UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~June~~September 30, 2012

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

For the transition period from to

Commission file number 000-30334

Angiotech Pharmaceuticals, Inc.

(Exact Name of Registrant as Specified in Its Charter)

British Columbia, Canada		98-0226269
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)

1618 Station Street Vancouver, B.C. Canada		V6A 1B6
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code: (604) 221-7676

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (as amended, the “Exchange Act”) 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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

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

Large accelerated filer o		Accelerated filer o

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

12,~~526~~547,702 Common Shares, no par value, as of ~~August~~November 14, 2012

Table of Contents

ANGIOTECH PHARMACEUTICALS, INC.

QUARTERLY REPORT ON FORM 10-Q

For the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2012

TABLE OF CONTENTS

		Page	~~Page~~
PART I—FINANCIAL INFORMATION
Item 1..	Financial Statements:
Item 1	Financial Statements:
		Consolidated Balance Sheets as of June 30, 2012 (unaudited) and December 31, 2011	3
	Consolidated Balance Sheets as of September 30, 2012 (unaudited) and December 31, 2011	3
		Consolidated Statements of Operations (unaudited) for the Three and Six Months Ended June 30, 2012; the Two Months Ended June 30, 2011; and the One and Four Months Ended April 30, 2011	4
	Consolidated Statements of Operations (unaudited) for the Three and Nine Months Ended September 30, 2012; the Three and Five Months ended September 30, 2011; and the Four Months Ended April 30, 2011	4
		Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the Three and Six Months Ended June 30, 2012; the Two Months ended June 30, 2011; and the One and Four Months Ended April 30, 2011	5
	Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the Three and Nine Months Ended September 30, 2012; the Three and Five Months ended September 30, 2011; and the Four Months Ended April 30, 2011	6
		Consolidated Statements of Stockholders’ Equity as of June 30, 2012 and 2011(unaudited)	6
	Consolidated Statements of Stockholders’ Equity as of September 30, 2012 and 2011(unaudited)	7
		Consolidated Statements of Cash Flows (unaudited) for the Three and Six Months Ended June 30, 2012; the Two Months Ended June 30, 2011; and the One and Four Months Ended April 30, 2011	7
	Consolidated Statements of Cash Flows (unaudited) for the Three and Nine Months Ended September 30, 2012; the Three and Five Months Ended September 30, 2011; and the Four Months Ended April 30, 2011	8
	Notes to Unaudited Consolidated Financial Statements	~~Notes to Unaudited Consolidated Financial Statements~~10	10
Item 2..	Management’s Discussion and Analysis of Financial Condition and Results of Operations		51
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	49
Item 3..	Quantitative and Qualitative Disclosures about Market Risk		78
Item 3	Quantitative and Qualitative Disclosures about Market Risk	77
Item 4..	Controls and Procedures		79
Item 4	Controls and Procedures	78
PART II—OTHER INFORMATION
Item 1..	Legal Proceedings		80
Item 1	Legal Proceedings	79
Item 1.A	Risk Factors	79	80
Item 2..	Unregistered Sales of Equity Securities and Use of Proceeds		81
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	79
Item 3..	Defaults Upon Senior Securities		81
Item 3	Defaults Upon Senior Securities	80
Item 4..	Reserved		81
Item 4	Reserved	80
Item 5..	Other Information		81
Item 5	Other Information	80
Item 6..	Exhibits		81
Item 6	Exhibits	80
SIGNATURES		82	82

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

ANGIOTECH PHARMACEUTICALS INC.

CONSOLIDATED BALANCE SHEETS

(All amounts expressed in thousands of U.S. dollars, except share data)

(Unaudited)

	Successor Company
	June 30,			December 31,
	September 30,			December 31,
	2012			2011
ASSETS
Current assets
Cash and cash equivalents [note 5]	$	5759,~~991~~712		$	22,173
Short-term investments [note 6]	~~644~~556			3,259
Accounts receivable	3028,~~419~~635			28,238
Income tax receivable	~~524~~1,335			1,462
Inventories [note 7]	3844,~~179~~548			34,304
Deferred income taxes, current portion	64,~~026~~931			3,995
Deferred financing costs, current portion	434			—
Deferred financing costs, current portion [note 12(e)]	831			—
Prepaid expenses and other current assets	23,~~973~~783			3,167
Total current assets	~~137~~144,~~190~~331			96,598
Property, plant and equipment [note 8]	3534,~~427~~437			39,189
Intangible assets [note 9 (a)]	~~326~~319,~~981~~275			343,066
Goodwill [note 3, 9(b)]	123,~~242~~771			123,228
Deferred income taxes, non-current portion	2,~~566~~652			2,165
Deferred financing cots, non-current portion	300			—
Deferred financing costs, non-current portion [note 12(e)]	2,087			—
Other assets	~~310~~291			3,860
Total assets	626,~~016~~844			608,106
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current liabilities
Accounts payable and accrued liabilities [note 10]	2526,~~658~~242			30,537
Deferred income taxes, current portion	—			—
Income taxes payable	3,460			2,023
Income taxes payable	5,658			2,023
Interest payable	2,094			1,450
Interest payable	1,406			1,450
Deferred revenue, current portion [note 11]	10,592			496
Deferred revenue, current portion [note 11]	6,205			496
Debt [note 1,12,21]	40,000			—
Revolving credit facility [note 12 (e)]	—			40
Revolving credit facility [note 12 (f)]	—			40
Total current liabilities	3882,~~927~~388			34,546
Deferred revenue, non-current portion [note 11]	18,~~069~~552			3,771
Deferred income taxes, non-current portion	9493,~~286~~036			92,634
Other tax liabilities	6,~~118~~584			5,729
Debt [note 12]	~~325~~289,~~000~~413			325,000
Other liabilities	—			19
Total non-current liabilities	~~443~~407,~~473~~585			427,153
Shareholders’ equity
Sucessor share capital	203,~~360~~613			203,719
Authorized:
Unlimited number of common shares, without par value
Common shares issued and outstanding:
December 31, 2011 — 12,556,673
June 30, 2012 - 12,526,702
September 30, 2012 - 12,547,702
Additional paid-in capital	9,~~349~~792			8,552
Accumulated deficit	(6372,~~393~~001		)	(60,446		)
Accumulated other comprehensive income	(5,700		)	(5,418		)
Accumulated other comprehensive loss	(4,533		)	(5,418		)
Total shareholders’ equity	~~143~~136,~~616~~871			146,407
Total liabilities and shareholders’ equity	$	626,~~016~~844		$	608,106

Contingencies and commitments [~~note 16~~note16]

Subsequent events [note 21]

See accompanying notes to the consolidated financial statements

Table of Contents

ANGIOTECH PHARMACEUTICALS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(All amounts expressed in thousands of U.S. dollars, except share and per share data)

(Unaudited)

	Successor Company						~~Predecessor Company~~
	Three months ended			~~Two~~Three months ended			~~One month ended~~
	June 30,			June 30,			April 30,
	September 30,			September 30,
	2012			2011			~~2011~~
REVENUE
Product sales, net	$	5652,~~523~~661		$	3551,~~902~~899		$	~~16,365~~
Royalty revenue	43,~~804~~912			15,~~068~~497			~~5,285~~
License fees	1164			—			24
	61,338			36,970			21,674
	56,637			57,396
EXPENSES
Cost of products sold	2724,~~322~~072			2638,~~934~~796			~~8,291~~
License and royalty fees	6398			50			—
Research and development	21,~~423~~399			24,~~829~~614			~~1,156~~
Selling, general and administration	1716,~~784~~010			1222,~~781~~613			~~6,191~~
Depreciation and amortization	8,~~428~~445			59,~~690~~246			~~3,088~~
Write-down of assets held for sale	—			—			570
Write-down of property, plant and equipment	—			143
Write-down of property, plant and equipment	692			—			—
	50,024			75,462
	56,712			48,284			19,296
Operating income (loss)	6,613			(18,066		)
Operating income (loss)	4,626			(11,314		)	2,378
Other income (expenses)
Other income (expenses)
Foreign exchange (loss) gain	(953		)	1,136
Foreign exchange (loss) gain	214			492			(366		)
Other income	207			221
Other income	240			112			10
Interest expense	(5,548		)	(4,584		)
Interest expense	(4,306		)	(3,032		)	(2,217		)
Impairments and realized losses on investments	82			—
Impairments and realized losses on investments	(68		)	—			—
Debt extinguishment loss [note 12]	(4,413		)	—
Total other expenses	(310,~~920~~625		)	(23,~~428~~227		)	~~(2,573~~		)
Income (loss) before reorganization items and income taxes	706			(13,742		)	(195		)
Loss before income taxes	(4,012		)	(21,293		)
Reorganization items [note 3]	—			—			329,826
Income tax expense (recovery)	4,596			(2,609		)
Gain on extinguishment of debt and settlement of other liabilities [note 3]	—			—			67,307
Net loss	(8,608		)	(18,684		)
Income (loss) before income taxes	706			(13,742		)	396,938
Basic and diluted net loss per common share	$	(0.67	)	$	(1.47	)
Income tax expense (recovery)	3,654			506			(581		)
Basic and diluted weighted average number of common shares outstanding (in thousands)	12,818			12,721
Net (loss) income	(2,948		)	(14,248		)	397,519
Basic and diluted net (loss) income per common share	$	(0.23	)	$	(1.12	)	$	4.67
Basic and diluted weighted average number of common shares outstanding (in thousands)	12,826			12,721			85,185

See accompanying notes to the consolidated financial statements

Table of Contents

ANGIOTECH PHARMACEUTICALS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(All amounts expressed in thousands of U.S. dollars, except share and per share data)

(Unaudited)

	Successor Company						Predecessor Company
	Six months ended			Two months ended			Four months ended
	Nine months ended			Five months ended			Four months ended
	June 30,			June 30,			April 30,
	September 30,			September 30,			April 30,
	2012			2011			2011
REVENUE
Product sales, net	$	~~111~~163,~~147~~808		$	3587,~~902~~801		$	69,198
Royalty revenue	1014,~~722~~634			16,~~068~~565			10,941
License fees	2084			—			127
	121,889			36,970			80,266
	178,526			94,366			80,266
EXPENSES
Cost of products sold	5276,~~006~~077			2665,~~934~~730			32,219
License and royalty fees	~~174~~272			50100			68
Research and development	45,~~408~~807			27,~~829~~443			5,686
Selling, general and administration	3551,~~431~~440			1235,~~781~~394			24,846
Depreciation and amortization	1725,~~451~~896			514,~~690~~935			14,329
Write-down of assets held for sale	—			—			570
Write-down of property, plant and equipment	865			—143			215
	110,335			48,284			77,933
	160,357			123,745			77,933
Operating income (loss)	1118,~~554~~169			(1129,~~314~~379		)	2,333
Other income (expenses)
Foreign exchange (loss) gain	(561,009		)	~~492~~1,627			(646		)
Other income	~~902~~1,107			~~112~~334			34
Interest expense	(814,~~558~~106		)	(37,~~032~~616		)	(10,327		)
Impairments and realized losses on investments	(~~349~~267		)	—			—
Total other expenses	(8,061		)	(2,428		)	(10,939		)
Debt extinguishment loss [note 12]	(4,413		)	—			—
Income (loss) before reorganization items and income taxes	3,493			(13,742		)	(8,606		)
Total other expenses	(18,688		)	(5,655		)	(10,939		)
Loss before reorganization items and income taxes	(519		)	(35,034		)	(8,606		)
Reorganization items [note 3]	—			—			321,084
Gain on extinguishment of debt and settlement of other liabilities [note 3]	—			—			67,307
Income (loss) before income taxes	3,493			(13,742		)	379,785
(Loss) income before income taxes	(519		)	(35,034		)	379,785
Income tax expense (recovery)	611,~~440~~036			~~506~~(2,102		)	267
Net (loss) income	(211,~~947~~555		)	(1432,~~248~~932		)	379,518
Basic and diluted net (loss) income per common share	$	(0.2390	)	$	(12.1259	)	$	4.46
Basic and diluted weighted average number of common shares outstanding (in thousands)	12,818			12,~~721~~710			85,185

See accompanying notes to the consolidated financial statements

Table of Contents

ANGIOTECH PHARMACEUTICALS INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(All amounts expressed in thousands of U.S. dollars)

(unaudited)

	Successor Company						~~Predecessor Company~~
	Three months ended			~~Two~~Three months ended			~~One month ended~~
	June 30,			June 30,			April 30,
	September 30,			September 30,
	2012			2011			~~2011~~
Net (loss) income	$	(2,948	)	$	(14,248	)	397,519
Net loss	$	(8,608	)	$	(18,684	)
Other comprehensive (loss) income:
Net unrealized (loss) gain on available-for-sale securities, net of taxes ($0)	—			(188		)	640
Net unrealized loss on available-for-sale securities, net of taxes ($0)	—			(1,790		)
Cumulative translation adjustment	(1,~~749~~167		)	(~~834~~1,640		)	~~254~~
Other comprehensive (loss) income	(1,749		)	(1,022		)	894
Other comprehensive income (loss)	1,167			(3,430		)
Comprehensive (loss) income	$	(4,697	)	$	(15,270	)	$	398,413
Comprehensive loss	$	(7,441	)	$	(22,114	)

	Successor Company						Predecessor Company
	Six months ended			Two months ended			Four months ended
	Nine months ended			Five months ended			Four months ended
	June 30,			June 30,			April 30,
	September 30,			September 30,			April 30,
	2012			2011			2011
Net (loss) income	$	(211,~~947~~555	)	(1432,~~248~~932		)	379,518
Other comprehensive (loss) income:
Net unrealized (loss) gain on available-for-sale securities, net of taxes ($0)	—			(~~188~~1,978		)	~~1,337~~640
Cumulative translation adjustment	~~(282~~885		)	(~~834~~2,474		)	12,~~485~~182
Other comprehensive (loss) income	(282		)	(1,022		)	2,822
Other comprehensive income (loss)	885			(4,452		)	2,822
Comprehensive (loss) income	$	(310,~~229~~670	)	$	(1537,~~270~~384	)	$	382,340

Table of Contents

ANGIOTECH PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(All amounts expressed in thousands of U.S. dollars, except share data)

(Unaudited)

									(Accumulated			Accumulated
	Common Shares					Additional paid-in-			(Accumulated deficit) / Retained			Accumulated other comprehensive			Total Stockholder’s
						Additional			deficit) /			other			Total
	Common Shares					paid-in-			Retained			comprehensive			Stockholder’s
Successor Company	Shares		Amount			capital			Earnings			income (loss)			(deficit) equity
Balance at December 31, 2011	12,556,673		$	203,719		$	8,552		$	(60,446	)	$	(5,418	)	$	146,407
Stock-based compensation						573									573
Net income									1						1
Other comprehensive income												1,467			1,467
Balance at March 31, 2012	12,556,673		$	203,719		$	9,125		$	(60,445	)	$	(3,951	)	$	148,448
Vesting of restricted stock	43,403		$	522		$	(522	)							—
Share capital repurchases	(73,374	)	(881		)										(881		)
Stock-based compensation						746									746
Net loss									(2,948		)				(2,948		)
Other comprehensive income												(1,749		)	(1,749		)
Balance at June 30, 2012	12,526,702		$	203,360		$	9,349		$	(63,393	)	$	(5,700	)	$	143,616
Vesting of restricted stock	22,000		265			(265		)							—
Share capital repurchases	(1,000	)	(12		)	12									—
Stock-based compensation						696									696
Net loss									(8,608		)				(8,608		)
Other comprehensive income												1,167			1,167
Balance at September 30, 2012	12,547,702		$	203,613		$	9,792		$	(72,001	)	$	(4,533	)	$	136,871

												Accumulated			Total
	Common Shares					Additional paid-in-			Accumulated			Accumulated other comprehensive			Total Stockholder’s (deficit)
						Additional						other			Stockholder’s
	Common Shares					paid-in-			Accumulated			comprehensive			(deficit)
	Shares		Amount			capital			deficit			income (loss)			equity
Balance at December 31, 2010 (Predecessor Company)	85,180,377		$	472,753		$	35,470		$	(933,352	)	$	41,053		$	(384,076	)
Exercise of stock options	5,120		1												1
Stock-based compensation						294									294
Net loss									(18,001		)				(18,001		)
Other comprehensive income												1,928			1,928
Balance at March 31, 2011 (Predecessor Company)	85,185,497		472,754			35,764			(951,353		)	42,981			(399,854		)
Exercise of stock options	—		—												—
Stock-based compensation						1,441									1,441
Net income									397,519						397,519
Other comprehensive income												894			894
Balance at April 30, 2011 (Predecessor Company)	85,185,497		472,754			37,205			(553,834		)	43,875			—
Reorganization adjustment: Cancellation of Predecessor common shares	(85,185,497	)	(472,754		)				472,754						—
Reorganization adjustment: Issuance of Successor common shares	12,721,354		202,948												202,948
Fresh start accounting adjustments: Elimination of Predecessor additional-paid-in-capital, accumulated deficit and accumulated other comprehensive income						(37,205		)	81,080			(43,875		)	—
Balance at May 1, 2011 (Successor Company)	12,721,354		202,948			—			—			—			202,948
Net loss									(14,248		)				(14,248		)
Other comprehensive loss												(1,022		)	(1,022		)
Balance at June 30, 2011 (Successor Company)	12,721,354		$	202,948		$	—		$	(14,248	)	$	(1,022	)	$	187,678
Vesting of restricted stock	—		1,291			(1,291		)							—
Share capital repurchases	(34,473	)	(488		)										(488		)
Stock-based compensation						3,732									3,732
Other comprehensive loss												(3,430		)	(3,430		)
Net loss									(18,684		)				(18,684		)
Balance at September 30, 2011 (Successor)	12,686,881		$	203,751		$	2,441		$	(32,932	)	$	(4,452	)	$	168,808

See accompanying notes to the consolidated financial statements

Table of Contents

ANGIOTECH PHARMACEUTICALS INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(All amounts expressed in thousands of U.S. dollars)

(Unaudited)

	Successor Company						~~Predecessor Company~~
	Three months ended			~~Two~~Three months ended			~~One month ended~~
	June 30,			June 30,			April 30,
	September 30,			September 30,
	2012			2011			~~2011~~
OPERATING ACTIVITIES
Net (loss) income	$	(2,948	)	$	(14,248	)	$	397,519
Net loss	$	(8,608	)	$	(18,684	)
Adjustments to reconcile net loss to cash provided by operating activities:
Non-cash items
Depreciation and amortization	9,~~536~~492			610,~~416~~238			~~3,251~~
Impairment and realized losses on investments	64			—			—
Impairment and unrealized losses on investments	88			—
Loss (gain) on disposition of property, plant and equipment	~~(189~~5		)	—143			~~218~~
Reorganization items [note 3]	—			—			(329,826		)
Non-cash cost of product sold adjustment from fresh start accounting	—			12,808
Non-cash cost of product sold adjustment from fresh start accounting	—			9,808			—
Debt extinguishment loss [note 12]	4,413			—
Gain on extinguishment of debt and settlement of other liabilities	—			—			(67,307		)
Quill deferred revenue [note 11]	5,000			—
Write-down of assets held for sale	—			—			570
Deferred income taxes	137			(4,776		)
Write-down of property, plant and equipment	692			—			—
Stock-based compensation expense	694			3,244
Deferred leasehold amortization	—			—			(72		)
Non-cash interest expense	142			—
Deferred revenue	(152		)	—			—
Other	(54		)	—
Quill deferred revenue [note 11]	20,000			—			—
Net change in non-cash working capital items relating to operations, excluding non-cash cost of product sold adjustment [note 19]	(7,658		)	2,291
Deferred income taxes	(1,845		)	(760		)	(314		)
Cash provided by operating activities	3,651			5,264
Stock-based compensation expense	746			—			70
INVESTING ACTIVITIES
Non-cash interest expense	186			—			1,316
Purchase of property, plant and equipment	(447		)	(349		)
Other	17			(106		)	270
Cash used in investing activities	(447		)	(349		)
Net change in non-cash working capital items relating to operations, excluding non-cash cost of product sold adjustment [note 19]	(2,746		)	6,747			(3,889		)
FINANCING ACTIVITIES
Cash provided by operating activities before reorganization items	23,361			7,857			1,806
Deferred financing charges and costs	(1,679		)	(48		)
OPERATING CASH FLOWS FROM REORGANIZATION ACTIVITIES
Net (repayments) advances on Revolving Credit Facility	—			(6,968		)
Professional fees paid for services rendered in connection with the Creditor Protection Proceedings	—			(8,105		)	(3,095		)
Cash used in financing activities	(1,679		)	(7,016		)
Key Employment Incentive Plan fee	—			(551		)	—
Effect of exchange rate changes on cash and cash equivalents	196			(286		)
Director’s and officer’s insurance	—			—			—
Net increase (decrease) in cash and cash equivalents	1,721			(2,387		)
Cash used in reorganization activities	—			(8,656		)	(3,095		)
Cash and cash equivalents, beginning of period	57,991			21,637
Cash provided by (used in) operating activities	23,361			(799		)	(1,289		)
Cash and cash equivalents, end of period	$	59,712		$	19,250
INVESTING ACTIVITIES
Proceeds from sale of short term investments	1,150			—			—
Purchase of property, plant and equipment	(436		)	(385		)	(142		)
Proceeds from disposition of property, plant and equipment	400			2,624			—
Cash provided by (used in) investing activities	1,114			2,239			(142		)
FINANCING ACTIVITIES
Share capital issued	(881		)	—			—
Deferred financing charges and costs	(474		)	(1,358		)	(50		)
Net (repayments) advances on Revolving Credit Facility	—			(7,542		)	5,000
Proceeds from stock options exercised	—			—			—
Cash (used in) provided by financing activities before reorganization activities	(1,355		)	(8,900		)	4,950
FINANCING CASH FLOWS FROM REORGANIZATION ACTIVITIES
Deferred financing costs	—			(1,408		)	—
Cash (used in) provided by financing activities	(1,355		)	(10,308		)	4,950
Effect of exchange rate changes on cash and cash equivalents	(202		)	283			(208		)
Net increase (decrease) in cash and cash equivalents	22,918			(8,585		)	3,311
Cash and cash equivalents, beginning of period	35,073			30,222			26,911
Cash and cash equivalents, end of period	$	57,991		$	21,637		$	30,222

See accompanying notes to the consolidated financial statements

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ANGIOTECH PHARMACEUTICALS INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(All amounts expressed in thousands of U.S. dollars)

(Unaudited)

	Successor Company						Predecessor Company
	Six months ended			Two months ended			Four months
	Nine months ended			Five months ended			Four months
	June 30,			June 30,			April 30,
	September 30,			September 30,			April 30,
	2012			2011			2011
OPERATING ACTIVITIES
Net (loss) income	$	(211,~~947~~555	)	$	(1432,~~248~~932	)	$	379,518
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization	1928,~~505~~997			616,~~416~~654			15,518
Impairment and realized losses on investments	341
Impairment and unrealized losses on investments	429			—			—
Loss (gain) on disposition of property, plant and equipment	(766		)	—			218
(Gain) loss on disposition of property, plant and equipment	(761		)	143			218
Reorganization items [note 3]	—			—			(321,084		)
Non-cash cost of product sold adjustment from fresh start accounting	—			922,~~808~~616			—
Gain on extinguishment of debt and settlement of other liabilities	—			—			(67,307		)
Debt extinguishment loss [note 12]	4,413			—			—
Gain on extinguishment of debt and settlement of other liabilities [note 3]	—			—			(67,307		)
Write down of property, plant and equipment	814			—			—
Write-down of assets held for sale	—			—			570
Write down of property, plant and equipment	865			—			—
Deferred leasehold amortization	—			—			(1,300		)
Deferred revenue	6			—			—
Quill deferred revenue [note 11]	25,000			—			—
Quill deferred revenue [note 11]	20,000			—			—
Deferred income taxes	(228		)	(5,536		)	(486		)
Deferred income taxes	(365		)	(760		)	(486		)
Stock-based compensation expense	2,013			3,244			364
Stock-based compensation expense	1,318			—			364
Non-cash interest expense	328			—			4,155
Non-cash interest expense	186			—			4,155
Other	99			(106		)	1,135
Other	97			(106		)	1,135
Net change in non-cash working capital items relating to operations, excluding non-cash cost of product sold adjustment [note 19]	(10,667		)	7,680			(12,721		)
Net change in non-cash working capital items relating to operations, excluding non-cash cost of product sold adjustment [note 19]	(3,009		)	6,747			(12,721		)
Cash provided by (used in) operating activities before reorganization items	38,882			11,763			(1,420		)
Cash provided by (used in) operating activities before reorganization items	35,231			7,857			(1,420		)
OPERATING CASH FLOWS FROM REORGANIZATION ACTIVITIES
Professional fees paid for services rendered in connection with the Creditor Protection Proceedings	—			(8,105		)	(10,055		)
Key Employment Incentive Plan fee	—			(551		)	—
Director’s and officer’s insurance	—			—			(1,382		)
Cash used in reorganization activities	—			(8,656		)	(11,437		)
Cash provided by (used in) operating activities	3538,~~231~~882			~~(799~~3,107		)	(12,857		)
INVESTING ACTIVITIES
Proceeds from disposition of short term investments	2,272			—			—
Purchase of property, plant and equipment	(~~849~~1,296		)	(~~385~~734		)	(945		)
Proceeds from disposition of property, plant and equipment	976			2,624			—
Cash provieded by (used in) investing activities	21,~~399~~952			21,~~239~~890			(945		)
FINANCING ACTIVITIES
Share capital issued	(881		)	—			1
Share capital issued and/or repurchased	(881		)	—			1
Deferred financing charges and costs	(~~824~~2,503		)	(~~1,358~~48		)	(1,278		)
Net (repayments) advances on Revolving Credit Facility	(39		)	(714,~~542~~510		)	12,018
Proceeds from stock options exercised	—			—			—
Cash (used in) provided by financing activities before reorganization activities	(13,~~744~~423		)	(814,~~900~~558		)	10,741
FINANCING CASH FLOWS FROM REORGANIZATION ACTIVITIES
Deferred financing costs	—			(1,408		)	—
Cash (used in) provided by financing activities	(13,~~744~~423		)	(1015,~~308~~966		)	10,741
Effect of exchange rate changes on cash and cash equivalents	~~(68~~128		)	~~283~~(3		)	(32		)
Net increase (decrease) in cash and cash equivalents	3537,~~818~~539			(810,~~585~~972		)	(3,093		)
Cash and cash equivalents, beginning of period	22,173			30,222			33,315
Cash and cash equivalents, end of period	$	5759,~~991~~712		$	2119,~~637~~250		$	30,222

See accompanying notes to the consolidated financial statements

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Angiotech Pharmaceuticals, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All tabular amounts expressed in thousands of U.S. dollars, except share and per share data)

(Unaudited)

1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION

Nature of Operations

Angiotech Pharmaceuticals, Inc. (“Angiotech” or the “Company”) is incorporated under the Business Corporations Act (British Columbia). The Company develops, manufactures and markets medical device products and technologies. Angiotech’s products are designed to serve physicians and patients primarily in the areas of interventional oncology, wound closure and ophthalmology. The Company generates revenue through sales of these products, as well as through royalties derived from sales by its partners of products, which utilize certain of the Company’s proprietary technologies. Accordingly, the Company currently operates in two business segments: Medical Device Technologies and Licensed Technologies.

Basis of Presentation

These unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles of the United States of America (“U.S. GAAP”) and the U.S. Securities and Exchange Commission’s (“SEC”) rules and regulations on interim reporting. Accordingly, certain information and footnote disclosures normally included in the annual financial statements have been omitted. The accounting policies used in the preparation of these interim consolidated financial statements are the same as those described in the Company’s 2011 Annual Report filed on Form 10-K. In management’s opinion, all adjustments (including reclassification and normal recurring adjustments) necessary for the fair presentation of the unaudited interim consolidated financial statements have been made. All amounts herein are expressed in U.S. dollars and thousands of U.S. dollars, except share and per share data, unless otherwise noted. The information included in this Quarterly Report on Form 10-Q should therefore be read in conjunction with the Company’s 2011 Annual Report filed on Form 10-K with the SEC on March 29, 2012.

On May 12, 2011 (the “Plan Implementation Date” or the “Effective Date”), Angiotech implemented a recapitalization transaction that, among other things, eliminated its $250 million 7.75% Senior Subordinated Notes due in 2014 (“Subordinated Notes”) and $16 million of related interest obligations in exchange for new common shares of Angiotech (the “Recapitalization Transaction”). In connection with the execution of this Recapitalization Transaction, on January 28, 2011, Angiotech and certain of its subsidiaries (the “Angiotech Entities”) filed for creditor protection under the Companies’ Creditors Arrangement Act (“CCAA”) in Canada and Chapter 15 of Title 11 of the Bankruptcy Code in the U.S (the “Creditor Protection Proceedings”). For additional information on the Recapitalization Transaction and related Creditor Protection Proceedings, refer to the annual audited consolidated financial statements included in the 2011 Annual Report filed with the SEC on Form 10-K on March 29, 2012.

Upon ~~commencement~~emergence offrom ~~the~~ Creditor Protection Proceedings ~~through~~and tocompletion of the ~~Convenience~~Recapitalization ~~Date~~Transaction on May 12, 2011 (asthe ~~described~~“Effective ~~below~~Date”), the Company ~~adopted~~was ~~Accounting~~required ~~Standards~~to ~~Codification~~adopt (“fresh-start accounting in accordance with ASC”) No. 852. —The ~~Reorganization~~Company toapplied ~~prepare~~fresh ~~its~~start ~~interim~~accounting ~~and~~on ~~annual~~April 30, ~~consolidated~~2011 ~~financial~~(the ~~statements.~~“Convenience ~~During~~Date”) ~~Creditor~~after ~~Protection~~concluding ~~Proceedings,~~that ~~ASC~~the ~~No. 852~~operating ~~required~~results ~~that~~between the ~~Company~~Convenience ~~distinguish~~Date ~~transactions~~ and ~~events~~the ~~directly~~Effective ~~associated~~Date ~~with~~did not result in a material difference. Given that the ~~Recapitalization~~reorganization ~~Transaction~~and ~~(described~~adoption of fresh-start accounting resulted in ~~note~~a 3)new ~~from~~entity ~~ongoing~~for ~~operations~~financial ofreporting purposes, the ~~business~~Company asis ~~follows:~~referred ~~(i) certain~~to ~~expenses,~~as ~~recoveries,~~the ~~loss~~“Predecessor ~~provisions,~~Company” ~~and~~for ~~other~~all ~~charges~~periods ~~incurred~~preceding ~~during~~the ~~Creditor~~Convenience ~~Protection~~Date ~~Proceedings~~and ~~were~~the ~~reported~~“Successor asCompany” ~~Reorganization~~for ~~Items~~all onperiods subsequent to the ~~Consolidated~~Convenience ~~Statement~~Date.Overall, the implementation of ~~Operations~~fresh ~~(see~~start ~~note~~accounting 3resulted in: (i) a comprehensive revaluation of Predecessor Company’s assets and liabilities to their estimated fair values; (ii) ~~specific~~the ~~cash~~elimination ~~flow~~of ~~items~~the ~~directly~~Predecessor ~~related~~Company’s todeficit, ~~the~~additional ~~Reorganization~~paid-in-capital ~~Items~~and ~~were~~accumulated ~~segregated~~other oncomprehensive ~~the~~income ~~Consolidated~~balances; ~~Statement~~and (iii) reclassification of ~~Cash~~certain ~~Flows~~balances. Given Inthese ~~addition,~~material inchanges ~~accordance~~to ~~with~~Angiotech’s ~~the~~consolidated ~~terms~~financial ofstatements, the ~~recapitalization~~results ~~plan,~~of the Successor Company ~~ceased~~may tonot ~~accrue~~be ~~interest~~comparable ~~from~~in ~~January 28,~~certain ~~2011~~respects ~~onwards~~to onthose ~~its~~of ~~pre-petition~~the ~~Subordinated~~Predecessor ~~Notes~~Company.

~~Upon~~Liquidity emergence from Creditor Protection Proceedings and completion of the Recapitalization Transaction on May 12, 2011 (the “Effective Date”), the Company was required to adopt fresh-start accounting in accordance with ASC No. 852. The Company applied fresh start accounting on April 30, 2011 (the “Convenience Date”) after concluding that the operating results between the Convenience Date and the Effective Date did not result in a material difference. Given that the reorganization and adoption of fresh-start accounting resulted in a new entity for financial reporting purposes, the Company is referred to as the “Predecessor Company” for all periods preceding the Convenience Date and the “Successor Company” for all periods subsequent to the Convenience Date.Risk

Liquidity risk is the risk that the Successor Company will encounter difficulty in meeting its contractual obligations and financial liabilities in the normal course of business. Angiotech faces certain risks and uncertainties that may materially impact its liquidity position and cash flows throughout the remainder of 2012 and beyond.

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~~Overall~~As at September 30, 2012, the ~~implementation~~Successor Company’s most significant risk relates to its financial liabilities which include $229.4 million of ~~fresh~~9% ~~start~~Senior ~~accounting~~Notes ~~resulted~~due ~~in:~~December 1, 2016 (ithe “New Notes”) and $100.0 million of Senior Floating Rate Notes due December a1, ~~comprehensive~~2013 ~~revaluation~~(the “Existing Notes”). On September 17, 2012, pursuant to a Notice of ~~Predecessor~~Optional Partial Redemption, the Successor Company’s ~~assets~~exercised ~~and~~its ~~liabilities~~option to ~~their~~call ~~estimated~~for ~~fair~~the ~~values;~~partial ~~(ii)~~redemption of $40.0 million in aggregate principal amount of its outstanding Existing Notes. These Existing Notes were redeemed on October 17, 2012 at 100% of the ~~elimination~~principal amount, together with accrued interest of $0.2 million. Management expects that the ~~Predecessor~~remaining ~~Company’s~~$60 ~~deficit~~million of Existing Notes may be repaid, ~~additional~~prior ~~paid-in-capital~~to ~~and~~maturity, ~~accumulated~~using ~~other~~excess ~~comprehensive~~cash ~~income~~generated ~~balances;~~from operating activities and ~~(iii) reclassification~~/ ofor ~~certain~~with ~~balances. Given~~a ~~these~~portion ~~material~~or ~~changes~~all of the consideration received relating to ~~Angiotech’s~~the ~~consolidated~~Quill ~~financial~~transaction ~~statements~~completed with Ethicon, Inc. ~~the~~in ~~results~~April 2012 as discussed in note 11(b), or that a portion or all of the ~~Successor~~remaining ~~Company~~Existing Notes may ~~not~~ be ~~comparable~~refinanced inprior ~~certain~~to ~~respects~~their tomaturity. ~~those~~For ofmore information on the ~~Predecessor~~Successor Company’s Existing Notes and New Notes, refer to note 12.

Liquidity Risk

Liquidity risk is the risk that the Successor Company will encounter difficulty in meeting its contractual obligations and financial liabilities. Angiotech faces a number of risks and uncertainties that may adversely impact its ability to generate sufficient future cash flows from operations to meet its contractual obligations and support capital expenditures and other initiatives. These risks and uncertainties may continue to materially impact the Successor Company’s liquidity position, cash flows and future operating results throughout 2012 and the future. The more significant risks and uncertainties have been summarized as follows:

· As at June 30, 2012, the Successor Company’s most significant financial liability was its $325 million of Senior Floating Rate Notes (the “Existing Notes”) due December 1, 2013. As discussed in note 12, on July 3, 2012, the Successor Company launched an offer to exchange up to a maximum of $200 million in aggregate principal amount of the outstanding Existing Notes (“Maximum Principal Exchange Amount”) for new 9% Senior Notes due December 1, 2016 issued by Angiotech Pharmaceuticals (US), Inc. (the “New Notes”) pursuant to an Offering Memorandum and Consent Solicitation Statement (the “Exchange Offer”). On July 27, 2012, as a result of significant demand for New Notes by holders of the Existing Notes, Angiotech elected to amend the Exchange Offer to increase the Maximum Principal Exchange Amount to $225 million. On August 13, 2012, $225 million of the $255.5 million tendered Existing Notes were irrevocably extinguished and exchanged, on a pro rata basis, for approximately $230 million of New Notes. All Existing Notes were tendered by the prescribed July 23, 2012 early tender date and, therefore, the holders of such Existing Notes received the New Notes with a principal amount constituting a 2% premium (the “Early Tender Premium”) to the principal amount of the Existing Notes so exchanged. This refinancing significantly alleviates the Successor Company’s near term liquidity risk due to the three-year extension of the maturity date. Management expects that the remaining $100 million of Existing Notes may be repaid with excess cash generated from operating activities or potential contingent consideration to be received from the Quill transaction discussed below, or may be refinanced at or prior to their maturity.

The interest rate on the Existing Notes resets quarterly to an interest rate of 3-month London Interbank Offered Rate (“LIBOR”) plus 3.75%, subject to a LIBOR floor of 1.25%. The Existing Notes bore an interest rate of 5.0% on June 30, 2012 (December 31, 2011 — 5.0%). During the three and six months ended June 30, 2012, the Successor Company incurred $4.1 million and $8.2 million of interest expense, respectively, on the Existing Notes. Any increases in LIBOR applicable to the Existing Notes, outstanding at any given time, could adversely impact the Successor Company’s ability to service its future interest obligations.

· On April 4, 2012 the Successor Company and certain of its subsidiaries entered into an Asset Sale and Purchase Agreement (“APA”) with Ethicon, LLC and Ethicon, Inc. (collectively termed “Ethicon”). Pursuant to the terms of the APA, the Successor Company and the named subsidiaries sold certain intellectual property and manufacturing equipment related to its Quill wound closure products. On April 4, 2012, Ethicon made a non-refundable initial payment of $20.4 million for the purchase of these assets. Under the terms of the Existing Notes Indenture (described in note 12(a)), should the Company not find a qualified alternative use for $20 million of these proceeds from Ethicon, the Company may be required to make a bona fide offer to holders of the Existing Notes (described under note 12(a)) to repurchase up to an equivalent amount of outstanding notes by October 4, 2012. In the future, the Successor Company may receive up to an additional $42.0 million of contingent consideration payments from Ethicon based on the Successor Company fulfilling various performance obligations. As discussed above, a portion of these current and future funds may be used to prepay a portion of the Existing Notes prior to their maturity date. For more detail on the Quill transaction, refer to note 11(b).

· The Successor Company has a $28.0 million Revolving credit facility (“Revolving Credit Facility”) with Wells Fargo Capital Finance, LLC (“Wells Fargo”). As at June 30, 2012 the Successor Company had nil borrowings outstanding under the Revolving Credit Facility, $2.7 million in secured letters of credit issued under the Revolving Credit Facility and $21.1million of available borrowing capacity. The Successor Company is subject to a monthly stand-by charge on the unutilized portion of the facility and may incur additional interest charges on

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any future potential borrowings under the Revolving Credit Facility. Utilization of the Revolving Credit Facility is subject to a borrowing base formula based on the value of certain eligible inventory, accounts receivable and real property, net of applicable reserves. The utilization of the Revolving Credit Facility is also subject to certain restrictive covenants pertaining to operations and the maintenance of minimum levels of Adjusted EBITDA, liquidity and fixed charge coverage ratios. While the Successor Company is currently in compliance with the applicable minimum levels of Adjusted EBITDA, liquidity and fixed charge coverage covenants, there is no assurance that it will continue to comply with the covenants specified under the Revolving Credit Facility and future borrowing arrangements in 2012 and beyond. A breach of these covenants and failure to obtain waivers to cure any further breaches of the covenants and restrictions set forth under the Revolving Credit Facility may limit the Successor Company’s ability to obtain future advances or result in demands for accelerated repayment of any amounts outstanding at the time.

· Angiotech has a history of reporting operating losses. For the six months ended June 30, 2012, the Successor Company recorded a net loss of $2.9 million, compared to a net loss of $14.2 million incurred by the Predecessor Company during the two months ended June 30, 2011. However, during the three months ended June 30, 2012, Angiotech’s cash resources increased by $22.9 million. The net $22.9 million increase is primarily due to the $20.4 million of consideration received from Ethicon related to the sale of certain Quill related intellectual property and manufacturing equipment (see note 11) and $3.4 million of funds generated from operating activities, which were offset by $1.4 million of funds used for financing activities. For the six months ended June 30, 2012, Angiotech’s cash resources increased by $35.8 million. The net $35.8 million increase is primarily due to the $20.4 million of Quill consideration discussed above; $2.3 million of proceeds received from the liquidation of one of our investments; and $15.2 million of funds generated from operating activities; which were offset by $1.7 million of funds used for financing activities. Although the Company has been generating positive cash flows in recent quarters, future operating losses or negative operating cash flows would adversely impact the Successor Company’s liquidity position and its ability to meet its future obligations.

The Successor Company’s ability to maintain and sustain its future operations may depend upon its ability to: (i) complete the repayment or refinancing of existing debt obligations; (ii) remain in compliance with its debt covenants; (iii) achieve continued revenue growth and improvement in gross margins; and (iv) achieve continued improvement in operating efficiencies or reduced expenses.

The Successor Company’s future plans and current initiatives to manage its operating and liquidity risks include, but are not limited to the following:

· Potential repayment or refinancing of the $100 million of Existing Notes prior to the December 1, 2013 due date;

· Maintenance and potential utilization of the Revolving Credit Facility;

· Implementation of selected operations and gross margin improvement initiatives;

· Continued exploration of various strategic and financial alternatives, including but not limited to raising new equity or debt capital or exploring sales of various assets or businesses;

· Continued evaluation of potential cost savings in certain sales and marketing activities and certain research and development activities; and

· Potential sale of selected property, plant and equipment assets or other core or non-core assets.

Management continues to closely monitor and manage liquidity by regularly preparing rolling cash flow forecasts, monitoring the condition and value of assets available to be used as security in financing arrangements, seeking flexibility in financing arrangements and maintaining processes to ensure compliance with the terms of financing arrangements.

While management believes that it has developed planned courses of action and identified other opportunities to mitigate the operating and liquidity risks outlined above, there is no assurance that the Successor Company will be able to complete any or all of the plans or initiatives that have been identified or obtain sufficient liquidity to execute its

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business plan. Furthermore, there may be other material risks and uncertainties that may impact the Successor Company’s liquidity position that have not yet been identified.

2. SIGNIFICANT ACCOUNTING POLICIES

All accounting policies applicable to the Successor Company are the same as those described in note 2 of audited consolidated financial statements for the year ended December 31, 2011 included in the 2011 Annual Report.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reported periods. Estimates are used when accounting for the collectability of receivables, valuation of deferred tax assets, provisions for inventory obsolescence, accounting for manufacturing variances, determining stock-based compensation expense and reviewing long-lived assets for impairment. Actual results may differ materially from these estimates.

(a) Recently adopted accounting policies

No new accounting pronouncements were adopted by the Successor Company during three months ended ~~June~~September 30, 2012. For a summary of accounting pronouncements adopted by the Successor Company during the three months ended March 31, 2012, refer to the unaudited consolidated financial statements filed with the SEC on Form 10-Q on May 15, 2012.

(b) Future Accounting Pronouncements

AsIn atJuly 2012, the ~~date~~FASB ofissued ~~this~~ASC ~~assessment~~No. 2012-02, Intangibles no- ~~additional~~Goodwill ~~future~~and ~~accounting~~Other ~~pronouncements~~(Topic ~~were~~350): ~~identified,~~Testing ~~which~~Indefinite-Lived ~~are~~Intangible ~~expected~~Assets tofor ~~affect~~Impairment. This update provides companies with the ~~Successor~~option ~~Company’s~~to ~~future~~first ~~consolidated~~assess ~~financial~~qualitative ~~statements~~factors ~~beyond~~to ~~June~~determine whether events and circumstances indicate that it is more likely than not that an indefinite-lived intangible asset is impaired before proceeding to perform a quantitative impairment test. If a company concludes that impairment is unlikely, no further quantitative assessment is required. This update is effective for fiscal years beginning after September 3015, 2012. This guidance will be adopted when the annual goodwill impairment test is conducted in the fourth quarter of 2012.

3. REORGANIZATION

Overall, the implementation of the Recapitalization Transaction triggered a $67.3 million gain related to the forgiveness of debt calculated as follows:

	May 1, 2011 in 000’s
Predecessor Company liabilities subject to compromise:
Subordinated Notes	$	250,000
Pre-petition interest payable on Subordinated Notes	16,145
Trade accounts payable and accruals	4,480
Less: new common shares issued to satisfy Subordinated Noteholders’ claims	(202,948		)
Less: cash settlement of lender claims related to trade accounts payable and accruals	(370		)
Gain on extinguishment of debt and settlement of other liabilities	$	67,307

Reorganization Items

Upon commencement of the Creditor Protection Proceedings through to the Convenience Date, the Company adopted Accounting Standards Codification (“ASC”) No. 852 — Reorganization ~~items~~to ~~represent~~prepare ~~certain~~its ~~recoveries~~interim and annual consolidated financial statements. During Creditor Protection Proceedings, ASC No. 852 required that the Company distinguish transactions and events directly associated with the Recapitalization Transaction from ongoing operations of the business as follows: (i) certain expenses, ~~gains~~recoveries, loss provisions, and ~~losses~~other charges incurred during Creditor Protection Proceedings were reported as Reorganization Items on the Consolidated Statement of Operations and ~~loss~~(ii) specific ~~provisions~~cash ~~that~~flow ~~are~~items directly related to the ~~Company’s~~Reorganization ~~Creditor~~Items ~~Protection~~were ~~Proceedings~~segregated ~~and~~on ~~Recapitalization~~the ~~Transaction~~Consolidated Statement of Cash Flows. In addition, in accordance with ~~ASC~~the ~~No. 852~~terms of the recapitalization plan, ~~these~~the ~~reorganization~~Company ~~items~~ceased ~~have~~to ~~been~~accrue ~~separately~~interest ~~disclosed~~from asJanuary 28, ~~follows:~~2011 onwards on its pre-petition Subordinated Notes.

	Predecessor Company
	One month ended April 30, 2011			Four months ended April 30, 2011
Professional fees (1)	(9,008		)	(17,868		)
Director’s and officer’s insurance (2)	(219		)	(1,601		)
KEIP payment, net of tax (3)	(793		)	(793		)
Gain on settlement of financial liability approved by the Canadian Court (4)	—			1,500
Cancellation of options and awards (5)	(1,371		)	(1,371		)
Net gains due to fresh start accounting adjustments (6)	341,217			341,217
	$	329,826		$	321,084

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	Predecessor Company
	Four months ended April 30, 2011
Professional fees (1)	(17,868		)
Director’s and officer’s insurance (2)	(1,601		)
KEIP payment, net of tax (3)	(793		)
Gain on settlement of financial liability approved by the Canadian Court (4)	1,500
Cancellation of options and awards (5)	(1,371		)
Net gains due to fresh start accounting adjustments (6)	341,217
	$	321,084

(1) Professional fees represent legal, accounting and other financial consulting fees paid to advisors; which represented the Predecessor Company and Subordinated Noteholders during the Recapitalization Transaction. These advisors assisted in the analysis of financial and strategic alternatives as well as the execution and completion of the Recapitalization Transaction, throughout the Predecessor Company’s Creditor Protection Proceedings.

(2) Directors’ and officers’ insurance represents the purchase of additional insurance coverage required to indemnify the preceding directors and officers of the Predecessor Company for a period of six years after the Plan Implementation Date. Given that a new board of directors was appointed upon implementation of the CCAA Plan, total fees of $1.6 million were expensed to reorganization items during the four months ended April 30, 2011.

(3) Upon completion of the Recapitalization Transaction, a $0.8 million incentive payment (net of a $0.2 million tax recovery) was triggered under the terms of the Key Employment Incentive Plan (“KEIP”), which was established as part of the Recapitalization Transaction. The KEIP was fully paid out by August 10, 2011.

(4) In connection with the termination and settlement of an agreement with a previous distributor, the Predecessor Company recorded a $1.5 million recovery during the four months ended April 30, 2011 related to the full and final settlement of all milestone and royalty obligations owing and accrued as at December 31, 2010 under the terms of the original agreement.

(5) Upon implementation of the Recapitalization Transaction, the Predecessor Company cancelled all existing stock options and charged the total unrecognized stock based compensation of $1.4 million to earnings on April 30, 2011.

(6) Upon reorganization and implementation of fresh start accounting, the Company’s reorganization value of $692.8 million was allocated to all tangible and identifiable intangible assets based on their fair values, which totaled $567.6 million. The fresh start revaluation resulted in goodwill of $125.2 million and net revaluation gains of $341.1 million.

Unless specifically prescribed under ASC No. 852, other items that are indirectly related to the Predecessor Company’s reorganization activities, have been recorded in accordance with other applicable U.S. GAAP, including accounting for impairments of long-lived assets, modification of leases, accelerated depreciation and amortization, and severance and termination costs associated with exit and disposal activities.

For more detailed information about the Creditor Protection Proceedings and the Recapitalization Transaction, refer to the annual audited consolidated financial statements included in the 2011 Annual Report filed with the SEC on Form 10-K on March 29, 2012.

4. FINANCIAL INSTRUMENTS AND FINANCIAL RISK

For certain financial assets and liabilities, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities and interest payable, the carrying amounts approximate fair value due to their short-term nature. The fair value of short term investments was determined based on quoted market prices for identical assets. As at ~~June~~September 30, 2012, the fair value of Angiotech’s short-term investments was approximately $0.6 million (December 31, 2011 — $3.3 million).

As discussed above, on August 13, 2012, $225 million of the $255.5 million Existing Notes that were tendered were irrevocably extinguished and exchanged, on a pro rata basis, for $229.5 million of New Notes. As at ~~June~~September 30, 2012, the total fair value and carrying value of the ~~Successor~~New ~~Company’s~~Notes was $229.5 million. As at September 30, 2012, the total fair value of the Existing Notes was approximately $~~328~~100.42 million (December 31, 2011 - $316.0 million) and the carrying value was $~~325~~100.0 million (December 31, 2011 - $325.0 million). The estimated fair value of the ~~Existing~~New Notes was based on a consideration of cash flows associated with future interest and principal payments and discount rates from similar companies in the ~~healthcare~~health care industry. ~~As discussed above, the Successor Company’s Existing Notes were issued on May 12, 2011 and replaced the Predecessor Company’s Existing Floating Rate Notes.~~

~~Financial risk includes interest rate risk, exchange rate risk and credit risk.~~12

· Interest rate risk arises due to the Successor Company’s long-term debt bearing variable interest rates. The interest rate on the Existing Notes resets quarterly to 3-month LIBOR plus 3.75%, subject to a LIBOR floor of 1.25%. The Existing Notes currently bear interest at a rate of 5%. The Successor Company does not use derivatives to hedge against interest rate risks.

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~~Canadian~~Financial ~~dollar,~~risk ~~the~~includes ~~Danish~~interest ~~kroner,~~rate ~~the Swiss franc~~risk, ~~the Euro, and the UK pound sterling. Foreign~~ exchange rate risk isand ~~mitigated,~~credit ~~to some extent by satisfying foreign denominated expenditures with cash inflows or assets denominated in either the same currency or a pegged currency~~risk.

· ~~Credit~~Interest rate risk arises asdue ~~the Successor Company provides credit~~ to ~~its customers in~~ the ~~normal course of business. The~~ Successor Company’s ~~performs~~long-term ~~credit~~debt ~~evaluations~~bearing ofvariable ~~its~~interest ~~customers on a continuing basis and the majority of its trade receivables are unsecured~~rates. The ~~maximum~~interest ~~credit~~rate ~~risk~~on ~~loss that~~ the ~~Successor~~Existing ~~Company~~Notes ~~could~~resets ~~face~~quarterly ~~is limited~~ to ~~the~~3-month ~~carrying~~LIBOR ~~amount~~plus ~~of accounts receivable~~3.75%, ~~Concentrations~~subject ~~of credit risk with respect~~ to ~~trade~~a ~~accounts~~LIBOR ~~receivable~~floor ~~are limited due to the large number~~ of ~~customers and their dispersion across many geographic areas~~1.25%. ~~However,~~The ~~the~~remaining ~~Successor~~$100 ~~Company~~million ~~has a significant amount~~ of ~~trade~~Existing ~~accounts~~Notes ~~receivable~~currently ~~with~~bear ~~customers~~interest ~~who~~at ~~form~~a ~~part~~rate of ~~the national healthcare systems of several countries~~5%. ~~Efforts~~The ~~by governmental and third-party payers to reduce health care costs or the announcement of legislative proposals or reforms to implement government controls could impact the~~ Successor Company’s ~~credit risk. Although the Successor Company~~ does not ~~currently~~use ~~foresee~~derivatives ~~any~~to ~~significant~~hedge ~~credit~~against ~~risk~~interest ~~associated~~rate ~~with these receivables, collection is dependent upon the financial stability of those countries’ national economies~~risks. ~~At June 30, 2012, the accounts receivable allowance for uncollectible accounts was $0.3 million (December 31, 2011 — $0.2 million).~~

· Foreign exchange rate risk arises as a portion of the Successor Company’s investments, revenues and expenses are denominated in other than U.S. dollars. The Successor Company’s financial results are subject to the variability that arises from exchange rate movements in relation to the U.S. dollar, and is primarily limited to the Canadian dollar, the Danish kroner, the Swiss franc, the Euro, and the UK pound sterling. Foreign exchange risk is mitigated, to some extent by satisfying foreign denominated expenditures with cash inflows or assets denominated in either the same currency or a pegged currency.

· Credit risk arises as the Successor Company provides credit to its customers in the normal course of business. The Successor Company performs credit evaluations of its customers on a continuing basis and the majority of its trade receivables are unsecured. The maximum credit risk loss that the Successor Company could face is limited to the carrying amount of accounts receivable. Concentrations of credit risk with respect to trade accounts receivable are limited due to the large number of customers and their dispersion across many geographic areas. However, the Successor Company has a significant amount of trade accounts receivable with customers who form part of the national health care systems of several countries. Efforts by governmental and third-party payers to reduce health care costs or the announcement of legislative proposals or reforms to implement government controls could impact the Successor Company’s credit risk. Although the Successor Company does not currently foresee any significant credit risk associated with these receivables, collection is dependent upon the financial stability of those countries’ national economies. At September 30, 2012, the accounts receivable allowance for uncollectible accounts was $0.3 million (December 31, 2011 — $0.2 million).

5. CASH AND CASH EQUIVALENTS

All cash and cash equivalents are held in interest and non-interest bearing bank accounts and are denominated in the following currencies:

	Successor Company
	June 30,		December 31,
	September 30,		December 31,
	2012		2011
U.S. dollars	$	4349,~~938~~794	$	12,837
Canadian dollars	63,~~974~~716		4,884
Swiss francs	~~127~~185		307
Euros	1,~~158~~235		1,515
Danish kroner	2,~~609~~439		940
Other	32,~~185~~343		1,690
	$	5759,~~991~~712	$	22,173

~~6. SHORT-TERM INVESTMENTS~~13

Short term investments - Available-for-sale securities	June 30, 2012			December 31, 2011
Cost	$	3,259		$	5,294
Securities sold	(2,567		)	—
Net unrealized gains (losses) recognized in earnings	(48		)	(2,035		)
Carrying value	644			3,259

Short term investments as at June 30, 2012 and December 31, 2011 consist of equity securities in a publicly traded biotechnology company, which is recorded at its fair value at the end of each reporting period. In accordance with ASC 820 — Fair Value Measurements and Disclosures, this fair value measure is included in Level 1 of the fair value hierarchy given that its measurement is based on quoted bid prices which are available in an active stock market.

During the three months ended June 30, 2012, the Successor Company disposed of $1.4 million of its investment for net proceeds of $1.2 million and realized a loss of $0.2 million (of which $0.1 million was previously recorded as an unrealized loss). During the six months ended June 30, 2012, the Successor Company disposed of $2.6 million of its investment for net proceeds of $2.3 million and realized a loss of $0.3 million.

During the one and four months ended April 30, 2011 and the two months ended June 30, 2011, no investment impairments or unrealized investment losses were recorded in earnings. However, as at December 31, 2011 the Successor Company determined that this investment was impaired on an other-than-temporary basis due to the value being depressed for an extended period of time and management’s intent to liquidate these securities in the near future.

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~~As a result, the $2~~6.~~0 million of net unrealized losses recorded in accumulated other comprehensive income were reclassified to the Consolidated Statement of Operations as an impairment write~~ SHORT-~~down.~~TERM INVESTMENTS

Short term investments - Available-for-sale securities	September 30, 2012			December 31, 2011
Cost	$	3,259		$	5,294
Securities sold	(2,567		)	—
Net unrealized gains (losses) recognized in earnings	(136		)	(2,035		)
Carrying value	556			3,259

Short term investments as at September 30, 2012 and December 31, 2011 consist of equity securities in Athersys, Inc., a publicly traded biotechnology company, which is recorded at its fair value at the end of each reporting period. In accordance with ASC 820 — Fair Value Measurements and Disclosures, this fair value measure is included in Level 1 of the fair value hierarchy given that its measurement is based on quoted bid prices which are available in an active stock market.

During the nine months ended September 30, 2012, the Successor Company disposed of $2.6 million of its investment for net proceeds of $2.3 million and realized a loss of $0.3 million on the statement of operations. During the three and five months ended September 30, 2011, the Successor Company recorded unrealized losses of $1.8 million and $2.0 million, respectively in accumulated and other comprehensive income.

However, as at December 31, 2011 the Successor Company determined that this investment was impaired on an other-than-temporary basis due to the value being depressed for an extended period of time and management’s intent to liquidate these securities in the near future. As a result, the $2.0 million of net unrealized losses recorded in accumulated other comprehensive income were reclassified to the Consolidated Statement of Operations as an impairment write-down.

7. INVENTORIES

Inventories are comprised of the following:

	Successor Company
	June 30,		December 31,
	September 30,		December 31,
	2012		2011
Raw materials	$	1113,~~962~~745	$	9,641
Work in process	14,~~610~~928		11,882
Finished goods	1115,~~607~~875		12,781
Total	$	3844,~~179~~548	$	34,304

As at ~~June~~September 30, 2012, the Successor Company’s inventory allowance was $10.38 million (December 31, 2011 - $1.0 million). For the three and ~~six~~nine months ended ~~June~~September 30, 2012, the Successor Company recorded net inventory write-downs and obsolescence expense of $0.15 million and $0.31 million, respectively (Successor Company — ~~two~~three and five months ended ~~June~~September 30, 2011 - $0.41 million ~~expense~~and $0.3 million, respectively; Predecessor Company — ~~one and~~ four months ended April 30, 2011- $~~nil and $~~0.5 million recovery~~, respectively~~).

~~8. PROPERTY, PLANT AND EQUIPMENT~~14

			Accumulated		Net Book
June 30, 2012 - Successor Company	Cost		Depreciation		Value
Land	$	3,586	$	—	$	3,586
Buildings	14,324		764		13,560
Leasehold improvements	7,454		3,304		4,150
Manufacturing equipment	14,467		2,793		11,674
Research equipment	316		127		189
Office furniture and equipment	679		251		428
Computer equipment	2,353		513		1,840
	$	43,179	$	7,752	$	35,427

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8. PROPERTY, PLANT AND EQUIPMENT

			Accumulated		Net Book
September 30, 2012 - Successor Company	Cost		Depreciation		Value
Land	$	3,598	$	—	$	3,598
Buildings	14,370		913		13,457
Leasehold improvements	7,459		3,732		3,727
Manufacturing equipment	14,896		3,688		11,208
Research equipment	316		158		158
Office furniture and equipment	687		298		389
Computer equipment	2,538		638		1,900

	$	43,864	$	9,427	$	34,437

			Accumulated		Net Book
December 31, 2011 - Successor Company	Cost		Depreciation		Value
Land	$	3,589	$	—	$	3,589
Buildings	14,355		452		13,903
Leasehold improvements	4,946		1,930		3,016
Manufacturing equipment	17,504		1,573		15,931
Research equipment	312		63		249
Office furniture and equipment	798		156		642
Computer equipment	2,120		261		1,859

	$	43,624	$	4,435	$	39,189

Depreciation expense for the three and ~~six~~nine months ended ~~June~~September 30, 2012 was $1.65 million and $3.5.0 million, respectively. Approximately $1.0 million and $23.0 million of these amounts were allocated to cost of products sold, respectively. Depreciation expense for the ~~two~~three and five months ended ~~June~~September 30, 2011 and ~~the one and~~ four months ended April 30, 2011 was $01.97 million, $12.07 million and $3.9 million, respectively. Approximately $01.70 million, $01.37 million and $1.4 million of these amounts were allocated to cost of products sold, respectively.

9. INTANGIBLE ASSETS AND GOODWILL

a) Intangible assets

			Accumulated
June 30, 2012 - Succcessor Company	Cost		Amortization		Net Book
September 30, 2012- Succcessor Company	Cost		Amortization		Net Book
Customer relationships	$	170,~~237~~390	$	1114,~~755~~301	$	~~158~~156,~~482~~089
Trade names and other	24,~~802~~829		12,~~920~~335		22,~~882~~494
Patents	105,700		1822,~~675~~674		8783,~~025~~026
Core and developed technology	63,~~572~~727		46,~~980~~061		5857,~~592~~666
	$	364,~~311~~646	$	3745,~~330~~371	$	~~326~~319,~~981~~275

			Accumulated		Net Book
December 31, 2011 - Succcessor Company	Cost		Amortization		Value
Customer relationships	$	170,269	$	6,723	$	163,546
Trade names and other	24,859		1,102		23,757
Patents	105,700		10,663		95,037
Core and developed technology	63,576		2,850		60,726
	$	364,404	$	21,338	$	343,066

Amortization expense for the three and six months ended June 30, 2012 was $7.9 million and $16.0 million, respectively. Amortization expense for the two months ended June 30, 2011 and the one and four months ended April 30, 2011 was $5.9 million, $2.4 million and $11.8 million, respectively.

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			Accumulated		Net Book
December 31, 2011 - Succcessor Company	Cost		Amortization		Value
Customer relationships	$	170,269	$	6,723	$	163,546
Trade names and other	24,859		1,102		23,757
Patents	105,700		10,663		95,037
Core and developed technology	63,576		2,850		60,726
	$	364,404	$	21,338	$	343,066

Amortization expense for the three and nine months ended September 30, 2012 was $8.0 million and $24.0 million, respectively. Amortization expense for the three and five months ended September 30, 2011 and four months ended April 30, 2011 was $8.2 million, $13.7 million and $11.8 million, respectively.

b) Goodwill

As described in note 3, on May 1, 2011 the Successor Company recorded $125 million of goodwill in connection with its implementation of fresh start accounting. All of the goodwill was assigned to our Medical Device ~~Technologies~~Products reporting unit. The following table details the changes in the carrying value of goodwill during the ~~six~~nine months ended ~~June~~September 30, 2012:

	Medical Device Technologies
Balance, December 31, 2011	$	123,228
Foreign currency revaluation adjustment for goodwill denominated in foreign currencies	14543
Balance, June 30, 2012	$	123,242
Balance, September 30, 2012	$	123,771

10. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

	Successor Company
	June 30, 2012		December 31, 2011
	September 30, 2012		December 31, 2011
Trade accounts payable	$	4,~~364~~416	$	3,923
Accrued license and royalty fees	~~468~~413		542
Employee-related accruals	1214,~~906~~015		17,909
Accrued professional fees	12,~~997~~242		1,509
Accrued contract research	~~133~~20		133
Other liabilities (1)	5,~~790~~136		6,521
	$	2526,~~658~~242	$	30,537

(1) Other liabilities as at ~~June~~September 30, 2012 includes $1.83 million for the remaining obligation related to the prior 2011 settlement of certain litigation with QSR ~~Settlement~~Holdings, Inc., ~~Amount~~which ~~described~~will inbe ~~note~~fully 16paid by May 2013, (December 31, 2011 - $2.8 million),; $1.0.9 million for VAT payable by certain of our European entities (December 31, 2011 - $1.02 million),; and $3.0 million of other general operating liabilities (December 31, 2011 - $2.75 million).

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11. DEFERRED REVENUE

a) Cook Milestone Payment

In July 1997, the Predecessor Company entered into a license agreement with Cook Medical, Inc. (“Cook”) to utilize certain of Angiotech’s technologies in its Zilver® PTX® paclitaxel-eluting peripheral vascular stent (“Zilver PTX”) for the treatment of vascular disease in the leg (the “License Agreement”). Zilver PTX is currently approved for sale in the European Union (“E.U.”), certain other countries outside of the U.S., and is awaiting approval by the U.S. Food and Drug Administration (“FDA”) for sale in the U.S.

On February 3, 2012, the Successor Company received a $4.0 million sales milestone fee that was triggered upon Cook’s achievement of a certain targeted level of sales of Zilver PTX under the terms of the License Agreement. Upon receipt, the $4.0 million sales milestone fee was recognized as deferred revenue given that: (i) the milestone was not determined to be substantive for the purposes of assessing revenue recognition under ASC No. 605 — Revenue Recognition: Milestone Method, and (ii) under the terms of the arrangement, the fee is subject to adjustment based on a 50% draw down applied to all future Zilver PTX royalties received from Cook. During the three and ~~six~~nine months ended ~~June~~September 30, 2012, $0.13 million and $0.4 million of the deferred revenue balance was recognized as revenue, respectively, based on the draw down formula stipulated by the License Agreement. As at September 30, 2012, the remaining deferred revenue balance was $3.5 million. Approximately $1.3 million of this balance was classified as current and $2.2 million was classified as non-current.

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Agreement. As at June 30, 2012, the remaining deferred revenue balance was $3.8 million. Approximately $0.8 million of this balance was classified as current and $3.0 million was classified as non-current.

b) Quill Consideration

On April 4, 2012, Angiotech concurrently entered into a series of agreements with Ethicon, LLC and Ethicon, Inc. (collectively “Ethicon”) in connection with the Company’s proprietary Quill technology and certain related manufacturing equipment and services. Significant terms of the respective agreements are described as follows:

i. Asset Sale and Purchase Agreement

Angiotech entered into an Asset Sale and Purchase Agreement dated April 4, 2012 (the “APA”) with Ethicon. Pursuant to the terms of the APA, Angiotech sold certain intellectual property related to its Quill technology, as well as certain related manufacturing equipment, to Ethicon. Under the terms of the APA, on April 4, 2012 Ethicon made an initial cash payment of $20.4 million to Angiotech, and agreed to pay up to an additional $30.0 million in additional cash consideration, with any additional amounts that may be paid contingent upon the completion of certain activities, including the transfer of certain Quill-related know-how to Ethicon and the achievement of certain product development milestones.

ii. Co-Exclusive Patent and Know-How License Agreement

Concurrent with the APA, Angiotech also entered into a Co-Exclusive Patent and Know-How License Agreement dated April 4, 2012 (the “License Agreement”) with Ethicon. Under the License Agreement, Ethicon has granted Angiotech a worldwide, royalty free license to the intellectual property sold to Ethicon under the APA, which effectively grants the Company an unrestricted right to manufacture and distribute Quill wound closure products (without the Ethicon label) in any market and at the Company’s discretion.

iii. Manufacturing and Supply Agreement

The Company also entered into a Manufacturing and Supply Agreement dated April 4, 2012 (the “MSA”) with Ethicon, pursuant to which the Company will act as Ethicon’s exclusive manufacturer of knotless wound closure products that utilize the Quill technology for an undisclosed term. Under the terms of the MSA, Ethicon agreed to pay up to $12.0 million in cash consideration to Angiotech, with any amounts that may be paid contingent upon the completion of certain activities, specifically the achievement of certain product development milestones. The MSA requires Angiotech to fulfill monthly orders placed by Ethicon subject to certain terms and conditions. In addition, under the terms of the MSA, Ethicon has a right of first negotiation with respect to the commercialization of any new products, as defined, in the field of knotless wound closure, which may be developed by the Company and are not otherwise covered by the MSA.

As many of the contingent payments embedded in the respective agreements are subject to the same or interrelated performance conditions; the APA, License Agreement and MSA were determined to be closely related for accounting purposes. As such, these agreements were collectively determined, for accounting purposes, to represent a multiple-element arrangement. This conclusion was based on the following factors: (a) the degree of continuing involvement required from Angiotech to complete the transfer of certain Quill know-how to Ethicon, and to achieve the product development milestones, and (b) the fact that Angiotech has retained the same unrestricted rights that it had on a pre-transaction basis to continue manufacturing and distributing its Quill wound closure products for its own purposes, in any market at its discretion.

~~In accordance with ASC No. 605, management evaluated this multiple-element arrangement to identify all key deliverables listed below:~~17

· $0.4 million of cash received during the three months ended June 30, 2012, related to the sale of certain manufacturing equipment;

· $20.0 million of cash received up-front during the three months ended June 30, 2012 for the transfer of title of certain Quill related intellectual property to Ethicon;

· $27.0 million of future contingent consideration, comprised as follows: (i) $5.0 million to be received upon completion of transfer to Ethicon of certain know-how; and (ii) $22.0 million due

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~~upon~~retained the ~~achievement~~same ofunrestricted ~~certain~~rights ~~product~~that ~~development~~it ~~milestones,~~had ~~primarily~~on ~~relating~~a pre-transaction basis to ~~the~~continue ~~development~~manufacturing ofand andistributing ~~initial~~its ~~set~~Quill ofwound ~~product~~closure ~~codes;~~products for its own purposes, in any market at its discretion.

~~· $15.0~~In ~~million~~accordance ofwith ~~future~~ASC ~~contingent~~No. 605, ~~consideration~~management ~~due~~evaluated ~~upon~~this ~~the~~multiple-element ~~achievement~~arrangement ~~of certain product development milestones primarily relating~~ to ~~the~~identify ~~development~~all ofkey andeliverables ~~additional~~listed ~~set of product codes.~~below:

~~The~~ · $0.4 million of cash received ~~was recognized as revenue~~ during ~~the three months ended June~~April 302012, ~~2012~~related ~~upon~~to ~~delivery~~the sale of ~~the~~certain manufacturing equipment ~~to Ethicon in April 2012.~~;

· $20.0 million of cash received up-front during April 2012 for the transfer of title of certain Quill related intellectual property to Ethicon;

· $5.0 million of cash received during August 2012 for the transfer of certain know-how to Ethicon;

· $22.0 million of cash received during October 2012 related to the achievement of certain product development milestones associated with the development of an initial set of product codes; and

· $15.0 million of future contingent consideration due upon the achievement of certain product development milestones associated with the development of an additional set of product codes.

The $0.4 million of cash received was recognized as revenue in April 2012 upon delivery of the manufacturing equipment to Ethicon in April 2012.

The Company has determined that each of the remaining deliverables under the collective agreements does not independently have standalone value to Ethicon without Angiotech’s continuing involvement and proprietary knowledge, which is required to complete certain product development tasks and the manufacture and supply of products utilizing the Quill technology. As such, the entire arrangement has been treated as one unit of accounting and the consideration is expected to be recognized as follows:

· As the earnings process associated with the $2025.0 million of consideration received up~~-front~~ ~~consideration~~to September 30, 2012 was deemed to be incomplete, it has been recorded as atdeferred ~~June 30,~~revenue. ~~2012~~Similarly, the $2022.0 million ~~up-front~~of ~~payment~~consideration ~~was~~received in October 2012 will also be recorded as deferred revenue. A portion or all of the $2047.0 million of ~~up-front~~ consideration received to date and $2715.~~0million~~0 million of future contingent consideration is expected to be ratably recognized into revenue upon completion of the activities ~~associated~~over ~~with~~period of approximately three years. Management anticipates that the ~~various~~Successor ~~milestones~~Company ~~over~~will ~~period~~begin to recognize revenue recognition in the fourth quarter of ~~approximately~~2012 ~~three~~upon ~~years~~completion and fulfillment of certain of its performance obligations.

· In accordance with ASC No. 605, Angiotech is evaluating whether the contractual gross margins to be earned under the MSA are representative of fair value. If the contractual gross margins are not determined to be representative of fair value, a portion of the $2047.0 million of ~~up-front~~ consideration received to date and/or future contingent consideration may need to be reallocated to the manufacturing and supply based on management’s best estimate of selling price. This will ensure that gross margins recorded for accounting purposes on any product sold to Ethicon are reflected at their estimated fair values, which are commensurate with gross margins earned from similar third party sales.

· Due to the risk and uncertainty associated with the completion of activities relating to these future milestones, and the fact that various activities were still in process as at ~~June~~September 30, 2012, no amounts have been recorded in the financial statements as at ~~June~~September 30, 2012 in connection with the remaining contingent consideration described above. The Company will only begin to recognize future contingent consideration as revenue over the remaining contract term once the relevant performance obligations have been completed and all revenue recognition criteria have been met.

· As at ~~June~~September 30, 2012, approximately $59.42 million of the $2025.0 million of deferred revenue is expected to be recognized as revenue over the next year. This amount has therefore been classified as current.

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12. DEBT

The Company has the following debt issued and outstanding:

	Successor Company
	June 30, 2012		December 31, 2011
	September 30, 2012		December 31, 2011
Existing Notes	$	325,000	$	325,000
Existing Notes - Floating Rate Notes, current portion	$	40,000	$	—
Existing Notes - Floating Rate Notes, non-current portion	60,000		325,000
New Notes - 9% Senior Notes	229,413		—
Revolving Credit Facility	—		40
	$	~~325~~329,~~000~~413	$	325,040

20(a) New Notes

~~Table~~In July 2012, Angiotech launched an offer to exchange up to a maximum of ~~Contents~~$225.0 million in aggregate principal amount of the outstanding Existing Notes (the “Maximum Principal Exchange Amount”) for New Notes issued by Angiotech Pharmaceuticals (U.S.), Inc. pursuant to an Offering Memorandum and Consent Solicitation Statement (the “Exchange Offer”). On August 13, 2012, $225 million of the $255.5 million tendered Existing Notes were irrevocably extinguished and exchanged, on a pro rata basis, for $229.4 million of New Notes. All Existing Notes were tendered by the prescribed July 23, 2012 early tender date and, therefore, received the New Notes with a principal amount that included a 2% premium (“Early Tender Premium”) of the Existing Notes exchanged. In accordance with ASC No. 470-50 — Debt Extinguishment and Modification, the refinancing of the $225.0 million of Existing Notes was determined to be an extinguishment of debt given that the change in the future cash flows on a pre and post transaction basis was considered substantial. As such, the New Notes were initially recorded at their fair value of $229.4 million and a $4.4 million non-cash debt extinguishment loss was triggered during the three and nine months ended September 30, 2012 upon settlement and cancellation of the $225.0 million of Existing Notes were tendered.

~~(a)~~The $229.4 million of New Notes are due on December 1, 2016 and bear interest at 9% per annum, which is payable quarterly in cash and in arrears on March 1, June 1, September 1, and December 1 of each year. The New Notes are senior secured obligations, which are fully, joint and severally, and unconditionally guaranteed by Angiotech’s existing and future subsidiaries which may guarantee any of its other indebtedness. Subject to certain exceptions, the New Notes and the Guarantors’ guarantees of the New Notes are secured, ratably with the Existing Notes, by second-priority liens and security interests over the same collateral that currently or in the future secures the obligations owing under the Successor Company’s Revolving Credit Facility, Hedging Obligations and cash management obligations.

~~The~~Aside ~~Existing~~from ~~Notes~~the ofhigher ~~$325 million were issued on May 12, 2011 and are due on December 1, 2013. The Existing Notes bear interest at an annual~~ rate of ~~LIBOR (London Interbank Offered Rate) plus 3.75%, subject to a LIBOR floor of 1.25%. The~~ interest ~~rate resets quarterly~~ and isextended ~~payable~~maturity ~~in arrears on March 1~~date, ~~June 1, September 1,~~ ~~and~~the ~~December 1~~New ~~of each year. The Existing~~ Notes ~~are~~were ~~unsecured~~issued ~~senior~~pursuant ~~obligations, which are guaranteed by certain of the Successor Company’s subsidiaries, and rank equally in right of payment~~ to ~~all~~an ~~existing~~indenture ~~and future senior indebtedness other than debt incurred under~~ (the ~~Revolving~~“New ~~Credit Facility. In addition, as described below, the Existing~~ Notes ~~are~~Indenture”) ~~secured~~on bysubstantially ~~second liens. The guarantees of~~ the ~~guarantor~~same ~~subsidiaries~~terms ~~are unconditional, joint~~ and ~~several.~~conditions ~~Under~~as the ~~terms of the~~ indenture governing the Existing Notes dated May 12, 2011 among Angiotech, the guarantors party thereto and Deutshe Bank National Trust Company as trustee (the “Existing Notes Indenture”) ~~and subject to certain conditions~~, ~~the~~except ~~holders~~for of the Existing Notes have been granted a security interest in the form of a second lien over the Successor Company and certain of its subsidiaries’ property, assets and undertakings that secure the Revolving Credit Facility.following:

On July 3, 2012, Angiotech launched an offer to exchange up to a maximum of $200 million in aggregate principal amount of the outstanding Existing Notes for new 9% Senior Notes due December 1, 2016 issued by Angiotech Pharmaceuticals (US), Inc. pursuant to an Offering Memorandum and Consent Solicitation Statement. On July 27, 2012, as a result of significant demand for New Notes by holders of the Existing Notes, Angiotech elected to amend the Exchange Offer to increase the Maximum Principal Exchange Amount to $225 million. On August 13, 2012, $225 million of the $255.5 million tendered Existing Notes were irrevocably extinguished and exchanged, on a pro rata basis, for approximately $230 million of New Notes. All Existing Notes were tendered by the prescribed July 23, 2012 early tender date and, therefore, received the New Notes with a principal amount constituting a 2% premium to the principal amount of the Existing Notes so exchanged.

Aside from the higher rate of interest and extended maturity date, the New Notes were issued pursuant to an indenture (the “New Notes Indenture”) on substantially the same terms and conditions as the Existing Notes Indenture, except for the following:

· The Existing Notes were issued by Angiotech and guaranteed by Angiotech US and certain other subsidiaries. The New Notes were issued by Angiotech US, and are guaranteed by Angiotech and certain of its subsidiaries.

· The New Notes are redeemable at Angiotech US’s option at any time, in whole or in part, at a redemption price equal to 100% of the principal amount thereof, plus any accrued and unpaid interest thereon to the applicable redemption date and any outstanding fees, expenses or other amounts owing in respect thereof. However, the redemption is subject to the condition that all Existing Notes then outstanding, if any, must be concurrently redeemed under the Existing Notes Indenture.

· The covenants restricting incurrence of Indebtedness were modified to prohibit the incurrence of Indebtedness based on the Fixed Charge Coverage Ratio and limit the amount of Permitted Refinancing Indebtedness that can be secured with Permitted Liens.

· Provided that no Default or Event of Default has occurred, under the New Notes Indenture, Angiotech has the option to prepay the outstanding Existing Notes in whole or in part prior to making any principal payments on the New Notes.

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Under the terms of the New Notes Indenture, an event of default would permit the holders of the New Notes to exercise their right to demand immediate repayment of the Successor Company’s debt obligations owing thereunder. In the event that this occurred and the Successor Company was unable to refinance the New Notes, the Successor Company’s current cash and credit capacity may not be sufficient to service its principal debt and interest obligations. In addition, restrictions on the Successor Company’s ability to borrow and the possible accelerated demand of repayment of existing or future obligations by any of its creditors may jeopardize its working capital position and ability to sustain future operations.

If a change in control occurs in the future, Angiotech will be required to offer to repurchase the New Notes at a price equal to 101% of the principal amount thereof, plus any accrued and unpaid interest, if any, to the date of repurchase.

Subject to certain exceptions, the New Notes and the Guarantors’ guarantees of the New Notes are secured, ratably with the Existing Notes, by second-priority liens and security interests over the same collateral that currently or in the future secures the obligations owing under the Successor Company’s Revolving Credit Facility, Hedging Obligations and cash management obligations. The New Notes are senior secured obligations, which are fully, joint and severally, and unconditionally guaranteed by Angiotech’s existing and future subsidiaries which may guarantee any of its other indebtedness.

In connection with the Exchange Offer, the Successor Company also received consents from the holders of the Existing Notes to amend the Existing Notes Indenture dated May 12, 2011 to provide for, among other things, the New Notes and Existing Notes to vote together as a single class on certain matters.

~~Under the terms of the~~ (b) Existing Notes Indenture and New Notes Indenture, an event of default would permit the holders of the Existing Notes to exercise their right to demand immediate repayment of the Successor Company’s debt obligations owing thereunder. In the event that this occurred and the Successor Company was unable to refinance the Existing Notes, the Successor Company’s current cash and credit capacity may not be sufficient to service its principal debt and interest obligations. In addition, restrictions on the Successor Company’s ability to borrow and the possible accelerated demand of

21On September 17, 2012, pursuant to a Notice of Optional Partial Redemption, the Successor Company exercised its option to call for the redemption of $40.0 million in aggregate principal amount of its $100.0 million then outstanding Existing Notes. These Existing Notes were redeemed on October 17, 2012 at 100% of the principal amount, together with accrued and unpaid interest of $0.2 million.

~~Table~~The Existing Notes were issued on May 12, 2011 and are due on December 1, 2013. The Existing Notes bear interest at an annual rate of ~~Contents~~LIBOR (London Interbank Offered Rate) plus 3.75%, subject to a LIBOR floor of 1.25%. The interest rate resets quarterly and is payable in arrears on March 1, June 1, September 1, and December 1 of each year. The Existing Notes are unsecured senior obligations, which are guaranteed by certain of the Successor Company’s subsidiaries, and rank equally in right of payment to all existing and future senior indebtedness other than debt incurred under the Revolving Credit Facility. In addition, as described below, the Existing Notes are secured by second liens. The guarantees of the guarantor subsidiaries are unconditional, joint and several. Under the terms of the Existing Notes Indenture and subject to certain conditions, the holders of the Existing Notes have been granted a security interest in the form of a second lien over the Successor Company and certain of its subsidiaries’ property, assets and undertakings that secure the Revolving Credit Facility. Under the terms of the New Notes Indenture, an event of default would permit the holders of the Existing Notes to exercise their right to demand immediate repayment of the Successor Company’s debt obligations owing thereunder.

~~repayment of existing or future obligations by any of its creditors may jeopardize its working capital position and ability to sustain future operations.~~(c) Covenants

In addition, under the terms of the Existing Notes Indenture, should the Company not find a qualified alternative use for the $20 million of proceeds from the transaction with Ethicon described in note 11(b), the Company may be required to make a bona fide offer to holders of the Existing Notes to repurchase up to an equivalent amount of outstanding notes by October 4, 2012.

(b) Covenants

The Existing Notes Indenture contains various covenants which impose restrictions on the operation of the Successor Company’s business and the business of its subsidiaries, including the incurrence of certain liens and additional indebtedness. Material covenants under this indenture: specify maximum or permitted amounts for certain types of capital transactions; impose certain restrictions on asset sales, the use of proceeds and the payment of dividends by the Successor Company; and requires that all outstanding principal amounts and interest accrued and unpaid become due and payable upon the occurrence of a defined event of default.

The ~~proposed~~ New Notes Indenture ~~discussed above~~ contains similar covenants that ~~will~~, among other things, ~~limit~~limits the Successor Company’s ability to: incur, assume or guarantee additional indebtedness or issue preferred stock;, pay dividends or make other equity distributions; to stockholders, purchase or redeem capital stock;, make certain investments;, create liens;, sell or otherwise dispose of assets;, engage in transactions with affiliates;, and merge or consolidate with another entity, or transfer substantially ~~all~~ of the Successor Company’s assets.

In addition, the Revolving Credit Facility described below includes certain customary affirmative and negative covenants, which limit the Successor Company’s ability to, among other things, incur indebtedness, create liens, merge or consolidate, sell or dispose of assets, change the nature of its business, make distributions or advances, loans or investments. The Revolving Credit Facility also requires the Successor Company to comply with a specified minimum adjusted earnings before income taxes, depreciation and amortization (“Adjusted EBITDA”) and fixed charge coverage ratio as well as maintain $15.0 million in Excess Availability plus Qualified Cash (as defined under the Revolving Credit Facility), of which Qualified Cash must be at least $5.0 million. In addition, in the event that the aggregate amount of cash and cash equivalents of the parent company and its subsidiaries exceeds $20 million at any time, the Successor Company is required to immediately prepay the outstanding principal amount of the advances until paid in full in an amount equal to such excess. The Revolving Credit Facility contains certain customary events of default including but not limited to those for failure to comply with covenants, commencement of insolvency proceedings and defaults under the Successor Company’s other indebtedness. As described in note 12(e) below, the Successor Company entered into an amendment to its Revolving Credit Facility on March 12, 2012 to modify certain of these covenants and other conditions to provide increased financial flexibility and improve liquidity.

~~(c) Interest~~20

The Existing Notes accrue interest at LIBOR plus 3.75%, subject to a LIBOR floor of 1.25%. The effective interest rate on these notes for the three and six months ended June 30, 2012 was 5.0% and the rate in effect on June 30, 2012 was 5% (December 31, 2011 - 5.0%). The effective interest rate on these notes for the two months ended June 30, 2011 was 3.4%. The effective interest rate on these notes for one and four months ended April 30, 2011 was 3.7% and 5.5%, respectively. For the three and six months ended June 30, 2012 the Successor Company incurred interest expense of $4.1 million and $8.2 million, respectively, on the Existing Notes. For the two months ended June 30, 2011, the Successor Company incurred interest expense of $2.8 million on the Existing Notes. For the one and four months ended April 30, 2011, the Predecessor Company incurred interest expense of $1.1 million and $4.4 million on the senior floating rate notes that were in place prior to the issuance of the Existing Notes on the Plan Implementation Date.

d) Deferred Financing Costs

Deferred financing costs are capitalized and amortized to interest expense over the life of the debt instruments on a straight-line basis, which approximates the effective interest rate method. As at June 30, 2012, the Successor Company had $0.7 million of deferred financing costs recorded related to the fees that were incurred to complete the Exchange Offer and amend to the Revolving Credit Facility described in note 12(e) below. Upon implementation of fresh start accounting on April 30, 2011, the Predecessor Company’s $4.4 million of deferred financing costs, related to the Existing Floating Rate Notes and

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~~Exit Credit Facility, were fair valued to nil. As a result, the Successor Company had nil deferred financing costs as at June~~(d) ~~30, 2011.~~Interest

During the three and ~~six~~nine months ended ~~June~~September 30, 2012, the Successor Company ~~recorded~~incurred ~~nil and~~ $02.18 million of ~~non-cash~~ interest expense, ~~respectively,~~on ~~related to~~ the ~~amortization~~New ~~of its deferred financing costs~~Notes. ~~During~~The ~~the~~effective ~~two~~interest ~~months~~rate ~~ended~~on ~~June 30,~~these ~~2011~~notes ~~and~~during the ~~one~~three ~~and four~~ months ended ~~April~~September 30, ~~2011,~~2012 ~~Angiotech~~was ~~recorded nil, $1.0 million and $3.~~9 ~~million of non-cash interest expense, respectively~~.4%.

eDuring the three and nine months ended September 30, 2012, the Successor Company incurred interest expense of $5.4 million and $13.6 million, respectively, on the Existing Notes. During the three and five months ended September 30, 2011, the Successor Company incurred interest expense of $4.2 million and $6.9 million, respectively on the Existing Notes. For the four months ended April 30, 2011, the Predecessor Company incurred interest expense of $4.4 million on the senior floating rate notes that were in place prior to the issuance of the Existing Notes on the Plan Implementation Date. The effective interest rate on these notes for the three and nine months ended September 30, 2012 was 5.0% and the rate in effect on September 30, 2012 was 5% (December 31, 2011 - 5.0%). ~~Revolving~~The ~~Credit~~effective ~~Facility~~interest rate on these notes for the three and five months ended September 30, 2011 and four months ended April 30, 2011 was 5.2%, 5.2% and 4.1%, respectively.

On March 12, 2012, the Successor Company completed a second amendment to its Revolving Credit Facility to provide increased financial flexibility and improve its overall liquidity. This amendment provides for, among other things: (ie) ~~the~~ ~~repurchase~~Deferred ofFinancing the Successor Company’s outstanding Senior Floating Rate Notes, subject to certain terms and conditions; (ii) the repurchase of equity held by current or former employees, officers or directors subject to certain limitations; (iii) an increase in the amount of cash that can be held by the Successor Company’s foreign subsidiaries; (iv) the ability to dispose of certain of the Successor Company’s intellectual property assets (at which time the component of the borrowing base supported by such intellectual property assets would be reduced to nil); (v) a reduction in the restrictions surrounding eligibility of certain accounts receivable; (vi) the removal of the lien over the Successor Company’s short term investments; (vii) a revision to the definition of EBITDA to allow for certain historical and future restructuring and CCAA costs; and (viii) less restrictive reporting requirements when advances under the Revolving Credit Facility are below certain thresholds. During the six months ended June 30, 2012, the Successor Company incurred total fees of $0.4 million to complete this amendment.Costs

As at September 30, 2012, the Successor Company had the following deferred financing costs:

September 30, 2012	Cost		Amortization		Net Book Value
Deferred financing costs related to:
New Notes	$	2,751	$	77	$	2,674
Revolving Credit Facility	376		133		243
Total	3,127		210		2,917

Deferred financing costs are capitalized and amortized to interest expense over the life of the debt instruments on a straight-line basis, which approximates the effective interest rate method. As at September 30, 2012, the Successor Company had $2.7 million of deferred financing costs recorded related to the fees that were incurred to complete the Exchange Offer described in note 12(a) above and $0.2 million of deferred financing costs related to amendments to the Revolving Credit Facility described in note 12(e) below. As at September 30, 2012, approximately $0.8 million and $2.1 million of the deferred financing costs have been classified as current and non-current, respectively.

Upon implementation of fresh start accounting on April 30, 2011, the Predecessor Company’s $4.4 million of deferred financing costs, related to the Existing Floating Rate Notes and Exit Credit Facility, were fair valued to nil. As a result, the Successor Company had nil deferred financing costs as at September 30, 2011.

During the three and nine months ended September 30, 2012, the Successor Company recorded $0.1 million and $0.2 million of non-cash interest expense, respectively, related to the amortization of its deferred financing costs. During the three and five months ended September 30, 2011 and the four months ended April 30, 2011, Angiotech recorded nil, nil and $3.9 million of non-cash interest expense, respectively.

f) Revolving Credit Facility

On March 12, 2012, the Successor Company completed a second amendment to its Revolving Credit Facility to provide increased financial flexibility and improve its overall liquidity. This amendment provides for, among other things: (i) the repurchase of the Successor Company’s outstanding Senior Floating Rate Notes, subject to certain terms and conditions; (ii) the repurchase of equity held by current or former employees, officers or directors subject to certain limitations; (iii) an increase in the amount of cash that can be held by the Successor Company’s foreign subsidiaries; (iv) the ability to dispose of certain of the Successor Company’s intellectual property assets (at which time the component of the borrowing base supported by such intellectual property assets would be reduced to nil); (v) a reduction in the restrictions surrounding eligibility of certain accounts receivable; (vi) the removal of the lien over the Successor Company’s short term investments; (vii) a revision to the definition of EBITDA to allow for certain historical and future restructuring and CCAA costs; and (viii) less restrictive reporting requirements when advances under the Revolving Credit Facility are below certain thresholds. Total fees of $0.4 million were incurred to complete this amendment.

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On August 13, 2012, the Successor Company completed a third amendment to its Revolving Credit Facility to amend the covenants to allow for the completion of the Exchange Offer.

As at ~~June~~September 30, 2012, the Successor Company had nil borrowings outstanding under the Revolving Credit Facility (December 31, 2011 - $0.04 million), $10.78 million of letters of credit issued under the facility (December 31, 2011 - $2.6 million) and $2123.17 million of remaining availability under the Revolving Credit Facility (December 31, 2011 - $21.3 million). During the three and ~~six~~nine months ended ~~June~~September 30, 2012, the Successor Company incurred nil interest expense on borrowings under the Revolving Credit Facility.

13. RESTRUCTURING CHARGES

In April 2012, the Successor Company announced the closure of its Denmark manufacturing plant, primarily due to the high cost of manufacturing in that territory. Production activities associated with the Demark manufacturing plant will be transferred to other locations. Closure of the Denmark manufacturing plant is expected to be completed by April 30, 2013.

During the three and ~~six~~nine months ended ~~June~~September 30, 2012, the Medical Device Products segment of the Successor Company ~~did~~incurred ~~not~~and ~~incur~~recorded or$0.5 ~~record~~million ~~any~~of ~~significant~~retention ~~restructuring~~and ~~charges~~severance costs and $0.3 million of costs related to certain transfer and transition activities. Approximately $0.4 million of the ~~Denmark~~retention and severance costs related to manufacturing ~~plant~~employees ~~closure.~~and ~~However,~~was recorded in cost of products sold during the ~~Medical~~three ~~Device~~months ~~Products~~ended ~~segment~~September 30, 2012. The remaining $0.1 million of retention and severance costs related to administrative employees and was recorded in selling, general and administrative expenses along with the $0.3 million of transition cost discussed above. The Successor Company expects to incur a further $1.0.5 million in retention and severance costs and $1.0.7 million of other transfer and transition activities over the next year. In accordance with ASC No. 420 — Exit or Disposal Cost Obligations, the retention and severance costs were measured at the communication date, based upon the fair value of the liability as of the termination date, and shall be recognized ratably over the future service period. Other transfer and transition costs shall be recognized in the period in which the liability is incurred. At the date of this assessment, management is still assessing the tax impact of the closure of the Denmark manufacturing facility.

14. INCOME TAXES

Income tax expense for the three months ended ~~June~~September 30, 2012 was $34.76 million compared to ~~income tax expense of $0.5 million during the two months ended June 30, 2011 and~~ an income tax recovery of $02.6 million recorded during the ~~one~~same ~~month~~period ~~ended~~in ~~April 30,~~ 2011. Income tax expense for the ~~six~~nine months ended ~~June~~September 30, 2012 was $611.440 million compared to an income tax ~~expense~~recovery of $02.51 million during the ~~two~~five months ended ~~June~~September 30, 2011 and income tax expense of $0.3 million during the four months ended April 30, 2011. The increase in income tax expense for ~~the~~both ~~three~~periods ~~months and six months ended June 30, 2012~~ is primarily due to higher income from operations in the U.S. and other foreign jurisdictions as well as the effect of the limitation on the utilization of U.S. losses available to the Successor Company to offset current income.

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The effective tax rate for the current period differs from the statutory Canadian tax rate of 25% primarily due to valuation allowances on net operating losses in certain jurisdictions, tax rate differences in foreign jurisdictions, and permanent differences not subject to tax.

15. SHARE CAPITAL

a) Common Shares

During the three and ~~six~~nine months ended ~~June~~September 30, 2012, the Successor Company issued nil and 26,702 common shares, respectively, upon the vesting of Restricted Stock awards. The Company issues new shares to satisfy stock option and award exercises.

As described under Note 3 “Reorganization and Fresh-Start Reporting”, upon consummation of the CCAA Plan, Angiotech’s Articles and Notice of Articles were amended on May 12, 2011 to: (a) eliminate the existing class of common shares from the authorized capital of the Predecessor Company; and (b) create an unlimited number of authorized no-par value new common shares for the Successor Company with similar rights, privileges, restrictions and conditions as were attached to the previous class of common shares. Accordingly and in connection with the implementation of the CCAA Plan, 12,500,000 new common shares were issued to holders of the Successor Company’s Subordinated Notes in consideration and settlement for the irrevocable and final cancellation and elimination of such noteholders’ Subordinated Notes.

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b) Stock Incentive Plans

(i) Successor company

Upon completion of the Recapitalization Transaction described in Note 3, the Successor Company established and implemented a new equity compensation plan — the 2011 Stock Incentive Plan (“2011 SIP”). The 2011 SIP provides for the granting of Restricted Stock, RSUs, stock options, stock appreciation rights, and deferred share units (collectively referred to as “Awards”) and is available to certain eligible employees, directors, consultants and advisors as determined by the Governance, Nominating and Compensation Committee of the Board of Directors. The 2011 SIP allows for a maximum of 2,130,150 shares with respect to the number of Awards that may be granted.

(1) Restricted Stock

The terms of the Restricted Stock provide that a holder shall generally have the same rights and privileges as a common shareholder as to such Restricted Stock, including the right to vote such Restricted Stock. The Restricted Stock vests 1/3rd on each of the first, second and third anniversaries from the date of grant. During the ~~three~~nine months ended ~~June~~September 30, 2012, 43,403 commons shares were issued to executives upon the vesting of units of Restricted Stock (nil for the ~~two~~five months ended ~~June~~September 30, 2011), at which time Angiotech repurchased 16,701 units from the executives in consideration of withholding taxes owing on the vested units.

A summary of Restricted Stock activity for the Successor Company is as follows:

	Number outstanding		Weighted average grant date fair value
Outstanding at May 1, 2011	—		$	—
Granted	221,354		15.17
Outstanding at June 30, 2011	221,354		$	15.17
Outstanding and Exercisable at June 30, 2011	—		—
Vested and exchanged for common shares	(91,146	)	15.17
Outstanding at September 30, 2011	130,208		15.17
Outstanding and Exercisable at September 30, 2011	—		—

	Number outstanding		Weighted average grant date fair value
Outstanding at December 31, 2011	130,208		$	15.17
Outstanding at March 31, 2012	130,208		$	15.17
Vested and exchanged for common shares	(43,403	)
Outstanding at June 30, 2012	86,805		$	15.17
Outstanding and Exercisable at June 30, 2012	—		—
Outstanding at September 30, 2012	86,805		15.17
Outstanding and Exercisable at September 30, 2012	—		—

24A summary of the status of nonvested restricted stock awards as of September 30, 2012 and changes during the three months ended September 30, 2012, is presented below:

	No. of awards		Weighted average grant- date fair value
Nonvested at May 1, 2011	—
Granted	221,354		$	15.17
Nonvested at June 30, 2011	221,354		$	15.17
Vested and exchanged for common shares	(91,146	)	15.17
Nonvested at September 30, 2011	130,208		15.17

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A summary of the status of nonvested restricted stock awards as of June 30, 2012 and changes during the three months ended June 30, 2012, is presented below:

	No. of awards		Weighted average grant- date fair value
Nonvested at December 31, 2011	130,208		$	15.17
Nonvested at March 31, 2012	130,208		$	15.17
Vested and exchanged for common shares	(43,403	)
Nonvested at June 30, 2012	86,805		$	15.17
Nonvested at September 30, 2012	86,805		15.17

	No. of awards	Weighted average grant- date fair value
Nonvested at May 1, 2011	—
Granted	221,354	$	15.17
Nonvested at June 30, 2011	221,354	$	15.17

Stock-based compensation expense related to Restricted Stock for the three months ended September 30, 2012 was $0.2 million.

	No. of awards		Weighted average grant- date fair value
Nonvested at December 31, 2011	130,208		$	15.17
Nonvested at March 31, 2012	130,208		$	15.17
Vested and exchanged for common shares	(43,403	)
Nonvested at June 30, 2012	86,805		$	15.17

Stock-based compensation expense related to Restricted Stock for the three months ended June 30, 2012 was $0.2 million.

(2) Restricted Stock Units

Restricted Stock Units (“RSUs”) allow the holder to acquire one common share for each unit held upon vesting. The majority of the outstanding RSUs vest 1/3rd on each of the first, second and third anniversaries from the date of grant with the exception of 35,500 of the RSUs, which vest upon the consummation of a change of control (as defined) that occurs on or before December 31, 2012. There is no expiry date on vested RSUs.

A summary of RSU activity for the Successor Company is as follows:

	No. of RSUs	Weighted average grant date fair value
Outstanding at May 1, 2011	—
Granted	299,479	$	15.17
Outstanding at June 30, 2011	299,479	$	15.17
Outstanding and Exercisable at June 30, 2011	—
Granted	116,000	15.17
Outstanding at September 30, 2011	415,479	15.17
Outstanding and Exercisable at September 30, 2011	—

	No. of RSUs		Weighted average grant date fair value
Outstanding at December 31, 2011	415,479		$	14.48
Forfeited	(14,500	)
Outstanding at March 31, 2012	400,979		$	14.60
Granted	189,500		$	12.02	(a)
Exercised	—
Forfeited	—
Outstanding at June 30, 2012	590,479		$	13.38
Outstanding and Exercisable at June 30, 2012	291,097		$	15.17
Granted	30,000		12.02
Exercised	(22,000	)	15.17
Forfeited	(14,500	)
Outstanding at September 30, 2012	583,979		13.63
Outstanding and Exercisable at September 30, 2012	269,097		$	15.06

(a) The fair value of these RSU grants was determined by a third party valuation based on market inputs.

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A summary of the status of nonvested RSU awards as of ~~June~~September 30, 2012 and changes during the three months ended ~~June~~September 30, 2012, is presented below:

	No. of awards	Weighted average grant- date fair value
Nonvested at May 1, 2011	—	$	—
Granted	299,479	15.17
Nonvested at June 30, 2011	299,479	$15.17	~~15.17~~
Nonvested at September 30, 2011	299,479	$	15.17

	No. of awards		Weighted average grant- date fair value
Nonvested at December 31, 2011	161,573		$	13.38
Forfeited	(14,500	)
Nonvested at March 31, 2012	147,073		$	13.38
Granted	189,500		12.02
Vested	(37,191	)	15.17
Nonvested at June 30, 2012	~~329~~299,382		$	11.75
Granted	30,000		$	12.02
Forfeited	(14,500	)	6.05
Nonvested at September 30, 2012	314,882		12.31

Stock-based compensation expense related to RSUs for the three months ended ~~June~~September 30, 2012 was $0.3 million. The aggregate intrinsic value of RSUs outstanding and exercisable is $4.4 million.

(3) Stock Options

Outstanding stock options expire on May 12, 2018. Options to acquire an additional 5% of the new common shares have been reserved for issuance at a later date at the discretion of the new board of directors put in place upon implementation of the Recapitalization Transaction. Stock-based compensation expense related to stock options for the three months ended ~~June~~September 30, 2012 was $0.2 million.

A summary of stock option and award activity for the Successor Company is as follows:

	No. of Stock Options	Weighted average exercise price		Weighted average remaining contractual term (years)	Weighted average grant date fair value
Outstanding at May 1, 2011	—
Granted	708,023	$	20.00	7.00	$	9.40
Outstanding at June 30, 2011	708,023	$	20.00	6.87	$	9.00
Outstanding and Exercisable at June 30, 2011	—
Outstanding at September 30, 2011	708,023	20.00		6.62	9.00
Outstanding and Exercisable at September 30, 2011	—

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	No. of Stock Options		Weighted average exercise price		Weighted average remaining contractual term (years)	Weighted average grant date fair value
Outstanding at December 31, 2011	673,523		$	20.00	6.37	9.45
Forfeited	(28,200	)	20.00		—	—
Outstanding at March 31, 2012	645,323		$	20.00	6.17	$	9.50
Granted	—
Exercised	—
Forfeited	—
Outstanding at June 30, 2012	645,323		$	20.00	5.87	$	9.50
Outstanding and Exercisable at June 30, 2012	434,559		$	20.00	5.87	$	9.64
Forfeited	(9,000	)
Outstanding at September 30, 2012	636,323		20.00		5.62	9.51
Outstanding and Exercisable at September 30, 2012	434,559		$	20.00	5.62	$	9.64

A summary of the status of nonvested stock option awards as of ~~June~~September 30, 2012 and changes during the three months ended ~~June~~September 30, 2012, is presented below:

		Weighted		Weighted
		average		average
		grant-date		exercise
	No.of awards	fair value		price
Nonvested at May 1, 2011	—
Granted	708,023	$	9.40	$	20.00
Nonvested at June 30, 2011	708,023	$	9.40	$	20.00
Nonvested at September 30, 2011	708,023	9.40		20.00

			Weighted		Weighted
			average		average
			grant-date		exercise
	No.of awards		fair value		price
Nonvested at March 31, 2012	316,146		$	9.62	$	20.00
Nonvested at December 31, 2011	344,346		$	9.15	$	2.00
Forfeited	(28,200	)	8.42		20.00
Nonvested at March 31, 2012	316,146		$	9.62	20.00
Granted	—
Vested	(105,382	)	$	8.42	$	20.00
Forfeited	—
Nonvested at June 30, 2012	210,764		$	98.2242	$	20.00
Forfeited	(6,000	)
Nonvested at September 30, 2012	204,764		8.24		20.00

(ii) Predecessor Company

The Predecessor Company’s stock option plan provided for the issuance of non-transferable stock options and stock-based awards to purchase up to 13,937,756 common shares to employees, officers, directors of the Predecessor Company, and persons providing ongoing management or consulting services to the Company. The plan also provided for the granting of tandem stock appreciation rights that at the option of the holder may have been exercised instead of the underlying option. The exercise price of the options and awards was fixed by the Board of Directors, but was generally at least equal to the market price of the ~~common shares at the date of grant. The term of the options and awards was between five and ten years. Options and awards generally vested monthly over varying terms from two to four years.~~

~~During the one and four months ended April 30, 2011, the Predecessor Company issued 5,120 common shares respectively upon exercise of awards.~~26

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common shares at the date of grant. The term of the options and awards was between five and ten years. Options and awards generally vested monthly over varying terms from two to four years.

During the one and four months ended April 30, 2011, the Predecessor Company issued 5,120 common shares respectively upon exercise of awards.

A summary of Canadian dollar stock option and award activity for the Predecessor Company is as follows:

	No. of stock options and awards		Weighted average exercise price (in CDN$)		Weighted average remaining contractual term (years)	Aggregate intrinsic value (in CDN$)
Outstanding at December 31, 2010	5,275,184		$	3.83	2.75	$	132
Granted	—		—
Exercised	—		—
Forfeited	(1,439,834	)	3.86

Outstanding at March 31, 2011	3,835,350		3.81		2.54	—

Forfeited	(3,835,350	)	3.81
Outstanding at April 30, 2011	—		—		—	—
Exercisable at April 30, 2011	—		—		—	—

Exercisable and expected to vest at April 30, 2011	—		$	—	—	$	—

A summary of the status of Canadian dollar nonvested stock option awards as of April 30, 2011 and changes during the one and four months ended April 30, 2011, is presented below:

Nonvested CDN$ awards	No. of awards		Weighted average grant-date fair value (in CDN$)
Nonvested at December 31, 2010	2,225,194		$	0.46
Vested	(239,215	)	1.67
Forfeited	(560,223	)	0.57
Nonvested at March 31, 2011	1,425,756		$	0.59
Vested	(55,362	)	0.57
Nonvested at April 30, 2011	1,370,394		$	0.59

A summary of U.S. dollar award activity for the Predecessor Company is as follows:

	No. of Awards		Weighted average exercise price (in U.S.$)			Weighted average remaining contractual term (years)	Aggregate intrinsic value (in U.S.$)
Outstanding at December 31, 2010	3,890,999		$	1.51		3.14	$	179
Granted	—		—
Exercised	(20,833	)	(0.26		)
Forfeited	(148,541	)	1.38
Outstanding at March 31, 2011	3,721,625		$	1.52		2.89	—
Forfeited	(3,721,625	)	1.52
Exercisable at April 30, 2011	—		$	—		—	—
Exercisable and expected to vest at April 30, 2011	—		$	—		—	—

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A summary of the status of U.S. dollar nonvested stock option awards as of March 31, 2011 and changes during the three months ended March 31, 2011, is presented below:

Nonvested U.S. $ awards	No. of awards		Weighted average grant-date fair value (in U.S.$)
Nonvested at December 31, 2010	2,044,339		$	0.48
Vested	(370,174	)	1.19
Forfeited	(74,890	)	0.64
Nonvested at March 31, 2011	1,659,275		$	.0.63
Vested	(61,572	)	0.59
Nonvested at April 30, 2011	1,597,703		$	0.64

American Medical Instruments Holdings, Inc. (“AMI”)

On March 9, 2006, AMI granted 304 stock options under AMI’s 2003 Stock Option Plan (the “AMI Stock Option Plan”), each of which was exercisable for approximately 3,852 of the Predecessor Company’s common shares. All outstanding options and warrants granted prior to the March 9, 2006 grant were settled and cancelled upon the acquisition of AMI. No further options to acquire common shares can be issued pursuant to the AMI Stock Option Plan. Approximately 1,171,092 of the Predecessor Company’s common shares were reserved in March 2006 to accommodate future exercises of the AMI options.

	No. of Shares Underlying Options		Weighted average exercise price (in U.S.$)	Weighted average remaining contractual term (years)	Aggregate intrinsic value (in U.S.$)
Outstanding at December 31, 2010	300,480		15.44	6.19	—
Outstanding at March 31, 2011	300,480		15.44	4.94
Forfeited	(300,480	)	15.44
Outstanding at April 30, 2011	—
Exercisable at April 30, 2011	—
Exercisable and expected to vest at April 30, 2011	—

A summary of the status of the Predecessor Company’s AMI nonvested stock option awards as of April 30, 2011 and changes during the one and four months ended April 30, 2011, is presented below:

Nonvested AMI options	No. of shares underlying options		Weighted average grant-date fair value (in U.S.$)
Nonvested at December 31, 2010	112,683		$	6.51
Vested	(75,124	)	6.51
Nonvested at March 31, 2011	37,599		$	6.51
Nonvested at April 30, 2011	37,599		$	6.51

As described under note 1 upon implementation of the CCAA Plan on May 12, 2011, all stock options, warrants and other rights or entitlements to acquire or purchase common shares of the Predecessor Company under existing stock option plans were cancelled and terminated without any liability, payment or other compensation in respect thereof. In conjunction with the cancellation of all awards and other rights or entitlements to purchase common shares in accordance with the implementation of the CCAA Plan; $1.1 million and $0.3 million of these costs related to the nonvested awards granted under the 2006 Plan and AMI stock options, respectively, was charged to restructuring items in April 2011.

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nonvested awards granted under the 2006 Plan and AMI stock options, respectively, was charged to restructuring items in April 2011.

(c) Stock-based compensation expense

The Successor Company recorded stock-based compensation expense of $0.7 million ~~for the three months ended June 30, 2012,~~ and ~~the Predecessor Company recorded~~ $02.~~1 million and $~~0.4 million for the ~~one~~three and ~~four~~nine months ended ~~April~~September 30, ~~2011~~2012, respectively., ~~The~~and ~~Successor Company recorded stock-based compensation expense of~~ $1.3.7 million for both the ~~six~~three ~~months ended June 30, 2012~~ and ~~nil~~five ~~for the two~~ months ended ~~June~~ September 30, 2011. The Predecessor Company recorded ~~stock-based compensation expense of~~ $0.1 million and $0.4 million for the one and four months ended April 30, 2011, respectively. The stock based compensation expense relates to awards granted under the Company’s stock option plan that was modified or settled subsequent to October 1, 2002.

The Company expenses the compensation cost of stock-based payments using the straight-line method over the vesting period. The total unrecognized compensation cost of non-vested awards was $65.41 million as at ~~June~~September 30, 2012. The Successor Company ~~granted~~did ~~189,500~~not ~~RSU~~grant any awards during the three months ended ~~June~~September 30, 2012. The Predecessor Company did not grant any awards during the one and four months ended April 30, 2011.

During the one and four months ended April 30, 2011 the following activity occurred for the Predecessor Company:

(in thousands)	One and Four months ended April 30, 2011
Total intrinsic value of awards exercised
CDN dollar awards	$	n/a
U.S. dollar awards	$	0.4
Total fair value of awards vested	$	0.044

Cash received from award exercises was $nil for the one and four months ended April 30, 2011.

During the three months ended ~~June~~September 30, 2012 the following activity occurred for the Successor Company:

	Successor Company
(in thousands)	Three months ended ~~June~~September 30, 2012
Total intrinsic value of awards exercised
Restricted Stock	$	~~522~~n/a
Restricted Stock Units	$	n/a
Stock Options	$	n/a
Total fair value of awards vested	$	~~2,110~~nil

16. CONTINGENCIES AND COMMITMENTS

(a) Commitments

Quill Medical, Inc. (“Quill”)

In connection with the acquisition of Quill in June 2006, the Predecessor Company was required to make additional contingent payments of up to $150 million upon the achievement of certain revenue growth and a development milestone. These payments were primarily contingent upon the achievement of significant incremental revenue growth over a five-year period beginning on July 1, 2006, subject to certain conditions.

On October 4, 2010, the Predecessor Company was notified that QSR Holdings, Inc. (“QSR”), as a representative for former stockholders of Quill Medical, Inc. (“QMI”), had made a formal demand (the “Arbitration Demand”) to the American Arbitration Association naming the Company, QMI and Angiotech Pharmaceuticals (US), Inc. as respondents (collectively, the “Respondents”). The Arbitration Demand alleged that the Respondents failed to satisfy certain obligations under the Agreement and Plan of Merger, dated May 25, 2006, by and among Angiotech, Angiotech

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US, Quaich Acquisition, Inc. and QMI (the “Merger Agreement”), notably including the obligations to make certain earn out payments and the orthopedic milestone payment. The Arbitration Demand sought either direct monetary damages or, in the alternative, extension of the earn-out period for a sixth year as more fully set forth in the Merger Agreement. In addition, QSR commenced an action in the United States District Court for the Middle District of North Carolina on October 1, 2010 against the Respondents, entitled QSR Holdings, Inc. v. Angiotech.

On January 27, 2011 the Predecessor Company entered into a settlement agreement (the “Settlement Agreement”) for the full and final settlement of all claims, including all potential contingent payments, under the Merger Agreement. Under the terms of the Settlement Agreement, Angiotech is required to pay QSR $6.0 million (the “Settlement Amount”). In accordance with the terms of the Settlement Agreement, the first $2.0 million was paid on May 26, 2011, with the remainder being payable in equal monthly installments over a 24 month period. As at June 30, 2012, $1.8 million is accrued for the remaining Settlement Amount.

Biopsy Sciences LLC (“Biopsy Sciences”)

In connection with the acquisition of certain assets from Biopsy Sciences in January 2007, Angiotech was contractually required to make certain contingent payments of up to $2.0 million upon achievement of certain clinical and regulatory milestones and up to $10.7 million upon achievement of certain commercialization milestones. In May 2012, Angiotech entered into an amendment to the original 2007 Asset Purchase Agreement and Amended and Restated License Agreement with Biopsy Sciences, LLC, to eliminate all future financial obligations related to the development, commercialization and sale of the BioSeal Product in exchange for an amendment fee of $1.0 million (the “Amendment Fee”). The Amendment Fee was paid on May 31, 2012 and has been recorded as a research and development expense in the consolidated statement of operations ~~for~~during the ~~three~~nine ~~and six~~ months ended ~~June~~September 30, 2012.

(b) Contingencies

From time to time, the Successor Company may be subject to claims and legal proceedings brought against usAngiotech in the normal course of business. Such matters are subject to many uncertainties. ~~The~~and ~~Successor~~may ~~Company~~be ~~maintains~~difficult ~~insurance policies that provide limited coverage~~ for ~~amounts~~management in excess of certain pre-determined deductibles for intellectual property infringement and product liability claims. Management believes that adequate provisions have been made in the accounts where required. However, the Successor Company is not able to determine the outcome or estimate ~~potential losses of~~ the ~~pending~~potential ~~legal~~range ~~proceedings listed below to which it may become subject in the normal course~~ of ~~business~~losses ~~nor~~if us the Successor Company ~~able~~does ~~to estimate the amount or range of any possible loss we might incur should we~~ not prevail in such matters. ~~Management~~The ~~cannot~~Successor ~~provide~~Company ~~assurance~~maintains ~~that~~insurance ~~the~~policies ~~legal~~that ~~proceedings~~provide ~~listed~~limited ~~here,~~coverage orfor ~~other~~amounts ~~legal~~in ~~proceedings~~excess ~~not~~of ~~listed~~certain ~~here,~~pre-determined ~~will~~deductibles ~~not~~for ~~have~~intellectual aproperty ~~material~~infringement ~~adverse~~and ~~impact~~product onliability ~~our~~claims. ~~financial~~Management ~~condition~~believes orthat ~~results~~adequate ofprovisions ~~operations.~~

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have been made in the accounts where required. Management cannot provide assurance that the legal proceedings disclosed here, or other legal proceedings not disclosed here, will not have a material adverse impact on our financial condition or results of operations.

At the European Patent Office (“EPO”), various patents either owned or licensed by or to Angiotech are in opposition proceedings. The outcomes of these proceedings have not yet been determined.

17. SEGMENTED INFORMATION

As at ~~June~~September 30, 2012, the Successor Company had two reportable segments based on the type of revenue generated: (i) Medical Device Products and (2) Licensed Technologies. The Medical Device Products segment includes revenues and gross margins of single use, specialty medical devices ~~including suture needles, biopsy needles / devices, micro surgical ophthalmic knives, drainage catheters, self-anchoring sutures, other specialty devices, biomaterials and other technologies~~. The Licensed Technologies segment includes royalty revenue generated from out-licensing technology related primarily to ~~the~~ drug-eluting ~~stent and other technologies~~stents.

The Successor Company and Predecessor Company reports segmented information on each of these segments to the gross margin level. All other income and expenses are not allocated to segments as they are not considered in evaluating the segment’s operating performance. The following tables represent reportable segment information for the three and ~~six~~nine months ended ~~June~~September 30, 2012; the ~~two~~three and five months ended ~~June~~September 30, 2011; and the ~~one and~~ four ~~month~~months ended April 30, 2011:

	Successor Company
	Three months ended September 30,			Three months ended September 30,
	2012			2011
Revenue
Medical Device Products	$	52,661		$	51,899
Licensed Technologies	3,976			5,497

Total revenue	56,637			57,396

Cost of products sold – Medical Device Technologies	24,072			38,796
Licence and royalty fees – Licensed Technologies	98			50

Gross margin
Medical Device Technologies	28,589			13,103
Licensed Technologies	3,878			5,447

Total gross margin	32,467			18,550

Research and development	1,399			4,614
Selling, general and administration	16,010			22,613
Depreciation and amortization	8,445			9,246
Write-down of property, plant and equipment	—			143

Operating income (loss)	6,613			(18,066		)
Other expenses	(10,625		)	(3,227		)
Loss before reorganization items and income taxes	(4,012		)	(21,293		)
Income tax expense (recovery)	4,596			(2,609		)
Net loss	$	(8,608	)	$	(18,684	)

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	Successor Company						Predecessor Company
	Nine months ended September 30,			Five months ended September 30,			Four month ended April 30,
	2012			2011			2011
Revenue
Medical Device Products	$	163,808		$	87,801		$	69,198
Licensed Technologies	14,718			6,565			11,068

Total revenue	178,526			94,366			80,266

Cost of products sold — Medical Device Technologies	76,077			65,730			32,219
Licence and royalty fees — Licensed Technologies	272			100			68

Gross margin
Medical Device Technologies	87,731			22,071			36,979
Licensed Technologies	14,446			6,465			11,000

Total gross margin	102,177			28,536			47,979

Research and development	5,807			7,443			5,686
Selling, general and administration	51,440			35,394			24,846
Depreciation and amortization	25,896			14,935			14,329
Write-down of assets held for sale	—			—			570
Write-down of property, plant and equipment	865			143			215

Operating income (loss)	18,169			(29,379		)	2,333
Other expenses	(18,688		)	(5,655		)	(10,939		)

Loss before reorganization items and income taxes	(519		)	(35,034		)	(8,606		)
Reorganization items	—			—			321,084
Gain on extinguishment of debt and settlement of other liabilities	—			—			67,307
Loss before income taxes	(519		)	(35,034		)	379,785
Income tax expense (recovery)	11,036			(2,102		)	267
Net (loss) income	$	(11,555	)	$	(32,932	)	$	379,518

During the three and nine months ended September 30, 2012, revenue from BSC represented approximately 1% and 6% of total revenue, respectively. During the three and five months ended September 30, 2011 and the four months ended April 30, 2011, royalty revenue from BSC represented approximately 8%, 7% and 12% of total revenue.

The following table represents total assets for each reportable segment at September 30, 2012 and December 31, 2011:

	Successor Company
	September 30,		December 31,
	2012		2011

Total assets
Medical Device Technologies	$	553,297	$	522,120
Licensed Technologies	73,547		85,986

Total assets	$	626,844	$	608,106

The following tables present capital expenditures for each reportable segment during the three and nine months ended September 30, 2012; the three and five months ended September 30, 2011; and the four months ended April 30, 2011:

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	Successor Company						~~Predecessor Company~~
	Three months ended June 30,			Two months ended June 30,			One month ended April 30,
	Three months ended September 30,			Three months ended September 30,
	2012			2011			~~2011~~
Revenue
Capital expenditures
Medical Device Products	$	~~56,523~~447		$	~~35,902~~133		$	~~16,365~~
Licensed Technologies	~~4,815~~—			~~1,068~~216			~~5,309~~
Total revenue	61,338			36,970			21,674
Total capital expenditures	$	447		$	349
Cost of products sold — Medical Device Technologies	27,322			26,934			8,291
Licence and royalty fees — Licensed Technologies	63			50			—
Gross margin
Medical Device Technologies	29,201			8,968			8,074
Licensed Technologies	4,752			1,018			5,309
Total gross margin	33,953			9,986			13,383
Research and development	2,423			2,829			1,156
Selling, general and administration	17,784			12,781			6,191
Depreciation and amortization	8,428			5,690			3,088
Write-down of assets held for sale	—			—			570
Write-down of property, plant and equipment	692			—			—
Operating income (loss)	4,626			(11,314		)	2,378
Other expenses	(3,920		)	(2,428		)	(2,573		)
Loss before reorganization items and income taxes	706			(13,742		)	(195		)
Reorganization items	—			—			329,826
Gain on extinguishment of debt and settlement of other liabilities	—			—			67,307
Loss before income taxes	706			(13,742		)	396,938
Income tax expense (recovery)	3,654			506			(581		)
Net income (loss)	$	(2,948	)	$	(14,248	)	$	397,519

	Successor Company				Predecessor Company
	Nine months ended September 30,		Five months ended September 30,		Four month ended April 30,
	2012		2011		2011
Capital expenditures
Medical Device Products	$	1,296	$	504	$	621
Licensed Technologies	—		230		324

Total capital expenditures	$	1,296	$	734	$	945

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	Successor Company						Predecessor Company
	Six months ended June 30,			Two months ended June 30,			Four months ended April 30,
	2012			2011			2011
Revenue
Medical Device Products	$	111,147		$	35,902		$	69,198
Licensed Technologies	10,742			1,068			11,068
Total revenue	121,889			36,970			80,266
Cost of products sold — Medical Device Technologies	52,006			26,934			32,219
Licence and royalty fees — Licensed Technologies	174			50			68
Gross margin
Medical Device Technologies	59,141			8,968			36,979
Licensed Technologies	10,568			1,018			11,000
Total gross margin	69,709			9,986			47,979
Research and development	4,408			2,829			5,686
Selling, general and administration	35,431			12,781			24,846
Depreciation and amortization	17,451			5,690			14,329
Write-down of assets held for sale	—			—			570
Write-down of property, plant and equipment	865			—			215
Operating income (loss)	11,554			(11,314		)	2,333
Other expenses	(8,061		)	(2,428		)	(10,939		)
Loss before reorganization items and income taxes	3,493			(13,742		)	(8,606		)
Reorganization items	—			—			321,084
Gain on extinguishment of debt and settlement of other liabilities	—			—			67,307
Loss before income taxes	3,493			(13,742		)	379,785
Income tax expense (recovery)	6,440			506			267
Net income (loss)	$	(2,947	)	$	(14,248	)	$	379,518

During the three and six months ended June 30, 2012, revenue from BSC represented approximately 6% and 7% of total revenue, respectively. During the two months ended June 30, 2011 and the one and four months ended April 30, 2011, royalty revenue from BSC represented approximately 0%, 24% and 12% of total revenue

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The following table represents total assets for each reportable segment at June 30, 2012 and December 31, 2011:

	Successor Company
	June 30,		December 31,
	2012		2011
Total assets
Medical Device Products	$	548,329	$	522,120
Licensed Technologies	77,687		85,986
Total assets	$	626,016	$	608,106

The following tables present capital expenditures for each reportable segment during the three and six months ended June 30, 2012; the two months ended June 30, 2011; and the one and four months ended April 30, 2011:

	Successor Company				Predecessor Company
	Three months ended June 30,		Two months ended June 30,		One month ended April 30,
	2012		2011		2011
Capital expenditures
Medical Device Products	$	480	$	288	$	113
Licensed Technologies	—		97		29
Total capital expenditures	$	480	$	385	$	142

	Successor Company				Predecessor Company
	Six months ended June 30,		Two months ended June 30,		Four months ended April 30,
	2012		2011		2011
Capital expenditures
Medical Device Products	$	892	$	288	$	621
Licensed Technologies	—		97		324
Total capital expenditures	$	892	$	385	$	945

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18. NET (LOSS) INCOME PER SHARE

Net loss per share was calculated as follows:

	Successor Company						~~Predecessor Company~~
	Three months ended June 30,			Two months ended June 30,			One month ended April 30,
	Three months ended September 30,			Three months ended September 30,
	2012			2011			~~2011~~
Numerator:
Net (loss) income	$	(2,948	)	$	(14,248	)	$	397,519
Net loss	$	(8,608	)	$	(18,684	)
Denominator:
Basic and diluted weighted average common shares outstanding	12,~~826~~818			12,721			~~85,185~~
Basic and diluted net (loss) income per common share:	$	(0.23	)	$	(1.12	)(1)	$	4.67	(2)
Basic and diluted net loss per common share:	$	(0.67	)	$	(1.47	)(1)

	Successor Company						Predecessor Company
	Six months ended June 30,			Two months ended June 30,			Four months ended April 30,
	Nine months ended September 30,			Five months ended September 30,			Four months ended April 30,
	2012			2011			2011
Numerator:
Net (loss) income	$	(211,~~947~~555	)	$	(1432,~~248~~932	)	$	379,518
Denominator:
Basic and diluted weighted average common shares outstanding	12,818			12,~~721~~710			85,185
Basic and diluted net (loss) income per common share:	$	(0.2390	)	$	(12.1259	)(1)	$	4.46	(2)

(1) There is no dilutive effect on basic weighted average common shares outstanding for the three and ~~six~~nine months ended ~~June~~September 30, 2012 and the ~~two~~three and five months ended ~~June~~September 30, ~~2011,~~2011the ~~as the Predecessor~~ Company was in a net loss position during these periods.

(2) There was no dilutive effect on the basic weighted average common shares outstanding for the ~~one and~~ four months ended April 30, 2011 given that the impact of stock options was anti-dilutive.

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19. CHANGE IN NON-CASH WORKING CAPITAL ITEMS RELATING TO OPERATIONS AND SUPPLEMENTAL CASH FLOW INFORMATION

The change in non-cash working capital items relating to operations was as follows:

	Successor Company						Predecessor Company
	Three months ended June 30,			Two months ended June 30,			One month ended April 30,
	2012			2011			2011
Accounts receivable	$	(1,608	)	$	4,832		$	(3,411	)
Income tax receivable	781			—			(589		)
Inventories	(987		)	965			275
Prepaid expenses and other assets	(177		)	2,224			(1,073		)
Accounts payable and accrued liabilities	(4,101		)	(800		)	379
Income taxes payable	3,391			280			(440		)
Interest payable on long term debt	(45		)	(755		)	969
	$	(2,746	)	$	6,747		$	(3,889	)

	Successor Company						Predecessor Company
	Six months ended June 30,			Two months ended June 30,			Four months ended April 30,
	2012			2011			2011
Accounts receivable	$	(2,009	)	$	4,832		$	(855	)
Income tax receivable	937			—			(645		)
Inventories	(3,895		)	965			(2,603		)
Prepaid expenses and other assets	3,640			2,224			(492		)
Accounts payable and accrued liabilities	(5,271		)	(800		)	(10,020		)
Income taxes payable	3,634			280			(770		)
Interest payable on long term debt	(45		)	(755		)	2,663
	$	(3,009	)	$	6,747		$	(12,721	)

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	Successor Company
	Three months ended Septmeber 30,			Three months ended September 30,
	2012			2011

Accounts receivable	$	2,052		$	(756	)
Income tax receivable	(811		)	(14		)
Inventories	(6,300		)	1,172
Prepaid expenses and other assets	(899		)	391
Deferred financing costs	(648		)	—
Accounts payable and accrued liabilities	459			1,152
Income taxes payable	(2,199		)	464
Interest payable on long term debt	688			(118		)
	$	(7,658	)	$	2,291

	Successor Company						Predecessor Company
	Nine months ended September 30,			Five months ended September 30,			Four months ended April 30,
	2012			2011			2011

Accounts receivable	$	43		$	4,076		$	(855	)
Income tax receivable	126			(14		)	(645		)
Inventories	(10,195		)	2,137			(2,603		)
Prepaid expenses and other assets	2,741			1,257			917
Deferred financing costs	(648		)	—			(1,408		)
Accounts payable and accrued liabilities	(4,812		)	353			(10,020		)
Income taxes payable	1,435			744			(770		)
Interest payable on long term debt	643			(873		)	2,663
	$	(10,667	)	$	7,680		$	(12,721	)

Supplemental disclosure:

	Successor Company				~~Predecessor Company~~
	Three months ended June 30,		Two months ended June 30,		One month ended April 30,
	Three months ended September 30,		Three months ended September 30,
	2012		2011		~~2011~~
Net taxes paid	$	1,358	$	635	$	667
Net income taxes paid	$	8,306	$	876
Interest paid	4,~~153~~633		34,~~628~~152		~~205~~
Deferred financing charges and costs accrued but not paid	~~425~~1,050		—		~~1,160~~
Non-cash transaction - settlement of Subordinated Notes and related interest obligations for common shares	—		—		202,948
Non-cash transaction - exchange of $225.0 million Existing Notes for $229.4 million of New Notes	229,413		—

	Successor Company				Predecessor Company
	Six months ended June 30,		Two months ended June 30,		Four months ended April 30,
	2012		2011		2011
Net taxes paid	$	2,400	$	635	$	2,334
Interest paid	8,260		3,628		3,763
Deferred financing charges and costs accrued but not paid	425		—		1,160
Non-cash transaction - settlement of Subordinated Notes and related interest obligations for common shares	—		—		202,948

20. CONDENSED CONSOLIDATED GUARANTOR FINANCIAL INFORMATION

The following presents the condensed consolidating guarantor financial information as of June 30, 2012 and December 31, 2011 and for the three and six months ended June 30, 2012, the two months ended June 30, 2011, and the one and four months ended April 30, 2011for the direct and indirect subsidiaries of the Angiotech that serve as guarantors of the Senior Floating Rate Notes, and for the subsidiaries that do not serve as guarantors. Non-guarantor subsidiaries include the Swiss subsidiaries and a Canadian Trust that cannot guarantee the debt of the Angiotech. All of Angiotech’s subsidiaries are 100% owned, and all guarantees are full and unconditional, joint and several.

Table of Contents

	Successor Company			Predecessor Company
	Nine months ended September 30,	Five months ended September 30,		Four months ended April 30,
	2012	2011		2011

Net income taxes paid	9,664	$	1,511	$	2,334
Interest paid	12,893	7,780		3,763
Deferred financing charges and costs accrued but not paid	1,050	—		1,160
Non-cash transaction - settlement of Subordinated Notes and related interest obligations for common shares	—	—		202,948
Non-cash transaction - exchange of $225.0 million Existing Notes for $229.4 million of New Notes	229,413	—		—

Table of Contents

20. CONDENSED CONSOLIDATED GUARANTOR FINANCIAL INFORMATION

The following presents the condensed consolidating guarantor financial information as of September 30, 2012 and December 31, 2011 and for the three and five months ended September 30, 2011 and the four months ended April 30, 2011for the direct and indirect subsidiaries of Angiotech that serve as guarantors of the Senior Floating Rate Notes, and for the subsidiaries that do not serve as guarantors. Non-guarantor subsidiaries include the Swiss subsidiaries and a Canadian Trust that cannot guarantee the debt of the Angiotech. All of Angiotech’s subsidiaries are 100% owned, and all guarantees are full and unconditional, joint and several.

Condensed Consolidating Balance Sheet

As at ~~June~~ September 30, 2012

USD (in ‘000s)

	Successor Company
	Parent Company
	Angiotech
	Pharmaceuticals,			Guarantor		Non Guarantor		Consolidating			Consolidated
	Inc.			Subsidiaries		Subsidiaries		Adjustments			Total
ASSETS
Current assets
Cash and cash equivalents	$	2021,~~797~~875		$	2726,~~648~~663	$	911,~~546~~174	$	—		$	5759,~~991~~712
Short term investments	~~644~~556			—		—		—			~~644~~556
Accounts receivable	—(46		)	2119,~~077~~857		98,~~342~~824		—			3028,~~419~~635
Income taxes receivable	—			36765		~~488~~570		—			~~524~~1,335
Inventories	—			3137,~~631~~454		67,~~548~~094		—			3844,~~179~~548
Deferred income taxes, current portion	—			64,~~026~~931		—		—			64,~~026~~931
Deferred financing costs, current portion	—			~~434~~831		—		—			~~434~~831
Prepaid expenses and other current assets	12,~~345~~178			~~1,065~~600		~~563~~1,005		—			23,~~973~~783
Total Current Assets	2224,~~786~~563			8791,~~917~~101		2628,~~487~~667		—			~~137~~144,~~190~~331
Investment in subsidiaries	~~401~~174,~~721~~216			1928,~~377~~554		—		(~~421~~202,~~098~~770		)	—
Property, plant and equipment	1,~~603~~384			26,~~616~~071		76,~~208~~982		—			3534,~~427~~437
Intangible assets	6865,~~821~~354			~~243~~239,~~431~~195		14,~~729~~726		—			~~326~~319,~~981~~275
Goodwill	—			101,245		2122,~~997~~526		—			123,~~242~~771
Deferred income taxes	1,~~828~~909			~~738~~743		—		—			2,~~566~~652
Deferred financing costs, non-current portion	—			~~300~~2,087		—		—			~~300~~2,087
Other assets	80			6		~~224~~205		—			~~310~~291
Total Assets	~~496~~267,~~839~~506			~~479~~489,~~630~~002		7073,~~645~~106		(~~421~~202,~~098~~770		)	626,~~016~~844
LIABILITIES AND SHAREHOLDERS’ (DEFICIT) EQUITY
Current liabilities
Accounts payable and accrued liabilities	54,~~111~~898			1516,~~615~~177		45,~~932~~167		—			2526,~~658~~242
Income taxes payable	~~574~~573			~~2,500~~—		2,~~584~~887		—			53,~~658~~460
Interest payable on long-term debt	1,406			—		—		—			1,406
Deferred income taxes, current portion	—			—		—					—
Deferred revenue, current portion	4,846			1,359		—		—			6,205
Interest payable on long-term debt	374			1,720		—		—			2,094
Revolving credit facility	—			—		—		—			—
Deferred revenue, current portion	8,223			2,309		60		—			10,592
Total Current Liabilities	11,937			19,474		7,516		—			38,927
Debt	40,000			—		—		—			40,000
Deferred revenue	13,966			3,641		462		—			18,069
Total Current Liabilities	54,068			20,206		8,114		—			82,388
Deferred income taxes	—			89,697		4,589		—			94,286
Deferred revenue	14,041			3,941		570		—			18,552
Other tax liabilities	2,320			1,549		2,249		—			6,118
Deferred income taxes				88,591		4,445		—			93,036
Debt	325,000			—		—		—			325,000
Other tax liabilities	2,526			1,526		2,532		—			6,584
Debt	60,000			229,413		—		—			289,413
Other liabilities
Total Non-current Liabilities	~~341~~76,~~286~~567			94323,~~887~~471		7,~~300~~547		—			~~443~~407,~~473~~585
Total Shareholders’ (Deficit) Equity	~~143~~136,~~616~~871			~~365~~145,~~269~~325		5557,~~829~~445		(~~421~~202,~~098~~770		)	~~143~~136,~~616~~871
Total Liabilities and Shareholders’ (Deficit) Equity	$	~~496~~267,~~839~~506		$	~~479~~489,~~630~~002	$	7073,~~645~~106	$	(~~421~~202,~~098~~770	)	$	626,~~016~~844

3836

Table of Contents

Condensed Consolidating Balance Sheet

As at December 31, 2011

USD (in ‘000s)

	Successor Company
	Parent Company
	Angiotech
	Pharmaceuticals,		Guarantor		Non Guarantor		Consolidating			Consolidated
	Inc.		Subsidiaries		Subsidiaries		Adjustments			Total

ASSETS

Current assets
Cash and cash equivalents	$	8,649	$	7,449	$	6,075	$	—		$	22,173
Short term investments	3,259		—		—		—			3,259
Accounts receivable	167		20,076		7,995		—			28,238
Income taxes receivable	—		1,239		223		—			1,462
Inventories	—		26,744		7,560		—			34,304
Deferred income taxes	—		3,995		—		—			3,995
Prepaid expenses and other current assets	1,120		1,541		506		—			3,167

Total Current Assets	13,195		61,044		22,359		—			96,598

Investment in subsidiaries	388,653		20,538		—		(409,191		)	—
Assets held for sale	—		—		—		—			—
Property, plant and equipment	3,213		22,552		13,424		—			39,189
Intangible assets	75,754		251,905		15,407		—			343,066
Goodwill	—		101,244		21,984		—			123,228
Deferred income taxes	1,729		—		436		—			2,165
Other assets	3,537		54		269		—			3,860

Total Assets	486,081		457,337		73,879		(409,191		)	608,106

LIABILITIES AND SHAREHOLDERS’ (DEFICIT) EQUITY

Current liabilities
Accounts payable and accrued liabilities	6,999		17,896		5,642		—			30,537
Income taxes payable	—		—		2,023		—			2,023
Interest payable on long-term debt	1,450		—		—		—			1,450
Deferred revenue, current portion	496		—		—		—			496
Revolving credit facility	—		40		—		—			40
Debt	—		—		—		—			—

Total Current Liabilities	8,945		17,936		7,665		—			34,546

Deferred leasehold inducement	—		—		—		—			—
Deferred revenue	3,456		—		315		—			3,771
Deferred income taxes	—		87,415		5,219		—			92,634
Other tax liabilities	2,273		896		2,560		—			5,729
Debt	325,000		—		—		—			325,000
Other liabilities	—		19		—		—			19

Total Non-current Liabilities	330,729		88,330		8,094		—			427,153

Total Shareholders’ (Deficit) Equity	146,407		351,071		58,120		(409,191		)	146,407

Total Liabilities and Shareholders’ (Deficit) Equity	$	486,081	$	457,337	$	73,879	$	(409,191	)	$	608,106

Table of Contents

Condensed Consolidated Statement of Operations

Three months ended September 30, 2012

USD (in ‘000s)

	Successor Company
	Parent Company
	Angiotech
	Pharmaceuticals,			Guarantors			Non Guarantors			Consolidating			Consolidated
	Inc.			Subsidiaries			Subsidiaries			Adjustments			Total

REVENUE
Product sales, net	$	—		$	37,846		$	18,243		$	(3,428	)	$	52,661
Royalty revenue	2,882			1,030			—			—			3,912
License fees	—			—			64			—			64
	2,882			38,876			18,307			(3,428		)	56,637

EXPENSES
Cost of products sold	—			13,866			12,235			(2,029		)	24,072
License and royalty fees	98			—			—			—			98
Research & development	63			1,246			90			—			1,399
Selling, general and administration	1,392			12,179			2,439			—			16,010
Depreciation and amortization	3,741			4,357			347			—			8,445
Write-down of property, plant and equipment	—			—			—			—			—
Write-down of intangible assets	—			—			—			—			—
	5,294			31,648			15,111			(2,029		)	50,024

Operating income (loss)	(2,412		)	7,228			3,196			(1,399		)	6,613

Other income (expense)
Foreign exchange gain (loss)	(237		)	(7		)	(709		)	—			(953		)
Other (expense) income	51			40			116			—			207
Interest expense	(2,569		)	(2,979		)	—			—			(5,548		)
Impairments and realized losses on investments	(87		)	—			169			—			82
Debt extinguishment loss	—			(4,413		)							(4,413		)
Total other expenses	(2,842		)	(7,359		)	(424		)	—			(10,625		)

Income (loss) before income tax expense (recovery)	(5,254		)	(131		)	2,772			(1,399		)	(4,012		)
Income tax expense (recovery)	2,350			1,008			1,238			—			4,596

Income (loss) from operations	(7,604		)	(1,139		)	1,534			(1,399		)	(8,608		)
Equity in subsidiaries	(1,004		)	2,496						(1,492		)	—
Net income (loss)	$	(8,608	)	$	1,357		$	1,534		$	(2,891	)	$	(8,608	)

Table of Contents

Successor Company—Condensed Consolidated Statement of Operations

Three months ended September 30, 2011

USD (in ‘000s)

	Parent Company Angiotech Pharmaceuticals, Inc.			Guarantors Subsidiaries			Non Guarantors Subsidiaries			Consolidating Adjustments			Consolidated Total
REVENUE
Product sales, net	$	—		$	38,099		$	17,182		$	(3,382	)	$	51,899
Royalty revenue	4,476			1,021			—			—			5,497
	4,476			39,120			17,182			(3,382		)	57,396
EXPENSES
Cost of products sold	—			26,781			13,832			(1,817		)	38,796
License and royalty fees	50			—			—			—			50
Research & development	2,626			1,880			108			—			4,614
Selling, general and administration	4,497			15,106			3,010			—			22,613
Depreciation and amortization	3,987			4,681			578			—			9,246
Write-down of property, plant and equipment	—			143			—			—			143
	11,160			48,591			17,528			(1,817		)	75,462
Operating income (loss)	(6,684		)	(9,471		)	(346		)	(1,565		)	(18,066		)
Other income (expense)
Foreign exchange gain (loss)	514			58			564			—			1,136
Other (expense) income	151			66			4			—			221
Interest expense	(4,205		)	(375		)	(4		)	—			(4,584		)
Total other expenses	(3,540		)	(251		)	564			—			(3,227		)
Income (loss) before income tax expense (recovery)	(10,224		)	(9,722		)	218			(1,565		)	(21,293		)
Income tax expense (recovery)	421			(4,163		)	1,133			—			(2,609		)
Income (loss) from operations	(10,645		)	(5,559		)	(915		)	(1,565		)	(18,684		)
Equity in subsidiaries	(8,039		)	2,077			—			5,962			—
Net income (loss)	$	(18,684	)	$	(3,482	)	$	(915	)	$	4,397		$	(18,684	)

Table of Contents

Condensed Consolidated Statement of Operations

~~Three~~Nine months ended ~~June~~ September 30, 2012

USD (in ‘000s)

	Successor Company
	Parent Company
	Angiotech
	Pharmaceuticals,			Guarantors			Non Guarantors			Consolidating			Consolidated
	Inc.			Subsidiaries			Subsidiaries			Adjustments			Total
REVENUE
Product sales, net	$	—		$	40117,~~704~~150		$	1957,~~274~~127		$	(310,~~455~~469	)	$	56163,~~523~~808
Royalty revenue	412,~~051~~069			~~753~~2,565			—			—			414,~~804~~634
License fees	—			—			1184			—			1184
	4,051			41,457			19,285			(3,455		)	61,338
	12,069			119,715			57,211			(10,469		)	178,526
EXPENSES
Cost of products sold	—			1744,~~080~~829			1237,~~262~~398			(26,~~020~~150		)	2776,~~322~~077
License and royalty fees	63272			—			—			—			63272
Research & development	~~389~~876			14,~~996~~701			38230			—			25,~~423~~807
Selling, general and administration	26,~~851~~773			1237,~~329~~029			27,~~604~~638			—			1751,~~784~~440
Depreciation and amortization	311,~~819~~536			413,~~367~~329			~~242~~1,031			—			825,~~428~~896
Write-down of assets held for sale	—			—			—			—			—
Write-down of property, plant and equipment	692			173			—			—			865
Write-down of property, plant and equipment	692			—			—			—			692
	20,149			100,061			46,297			(6,150		)	160,357
Write-down of intangible assets	—			—			—			—			—
Operating income (loss)	(8,080		)	19,654			10,914			(4,319		)	18,169
	7,814			35,772			15,146			(2,020		)	56,712
Operating income (loss)	(3,763		)	5,685			4,139			(1,435		)	4,626
Other income (expense)
Foreign exchange gain (loss)	~~123~~(248		)	12(23		)	79(738		)	—			~~214~~(1,009		)
Other (expense) income	4647			~~236~~346			—114			—			~~240~~1,107
Interest expense	(410,~~108~~785		)	(~~198~~3,321		)	—			—			(414,~~306~~106		)
Impairments and realized losses on investments	(68436		)	—			—169			—			(68267		)
Total other expenses	(4,049		)	50			79			—			(3,920		)
Debt extinguishment loss	—			(4,413		)	—			—			(4,413		)
Income (loss) before income tax expense (recovery)	(7,812		)	5,735			4,218			(1,435		)	706
Total other expenses	(10,822		)	(7,411		)	(455		)	—			(18,688		)
Income tax expense (recovery)	95			2,449			1,110			—			3,654
Income (loss) before income tax expense (recovery)	(18,902		)	12,243			10,459			(4,319		)	(519		)
Income (loss) from operations	(7,907		)	3,286			3,108			(1,435		)	(2,948		)
Income tax expense (recovery)	2,309			5,082			3,645			—			11,036
Equity in subsidiaries	4,959			3,621						(8,580		)	—
Income (loss) from operations	(21,211		)	7,161			6,814			(4,319		)	(11,555		)
Net income (loss)	$	(2,948	)	$	6,907		$	3,108		$	(10,015	)	$	(2,948	)
Equity in subsidiaries	9,656			9,032			—			(18,688		)	—
Net income (loss)	$	(11,555	)	$	16,193		$	6,814		$	(23,007	)	$	(11,555	)

Table of Contents

Successor Company—Condensed Consolidated Statement of Operations

~~For~~Five ~~the two~~ months ended ~~June~~ September 30, 2011

USD (in ‘000s)

	Successor Company
	Parent Company Angiotech Pharmaceuticals, Inc.			Guarantors Subsidiaries			Non Guarantors Subsidiaries			Consolidating Adjustments			Consolidated Total
REVENUE
Product sales, net	$	7		$	2664,~~341~~440		$	1229,~~284~~466		$	(26,~~730~~112	)	$	3587,~~902~~801
Royalty revenue	944,570			~~974~~1,995			—			—			16,~~068~~565
	101			27,315			12,284			(2,730		)	36,970
	4,577			66,435			29,466			(6,112		)	94,366
EXPENSES
Cost of products sold	—			1844,~~065~~846			1024,~~446~~278			(13,~~577~~394		)	2665,~~934~~730
License and royalty fees	50100			—			—			—			50100
Research & development	13,~~216~~842			13,~~517~~397			96204			—			27,~~829~~443
Selling, general and administration	16,~~730~~227			924,~~267~~373			14,~~784~~794			—			1235,~~781~~394
Depreciation and amortization	26,~~466~~452			27,~~933~~614			~~291~~869			—			514,~~690~~935
	5,462			31,782			12,617			(1,577		)	48,284
Write-down of property, plant and equipment	—			143			—			—			143
Operating income (loss)	(5,361		)	(4,467		)	(333		)	(1,153		)	(11,314		)
	16,621			80,373			30,145			(3,394		)	123,745
Operating income (loss)	(12,044		)	(13,938		)	(679		)	(2,718		)	(29,379		)
Other income (expense)
Foreign exchange gain (loss)	~~172~~685			2482			~~296~~860			—			~~492~~1,627
Other (expense) income	~~652~~804			(2,~~696~~630		)	2,~~156~~160			—			~~112~~334
Interest expense	(26,~~784~~989		)	(~~235~~610		)	(1317		)	—			(37,~~032~~616		)
Total other expenses	(15,~~960~~500		)	(23,~~907~~158		)	23,~~439~~003			—			(25,~~428~~655		)
(Loss) income before income tax expense	(7,321		)	(7,374		)	2,106			(1,153		)	(13,742		)
Income (loss) before income tax expense (recovery)	(17,544		)	(17,096		)	2,324			(2,718		)	(35,034		)
Income tax (recovery) expense	509			(774		)	771			—			506
Income tax expense (recovery)	931			(4,937		)	1,904			—			(2,102		)
(Loss) income from operations	(7,830		)	(6,600		)	1,335			(1,153		)	(14,248		)
Income (loss) from operations	(18,475		)	(12,159		)	420			(2,718		)	(32,932		)
Equity in subsidiaries	(614,~~418~~457		)	13,~~286~~363			—			511,~~132~~094			—
Net income (loss)	$	(1432,~~248~~932	)	$	(58,~~314~~796	)	$	~~1,335~~420		$	38,~~979~~376		$	(1432,~~248~~932	)

Table of Contents

Condensed Consolidated Statement of Operations

For the ~~one~~four ~~month~~months ended April 30, 2011

USD (in ‘000s)

	Predecessor Company
	Parent Company Angiotech Pharmaceuticals, Inc.			Guarantors Subsidiaries			Non Guarantors Subsidiaries			Consolidating Adjustments			Consolidated Total
REVENUE
Product sales, net	$	38		$	1554,~~222~~494		$	522,~~617~~832		$	(48,~~477~~136	)	$	1669,~~365~~198
Royalty revenue	59,~~238~~930			471,011			—			—			510,~~285~~941
License fees	—			—			24127			—			24127
	5,241			15,269			5,641			(4,477		)	21,674
	9,938			55,505			22,959			(8,136		)	80,266
EXPENSES
Cost of products sold	—			722,~~433~~041			314,~~387~~783			(24,~~529~~605		)	832,~~291~~219
Research & development	583			522			51			—			1,156
License and royalty fees	68			—			—			—			68
Selling, general and administration	1,672			3,646			873			—			6,191
Research & development	2,448			3,022			216			—			5,686
Depreciation and amortization	808			2,205			75			—			3,088
Selling, general and administration	3,187			18,198			3,461			—			24,846
Depreciation and amortization	3,007			11,021			301			—			14,329
Write-down of assets held for sale	570			—			—			—			570
	3,633			13,806			4,386			(2,529		)	19,296
Write-down of property, plant and equipment	—			215			—			—			215
Operating income (loss)	1,608			1,463			1,255			(1,948		)	2,378
	9,280			54,497			18,761			(4,605		)	77,933
Operating income (loss)	658			1,008			4,198			(3,531		)	2,333
Other income (expense)
Foreign exchange gain (loss)	(~~242~~492		)	42(46		)	(~~166~~108		)	—			(~~366~~646		)
Other (expense) income	21,116			(51,134		)	1352			—			1034
Interest expense	(1,210		)	(996		)	(11		)	—			(2,217		)
Interest expense on long-term debt	(7,372		)	(2,914		)	(41		)	—			(10,327		)
Total other expenses	(16,~~450~~748		)	(~~959~~4,094		)	(~~164~~97		)	—			(210,~~573~~939		)
Income (loss) before reorganization items and income tax expense	158			504			1,091			(1,948		)	(195		)
Loss before reorganization items and income tax expense	(6,090		)	(3,086		)	4,101			(3,531		)	(8,606		)
Reorganization items	8981,~~011~~377			~~216~~215,~~567~~459			24,248			—			~~329~~321,~~826~~084
Gain on extinguishment of debt and settlement of other liabilities	67,307			—			—			—			67,307
Income (loss) before income taxes	156,476			217,071			25,339			(1,948		)	396,938
Income (loss) before income tax	142,594			212,373			28,349			(3,531		)	379,785
Income tax (recovery) expense	(~~111~~197		)	(~~685~~910		)	~~215~~1,374			—			~~(581~~267		)
Income (loss) from operations	~~156~~142,~~587~~791			~~217~~213,~~756~~283			2526,~~124~~975			(13,~~948~~531		)	~~397~~379,~~519~~518
Equity in subsidiaries	~~119~~(4,086		)	~~414~~2,502			—			~~(533~~1,584		)	—
Net income (loss)	$	~~156~~138,~~706~~705		$	~~218~~215,~~170~~785		$	2526,~~124~~975		$	(21,~~481~~947	)	$	~~397~~379,~~519~~518

Table of Contents

Condensed Consolidated Statement of ~~Operations~~Cash Flows

~~Six~~For the three months ended ~~June~~September 30, 2012

USD (in ‘000s)

	Successor Company
	Parent Company
	Angiotech
	Pharmaceuticals,			Guarantors			Non Guarantors			Consolidating			Consolidated
	Inc.			Subsidiaries			Subsidiaries			Adjustments			Total
REVENUE
OPERATING ACTIVITIES:
Product sales, net	$	—		$	79,304		$	38,884		$	(7,041	)	$	111,147
Cash used in operating activities before reorg items	$	(224,694	)	$	226,913		$	1,432		$	—		$	3,651
Royalty revenue	9,187			1,535			—			—			10,722
Cash used in operating activites	(224,694		)	226,913			1,432			—			3,651
License fees	—			—			20			—			20
INVESTING ACTIVITIES:
	9,187			80,839			38,904			(7,041		)	121,889
Purchase of property, plant and equipment	(56		)	(391		)	—			—			(447		)
EXPENSES
Cash used in investing activities	(56		)	(391		)	—			—			(447		)
Cost of products sold	—			30,964			25,163			(4,121		)	52,006
FINANCING ACTIVITIES:
License and royalty fees	174			—			—			—			174
Deferred financing charges and costs	—			(1,679		)	—			—			(1,679		)
Research & development	813			3,455			140			—			4,408
Dividends received / (paid)	225,000			(225,000		)	—			—			—
Selling, general and administration	5,381			24,851			5,199			—			35,431
Intercompany notes payable/receivable	828			(828		)	—			—			—
Depreciation and amortization	7,795			8,972			684			—			17,451
Cash (used in) provided by financing activities	225,828			(227,507		)	—			—			(1,679		)
Write-down of assets held for sale	—			—			—			—			—
Effect of exchange rate changes on cash and cash equivalents	—			—			196			—			196
Write-down of property, plant and equipment	692			173			—			—			865
Net (decrease) increase in cash and cash equivalents	1,078			(985		)	1,628			—			1,721
Write-down of intangible assets	—			—			—			—			—
Cash and cash equivalents, beginning of period	20,797			27,648			9,546			—			57,991
	14,855			68,415			31,186			(4,121		)	110,335
Cash and cash equivalents, end of period	$	21,875		$	26,663		$	11,174					$	59,712
Operating income (loss)	(5,668		)	12,424			7,718			(2,920		)	11,554
Other income (expense)
Foreign exchange gain (loss)	(11		)	(16		)	(29		)	—			(56		)
Other (expense) income	596			306			—			—			902
Interest expense	(8,216		)	(342		)	—			—			(8,558		)
Impairments and realized losses on investments	(349		)	—			—			—			(349		)
Total other expenses	(7,980		)	(52		)	(29		)	—			(8,061		)
Income (loss) before income tax expense (recovery)	(13,648		)	12,372			7,689			(2,920		)	3,493
Income tax expense (recovery)	(41		)	4,074			2,407			—			6,440
Income (loss) from operations	(13,607		)	8,298			5,282			(2,920		)	(2,947		)
Equity in subsidiaries	10,660			6,536			—			(17,196		)	—
Net income (loss)	$	(2,947	)	$	14,834		$	5,282		$	(20,116	)	$	(2,947	)

Table of Contents

Successor Company—Condensed Consolidated Statement of ~~Operations~~Cash Flows

For the ~~four~~three months ended ~~April~~September 30, 2011

USD (in ‘000s)

	Predecessor Company
	Successor Company
	Parent Company Angiotech Pharmaceuticals, Inc.			Guarantors Subsidiaries			Non Guarantors Subsidiaries			Consolidating Adjustments			Consolidated Total
REVENUE
OPERATING ACTIVITIES:
Product sales, net	$	8		$	54,494		$	22,832		$	(8,136	)	$	69,198
Cash used in operating activities	(11,583		)	14,145			2,702			—			5,264
Royalty revenue	9,930			1,011			—			—			10,941
INVESTING ACTIVITIES:
License fees	—			—			127			—			127
Purchase of property, plant and equipment	(132		)	(186		)	(31		)	—			(349		)
	9,938			55,505			22,959			(8,136		)	80,266
Cash used in investing activities	(132		)	(186		)	(31		)	—			(349		)
EXPENSES
FINANCING ACTIVITIES:
Cost of products sold	—			22,041			14,783			(4,605		)	32,219
Deferred financing charges and costs	—			(48		)	—			—			(48		)
License and royalty fees	68			—			—			—			68
Dividends received / (paid)	—			1,500			(1,500		)	—			—
Research & development	2,448			3,022			216			—			5,686
Net (repayments) advances on Revolving Credit Facility	—			(6,968		)	—			—			(6,968		)
Selling, general and administration	3,187			18,198			3,461			—			24,846
Intercompany notes payable/receivable	10,826			(10,826		)				—			—
Depreciation and amortization	3,007			11,021			301			—			14,329
Cash provided by (used in) financing activities before reorganization activities	10,826			(16,342		)	(1,500		)	—			(7,016		)
Write-down of assets held for sale	570			—			—			—			570
FINANCING CASH FLOWS FROM REORGANIZATION ACTIVITIES
Write-down of property, plant and equipment	—			215			—			—			215
Cash provided by (used in) financing activities	10,826			(16,342		)	(1,500		)	—			(7,016		)
	9,280			54,497			18,761			(4,605		)	77,933
Effect of exchange rate changes on cash and cash equivalents	—			—			(286		)	—			(286		)
Operating income (loss)	658			1,008			4,198			(3,531		)	2,333
Net (decrease) increase in cash and cash equivalents	(889		)	(2,383		)	885			—			(2,387		)
Other income (expense)
Cash and cash equivalents, beginning of period	5,056			8,485			8,096			—			21,637
Foreign exchange gain (loss)	(492		)	(46		)	(108		)	—			(646		)
Cash and cash equivalents, end of period	$	4,167		$	6,102		$	8,981		$	—		$	19,250
Other (expense) income	1,116			(1,134		)	52			—			34
Interest expense on long-term debt	(7,372		)	(2,914		)	(41		)	—			(10,327		)
Total other expenses	(6,748		)	(4,094		)	(97		)	—			(10,939		)
Loss before reorganization items and income tax expense	(6,090		)	(3,086		)	4,101			(3,531		)	(8,606		)
Reorganization items	81,377			215,409			24,248			—			321,084
Gain on extinguishment of debt and settlement of other liabilities	67,307			—			—			—			67,307
Income (loss) before income tax	142,594			212,373			28,349			(3,531		)	379,785
Income tax (recovery) expense	(197		)	(910		)	1,374			—			267
Income (loss) from operations	142,791			213,383			26,975			(3,531		)	379,518
Equity in subsidiaries	(4,086		)	2,502			—			1,584			—
Net income (loss)	$	138,705		$	215,785		$	26,975		$	(1,947	)	$	379,518

Table of Contents

Condensed Consolidated Statement of Cash Flows

For the ~~three~~nine months ended ~~June~~September 30, 2012

USD (in ‘000s)

	Successor Company
	Parent Company
	Angiotech
	Pharmaceuticals,			Guarantors			Non Guarantors			Consolidating		Consolidated
	Inc.			Subsidiaries			Subsidiaries			Adjustments		Total
OPERATING ACTIVITIES:
Cash used in operating activities before reorg items	$	12(212,~~181~~694	)	$	6243,~~430~~481		$	48,~~750~~095		$	—	$	2338,~~361~~882
OPERATING CASH FLOWS FROM REORGANIZATION ACTIVITIES
Cash used in operating activites	(212,694		)	243,481			8,095			—		38,882
Professional fess paid for services rendered in connection with the Creditor Protection Proceedings	—			—			—			—		—
Key Employment Incentive Plan fee	—			—			—			—		—
Cash used in reorganization activities	—			—			—			—		—
Cash used in operating activites	12,181			6,430			4,750			—		23,361
INVESTING ACTIVITIES:
Purchase of property, plant and equipment	(37112		)	(~~335~~1,060		)	(64124		)	—		(~~436~~1,296		)
Proceeds from disposition of property, plant and equipment	—576			400			—			—		~~400~~976
Proceeds from disposition of short term investments	12,~~150~~272			—			—			—		12,~~150~~272
Cash used in investing activities	12,~~113~~736			65(660		)	(64124		)	—		1,~~114~~952
FINANCING ACTIVITIES:
Share capital issued	(881		)	—			—			—		(881		)
Deferred financing charges and costs	—			(~~474~~2,503		)	—			—		(~~474~~2,503		)
Dividends received / (paid)	—225,000			1(222,~~500~~000		)	(13,~~500~~000		)	—		—
Advances on Revolving Credit Facility	—			—			—			—		—
Repayments on revolving Credit Facility	—			—(39		)	—			—		—(39		)
Intercompany notes payable/receivable	~~325~~(935		)	~~(325~~935		)	—			—		—
Cash (used in) provided by financing activities	~~(556~~223,184		)	~~701~~(223,607		)	(13,~~500~~000		)	—		(13,~~355~~423		)
Effect of exchange rate changes on cash and cash equivalents	—			—			~~(202~~128		)	—		~~(202~~128		)
Net (decrease) increase in cash and cash equivalents	1213,~~738~~226			719,~~196~~214			25,~~984~~099			—		2237,~~918~~539
Cash and cash equivalents, beginning of period	8,~~059~~649			207,~~452~~449			6,~~562~~075			—		3522,~~073~~173
Cash and cash equivalents, end of period	$	2021,~~797~~875		$	2726,~~648~~663		$	911,~~546~~174		$	—	$	5759,~~991~~712

Table of Contents

Successor Company—Condensed Consolidated Statement of Cash Flows

For the ~~two~~five month ended ~~June~~September 30, 2011

USD (in ‘000s)

	Successor Company
	Parent Company Angiotech Pharmaceuticals, Inc.			Guarantors Subsidiaries			Non Guarantors Subsidiaries			Consolidating Adjustments		Consolidated Total
OPERATING ACTIVITIES:
Cash used in operating activities before reorg items	$	(214,~~826~~409	)	$	721,~~012~~157		$	25,~~313~~015		$	—	$	611,~~499~~763
OPERATING CASH FLOWS FROM REORGANIZATION ACTIVITIES
Professional fees paid for services rendered in connection with the Creditor Protection Proceedings	(8,105		)	—			—			—		(8,105		)
Professional fess paid for services rendered in connection with the Creditor Protection Proceedings	(8,105		)	—			—			—		(8,105		)
Key Employment Incentive Plan fee	(156		)	(395		)	—			—		(551		)
Cash used in reorganization activities	(8,261		)	(395		)	—			—		(8,656		)
Cash used in operating activities	(1122,~~087~~670		)	620,~~617~~762			25,~~313~~015			—		(23,~~157~~107		)
INVESTING ACTIVITIES:
Purchase of property, plant and equipment	(97229		)	(~~288~~474		)	—(31		)	—		(~~385~~734		)
Proceeds from disposition of property, plant and equipment	1,732			892			—			—		2,624
Cash used in investing activities	1,~~635~~503			~~604~~418			—(31		)	—		21,~~239~~890
FINANCING ACTIVITIES:
Dividends received / (paid)	—			1,500			(1,500		)	—		—
Deferred financing charges and costs	—			(48		)	—			—		(48		)
Net (repayments) advances on Revolving Credit Facility	—			(7,542		)	—			—		(7,542		)
Dividends received / (paid)	—			3,000			(3,000		)	—		—
Intercompany notes payable/receivable	10,826			(10,826		)				—		—
Net (repayments) advances on Revolving Credit Facility	—			(14,510		)	—			—		(14,510		)
Cash provided by (used in) financing activities before reorganization activities	10,826			(16,868		)	(1,500		)	—		(7,542		)
Intercompany notes payable/receivable	21,652			(21,652		)				—		—
Cash provided by (used in) financing activities before reorganization activities	21,652			(33,210		)	(3,000		)	—		(14,558		)
FINANCING CASH FLOWS FROM REORGANIZATION ACTIVITIES
Deferred financing costs	(1,408		)	—			—			—		(1,408		)
Cash provided by (used in) financing activities	920,~~418~~244			(1633,~~868~~210		)	(13,~~500~~000		)	—		(815,~~950~~966		)
Effect of exchange rate changes on cash and cash equivalents	—			—			~~283~~(3		)	—		~~283~~(3		)
Net (decrease) increase in cash and cash equivalents	(34923		)	(912,~~647~~030		)	1,~~096~~981			—		(810,~~585~~972		)
Cash and cash equivalents, beginning of period	5,090			18,132			7,000			—		30,222
Cash and cash equivalents, end of period	$	54,~~056~~167		$	86,~~485~~102		$	8,~~096~~981		$	—	$	2119,~~637~~250

Table of Contents

Condensed Consolidated Statement of Cash Flows

For the one month ended April 30, 2011

USD (in ‘000s)

	Predecessor Company
	Parent Company Angiotech Pharmaceuticals, Inc.			Guarantors Subsidiaries			Non Guarantors Subsidiaries			Consolidating Adjustments		Consolidated Total
OPERATING ACTIVITIES:
Cash used in operating activities before reorg items	$	(998	)	$	288		$	2,516		$	—	$	1,806
OPERATING CASH FLOWS FROM REORGANIZATION ACTIVITIES
Professional fees paid for services rendered in connection with the Creditor
Protection Proceedings	(3,095		)	—			—			—		(3,095		)
Key Employment Incentive Plan fee	—			—			—			—		—
Director’s and officer’s insurance	—			—			—			—		—
Cash used in reorganization activities	(3,095		)	—			—			—		(3,095		)
Cash used in operating activities	(4,093		)	288			2,516			—		(1,289		)
INVESTING ACTIVITIES:
Purchase of property, plant and equipment	(29		)	(113		)	—			—		(142		)
Proceeds from disposition of property, plant and equipment	—			—			—			—		—
Loans advanced	—			—			—			—		—
Asset acquisition costs	—			—			—			—		—
Cash used in investing activities	(29		)	(113		)	—			—		(142		)
FINANCING ACTIVITIES:
Share capital issued	—			—			—			—		—
Deferred financing charges and costs	—			(50		)	—			—		(50		)
Dividends received / (paid)	—			2,137			(2,137		)	—		—
Net (repayments) advances on Revolving Credit Facility	—			5,000			—			—		5,000
Proceeds from stock options exercised	—			—			—			—		—
Intercompany notes payable/receivable	3,789			(3,789		)				—		—
Cash provided by (used in) financing activities	3,789			3,298			(2,137		)	—		4,950
Effect of exchange rate changes on cash and cash equivalents	—			—			(208		)	—		(208		)
Net (decrease) increase in cash and cash equivalents	(333		)	3,473			171			—		3,311
Cash and cash equivalents, beginning of period	5,423			14,659			6,829			—		26,911
Cash and cash equivalents, end of period	$	5,090		$	18,132		$	7,000		$	—	$	30,222

Table of Contents

Condensed Consolidated Statement of Cash Flows

For the six months ended June 30, 2012

USD (in ‘000s)

Successor Company

Filing Compare · ANGIOTECH PHARMACEUTICALS INC