10-Q 1 miv_10q-022908.txt U.S. Securities and Exchange Commission Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended February 29, 2008 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES ACT OF 1934 For the transition period from _____ to _____ COMMISSION FILE NUMBER: 000-30453 MIV Therapeutics, Inc (Exact name of registrant issuer as specified in its charter) Nevada 01-0809204 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) Suite 1-8765 ASH STREET, VANCOUVER, B.C., CANADA, V6P 6T3 (Address of principal executive offices) (604) 301-9545 (Issuer's telephone number) -------------------------------------------- (Former address if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerate 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. Large Accelerate filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller Reporting Company [X] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] Number of shares of common stock outstanding as of April 4, 2008: 112,991,278 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS MIV THERAPEUTICS INC. (A development stage company) Consolidated Financial Statements February 29, 2008 (Unaudited) INDEX Consolidated Balance Sheets Consolidated Statements of Operations and Comprehensive Loss Consolidated Statement of Stockholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements 1 MIV THERAPEUTICS, INC. (A development stage company) Consolidated Balance Sheets (Unaudited) Expressed in U.S. Dollars ------------------------------------------------------------------------------------------- February 29, 2008 May 31, 2007 ------------------------------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 3,314,934 $ 119,075 Accounts receivable 89,089 50,829 Employee advances (Note 12) 11,306 20,432 Prepaid expenses (Note 3) 352,810 346,883 Inventories (Note 4) 732,541 563,684 Assets of discontinued operations (Note 10) -- 393,593 ------------------------------------------------------------------------------------------- TOTAL CURRENT ASSETS 4,500,680 1,494,496 EMPLOYEE ADVANCES -- 14,343 PROPERTY AND EQUIPMENT, net (Note 6) 2,002,636 1,253,010 CE MARK LICENSE, net (Note 7) 1,273,233 1,389,279 DEPOSITS AND OTHER ASSETS 45,686 37,264 ASSETS OF DISCONTINUED OPERATIONS, net of current (Note 10) -- 58,573 ------------------------------------------------------------------------------------------- TOTAL ASSETS $ 7,822,235 $ 4,246,965 =========================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES CURRENT LIABILITIES Accounts payable and other payables (Note 12) $ 1,063,903 $ 1,462,616 Related party loan (Note 12) -- 100,000 Loan payable (Note 8) -- 525,000 Deferred lease inducement - current portion (Note 13(a)) 8,081 8,081 Liabilities of discontinued operations (Note 10) -- 154,742 ------------------------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 1,071,984 2,250,439 DEFERRED LEASE INDUCEMENT (Note 13 (a)) 13,468 19,529 DEFERRED INCOME TAX LIABILITY 96,000 297,000 ------------------------------------------------------------------------------------------- TOTAL LIABILITIES 1,181,452 2,566,968 ------------------------------------------------------------------------------------------- COMMITMENTS AND CONTINGENCIES (Notes 5, 11 and 13) STOCKHOLDERS' EQUITY Common stock (Note 9) Authorized: 20,000,000 preferred shares with a par value of $0.001 230,000,000 common shares with a par value of $0.001 Issued and outstanding: 112,991,278 common shares at February 29, 2008 and 83,785,056 common shares at May 31, 2007 112,991 83,785 Additional paid-in capital 57,400,068 42,329,385 Deferred compensation (89,644) (320,579) Common stock issuable 1,127,012 1,411,489 Deficit accumulated during the development stage (51,712,976) (41,627,415) Accumulated other comprehensive loss (196,668) (196,668) ------------------------------------------------------------------------------------------- TOTAL STOCKHOLDERS' EQUITY 6,640,783 1,679,997 ------------------------------------------------------------------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,822,235 $ 4,246,965 =========================================================================================== The accompanying notes are in integral part of these consolidated financial statements. 2 MIV THERAPEUTICS, INC. (A development stage company) Consolidated Statements of Operations and Comprehensive Loss (Unaudited) Expressed in U.S. Dollars ------------------------------------------------------------------------------------------------------------------------------- Period from inception (January 20, 1999) to Nine months ended Three months ended February 29, February 29, February 28, February 29, February 28, 2008 2008 2007 2008 2007 ------------------------------------------------------------------------------------------------------------------------------- (as restated) (as restated) REVENUE $ 1,045,658 $ 854,168 $ 1,461 $ 302,527 $ 1,461 COST OF SALES (exclusive of amortization of CE Mark license shown below) 1,115,256 968,116 646 475,052 646 ------------------------------------------------------------------------------------------------------------------------------- GROSS PROFIT (LOSS) (69,598) (113,948) 815 (172,525) 815 ------------------------------------------------------------------------------------------------------------------------------- EXPENSES General and administrative (Note 14) 31,694,349 5,371,349 3,663,280 1,705,655 1,426,935 Research and development 14,584,093 4,112,492 2,103,463 1,762,046 679,869 Interest expense and finance fees 1,221,952 196,495 11,295 21,832 9,236 Depreciation 1,026,027 41,984 77,222 24,539 31,706 Amortization of CE Mark license 148,050 116,046 4,572 35,532 4,572 Licenses acquired charged to operations 479,780 -- -- -- -- Finance cost on convertible debentures 382,307 -- -- -- -- Purchased in-process research and development 2,205,013 -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------- 51,741,571 9,838,366 5,859,832 3,549,604 2,152,318 ------------------------------------------------------------------------------------------------------------------------------- LOSS FROM OPERATIONS (51,811,169) (9,952,314) (5,859,017) (3,722,129) (2,151,503) GAIN (LOSS) ON FOREIGN EXCHANGE 47,658 25,072 13,632 (6,069) 36,370 INTEREST INCOME 313,990 173,104 5,832 40,677 -- GAIN ON EXTINGUISHMENT OF DEBT 462,249 -- -- -- -- MINORITY INTEREST SHARE OF LOSS 806,310 -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------- LOSS BEFORE DEFERRED INCOME TAX RECOVERY (50,180,962) (9,754,138) (5,839,553) (3,687,521) (2,115,133) DEFERRED INCOME TAX RECOVERY 228,000 201,000 14,000 92,000 14,000 ------------------------------------------------------------------------------------------------------------------------------- LOSS FROM CONTINUING OPERATIONS (49,952,962) (9,553,138) (5,825,553) (3,595,521) (2,101,133) LOSS FROM DISCONTINUED OPERATIONS (2,672,723) (600,955) (702,725) -- (282,158) GAIN ON SALE OF DISCONTINUED OPERATIONS 68,532 68,532 -- 68,532 -- ------------------------------------------------------------------------------------------------------------------------------- NET LOSS (52,557,153) (10,085,561) (6,528,278) (3,526,989) (2,383,291) OTHER COMPREHENSIVE LOSS Foreign currency translation (196,668) -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------- COMPREHENSIVE LOSS $ (52,753,821) $ (10,085,561) $ (6,528,278) $ (3,526,989) $ (2,383,291) =============================================================================================================================== BASIC AND DILUTED LOSS PER COMMON SHARE - continuing operations $ 1.29 $ 0.09 $ 0.08 $ 0.03 $ 0.03 - discontinued operations 0.07 -- 0.01 -- -- ------------------------------------------------------------------------------------------------------------------------------- - NET LOSS $ 1.36 $ 0.09 $ 0.09 $ 0.03 $ 0.03 =============================================================================================================================== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - basic and diluted 38,801,569 108,134,229 72,915,205 112,530,493 75,143,989 =============================================================================================================================== The accompanying notes are in integral part of these consolidated financial statements. 3 MIV THERAPEUTICS, INC. (A development stage company) Consolidated Statement of Stockholders' Equity (Unaudited) Expressed in U.S. Dollars ------------------------------------------------------------------------------------------------------ Common Stock Additional Deferred ------------------------ Paid-in Compen- Shares Amount Capital sation ------------------------------------------------------------------------------------------------------ Balance, May 31, 2007 83,785,056 $ 83,785 $ 42,329,385 $(320,579) Issuance of common stock: - for share subscriptions - private placement 27,666,000 27,666 12,816,311 -- - for exercise of options 315,715 316 38,184 -- - for services 1,224,507 1,224 511,642 (167,545) Fair value of warrants issued for loan (Note 8) -- -- 16,405 -- Fair value of vested stock option grants -- -- 1,529,341 -- Fair value of extended stock options -- -- 48,400 -- Fair value of extended warrants -- -- 110,400 -- Amortization of deferred compensation -- -- -- 398,480 Comprehensive loss: Foreign currency translation -- -- -- -- Net loss -- -- -- -- ------------------------------------------------------------------------------------------------------ BALANCE, February 29, 2008 112,991,278 $ 112,991 $ 57,400,068 $ (89,644) ====================================================================================================== (CONTINUED) Accumulated Deficit Other Accumulated Common Compre- During the Stock hensive Development Issuable Loss Stage Total ------------------------------------------------------------------------------------------------------------ Balance, May 31, 2007 $ 1,411,489 $(196,668) $(41,627,415) $ 1,679,997 Issuance of common stock: - for share subscriptions - private placement (927,000) -- -- 11,916,977 - for exercise of options (38,500) -- -- -- - for services 681,023 -- -- 1,026,344 Fair value of warrants issued for loan (Note 8) -- -- -- 16,405 Fair value of vested stock option grants -- -- -- 1,529,341 Fair value of extended stock options -- -- -- 48,400 Fair value of extended warrants -- -- -- 110,400 Amortization of deferred compensation -- -- -- 398,480 Comprehensive loss: Foreign currency translation -- -- -- -- Net loss -- -- (10,085,561) (10,085,561) ------------------------------------------------------------------------------------------------------------ BALANCE, February 29, 2008 $ 1,127,012 $(196,668) $(51,712,976) $ 6,640,783 ============================================================================================================ The accompanying notes are in integral part of these consolidated financial statements. 4 MIV THERAPEUTICS, INC. (A development stage company) Consolidated Statements of Cash Flows (Unaudited) Expressed in U.S. Dollars ----------------------------------------------------------------------------------------------------------- Period from inception (January 20, 1999) to Nine months ended February 29, February 29, February 28, 2008 2008 2007 ----------------------------------------------------------------------------------------------------------- (as restated) CASH FLOWS FROM OPERATING ACTIVITIES Net loss from continuing operations $(49,952,962) $ (9,553,138) $ (5,825,553) Adjustments to reconcile net loss from continuing operations to net cash used in operating activities: Stock-based compensation 11,940,000 1,976,221 1,177,712 Stock issued for other than cash 7,106,575 1,026,344 416,398 Depreciation and amortization 1,472,997 400,884 81,794 Deferred income tax recovery (228,000) (201,000) (14,000) Fair value of extended warrants 451,227 110,400 1,230 Fair value of granted warrants 16,405 16,405 -- Interest expense on related party loan 850,000 -- -- Interest expense on convertible debentures 34,730 -- -- Leasehold improvements written down 13,300 -- -- Purchased in-process research and development 2,125,013 -- -- Intangible asset impairment 150,000 -- -- Gain on extinguishment of debt (462,249) -- -- Provision for bad debt 160,000 -- -- Beneficial conversion feature on convertible debenture 289,800 -- -- Minority interest (806,310) -- -- Changes in operating assets and liabilities: Accounts receivable (249,340) (38,260) (1,812) Due from related party (11,306) 23,469 (35,098) Prepaid expenses and deposits (278,628) (5,927) (187,861) Inventories (487,739) (168,857) 23,079 Deposits and other assets (45,686) (8,422) -- Accounts payable and other payables 946,486 (404,771) 624,093 ----------------------------------------------------------------------------------------------------------- Net cash used in operating activities (26,965,687) (6,826,652) (3,740,018) ----------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Issuance of common stock, less share issuance costs 33,633,250 11,916,977 4,840,427 Proceeds from (repayments of) loan payable 500,000 (525,000) -- Due to related parties 850,000 (100,000) -- Subscriptions received 1,389,310 -- 50,000 Cash acquired in reverse acquisition 13,824 -- -- Proceeds from convertible debentures 755,000 -- -- Common stock redemption (120,000) -- -- ----------------------------------------------------------------------------------------------------------- Net cash provided by financing activities 37,021,384 11,291,977 4,890,427 ----------------------------------------------------------------------------------------------------------- The accompanying notes are in integral part of these consolidated financial statements. 5 MIV THERAPEUTICS, INC. (A development stage company) Consolidated Statements of Cash Flows (continued) (Unaudited) Expressed in U.S. Dollars -------------------------------------------------------------------------------------------------------- Period from inception (January 20, 1999) to Nine months ended February 29, February 29, February 28, 2008 2008 2007 -------------------------------------------------------------------------------------------------------- (as restated) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (2,557,540) (1,034,466) (66,258) Pre-acquisition advances to Biosync (121,870) -- (121,870) Acquisition of Biosync, net of cash acquired (1,415,885) -- (1,415,885) Cash acquired on acquisition of Biosync 17,557 -- 17,557 Cash transferred on disposition of SagaX (48,802) (48,802) -- Acquisition of license (200,000) -- -- -------------------------------------------------------------------------------------------------------- Net cash used in investing activities (4,326,540) (1,083,268) (1,586,456) -------------------------------------------------------------------------------------------------------- Net cash provided by (used in) continuing operations 5,729,157 3,382,057 (436,047) Cash flows from discontinued operating activities (2,099,724) (539,605) (593,000) Cash flows from discontinued investing activities (75,515) (937) (27,654) Foreign exchange effect on cash (238,984) -- -- -------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,314,934 2,841,515 (1,056,701) CASH AND CASH EQUIVALENTS, beginning of period Continuing operations -- 119,075 1,374,311 Discontinued operations -- 354,344 199,511 -------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, end of period $ 3,314,934 $ 3,314,934 $ 517,121 ======================================================================================================== Ending cash and cash equivalents consists of the following: Continuing operations $ 3,314,934 $ 3,314,934 $ 334,271 Discontinued operations -- -- 182,850 -------------------------------------------------------------------------------------------------------- Total $ 3,314,934 $ 3,314,934 $ 517,121 ======================================================================================================== The accompanying notes are in integral part of these consolidated financial statements. 6

MIV THERAPEUTICS, INC. (A development stage company) Notes to Consolidated Financial Statements February 29, 2008 (Unaudited) Expressed in U.S. Dollars 1. BASIS OF PRESENTATION AND NATURE OF OPERATIONS The accompanying unaudited interim consolidated balance sheets, statements of operations and comprehensive loss, stockholders' equity and cash flows reflect all adjustments, consisting of normal recurring adjustments and other adjustments, that are, in the opinion of management, necessary for a fair presentation of the financial position of MIV Therapeutics, Inc. (the "Company"), at February 29, 2008, and the results of operations and cash flows for the interim periods ended February 29, 2008 and February 28, 2007. Operating results of these interim periods are not necessary indicative of result that may be expected for the full fiscal year ending May 31, 2008. The accompanying unaudited interim consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles using the same accounting policies and methods of application as those disclosed in Note 2 of the Company's annual consolidated financial statements for the year ended May 31, 2007 except as disclosed in Note 2 and accordingly should be read in conjunction with the Company's annual consolidated financial statements for the year ended May 31, 2007. Since inception, the Company has suffered recurring losses, totaling $52,557,153 as of February 29, 2008. To date, management has been able to finance the operations through the issuance of common stock, and through related party loans, in order to meet its strategic objectives. Management plans to continue to seek other sources of financing on favorable terms; however, there are no assurances that any such financing can be obtained on favorable terms, if at all. Management expects to monitor and control the Company's operating costs to a minimum until cash is available through financing or operating activities. There are no assurances that the Company will be successful in achieving these plans. The Company anticipates that losses will continue until such time, if ever, as the Company is able to generate sufficient revenues to support its operations. The Company's ability to generate revenue primarily depends on its success in completing development and obtaining regulatory approvals for the commercialization of its stent technology. The Company's ability to obtain sufficient financing to continue the development of, and if successful, to commence the manufacture and sale of its products under development, if and when approved by the applicable regulatory agencies is uncertain. In view of these conditions, the ability of the Company to continue as a going concern is in substantial doubt and dependent upon achieving a profitable level of operations and on the ability of the Company to obtain necessary financing to fund ongoing operations. Management believes that its current and future plans enable it to continue as a going concern. These unaudited interim consolidated financial statements do not give effect to any adjustments which would be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in the accompanying unaudited interim consolidated financial statements. Reclassifications Certain amounts from prior periods have been reclassified to conform to the current period presentation. These reclassifications had no effect on net loss or loss per common share. 7 2. ACCOUNTING POLICY CHANGE AND NEW ACCOUNTING PRONOUNCEMENTS (a) Adoption of New Accounting Policy In July 2006, FASB issued Interpretation No. 48 "Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109" ("FIN 48"). This Interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with SFAS Statement No. 109, "Accounting for Income Taxes". This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. This Interpretation is effective for fiscal years beginning after December 15, 2006. The Company is subject to taxation in the U.S. and various states and foreign jurisdictions. In addition to U.S., the Company's major taxing jurisdictions include Canada, India and formerly, Israel. Income tax returns filed by the Company and its active subsidiaries that are still subject to examination are MIVI Technologies, Inc. for May 31, 2007 and subsequent years, and Biosync Scientific Pvt. Ltd. for March 31, 2007 and subsequent years. Income tax returns not yet filed by MIV Therapeutics Inc. for the fiscal year ended May 31, 1999, and subsequent years will be subject to examination. Interest and penalties related to tax positions taken in tax returns shall be recorded in other operating expenses in the consolidated statement of operations; however, there were no interest and penalties related to tax positions taken in our tax returns during the first three quarters of fiscal 2008. The Company adopted the provisions of FASB Interpretation No. 48 on June 1, 2007. The adoption of FIN 48 did not result in a cumulative adjustment to equity and there were no unrecognized tax benefits, penalties or interest at the time of, or subsequent to, adoption. (b) New Accounting Pronouncements In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB No. 51". This statement amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest (minority interest) in a subsidiary and for the deconsolidation of a subsidiary. Upon its adoption, effective as of the beginning of the Company's fiscal 2010, noncontrolling interests will be classified as equity in the Company's balance sheet and income and comprehensive income attributed to the noncontrolling interest will be included in the Company's income and comprehensive income. The provisions of this standard must be applied prospectively upon adoption except for the presentation and disclosure requirements. Management is currently evaluating the impact of adopting SFAS No. 160 on the Company's consolidated financial position and results of operations. In December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business Combinations" ("SFAS No. 141(R)"). SFAS No. 141(R) establishes principles and requirements for how an acquirer in a business combination recognizes and measures the assets acquired, liabilities assumed, and any noncontrolling interest in the acquiree. The provisions of SFAS No. 141(R) will become effective for the Company's business combinations occurring on or after June 1, 2009. In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS 159"). SFAS 159 permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected will be reported in earnings. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company currently is assessing the impact of SFAS 159 on its' consolidated financial position or results of operation. 8 2. ACCOUNTING POLICY CHANGE AND NEW ACCOUNTING PRONOUNCEMENTS (continued) (b) New Accounting Pronouncements (continued) In September 2006, FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS 157"). The objective of SFAS 157 is to increase consistency and comparability in fair value measurements and to expand disclosures about fair value measurements. SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements. The provisions of SFAS 157 are effective for fair value measurements made in fiscal years beginning after November 15, 2007. The Company has not determined the effect, if any, that the adoption of SFAS 157 will have on the Company's consolidated financial position or results of operations. In February 2008, the FASB released FSP No. FAS 157-2. FSP No. FAS 157-2 defers the effective date of SFAS 157 for one year for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. It does not defer recognition and disclosure requirements for financial assets and financial liabilities, or for nonfinancial assets and nonfinancial liabilities that are remeasured at least annually. 3. PREPAID EXPENSES Prepaid expenses consisted of the following at: February 29, May 31, 2008 2007 ------------------------- Prepayment to suppliers $251,632 $337,936 Other prepaid expenses 101,178 8,947 ------------------------- $352,810 $346,883 ========================= 4. INVENTORIES Inventories consisted of the following at: February 29, May 31, 2008 2007 --------------------------- Raw materials $257,380 $248,496 Packing materials 10,370 14,392 Work-in-process 76,518 190,854 Finished goods 388,273 109,942 --------------------------- $732,541 $563,684 =========================== 5. LICENSES (a) On February 1, 2003, the Company entered into two license agreements with the University of British Columbia ("UBC") which provides the Company with the worldwide right to use, develop and sublicense coating technology for stents and other medical devices. 9 5. LICENSES (continued) In consideration of granting the licenses, the Company will pay UBC a royalty of 2.5% of related revenue and a royalty ranging from 10% or 15% of sublicense revenue depending upon the sublicensed technology. In addition, various minimum annual royalties, maintenance fees and milestone payments are payable over the period of development. The Company issued 750,000 common shares to UBC as part of the consideration for the grant of the rights. The 750,000 common shares had a fair value of $187,500 and were issued and recorded as research and development expense in the year ended May 31, 2003. On May 19, 2005, the Company signed an amendment to the existing license agreements to include some amendments in the definition of "Field of Use". Also, the royalty terms were amended from 2.5% to range from 2.5% to 5%, depending on the nature of the related revenue. In consideration for the amendments, the Company agreed to issue 200,000 common shares which had a fair value of $74,000 at the time of the amendment. This amount was recorded as research and development expense during the year ended May 31, 2005. The shares were issued in June 2006. (b) On March 15, 2004, the Company entered into a collaborative research agreement with UBC to continue with exploratory research on coating technology for stents for a period from April 1, 2004 to March 31, 2006. During the period of the agreement, various milestone payments were to be made to UBC for the continuation of the research program, estimated to be approximately CAD$220,800 ($164,445). On October 28, 2004, the Company and UBC amended the existing collaborative research agreements and referred to it as Amendment No. 1 and 2. In Amendment No. 1, the contract period of the existing collaborative agreement was changed to April 1, 2004 to November 30, 2004 and total costs to the Company were estimated at CAD$110,400 ($87,633). As of May 31, 2005, the Company had accrued/paid and recorded CAD$110,400 ($87,633) to research and development costs in accordance with Amendment No. 1. In Amendment No. 2, the contract period, work plan and total costs of the existing collaborative agreement as amended by Amendment No. 1 were amended. The contract period was extended from December 1, 2004 to November 30, 2006 and total costs to the Company were estimated at CAD$400,400 ($317,828), being payable over the term of the Agreement at various stipulated intervals. As of May 31, 2007, the Company has paid CAD$400,400 ($317,828) for research and development costs in accordance with Amendment No. 2. The Company obtained financial support of up to CAD$315,000 ($250,040) from the Industrial Research Assistance Program ("IRAP") from the National Research Council Canada. As of February 29, 2008, the Company had received CAD$265,791 ($268,555) from IRAP. (c) On September 14, 2007, the Company and UBC executed the new license agreement with an effective date of September 1, 2007. The form and content will be similar to that of the license agreements entered into in February 2003 (See Note 5(a) above). Upon execution, the stock certificate for the 100,000 common shares, which was issued during the year ended May 31, 2007, was delivered to UBC on September 18, 2007. In consideration of granting the license, the Company will pay UBC a royalty of 2.5% or 5% of related revenue and a royalty ranging from 10% or 15% of sublicense revenue depending upon the sublicensed technology. In addition, various minimum annual royalties, maintenance fees and milestone payments are payable over the period of development. 10 5. LICENSES (continued) (d) On December 1, 2006, the Company extended its collaborative research agreement with UBC to continue with exploratory research on coating technology for stents for a period from December 1, 2006 to November 30, 2007. During the period of the agreement, four equal payments will be made to UBC for a total budget estimate of CAD$274,896 ($241,264). As of May 31, 2007, the Company had paid CAD$137,448 ($120,632) and charged the costs to research and development. On April 4, 2007, the Company and UBC amended the tasks and objectives of the existing collaborative research agreement. On August 29, 2007, the total costs of the project was revised to be estimated at CAD$190,479 ($167,175) from CAD$274,896 ($241,264). The Company paid in full the CAD$190,479 due to UBC for this project during the nine months ended February 29, 2008. (e) On February 21, 2008, the Company entered into a new license agreement with UBC with an effective date of February 1, 2008. The form and content of this agreement is similar to previous license agreements (refer to (a) and (c) in this note). Upon execution of this license agreement in March 2008, the Company paid an initial license fee of CAD$50,000 ($50,560). In consideration of granting the license, the Company will pay UBC a royalty of 5% of related revenue and a 20% royalty for sublicense revenue. In addition, certain milestone payments related to future pre-clinical and clinical trials are payable over the corresponding periods of development and annual license maintenance fees of CAD$30,000 ($29,634) commence on February 1, 2009. The term of this agreement is the later of: (i) twenty years from the effective date, or (ii) the expiry of the last patent licensed under this agreement. 6. PROPERTY AND EQUIPMENT Property and equipment consisted of the following at: February 29, May 31, 2008 2007 --------------------------- Laboratory equipment $2,500,369 $1,972,255 Land 260,784 21,483 Furniture and fixtures 240,886 107,163 Computer equipment 240,392 173,191 Building 163,859 12,450 Leasehold improvements 49,158 49,158 Construction-in-progress -- 85,282 --------------------------- 3,455,448 2,420,982 Less: accumulated depreciation 1,452,812 1,167,972 --------------------------- $2,002,636 $1,253,010 =========================== Depreciation expense for the three and nine months ended February 29, 2008 was $114,625 and $284,838 respectively (2007 - $31,706 and $77,222). Of these amounts, $42,739 and $99,893 (2006 - nil) has been included in research and development costs in the statements of operations for the three and nine months ended February 29, 2008, respectively. In addition, $47,347 and $142,961 (2006 - nil) has been included in cost of sales for the three and nine months ended February 29, 2008, respectively. 11 7. CE MARK LICENSE On February 16, 2007, the Company completed the acquisition of all of the issued and outstanding shares of Biosync Scientific Pvt. Ltd. ("Biosync"). The Company allocated the purchase price to the assets acquired and liabilities assumed based on their fair values. The purchase price in excess of the net tangible assets acquired totaling $1,421,283 was then allocated to the identified intangible asset being the CE Mark license. The fair value of the CE Mark license was based on a discounted future net cash flows analysis that used information and assumptions provided by the Company's management. The CE Mark license is being amortized over a period of 10 years. The following is a summary of the amortization of the CE Mark license at February 29, 2008: CE Mark license $1,421,283 Less: accumulated amortization 148,050 ---------- $1,273,233 ========== 8. LOAN PAYABLE At May 31, 2007, the Company had a loan payable totaling $525,000 which bore interest at 12.5% per annum. Of this amount, $400,000 was due on June 15, 2007 and $125,000 was due on July 13, 2007. On June 27, 2007, the due date of the $400,000 note payable was extended to July 31, 2007. An additional 150,000 non-transferable share purchase warrants to acquire one common share at an exercise price of $0.60 per share for a period of three years were issued to the lender. The warrants had an estimated fair value of $16,405 using the Black-Scholes option pricing model. The assumptions used in the Black-Scholes model were: volatility: 54.24%, discount rate: 4.91%, dividend: nil and expected life of one year. The Company repaid the two loans in full and accrued interest during the quarter ended August 31, 2007. 9. STOCKHOLDERS' EQUITY (a) Common Stock (i) On June 6, 2007, the Company issued 1,790,000 common shares pursuant to a private placement completed during the previous fiscal year. At May 31, 2007, the shares were recorded as common stock issuable in the statement of stockholder's equity. (ii) On July 9, 2007, the Company completed a brokered private placement of 25,100,000 units at a price of $0.50 per unit for total proceeds of $11,696,765 (net of finder's fee of $753,000 and legal fees of $100,235). Each unit is comprised of one common share and one-half of one share purchase warrant. Each warrant entitles the holder to purchase one additional common share at a price of $0.55 per share for a period of up to five years. The warrants had an estimated fair value of $2,034,048 using the Black-Scholes option pricing model. The assumptions used in the Black-Scholes model were: volatility: 54.24%, discount rate: 5.03%, dividend: nil and expected life of one year. In connection with the private placement, the Company issued to the finder 251,000 common shares and 753,000 share purchase warrants. Each warrant entitles the finder to purchase one common share at an exercise price of $0.55 per share for a period of up to five years. The 753,000 warrants had an estimated fair value of $122,043 using the Black-Scholes option pricing model. The assumptions used in the Black-Scholes model were: volatility: 54.24%, discount rate: 5.03%, dividend: nil and expected life of one year. 12 9. STOCKHOLDERS' EQUITY (continued) (a) Common Stock (continued) The Company filed a registration statement with the United States Securities and Exchange Commission to register for resale the shares and shares underlying the warrants issued under the private placement; however, it was not declared effective within four months from the date of the issuance of the units. As a result, the Company was required to pay to the holders of the units an amount in cash, as liquidated damages, of $125,500 which is equal to 1% of the aggregate purchase price paid by such holders for the units. This amount was charged to operations in the current quarter. (iii) On August 31, 2007, the Company completed a private placement of 525,000 units at a price of $0.50 per unit for total proceeds of $252,212 (net of finder's fee of $5,385 and legal fees of $4,903). Of this amount, $32,000 was received in May 2007 and recorded as common stock issuable. Each unit is comprised of one common share and one share purchase warrant. Each warrant entitles the holder to purchase one additional common share at a price of $0.75 per share for the 475,000 warrants and $0.70 for the 50,000 warrants for a period of up to two years from registration of the underlying warrant shares. The 525,000 common shares were recorded under common stock issuable in the statement of stockholder's equity at August 31, 2007 but were issued during the quarter ended November 30, 2007. The 475,000 warrants had an estimated fair value of $14,055 and the 50,000 warrants had an estimated fair value of $1,797 using the Black-Scholes option pricing model. The assumptions used in the Black-Scholes model were: volatility: 54.24%, discount rate: 4.19%, dividend: nil and expected life of one year. (iv) On August 31, 2007, the Company issued 400,000 share purchase warrants as finder's fee in connection with a private placement completed in December 2006. The warrants had an estimated fair value of $26,070 using the Black-Scholes option pricing model. The assumptions used in the Black-Scholes model were: volatility: 54.24%, discount rate: 4.19%, dividend: nil and expected life of one year. (v) During the nine months ended February 29, 2008, 150,000 options with an average exercise price of $0.26 were exchanged for 150,000 common shares for total gross proceeds of $38,500. These shares were recorded as common stock issuable as at May 31, 2007. During the nine months ended February 29, 2008, 345,000 stock options have been exercised on a cashless basis, The 345,000 options converted to 165,715 common shares. (vi) During the nine months ended February 29, 2008, the Company issued an aggregate of 258,142 common shares for research and development services with a fair value of $148,686. Of these shares, 14,755 were recorded as common stock issuable at May 31, 2007. In addition, 750,000 common shares were issued to the principal vendor of BioSync in accordance with his executive services agreement (refer to Note 12). In December 2007, the Company issued 100,000 common shares were issued to a former consultant with a fair value of $39,000. In January 2008, 116,345 common shares were granted to two of the Company's senior executives with an aggregate fair value of $44,218. 13 9. STOCKHOLDERS' EQUITY (continued) (a) Common Stock (continued) (vii) In September 2003, the Company placed 6,000,000 common shares to a financial custodian acting as trustee pursuant to a listing of the Company's shares on the Frankfurt Stock Exchange. The Company was then conducting a Regulation S ("Reg S") offering through the facilities of the Berlin Stock Exchange to raise capital in mainly German speaking countries. The trustee was to receive a fee of 3% of the total number of the shares held in trust was paid in equal installments of 30,000 common shares per month over a ten month period, assuming the maximum offering of up to 10,000,000 common shares were sold. The shares may only be traded on German stock exchanges pursuant to Reg S. At February 29, 2008, 2,500,000 Reg S shares were held in trust by the financial custodian and remain available for financing purposes. However, the Company's management is discussing the return of these shares with appropriate parties and anticipates that they will be returned to treasury prior to the end of the current fiscal year. (b) Warrants The following table summarizes information about the warrants issued by the Company. All regular warrants and Series A, B and C warrants are exercisable on a one-for-one basis into common shares. Number of Weighted Average Shares Exercise price ----------- -------------- Balance, May 31, 2007 - Regular 22,354,691 $ 0.65 Balance, May 31, 2007 - Series "A" 1,092,111 0.66 Balance, May 31, 2007 - Series "B" 3,904,998 0.70 Balance, May 31, 2007 - Series "C" 119,305 0.66 ----------- -------------- Balance, May 31, 2007 27,471,105 0.65 Regular: Issued - private placement 13,075,000 0.56 Issued - finder's fee 1,293,000 0.55 Issued - loan (Note 8) 150,000 0.60 Expired (71,429) 0.75 ----------- -------------- Series "B": Expired (3,904,998) 0.70 ----------- -------------- Balance, February 29, 2008 - Regular 36,801,262 0.61 Balance, February 29, 2008 - Series "A" 1,092,111 0.66 Balance, February 29, 2008 - Series "B" -- -- Balance, February 29, 2008 - Series "C" 119,305 0.66 ----------- -------------- Balance, February 29, 2008 38,012,678 $ 0.61 ----------- --------------

During the three months ended February 29, 2008, the board of directors approved an extension to the expiry date of 910,000 warrants. The incremental fair value of the extended warrants was $21,100 and was charged to operations. The assumptions used in the Black-Scholes model were: volatility: 81.78%, discount rate: 2.84%, dividend: nil and expected life of one year. In December 2007, the Company issued 140,000 warrants as a finder's fee in connection with previously completed private placements. The warrants have an exercise price of $0.55 and expire on December 10, 2010. The warrants had an estimated fair value of $35,100 using the Black-Scholes option pricing model. The assumptions used in the calculation were: volatility: 99.9%, discount rate: 3.19%, dividend: nil and expected life of 2 years. 14 9. STOCKHOLDERS' EQUITY (continued) (c) Stock Options The Company's incentive stock options plan provides for the grant of incentive stock options for up to 25,000,000 common shares to employees, consultants, officers and directors of the Company. Incentive benefits granted under the plan may be either incentive stock options, non-qualified stock options, stock awards, restricted shares or cash awards. Options are granted for a term not to exceed ten years from the date of grant. Stock options granted generally vest over a period of two years. As of February 29, 2008, 353,701 options remain available under the plan. During the nine months ended February 29, 2008, the Company granted an aggregate of 4,391,300 stock options to employees and consultants of the Company. Each option entitles its holder to acquire one common share of the Company at a prices ranging from $0.55 to $0.65 per share, vests over a specified time and expires up to two to five years from date of grant. During the nine months ended February 29, 2008, the board of directors granted options to acquire 8,000,000 common shares under an employment agreement with an executive officer of the Company. Since the available options covered by the existing stock option plan was 353,701, the estimated fair value of this share-based award will not be recognized for accounting purposes until a new stock option plan is approved by the Company's shareholders. The Company's management anticipates such a plan to be established prior to the end of the current fiscal year. During the nine months ended February 29, 2008, the board of directors approved an extension of 150,000 options from expiry date of November 30, 2007 to November 30, 2010. As a result of the extension, the Company recognized an additional $48,400 of consulting fees in the second quarter. The following weighted average assumptions were used in determining stock-based compensation costs under the Black-Scholes option pricing model: Nine months ended Three months ended February 29, February 28, February 29, February 28, 2008 2007 2008 2007 ------------------------------------------------------ Expected volatility 112.03% 132.16% 113.03% Nil Risk-free interest rate 3.17% 5.01% 2.83% Nil Expected life (years) 4.54 5.0 4.80 Nil Dividend yield Nil Nil Nil Nil Weighted average fair value of options granted $0.30 $0.58 $0.29 Nil ======================================================

The expected volatility is based on the Company's historical stock prices. Computation of expected life was estimated after considering the contractual terms of the stock-based award, vesting schedules and expectations of future employee behavior. The interest rate for period within the contractual life of the award is based on the U.S. Treasury yield curve in effect at the time of grant. Option pricing models require the use of highly subjective estimates and assumptions including the expected stock price volatility. Changes in the underlying assumptions can materially affect the fair value estimates and therefore, in management's opinion, existing models may not necessarily provide reliable measure of the fair value of the Company's stock options. Compensation cost related to the stock options granted to employees during the nine and three months ended February 29, 2008 was charged to operations at the awards' fair value of $1,468,023 and $893,920 (2007 - $487,304 and $334,273), respectively. 15 9. STOCKHOLDERS' EQUITY (continued) (c) Stock Options (continued) A summary of the weighted average fair value of stock options granted during the nine months ended February 29, 2008 is as follows: ----------------------------------- Weighted Weighted Number of Average Average Options Exer. Price Fair Value ----------------------------------- Exercise price equals market price at grant date: 610,000 $0.55 $0.55 Exercise price less than market price at grant date: - $Nil $Nil Exercise price greater than market price at grant date: 3,781,300 $ 0.55 $ 0.37 =================================== Summary of stock option information for the nine months ended February 29, 2008 is as follows: ----------------------------------- Weighted Aggregate Average Intrinsic Shares Exer. Price Value ----------------------------------- Options outstanding at May 31, 2007 20,039,999 $ 0.49 Options granted 4,391,300 0.55 Options exercised (Note 9(a)(v)) (345,000) 0.32 Options expired (980,000) 0.60 ----------------------------------- Options outstanding at February 29, 2008 23,106,299 $ 0.50 $1,634,500 =================================== Exercisable at February 29, 2008 19,021,189 $ 0.48 $1,591,500 =================================== The following summarizes information about the stock options outstanding and exercisable at February 29, 2008: Options Outstanding Options Exercisable ------------------------------------------------------------------------ Average Weighted Weighted Range of Number of Remaining Average Number of Average Exercise Options Contractual Exercise Options Exercise Price Outstanding Life (year) Price Exercisable price ------------------------------------------------------------------------ $0.17 700,000 0.68 $0.17 700,000 $0.17 $0.20 1,250,000 1.96 $0.20 1,250,000 $0.20 $0.21 500,000 0.14 $0.21 500,000 $0.21 $0.30 1,620,000 1.49 $0.30 1,620,000 $0.30 $0.40 3,815,000 3.21 $0.40 3,815,000 $0.40 $0.50 350,000 1.41 $0.50 350,000 $0.50 $0.55 5,325,000 4.29 $0.55 3,875,004 $0.55 $0.60 7,050,000 5.46 $0.60 5,550,000 $0.60 $0.62 300,000 4.24 $0.62 140,000 $0.62 $0.64 50,000 3.42 $0.64 50,000 $0.64 $0.65 1,656,299 4.25 $0.65 681,185 $0.65 $0.67 100,000 3.29 $0.67 100,000 $0.67 $0.75 200,000 3.15 $0.75 200,000 $0.75 $0.80 140,000 2.79 $0.80 140,000 $0.80 $1.10 50,000 2.73 $1.10 50,000 $1.10 ------------------------------------------------------------------------ $0.17 - $1.10 23,106,299 3.87 $0.50 19,021,189 $0.48 ======================================================================== Stock-based compensation expense is charged to operations over the vesting period of the options using the straight-line amortization method.

16 9. STOCKHOLDERS' EQUITY (continued) (c) Stock Options (continued) The aggregate intrinsic value of the Company's stock options is calculated as the difference between the exercise price of the options and the quoted price of the common shares that were in-the-money. The aggregate intrinsic value of the Company's stock options exercised under the Plan was $101,050 and $177,490 for the nine months ended February 29, 2008 and February 28, 2007, respectively, determined at the date of option exercise. As at February 29, 2008, there was approximately $292,716 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. This cost is expected to be recognized over a period of 24 months. The estimated fair value of stock options vested during 2008 and 2007 was $1,196,376 and $1,238,537, respectively. During the three months ended February 29, 2008, $404,502 and $Nil (2007 - $Nil and 32,379) of stock-based compensation pertains to options granted and extended, respectively, to research and development personnel. During the nine months ended February 29, 2008, $777,788 and $Nil (2007 - $183,491 and $57,553) of stock-based compensation pertains to options granted and extended, respectively, to research and development personnel. 10. SALE OF SAGAX, INC. On November 13, 2007, the Company entered into a definitive share purchase agreement to sell all of its issued and outstanding shares of SagaX Inc. ("SagaX"), its wholly-owned subsidiary, to Shimoco, LLC ("Purchaser"). Dr. Dov Shimon is a director of each of, SagaX and the Purchaser, and has been serving as the chief executive officer of SagaX since inception and is the owner and manager of the Purchaser. The Company sold SagaX due to its inability to meet certain previously established performance objectives. In exchange for the consideration described below, the Company paid the Purchaser $210,000 for working capital purposes in order to meet certain of SagaX's previously disclosed and bona fide current liabilities; with any said working capital advances to simply form part of the overall SagaX's indebtedness to the Company. Total consideration due to the Company is as follows: i.) the repayment by the Purchaser and SagaX an aggregate of $4 million in prior loans and associated indebtedness which have been advanced and undertaken by the Company in and to SagaX ("SagaX's Indebtedness") in accordance with any future private or public equity financing of SagaX subsequent to the closing of the purchase agreement (the "Closing"). In this regard, and until payment in full of SagaX's Indebtedness, SagaX's Indebtedness will be secured, contemporaneously with the closing, by way of a senior, subordinated (subordinated only to SagaX's existing banking indebtedness), fixed and floating charge registered over all of the assets of SagaX; and ii.) the payment by the Purchaser and SagaX to the Company of a royalty fee equating to 8% of net sales, other than from sub-licenses, in respect of gross sales from any product associated or related to SagaX's present intellectual property under any existing patent or patent-pending applications, and of any other benefit, directly or indirectly collected or received, whether for cash or credit or by way of any benefit, advantage, equity, or concession from the manufacturing, distribution, marketing, contracting, joint venturing, leasing, equity participation or any other activity in relation to the said products. In addition to the consideration above, both prior to, in conjunction with and subsequent to the Closing, the Purchaser and SagaX will also be responsible for paying the Company a bonus (the "Bonus") equal to 10% of any consideration in any form which is received by the Purchaser and/or SagaX any source and from any transaction, or a series of related transactions, at anytime and which is in anyway associated with a change in control of SagaX at anytime while the royalty hereinabove remains due and payable by the Purchaser and SagaX to the Company. 17 10. SALE OF SAGAX, INC. (continued) Effective on the execution date of the purchase agreement, Dr. Shimon resigned as a director of the Company and terminated his existing consulting agreement and arrangement with the Company and, consequent upon such resignation and termination, to have no further claim against the Company as a previous director of, officer of or consultant to the Company. The completion of the transactions comprising the Company's proposed purchase and sale under this agreement is subject to a number of conditions including, but not limited to: (i) if required, the specific ratification of the terms and conditions of this agreement by each of the Company's Board of Directors and of the General Shareholder's Assembly of the Purchaser (collectively, the "Ratification"); (ii) the completion by each of the Company and the Purchaser of an initial due diligence and operations review of the other party's respective businesses and operations within five business days of the prior satisfaction of the Ratification; (iii) if required under applicable corporate and securities laws, the receipt of all necessary approvals from any regulatory authority having jurisdiction over the transactions contemplated by this agreement on or before November 30, 2007; and (iv) the Closing of the proposed sale prior to December 31, 2007. On December 28, 2007, the Company and the Purchaser completed the Closing of the transactions contemplated by the purchase agreement and the Company paid the remaining $95,000 balance due, which is part of the $210,000 payment, to the Purchaser. The Company has reflected SagaX's results of operations for all periods presented in the consolidated statements of operations and cash flows as discontinued operations. Upon Closing, the carrying value of SagaX's assets and liabilities were as follows: Assets Cash $ 48,802 Prepaid expenses 48,868 --------- Total current assets 97,670 Property and equipment, net 51,760 --------- Total assets $ 149,430 ========= Liabilities Accounts payable and accrued liabilities $ 312,962 ========= Total liabilities in excess of total assets $ 163,532 Less: final payment to Purchaser (95,000) --------- Gain on disposal of SagaX $ 68,532 ========= As a result of the assets transferred to and liabilities assumed by the Purchaser, we recognized a gain of the disposal of SagaX of $68,532. The income tax effect of this transaction was nominal and no provision has been recorded. A full valuation allowance has been provided on the $4 million payment due from the Purchaser as the repayment is solely dependent on future successful operations of the business of SagaX. No royalty fee income has been accrued because the Purchaser has not demonstrated that any such product sales can be achieved in the immediate future. Further, no accrual for a bonus receivable has been recorded because there was not sufficient information available to determine such an amount and the realization of the bonus is not probable. 18 11. TERMINATION OF THE PROPOSED ACQUISITION OF VASCORE MEDICAL (SUZHOU) CO., LTD. In light of the Company's inability to complete its final due diligence and satisfy all remaining conditions precedent to the proposed closing of the terms and conditions of that previously disclosed equity transfer agreement, dated for reference effective on September 5, 2006, as previously entered into among the Company, each of Chimex Hongkong Incorporated Limited and Vascore Scientific Co., Ltd. (collectively, the "Vendors") and Vascore Medical (Suzhou) Co., Ltd. ("Vascore Medical"), the Company terminated the Equity Transfer Agreement to acquire the various equity interests and shareholders' loans of Vascore Medical from the Vendors effective as at August 31, 2007 (the "Termination"). As a consequence, the Company has informed each of the Vendors and Vascore Medical of the Termination and thereby requested that any previous government approved ownership and Board appointments to Vascore Medical be immediately reverted to the direction of the Vendors. In October 2007, the Company and certain senior officers and directors were served with summons and complaint documents for an action in New York state court alleging breach of contract, fraud, fraudulent concealment, negligent misrepresentation, unjust enrichment and conspiracy claims in connection with the Termination. The Company believes that this Action was brought improperly and intends to seek a stay of this Action pending arbitration in the appropriate forum, where the Company intends to vigorously defend itself. 12. RELATED PARTY TRANSACTIONS The related party transactions not disclosed elsewhere in these financial statements are disclosed as follows. These transactions, recorded at exchange amounts agreed to by all parties. During the nine months ended February 29, 2008, the Company paid or accrued $1,554,419 (2007 - $793,419) of management and consulting fees to four directors and two officers (2007 - 2 officer) of the Company. Of this amount, $242,686 (2007 - $110,025) was charged to research and development. Included in accounts payable is $nil at February 29, 2008 (2007 - $Nil). During the three months ended February 29, 2008, the Company paid or accrued $460,572 (2007 - $360,423) of management and consulting fees to four directors and two officers (2007 - 2 officer) of the Company. Of this amount, $121,704 (2007 - $68,387) was charged to research and development. Included in the amount of $1,554,419 is the accrued amount of $601,251 due to the Chief Operating Officer and President of Biosync which will be issued in common stock on time periods stipulated in the agreement as follows: The Company and Biosync entered into an executive services agreement with the principal vendor, being Mr. Rajesh Vaishnav, on February 16, 2007. Mr. Vaishnav will assume the position of Chief Operating Officer and President of Biosync under such commercially competitive compensation terms which will include, but not limited to, (i) a monthly fee of $12,000 plus monthly allowance of $500, (ii) stock options of up to 1,000,000 common shares at an exercise price of $0.60 for a period of not less than ten years from the date of grant and, (iii) an aggregate of up to 4,000,000 common shares with an issuance price of $0.50. Of the 4,000,000 common shares, 2,500,000 will be based on the achievement of certain milestones as outlined in the agreement, of which 750,000 common shares were issued upon receiving the CE Mark License and the other 1,500,000 common shares to be given in four equal installments over the two-year term of the agreement. Installments of 375,000 common shares were issued on September 28, 2007 and February 19, 2008. The fair value of the options and common shares are treated as stock-based compensation expenses and amortized over the service period. At February 29, 2008, amounts due from the employees of a subsidiary of the Company totaled $11,306 (May 31, 2007 - $34,775). These amounts are unsecured, non-interest bearing and will be repaid by periodic deduction of future wages. 19 12. RELATED PARTY TRANSACTIONS (continued) On August 31, 2007, the $100,000 related party loan due to the Company's Chief Executive Officer was fully repaid. 13. COMMITMENTS AND CONTINGENCIES (a) The Company has obligations under a long-term premises lease that expire in December 2010. The approximate aggregate minimum rent payments for the annual periods ending February 28 are as follows: 2009 $ 115,709 2010 115,709 2011 96,424 --------------- $ 327,842 =============== The Company received free rent, including property maintenance and taxes, for the months of November to December 2005 and free basic rent for the months of January to February 2006 for total free rent of $40,404. This amount was recorded under deferred lease inducement with a current portion of $8,081 (May 31, 2007 - $8,081) and long-term portion of $13,468 (May 31, 2007 - $19,529) and is being amortized over the term of the lease. During the nine months ended February 29, 2008 and February 28, 2007, amortization of $6,061 was recorded as a reduction of rent expense in the statement of operations. Rent expense for the nine and three months ended February 29, 2008 was $139,680 and $46,990, respectively (2007 - $117,271 and $31,180). Of these amounts, $69,308 and $14,576 was charged to research and development for the nine and three months ended February 29, 2008, respectively. (b) On November 18, 2002, a lawsuit against the Company was filed in the Supreme Court of British Columbia. The statement of claim, arising from a settlement agreement dated September 14, 2001, seeks the exchange of 3,192,399 common shares of the Company for 3,192,399 shares in the capital of one of the Company's subsidiaries or, alternatively, damages and costs. The Company and M-I Vascular Innovations, Inc. ("M-I") attended a court hearing in chambers during April 2003 on a summary trial application by the plaintiff for an order for a declaration of specific performance that the plaintiff is entitled to an exchange of 3,192,399 common shares of M-I for 3,192,399 common shares of the Company pursuant to the settlement agreement entered into on September 14, 2001. The plaintiff was granted the relief sought at the summary trial and the Company was ordered to perform the share exchange. On May 16, 2003, the Company delivered a Take-Over Bid Circular (the "Circular") to the plaintiff, offering to exchange its common shares of M-I for shares in the Company pursuant to British Columbia securities laws and regulations. In late May 2003, after the judgment was received, the Company asked the plaintiff to submit its M-I share certificates and fill in the required forms pursuant to the Circular, so that the Company could comply with the judgment and exchange its shares in accordance with British Columbia securities laws and regulations. On December 29, 2004, the Company issued 3,192,399 common shares to exchange for 3,192,399 common shares of M-I on a one-for-one basis. These shares were issued to comply with an order of the Supreme Court of British Columbia dated May 20, 2003. On May 26, 2005, the Company issued 17,000 common shares to exchange for 17,000 common shares of M-I on a one-for-one basis. In a counterclaim filed in the Supreme Court of British Columbia, the Company continues to dispute the plaintiff's entitlement to the 3,192,399 M-I shares and any Company shares that he may received pursuant to court order. No gain or loss provisions have been provided as of February 29, 2008 as the outcome of this legal proceeding is uncertain at this time. 20 14. GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses consisted of the following: Nine months ended Three months ended February 29, February 28, February 28, February 29, 2008 2007 2008 2007 --------------------------------------------------------- (as restated) (as restated) Legal $ 451,585 $ 384,929 $ 162,297 $ 139,930 Public relations, financing and corporate development 550,137 808,167 168,924 344,930 Management fees 2,122,893 1,054,757 821,087 363,384 Consulting 354,598 310,241 55,647 237,558 Audit 479,773 137,853 71,273 16,954 Operating expenses 1,412,363 967,333 426,427 324,179 --------------------------------------------------------- $ 5,371,349 $ 3,663,280 $ 1,705,655 $ 1,426,935 ========================================================= During the nine months ended February 29, 2008, general and administrative expenses include $17,135 (2007 - $124,151) and $221,298 (2007 - $51,974) of amortized deferred compensation in public relations and consulting, respectively. $751,553 and $48,400 (2007 - $495,284 and $142,255) of stock-based compensation pertains to options granted and extended, respectively, to administrative personnel. During the three months ended February 29, 2008, general and administrative expenses include $6,520 (2006 - Nil) and $52,369 (2007 - 39,819) of amortized deferred compensation in public relations and consulting, respectively. $524,956 and $nil (2007 - $147,949 and Nil) of stock-based compensation pertains to options granted and extended, respectively, to administrative personnel. 15. SUPPLEMENTAL CASH FLOW INFORMATION ------------------------------------------ Period from inception (January 20, Nine months ended 1999) to February 29, February 28, February 29, --------------------------- 2008 2008 2007 ------------------------------------------ SUPPLEMENTAL CASH FLOW INFORMATION: Interest paid in cash $ 59,740 $ 7,401 $ 11,041 ========================================== SUPPLEMENTAL NON-CASH TRANSACTIONS: Debt settlement with shares $ 621,375 $ -- $ -- Conversion of convertible debentures and accrued interest to common shares 740,810 -- -- Shares issued for finders' fees 387,468 150,600 -- ========================================== 21 16. SEGMENTED INFORMATION The Company operates in one segment which comprises the research, manufacture and development of bio-compatible stent coatings for implantable medical devices and drug-delivery technologies. The following is a summary of the Company's geographical information as of February 29, 2008 and for the periods ended February 29, 2008 and February 28, 2007: Discontinued Canada India Operations Total NINE MONTHS ENDED FEBRUARY 29, 2008 Net revenue $ -- $ 854,168 $ -- $ 854,168 Gross profit -- (113,948) -- (113,948) Depreciation and amortization 109,580 283,557 7,747 400,884 Net loss 8,660,928 892,210 532,423 10,085,561 THREE MONTHS ENDED FEBRUARY 29, 2008 Net revenue -- 302,527 -- 302,527 Gross profit -- (172,525) -- (172,525) Depreciation and amortization 39,811 102,596 142,407 Net loss (income) 3,210,986 384,535 (68,532) 3,526,989 AS OF FEBRUARY 29, 2008 Total assets 4,050,032 3,772,203 -- 7,822,235 Additions to property and equipment 505,265 625,412 937 1,131,614 CE Mark license -- 1,273,233 -- 1,273,233 NINE MONTHS ENDED FEBRUARY 28, 2007 Net revenue -- 1,461 -- 1,461 Gross profit -- 815 -- 815 Depreciation and amortization 72,486 9,308 8,772 90,566 Net loss 5,738,464 87,089 702,725 6,528,278 THREE MONTHS ENDED FEBRUARY 28, 2007 Net revenue -- 1,461 -- 1,461 Gross profit -- 815 -- 815 Depreciation and amortization 26,970 9,308 3,287 39,565 Net loss 2,014,044 87,089 282,158 2,383,291

22 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INFORMATION REGARDING FORWARD-LOOKING STATEMENTS The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Such "forward-looking" information is included in this Form 10-Q, including the MD&A section, and in other materials filed or to be filed by the Company with the Securities and Exchange Commission (as well as information included in oral statements or other written statements made or to be made by the Company). Forward-looking statements include all statements based on future expectations and specifically include, among other things, all statements relating to our expectations and beliefs with respect to the uses and adequacy of our capital resources. Any statements that are not based upon historical facts, including the outcome of events that have not yet occurred and our expectations for future performance, are forward-looking statements. The words "potential," "believe," "estimate," "expect," "intend," "may," "could," "will," "plan," "anticipate," and similar words and expressions are intended to identify forward-looking statements. Such statements are based upon the current beliefs and expectations of our management. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ from those expressed in any forward-looking statements made by or on behalf of the Company. These risks and uncertainties include, among others, our ability to successfully implement our corporate strategy and successfully integrate our newly-acquired subsidiary in India and the accuracy of management's beliefs with respect to the uses and adequacy of our capital resources. The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date of this Quarterly Report. We expressly disclaim any intent or obligation to update any forward-looking statements to reflect subsequent events or circumstances. OVERVIEW The following discusses the Company's financial condition and results of operations for the three and nine months ended February 29, 2008 based upon the Company's unaudited interim consolidated financial statements, included in Item 1 of Part 1 of this Quarterly Report, which have been prepared in accordance with United States generally accepted accounting principles. It should be read in conjunction with the Company's audited consolidated financial statements and the notes thereto and other financial information included in the Company's Form 10-K (as amended) for the fiscal year ended May 31, 2007. MIV Therapeutics Inc. (the "Company", "MIVT", "we", "us", or "our") is a research and development company pursuing the commercialization of the next generation of biocompatible coatings for coronary stents and other medical devices and advanced drug delivery systems with the intent of providing healing solutions for cardiovascular disease and other medical conditions. Pursuant to a license agreement from the University of British Columbia (UBC), we have developed unique coating technologies that utilize Hydroxyapatite (HAp) for application on medical devices and drug delivery systems. Simultaneously, alternative polymer-free coatings and advanced polymeric coatings with enhanced biocompatibility and bioavailability were developed by MIVT's R&D team at its wholly-owned subsidiary, MIVI Technologies Inc. MIVT proprietary coating and drug delivery technologies are protected by 50 patents and patent applications worldwide at the time of preparing this document. On February 16, 2007, we completed the acquisition of all of the issued and outstanding shares of BioSync Scientific Pvt. Ltd. ("BioSync Scientific"), a corporate body subsisting under and registered pursuant to the laws of India and is presently engaged, among other things, in the business of designing, manufacturing and marketing coated and non-coated vascular stents and related accessories. Accordingly, the financial information presented below may not be comparable from period to period. 23 Recent Developments On November 13, 2007, the Company entered into a definitive share purchase agreement to sell all of its issued and outstanding shares of SagaX Inc. ("SagaX"), its wholly-owned subsidiary, to Shimoco, LLC ("Purchaser"). Dr. Dov Shimon, a former director of the Company, is a director of each of, SagaX and the Purchaser, founded and has been serving as the chief executive officer of SagaX since inception and is the owner and manager of the Purchaser. The Company sold SagaX due to the inability of SagaX to meet certain previously established performance objectives. In exchange for the consideration described below, the Company paid the Purchaser $210,000 for working capital in order to meet certain of SagaX's previously disclosed and bona fide current liabilities; with any said working capital advances to simply form part of the overall SagaX's indebtedness to the Company. Total consideration to be paid to the Company is as follows: i) the repayment by the Purchaser and SagaX an aggregate of $4 million in prior loans and associated indebtedness which have been advanced and undertaken by the Company in and to SagaX ("SagaX's Indebtedness") in accordance with any future private or public equity financing of SagaX completed subsequent to the closing of the purchase agreement (the "Closing"). In this regard, and until payment in full of SagaX's Indebtedness, SagaX's Indebtedness will be secured by way of a senior, subordinated (subordinated only to SagaX's existing banking indebtedness), fixed and floating charge registered over all of the assets of SagaX; and ii) the payment by the Purchaser and SagaX to the Company of a royalty fee equating to 8% of net sales, other than from sub-licenses, in respect of gross sales from any product associated or related to SagaX's present intellectual property under any existing patent or patent-pending applications, and of any other benefit, directly or indirectly collected or received, whether for cash or credit or by way of any benefit, advantage, equity, or concession from the manufacturing, distribution, marketing, contracting, joint venturing, leasing, equity participation or any other activity in relation to the said products. In addition to the consideration above, both prior to, in conjunction with and subsequent to the Closing, the Purchaser and SagaX will also be responsible for paying the Company a bonus (the "Bonus") equal to 10% of any consideration in any form which is received by the Purchaser and/or SagaX from any source and from any transaction, or a series of related transactions, at anytime and which is in anyway associated with a change in control of SagaX at anytime while the royalty hereinabove remains due and payable by the Purchaser and SagaX to the Company. Effective on the execution date of the purchase agreement, Dr. Shimon resigned as a director of the Company and terminated his existing consulting agreement and arrangement with the Company and, consequent upon such resignation and termination, has no further claim against the Company as a previous director of, officer of or consultant to the Company. On December 28, 2007, the Company and the Purchaser completed the Closing of the transactions contemplated by the purchase agreement and the Company paid the $95,000 balance due, which was part of the $210,000 payment, to the Purchaser. The Company accounted for the sale of SagaX as a divestiture in the current quarter. The $68,532 gain on the sale of SagaX was a result of the carrying values of its liabilities exceeding its assets. A full valuation allowance has been provided on the $4 million payment due from the Purchaser as the repayment is solely dependent on future successful operations of the business of SagaX. No royalty fee income has been accrued because the Purchaser has not demonstrated that any such product sales can be achieved in the immediate future. Further, no accrual for a bonus receivable has been recorded because there was not sufficient information available to determine such an amount and the realization of the bonus is not probable. 24 DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION NINE MONTHS ENDED FEBRUARY 29, 2008 COMPARED TO FEBRUARY 28, 2007 Revenues. Revenues from the sale of stents were $854,168 during the nine months ended February 29, 2008. Sales were attributed to stents sold by Biosync Scientific in India, which we acquired during the third quarter of fiscal 2007. Cost of sales during nine months ended February 29, 2008 were $968,116 resulting in a gross loss of $113,948. The gross loss includes depreciation expense of approximately $143,000 in cost of sales. Revenues for the corresponding period in 2007 were $1,461 which resulted in a gross profit of $815. The comparative period in 2007 only reflected the revenues of Biosync Scientific from February 16 through February 28, 2007. We expect that revenues will continue to grow throughout the remainder of the fiscal year as a distribution network has recently been established. General and Administrative Expenses General and administrative expenses increased to $5,371,349 during the nine months ended February 29, 2008, from $3,663,280 during the nine months ended February 28, 2007. The majority of the overall increase is attributable to an increase in management fees due primarily to the recognition of share-based and also to cash compensation to Biosync Scientific. Consulting fees increased during the nine months ended February 29, 2008 compared to the same period in 2007 as a result of a new investor relations consulting agreement. Audit and legal fees increased in the current period due to the Company's expanded operations in India, completion of share registration statements and other regulatory filings, and accounting work related to the acquisition of Biosync Scientific. Operating expenses increased significantly in the current period primarily due to the increased activity related to our ongoing clinical trial and preparation for further trials which we anticipate will begin before the end of the current fiscal year. These increases were partially offset by a significant drop in public relations, financing and corporate development costs in the current nine month period. This was a result of the expiry of contracts and certain share-based awards being fully amortized in the first quarter of fiscal 2008. The following table compares the general and administrative expenses for the nine months ended February 29, 2008 and February 28, 2007: -------------------------------------------------------------------------------- 2008 2007 $Increase/ %Increase/ (Decrease) (Decrease) -------------------------------------------------------------------------------- Legal $ 451,585 $ 384,929 $ 66,656 17% -------------------------------------------------------------------------------- Public relations, financing and corporate development 550,137 808,167 (258,030) (32)% -------------------------------------------------------------------------------- Management fees 2,122,893 1,054,757 1,068,136 101% -------------------------------------------------------------------------------- Consulting 354,598 310,241 44,357 14% -------------------------------------------------------------------------------- Audit 479,773 137,853 341,920 248% -------------------------------------------------------------------------------- Operating expenses 1,412,363 967,333 445,030 46% -------------------------------------------------------------------------------- Total $5,371,349 $3,663,280 $1,708,069 38% -------------------------------------------------------------------------------- Research and Development Expenses Research and development costs increased during the nine months ended February 29, 2008 to $4,112,492 from $2,103,463 for the nine months ended February 28, 2007. The increase in the current period resulted primarily from the ongoing clinical trial that began in late fiscal 2007, the addition of new R&D employees, increased payments to purchase materials, more significant legal fees incurred in order to secure patents and technology protection, and more share-based incentives granted to R&D personnel. We expect research and development costs to increase in the remaining three months of the fiscal year as the more comprehensive second phase of the clinical trial is scheduled to begin. 25 Interest Expense and Finance Fees Interest expense and finance fees increased $185,200 to $196,495 during the nine months ended February 29, 2008 from $11,295 during the same period in 2007. The increase primarily resulted from a $125,500 charge from share registration costs associated with the private placement that occurred in July 2007 and the fair values of: (i) warrants granted to extend the due date of a note payable and (ii) the extended expiry of certain warrants. We do not expect to incur such expenses during the remainder of fiscal 2008. Depreciation and Amortization Expense Depreciation and amortization expense increased to $400,884 during the nine months ended February 29, 2008 compared to $81,794 for the nine months ended February 28, 2007. Approximately $143,000 of depreciation expense has been allocated to cost of sales during the current nine month period. The overall increase in depreciation and amortization expense is due to amortization of $116,046 related to the CE Mark license acquired during the third quarter of fiscal 2007 and significant additions to laboratory equipment, building and other property and equipment acquired during the second half of fiscal 2007 and the current year. Discontinued Operations During the nine months ended February 29, 2008, the Company entered into a share purchase agreement to sell the Company's wholly-owned subsidiary SagaX, Inc. ("SagaX"). Accordingly, SagaX's results of operations have been reflected as discontinued operations. SagaX incurred expenses of $600,955 during the nine months ended February 29, 2008 compared to $702,725 during the nine months ended February 28, 2007. There were no revenues generated by SagaX during the nine month periods in 2008 or 2007. The decrease of $101,770 reflects only the expenses incurred by SagaX for the first half of the current fiscal year as the effective date of the transaction was November 30, 2007. The $68,532 gain from disposal of SagaX is a result of the carrying values of its liabilities exceeding those of its assets at the closing of the transaction. Loss from Continuing Operations The Company incurred a loss from continuing operations of $9,553,138 for the nine months ended February 29, 2008 compared to $5,825,553 for the corresponding period in 2007. The increase in loss from continuing operations of approximately $3.7 million during 2008 is primarily a result of the elevated research and development activities and the related administrative costs compared to 2007, including the ongoing clinical trial, and higher legal, travel and other operating costs associated with the increased level of research. In addition, share-based compensation increased by approximately $800,000 during 2008 which reflects our efforts to retain key personnel while conserving cash for ongoing trials. We believe this level of activity will increase during the remainder of the current fiscal year as the completion of the first phase of the clinical trial nears and the preparation for subsequent clinical trials begins. THREE MONTHS ENDED FEBRUARY 29, 2008 COMPARED TO FEBRUARY 28, 2007 Revenues. During the three months ended February 29, 2008, revenues from the sale of stents were $302,527 compared to $1,461for the same quarter of the prior year. Cost of goods sold during the quarter ended February 29, 2008 were $475,052 resulting in a gross loss of $172,525. The comparative period in 2007 only reflected the revenues of Biosync Scientific from February 16 through February 28, 2007. We expect that revenues will continue to grow in the subsequent quarter in fiscal 2008 as a distribution network has recently been established. General and Administrative Expenses General and administrative expenses increased to $1,705,655 during the quarter ended February 29, 2008, from $1,426,935 during the quarter ended February 28, 2007. The majority of the overall increase is attributable to an increase in management fees due to the recognition of share-based and cash compensation to Biosync Scientific. Consulting fees increased in the current quarter compared to 26 corresponding period in 2007 as a result of the recognition of deferred fees associated with new and existing consulting agreements. Audit and legal fees increased in the current quarter due to the share registration statement and other regulatory filings. Operating expenses increased in the current quarter primarily due to the increased activity related to our ongoing clinical trial and preparation for further trials which we anticipate will begin before the end of the current fiscal year. These increases were partially offset by a significant drop in consulting fees and public relations, financing and corporate development costs in the current quarter. This was a result of the expiry of contracts and certain share-based awards being fully amortized in the first quarter of fiscal 2008. The following table compares the general and administrative expenses for the quarters ended February 29, 2008 and February 28, 2007: -------------------------------------------------------------------------------- 2008 2007 $Increase/ %Increase/ (Decrease) (Decrease) -------------------------------------------------------------------------------- Legal $ 162,297 $ 139,930 $ 22,367 16% -------------------------------------------------------------------------------- Public relations, financing and corporate development 168,924 344,930 (176,006) (51)% -------------------------------------------------------------------------------- Management fees 821,087 363,384 457,703 126% -------------------------------------------------------------------------------- Consulting 55,647 237,558 (181,911) (77)% -------------------------------------------------------------------------------- Audit 71,273 16,954 54,319 320% -------------------------------------------------------------------------------- Operating expenses 426,427 324,179 102,248 32% -------------------------------------------------------------------------------- Total $1,705,655 $1,426,935 $ 278,720 20% -------------------------------------------------------------------------------- Research and Development Expenses Research and development costs increased during the quarter ended February 29, 2008 to $1,762,046 compared to $679,869 for the quarter ended February 28, 2007. The increase in the current quarter resulted primarily from the ongoing clinical trial, increased payments to purchase materials, more significant legal fees incurred in order to secure patents and technology protection, and more share-based incentives granted to R&D personnel. We expect research and development costs to increase in the subsequent quarter of fiscal 2008 because we expect the ongoing clinical trial to be complete and subsequent clinical trials to begin. Interest Expense and Finance Fees Interest expense and finance fees increased $12,596 to $21,832 during the quarter ended February 29, 2008 from $9,236 during the same period in 2007. We do not expect to incur significant interest expenses in the fourth quarter of fiscal 2008. Depreciation and Amortization Expense Depreciation and amortization expenses increased to $150,157 during the quarter ended February 29, 2008 compared to $36,278 for same period in 2007. Approximately $47,000 of depreciation expense has been allocated to cost of sales during the current quarter. The overall increase in the current quarter is due to amortization of $35,532 related to the CE Mark license acquired during the third quarter of fiscal 2007 and significant additions to laboratory equipment, building and other property and equipment acquired during the second half of fiscal 2007 and during the current year. 27 Discontinued Operations During the previous quarter, the Company entered into a share purchase agreement to sell the Company's wholly-owned subsidiary SagaX, Inc. ("SagaX"). Accordingly, SagaX's results of operations have been reflected as discontinued operations. Because the agreement was effective at November 30, 2007, there were no expenses of SagaX reflected in the three months ended February 29, 2008. There were no revenues generated by SagaX during the three month ended February 29, 2008 or February 28, 2007. The $68,532 gain from disposal of SagaX is a result of the carrying values of its liabilities exceeding those of its assets at the closing of the transaction. Loss from Continuing Operations The Company incurred a loss from continuing operations of $3,595,521 for the three months ended February 29, 2008 compared to a loss of $2,101,133 for the corresponding period in 2007. The increase in loss from continuing operations of approximately $1.5 million is primarily a result of the elevated research and development activities and the related administrative costs compared to the same period in 2007, including the ongoing clinical trial, and higher legal, travel and other operating costs associated with the increased level of research. In addition, stock-based compensation increased significantly during 2008 which reflects our efforts to retain key personnel while conserving cash for ongoing trials. We believe this level of activity will increase during the remainder of the current fiscal year as the completion of the first phase of the clinical trial nears and the preparation for the subsequent clinical trial begins. Liquidity and Capital Resources Since inception, we have incurred significant losses from operations and have financed our operations primarily from proceeds from private financings, the exercise of options and warrants, and interest income. At February 29, 2008, we had cash and cash equivalents of $3,314,934 and working capital of $3,428,694. We completed two private placements during the quarter ended August 31, 2007 which raised net proceeds of approximately $11.9 million. We will continue to use the proceeds from these private placements for clinical trials and working capital to continue the expansion of our Biosync Scientific operations and sustain our ongoing clinical trials and research through the end of the current fiscal year. Net cash used in operations from continuing operations during the nine months ended February 29, 2008 was approximately $6.8 million which is a direct result of establishing and expanding operations in India, conducting the first clinical trial and the preparation required for subsequent clinical trials as well as continuing to fund our research program. Our management expects that our ongoing clinical trial and subsequent trials, along with the expansion of our India operations and our other research activities, will lead to further operating losses during the remainder of fiscal 2008. Net cash provided by financing activities during the nine months ended February 29, 2008 was approximately $11.3 million and was a direct result of the completion of two private placements during the quarter ended August 31, 2007 and was partially offset by the repayment of loans payable. Net cash used in investing activities during the nine months ended February 29, 2008 was approximately $1.1 million and was a result of further capital investments in property and equipment necessary to increase capacity at our facility in India and support our research activities. We anticipate that further investments in laboratory equipment, land and other property and equipment will be needed to further develop our manufacturing capabilities in India and to conduct future research activities throughout the remainder of fiscal 2008 and fiscal 2009. We expect to continue to use substantial resources and available cash to fund operating and investing activities. Our management anticipates that the existing cash balance will not be sufficient to meet the Company's working capital requirements for next twelve months and we will have to consider raising further funds through private placements or other equity transactions. However, there can be no assurance that additional financing will be available when required, or, if available, that such financing can be obtained on terms satisfactory to the Company. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements, as that term is used in Item 303(a)(4) of Regulation S-K. 28 Contractual Obligations Our contractual obligations are presented in Management's Discussion and Analysis in our Annual Report on Form 10-K (as amended) for the year ended May 31, 2007. The total obligations have not materially changed during the nine months ended February 29, 2008, except for the balance sheet changes in accounts payable and accrued liabilities and the repayment of two loan payables which totaled $625,000. Accounting Policy Change and New Accounting Pronouncements In July 2006, FASB issued Interpretation No. 48 "Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109" ("FIN 48"). This Interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with SFAS Statement No. 109, "Accounting for Income Taxes". This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. This Interpretation became effective for our fiscal year beginning June 1, 2007. The Company is subject to taxation in the U.S. and various states and foreign jurisdictions. In addition to U.S., the Company's major taxing jurisdictions include Canada and India and, formerly, Israel. Income tax returns filed by the Company and its active subsidiaries that are still subject to examination are MIVI Technologies, Inc. for May 31, 2007 and subsequent years, and Biosync Scientific Pvt. Ltd. for March 31, 2007 and subsequent years. Income tax returns not yet filed by MIV Therapeutics Inc. for the fiscal year ended May 31, 1999, and subsequent years will be subject to examination. Interest and penalties related to tax positions taken in tax returns shall be recorded in the unaudited interim consolidated statement of operations; however, there were no interest and penalties related to tax positions taken in our tax returns during the first three quarters of fiscal 2008. The Company adopted the provisions of FASB Interpretation No. 48 on June 1, 2007. The adoption of FIN 48 did not result in a cumulative adjustment to equity and there were no unrecognized tax benefits, penalties or interest at the time of, or subsequent to, adoption. In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB No. 51". This statement amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest (minority interest) in a subsidiary and for the deconsolidation of a subsidiary. Upon its adoption, effective as of the beginning of the Company's fiscal 2010, noncontrolling interests will be classified as equity in the Company's balance sheet and income and comprehensive income attributed to the noncontrolling interest will be included in the Company's income and comprehensive income. The provisions of this standard must be applied prospectively upon adoption except for the presentation and disclosure requirements. Management is currently evaluating the impact of adopting SFAS No. 160 on the Company's consolidated financial position and results of operations. In December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business Combinations" ("SFAS No. 141(R)"). SFAS No. 141(R) establishes principles and requirements for how an acquirer in a business combination recognizes and measures the assets acquired, liabilities assumed, and any noncontrolling interest in the acquiree. The provisions of SFAS No. 141(R) will become effective for the Company's business combinations occurring on or after June 1, 2009. In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS 159"). SFAS 159 permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected will be reported in earnings. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company currently is assessing the impact of SFAS 159 on its' consolidated financial position or results of operation. In February 2008, the FASB released FSP No. FAS 157-2. FSP No. FAS 157-2 defers the effective date of SFAS 157 for one year for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. It does not defer recognition and disclosure requirements for financial assets and financial liabilities, or for nonfinancial assets and nonfinancial liabilities that are remeasured at least annually. 29 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK. Not applicable. ITEM 4. CONTROLS AND PROCEDURES Disclosure Controls and Procedures. As of the end of the reporting period covered by this report, our management, including our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 15d-15(e) of the Securities Exchange Act of 1934 (the "Exchange Act"). Based on their evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer have concluded that during the quarterly period covered by this report, our disclosure controls and procedures were effective. It should be noted that any system of controls is based in part upon certain assumptions designed to obtain reasonable (and not absolute) assurance as to its effectiveness, and there can be no assurance that any design will succeed in achieving its stated goals. During the quarter ended February 29, 2008, there were no significant changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS No further update. ITEM 1.A. RISK FACTORS In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, "Item 1A Risk Factors" in our Annual Report on Form 10-K (as amended) for the year ended May 31, 2007, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K (as amended) are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. There have been no material changes from those risk factors set forth in our Annual Report on Form 10-K (as amended) for the year ended May 31, 2007, during the period covered by this report. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. During the three months ended February 29, 2008, we issued the following unregistered securities pursuant to prospectus exemptions contained in Section 4(2) of the Securities Act of 1933, as amended, and/or Regulation S, and will bear a restrictive Rule 144 legend to that effect: On December 14, 2007, our board of directors approved the issuance of 100,000 common shares to a former consultant. The shares were issued on February 22, 2008 and the quoted price on this date was $0.34. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None ITEM 5. OTHER INFORMATION. None 30 ITEM 6. EXHIBITS EXHIBIT NO. ----------- 31.1 Certification by the Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act. 31.2 Certification by the Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act. 32.1 Certification by the Principal Executive and Financial Officers Pursuant to Section 906 of the Sarbanes-Oxley Act. 31 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MIV Therapeutic, Inc. (Registrant) Date: April 11, 2008 /s/ Mark Landy ------------------------ Mark Landy Chief Executive Officer Date: April 11, 2008 /s/ Patrick McGowan ------------------------ Patrick McGowan Chief Financial Officer 32

MIV THERAPEUTICS INC 10-Q