing the
        remaining cash to the shareholders.

    -   As part of our restructuring, a new tenant was secured for our
        37,111 sq. ft. leased facility located at 2505 Meadowvale Boulevard
        in Mississauga, Ontario, and we completed a lease surrender agreement
        with our landlord. As a result, our lease for this facility
        terminated on September 30, 2008 and our new corporate address is
        4 Robert Speck Parkway, 15th Floor, Mississauga, Ontario, L4Z 1S1.

    -   On April 24, 2008, we received a letter from the Listing
        Qualifications Department of The NASDAQ Stock Market indicating that
        the minimum closing bid price of our common stock had fallen below
        US$1.00 for 30 consecutive trading days, and therefore, we were not
        in compliance with Marketplace Rule 4310(c)(4) (the "Rule"). In
        accordance with the NASDAQ Marketplace Rule 4310(c)(8)(D), we were
        provided a compliance period of 180 calendar days, or until
        October 21, 2008, to regain compliance with this requirement. In
        October 2008, the NASDAQ Stock Market had suspended the enforcement
        of the rules requiring a minimum US$1.00 closing price until
        January 20, 2009. Subsequently, on December 9, 2008, the NASDAQ
        extended this suspension. Accordingly, the NASDAQ will not take
        action to delist any security, including our shares, for a violation
        of the minimum bid price rule during the suspension, which now has
        been extended until April 20, 2009.

    -   As at November 30, 2008, we had cash and cash equivalents of
        $8.6 million and had 22.4 million common shares issued and
        outstanding. Other than our accounts payable and accrued liabilities
        we do not have any debt. As of January 31, 2009, our cash balance was
        $8.5 million.

    -   Subsequent to November 30, 2008 we entered into an agreement to sell
        a United States patent application and its related foreign
        counterparts for US$0.4 million. This device-based intellectual
        property has not been used to date in the Celacade System; however,
        we have retained rights to this technology for any potential use as
        it relates to its Celacade System.

Certain statements in this document constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and/or "forward-looking information" under the Securities Act (Ontario). These statements may include, without limitation, plans to consider a sale, merger, acquisition, or other alternatives resulting from our strategic review, statements regarding the status of development, or expenditures relating to the Celacade(TM) System or our VP series of drugs including VP015 and VP025, plans to fund our current activities, statements concerning our partnering activities, health regulatory submissions, strategy, future operations, future financial position, future revenues and projected costs. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expects", "plans", "anticipates", "believes", "estimated", "predicts", "potential", "continue", "intends", "could", or the negative of such terms or other comparable terminology. We made a number of assumptions in the preparation of these forward-looking statements. You should not place undue reliance on our forward-looking statements, which are subject to a multitude of risks and uncertainties that could cause actual results, future circumstances or events to differ materially from those projected in the forward-looking statements. These risks include, but are not limited to, the outcome of our strategic review, securing and maintaining corporate alliances, the need for additional capital and the effect of capital market conditions and other factors, including the current status of our programs, on capital availability, the potential dilutive effects of any financing and other risks detailed from time to time in our public disclosure documents or other filings with the Canadian and U.S. securities commissions or other securities regulatory bodies. Additional risks and uncertainties relating to our Company and our business can be found in the "Risk Factors" section of our Annual Information Form and Form 20-F, as well as in our other public filings, including our Management's Discussion and Analysis for the year ended November 30, 2008. The forward-looking statements are made as of the date hereof, and we disclaim any intention and have no obligation or responsibility, except as required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The consolidated financial statements, accompanying notes to the consolidated financial statements, and Management's Discussion and Analysis for the year ended November 30, 2008, will be accessible on Vasogen's web site at and will be available on SEDAR and EDGAR.

                   Financial statements are provided below

    Vasogen Inc.

    Consolidated Balance Sheets
    (In thousands of Canadian dollars)

    November 30, 2008 and 2007

                                                           2008         2007

    Current assets:
      Cash and cash equivalents                      $    8,556   $   23,545
      Clinical supplies                                       -        1,363
      Tax credits recoverable                               582        1,565
      Prepaid expenses and deposits                         188          787
      Change in fair value of forward foreign
       exchange contracts                                     -          376
                                                          9,326       27,636

    Property and equipment                                   16          414

                                                     $    9,342   $   28,050

    Liabilities and Shareholders' Equity

    Current liabilities:
      Accounts payable                               $      101   $    1,175
      Accrued liabilities                                 1,141        3,519
                                                          1,242        4,694

    Shareholders' equity
      Share capital:
          Unlimited common shares, without par value
        Issued and outstanding:
          22,424,719 common shares (2007 - 22,391,386)  365,677      365,670
      Warrants                                           16,725       16,725
      Contributed surplus                                23,555       22,744
      Deficit                                          (397,857)    (381,783)
                                                          8,100       23,356

                                                     $    9,342   $   28,050


    Consolidated Statements of Operations, Deficit and Comprehensive Income
    (In thousands of Canadian dollars, except per share amounts)

                                                                 Period from
                                                                  December 1,
                                                                     1987 to
                                     Years ended November 30,    November 30,
                                 2008         2007         2006         2008
      Research and
       development         $    8,794   $   12,039   $   32,732   $  247,711
      General and
       administration           8,098       14,259       19,251      125,326
      Foreign exchange
       loss (gain)               (305)       1,977          104       10,665

    Loss before the
     undernoted               (16,587)     (28,275)     (52,087)    (383,702)
    Interest expense on
     senior convertible
     notes payable                  -           (5)        (930)      (1,279)
    Accretion in carrying
     value of senior
     convertible notes
     payable                        -         (728)      (7,824)     (10,294)
    Amortization of
     deferred financing
      costs                         -         (154)      (2,495)      (3,057)
    Loss on extinguishment
     of senior convertible
     notes payable                  -       (1,754)      (4,995)      (6,749)
    Investment income             513        1,310        1,971       13,838
    Change in fair value
     of embedded
     derivatives                    -          829            -          829

    Loss and comprehensive
     loss for the period      (16,074)     (28,777)     (66,360)    (390,414)

    Deficit, beginning of
      As originally reported (381,783)    (351,374)    (284,719)      (1,510)
      Impact of change in
       accounting for stock-
       based compensation           -            -            -       (4,006)
      Impact of change in
       accounting for
       financial instruments
       on December 1, 2006          -       (1,632)           -       (1,632)
      As revised             (381,783)    (353,006)    (284,719)

    Charge for acceleration
     payments on equity
     component of senior
     convertible notes
     payable                        -            -         (295)        (295)

    Deficit, end of period $ (397,857)  $ (381,783)  $ (351,374)  $ (397,857)

    Basic and diluted loss
     per common share      $    (0.72)  $    (1.46)  $    (7.05)


    Consolidated Statements of Cash Flows
    (In thousands of Canadian dollars)

                                                                 Period from
                                                                  December 1,
                                                                     1987 to
                                   Years ended November 30,      November 30,
                                 2008         2007         2006         2008
    Cash provided by (used in):

    Operating activities:
      Loss for the period  $  (16,074)  $  (28,777)  $  (66,360)  $ (390,414)
      Items not involving
        Amortization              217          503          782        6,377
        Loss on disposition
         of property and
          equipment               125            -            -          125
        Accretion in
         carrying value
         of senior
         convertible notes
         payable                    -          728        7,824       10,294
        Amortization of
         deferred financing
         costs                      -          154        2,495        3,057
        Loss on extinguishment
         of senior convertible
         notes payable              -        1,754        4,995        6,749
        Change in fair value
         of embedded
         derivatives                -         (829)           -         (829)
         compensation             811        1,995        3,083       10,390
        Common shares
         issued for services        -            -           36        2,485
        Unrealized gain on
         forward foreign
         exchange contract        376         (376)           -            -
        Unrealized foreign
         exchange loss (gain)    (124)       2,566          (65)      11,419
        Other                       -            -            -          (35)
      Change in non-cash
      operating working
       capital                   (513)      (3,535)     (17,158)         438
                              (15,182)     (25,817)     (64,368)    (339,944)

    Financing activities:
      Shares and warrants
       issued for cash              -       17,345       23,106      326,358
      Warrants and options
       exercised for cash           -            -            -       24,610
      Share issue costs             -       (1,440)      (2,221)     (24,646)
      Issue (repayment) of
       senior convertible
       notes payable, net           -         (924)      (3,976)      38,512
      Cash released from
       restriction                  -        6,403        5,298            -
      Paid to related parties       -            -            -         (234)
                                    -       21,384       22,207      364,600
    Investing activities:
      Purchases of acquired
       technology                   -            -            -       (1,283)
      Purchases of property and
       equipment                   (6)         (49)         (23)      (2,471)
      Proceeds from disposition
       of property and equipment   62            -            -           62
      Purchases of marketable
       securities                   -            -          (80)    (244,846)
      Settlement of forward
       foreign exchange
       contracts                    -           10         (102)      (4,824)
      Maturities of marketable
       securities                   -            -       23,079      240,677
                                   56          (39)      22,874      (12,685)
    Foreign exchange gain
     (loss) on cash held
     in foreign currency          137       (2,410)        (807)      (3,415)

    Increase (decrease) in
     cash and cash
     equivalents              (14,989)      (6,882)     (20,094)       8,556

    Cash and cash
     equivalents, beginning
     of period                 23,545       30,427       50,521            -
    Cash and cash
     equivalents, end of
     period                $    8,556   $   23,545   $   30,427   $    8,556

SOURCE Vasogen Inc.
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