X___
|
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
|
_____
|
TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
Commission
File Number
|
|
0-50481
|
|
AEOLUS
PHARMACEUTICALS, INC.
|
|
(Exact
Name of Registrant as Specified in Its
Charter)
|
|
|
Delaware
|
56-1953785
|
|
(State
or Other Jurisdiction of Incorporation or
Organization)
|
(I.R.S. Employer Identification No.)
|
|
26361
Crown Valley Parkway #150
Mission Viejo, California
|
92691
|
|
(Address
of Principal Executive Offices)
|
(Zip Code)
|
|
(Registrant’s
Telephone Number, Including Area Code)
949-481-9825
|
|
|
Class
|
Outstanding
as of
April 30,
2009
|
|
Common
Stock, par value $.01 per share
|
37,467,855
shares
|
Page
|
|||
PART
I. FINANCIAL
INFORMATION
|
|||
Item 1.
|
Financial
Statements
|
||
Statement Regarding Financial
Information
|
3
|
||
Condensed Consolidated Balance
Sheets as of March
31, 2009
(unaudited)
and September 30, 2008
|
4
|
||
Condensed Consolidated Statements
of Operations for the Three Months and Six Months ended March 31, 2009 and 2008
(unaudited)
|
5
|
||
Condensed Consolidated Statements
of Cash Flows for the Six Months ended March 31, 2009 and 2008
(unaudited)
|
6
|
||
Notes to Condensed Consolidated
Financial Statements
|
7
|
||
Item 2.
|
Management’s Discussion and
Analysis of Financial Condition and Results of
Operations
|
14
|
|
Item 3.
|
Quantitative and Qualitative
Disclosures About Market Risk
|
16
|
|
Item 4T.
|
Controls and
Procedures
|
17
|
|
PART
II. OTHER
INFORMATION
|
|||
Item 1.
|
Legal
Proceedings
|
17
|
|
Item 1A.
|
Risk
Factors
|
17
|
|
Item 2.
|
Unregistered Sales of Equity
Securities and Use of Proceeds
|
17
|
|
Item 3.
|
Defaults
Upon Senior Securities
|
17
|
|
Item 4.
|
Submission of Matters to a Vote
of Security Holders
|
18
|
|
Item
5.
|
Other
Information
|
18
|
|
Item 6.
|
Exhibits
|
18
|
|
SIGNATURES
|
19
|
AEOLUS
PHARMACEUTICALS, INC.
|
|||||||||
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|||||||||
(In
thousands, except shares and per share data)
|
|||||||||
March
31,
|
September
30,
|
||||||||
2009
|
2008
|
||||||||
(Unaudited)
|
|||||||||
ASSETS
|
|||||||||
Current
assets:
|
|||||||||
Cash
and cash equivalents
|
$ | 1,433 | $ | 399 | |||||
Prepaids
and other current assets
|
160 | 156 | |||||||
Total
current assets
|
1,593 | 555 | |||||||
Marketable
investments (Note D)
|
- | 440 | |||||||
Other
investments
|
125 | 125 | |||||||
Total
assets
|
$ | 1,718 | $ | 1,120 | |||||
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|||||||||
Current
liabilities:
|
|||||||||
Accounts
payable
|
$ | 873 | $ | 991 | |||||
Margin
loan (Note E)
|
- | 366 | |||||||
Current
maturity of long-term note payable (Note E)
|
- | 534 | |||||||
Total
current liabilities
|
873 | 1,891 | |||||||
Senior
convertible notes to related parties, net (redemption value of
$1,000,000
and
$625,000 as of March 31, 2009 and September 30, 2008, respectively (Note
E))
|
457 | 266 | |||||||
Long-term
note payable (Note E)
|
562 | - | |||||||
Total
liabilities
|
1,892 | 2,157 | |||||||
Commitments
and contingences (Note H)
|
|||||||||
Stockholders'
deficit:
|
|||||||||
Preferred
stock, $.01 par value per share, 10,000,000 shares
authorized:
|
|||||||||
Series
B nonredeemable convertible preferred stock, 600,000
shares
|
|||||||||
authorized;
475,087 shares issued and outstanding at March 31,
|
|||||||||
2009
and September 30, 2008
|
5 | 5 | |||||||
Common
stock, $.01 par value per share, 200,000,000 shares
authorized;
|
|||||||||
37,467,855 shares issued and outstanding at March 31, 2009
and
|
|||||||||
31,952,749
shares issued and outstanding at September 30, 2008
|
375 | 320 | |||||||
Additional
paid-in capital
|
159,470 | 157,573 | |||||||
Unrealized
losses on investments, available for sale
|
- | (36 |
)
|
|
|||||
Accumulated
deficit
|
(160,024 | ) | (158,899 |
)
|
|
||||
Total
stockholders' deficit
|
(174 | ) | (1,037 |
)
|
|
||||
Total
liabilities and stockholders' deficit
|
$ | 1,718 | $ | 1,120 | |||||
The
accompanying notes are an integral part of these unaudited condensed
consolidated financial
statements.
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||||||||||||||
(Unaudited)
|
||||||||||||||||
(In
thousands, except per share data)
|
||||||||||||||||
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
March
31,
|
March
31,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Revenue
|
||||||||||||||||
Grant
income
|
$ | - | $ | - | $ | - | $ | - | ||||||||
Costs
and expenses:
|
||||||||||||||||
Research
and development
|
214 | 267 | 340 | 522 | ||||||||||||
General
and administrative
|
305 | 382 | 587 | 777 | ||||||||||||
Total
costs and expenses
|
519 | 649 | 927 | 1,299 | ||||||||||||
Loss
from operations
|
(519 | ) | (649 | ) | (927 | ) | (1,299 | ) | ||||||||
Interest
income (expense), net
|
(108 | ) | 1 | (208 | ) | 10 | ||||||||||
Other
(expense) income, net
|
(38 | ) | (49 | ) | 11 | (49 | ) | |||||||||
Net
loss
|
$ | (665 | ) | $ | (697 | ) | $ | (1,124 | ) | $ | (1,338 | ) | ||||
Net
loss per weighted share attributable to common
stockholders:
|
||||||||||||||||
Basic
|
$ | (0.02 | ) | $ | (0.02 | ) | $ | (0.04 | ) | $ | (0.05 | ) | ||||
Diluted
|
$ | (0.02 | ) | $ | (0.02 | ) | $ | (0.04 | ) | $ | (0.05 | ) | ||||
Weighted
average common shares outstanding:
|
||||||||||||||||
Basic
|
32,143 | 31,952 | 32,064 | 31,952 | ||||||||||||
Diluted
|
35,000 | 31,952 | 34,733 | 31,952 | ||||||||||||
The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
|
AEOLUS
PHARMACEUTICALS, INC.
|
||||||||
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||
(Unaudited)
|
||||||||
(In
thousands)
|
||||||||
Six
Months Ended
|
||||||||
March
31,
|
||||||||
2009
|
2008
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
loss
|
$ | (1,124 | ) | $ | (1,338 | ) | ||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
Noncash
compensation
|
111 | 236 | ||||||
Change
in fair value of trading securities
|
(49 | ) | - | |||||
Noncash
consulting expense
|
25 | - | ||||||
Noncash
interest and financing costs
|
242 | 25 | ||||||
Other
than temporary impairment charge
|
- | 49 | ||||||
Change
in assets and liabilities:
|
||||||||
Prepaids
and other assets
|
(14 | ) | (34 | ) | ||||
Accounts
payable and accrued expenses
|
(118 | ) | 36 | ) | ||||
Net
cash used in operating activities
|
(927 | ) | (1,026 | ) | ||||
Cash
flows from investing activities:
|
||||||||
Sales
(purchases) of marketable securities
|
525 | (525 | ) | |||||
Net
cash provided by (used in) financing activities
|
525 | (525 | ) | |||||
Cash
flows from financing activities:
|
||||||||
Repayment
of short term note payable
|
(368 | ) | - | |||||
Proceeds
from short term note payable
|
3 | 230 | ||||||
Proceeds
from the issuance of common stock and warrants
|
1,500 | - | ||||||
Proceeds
from issuance of Senior Convertible Notes
|
375 | - | ||||||
Costs
related to the issuance of common stock and warrants
|
(74 | ) | - | |||||
Net
cash provided by financing activities
|
1,436 | 230 | ||||||
Net
increase (decrease) in cash and cash equivalents
|
1,034 | (1,321 | ) | |||||
Cash
and cash equivalents at beginning of period
|
399 | 1,727 | ||||||
Cash
and cash equivalents at end of period
|
$ | 1,433 | $ | 406 | ||||
The
accompanying notes are integral part of these unaudited condensed
consolidated financial
statements.
|
Number of Shares
|
Exercise Price
|
Expiration Date
|
|||
2,500,000
|
$ 0.28
|
November
2010
|
|||
2,186,668
|
$ 0.28
|
May
2012
|
|||
13,392,857
|
$ 0.35
|
March
2014
|
|||
50,000
|
$ 0.50
|
May
2011
|
|||
1,000,000
|
$ 0.50
|
August
2013
|
|||
250,000
|
$ 0.50
|
September
2013
|
|||
250,000
|
$ 0.50
|
October
2013
|
|||
250,000
|
$ 0.50
|
November
2013
|
|||
250,000
|
$ 0.50
|
December
2013
|
|||
7,000,000
|
$ 0.75
|
June
2011
|
|||
50,000
|
$ 1.00
|
May
2011
|
|||
50,000
|
$ 1.50
|
May
2011
|
|||
50,000
|
$ 2.00
|
May
2011
|
|||
50,000
|
$ 2.50
|
May
2011
|
|||
410,400
|
$ 2.50
|
April
2009
|
|||
1,641,600
|
$ 4.00
|
April
2009
|
|||
29,381,525
|
$ 0.69
|
Shares
|
Weighted
Average Exercise Price
|
Weighted
Average Remaining Contractual Term
|
Aggregate
Intrinsic Value
|
|||||
Outstanding
at September 30, 2008
|
4,235,281
|
$
|
2.50
|
6.7
years
|
$
|
46
|
||
Granted
|
284,000
|
$
|
0.38
|
|||||
Exercised
|
---
|
$
|
---
|
|||||
Forfeited
|
---
|
$
|
---
|
|||||
Outstanding
at March 31, 2009 (unaudited)
|
4,519,281
|
$
|
2.37
|
6.4
years
|
$
|
3
|
||
Exercisable
at March 31, 2009 (unaudited)
|
4,208,885
|
$
|
2.52
|
6.2
years
|
$
|
2
|
Options
Outstanding
|
Options
Exercisable
|
|||||||||||
Range
of Exercise Prices
|
Number
Outstanding at March 31, 2009
|
Weighted
Average Exercise Price
|
Weighted
Average Remaining Contractual Life
|
Number
Exercisable at March 31, 2009
|
Weighted
Average Exercise Price
|
|||||||
$0.29
- 0.40
|
659,000
|
|
$
|
0.35
|
|
9.4
years
|
|
348,604
|
|
$
|
0.35
|
|
$0.44
- $0.60
|
526,050
|
|
$
|
0.55
|
|
8.2
years
|
|
526,050
|
|
$
|
0.55
|
|
$0.68
- $0.80
|
464,161
|
$
|
0.75
|
7.3
years
|
464,161
|
$
|
0.75
|
|||||
$0.81
- $0.90
|
780,085
|
$
|
0.88
|
7.1
years
|
780,085
|
$
|
0.88
|
|||||
$0.91
- $1.45
|
224,500
|
$
|
1.04
|
7.1
years
|
224,500
|
$
|
1.04
|
|||||
$1.50
|
1,256,015
|
$
|
1.50
|
4.3
years
|
1,256,015
|
$
|
1.50
|
|||||
$1.52
- $12.85
|
461,418
|
$
|
4.24
|
4.8
years
|
461,418
|
$
|
4.24
|
|||||
$14.50
- $31.88
|
99,253
|
$
|
25.97
|
1.6
years
|
99,253
|
$
|
25.97
|
|||||
$50.9375
|
2,999
|
$
|
50.94
|
1.0
years
|
2,999
|
$
|
50.94
|
|||||
$51.25
|
45,800
|
$
|
51.25
|
1.0
years
|
45,800
|
$
|
51.25
|
|||||
$0.29
- $51.25
|
4,519,281
|
$
|
2.37
|
6.4
years
|
4,208,885
|
$
|
2.52
|
For
the six months
March
31,
|
||||||||
2009
|
2008
|
|||||||
Research
and development expenses
|
$ | 23 | $ | 36 | ||||
General
and administrative expenses
|
88 | 200 | ||||||
Total
stock-based compensation expense
|
$ | 111 | $ | 236 |
For
the six months March 31,
|
||||
2009
|
2008
|
|||
Dividend
yield
|
0%
|
0%
|
||
Expected
volatility
|
200%
- 209%
|
197%
|
||
Risk-free
interest rate
|
2.6%
- 3.8%
|
3.8%
- 4.6%
|
||
Expected
option life after shares are vested
|
10
years
|
10
years
|
(a)
|
The
stockholders elected the following persons as directors of Aeolus
Pharmaceuticals: David C. Cavalier, John M. Farah, Jr., Joseph
J. Krivulka, Amit Kumar, Michael E. Lewis, Chris A. Rallis and Peter D.
Suzdak, The votes for and against (withheld) each nominee were
as follows:
|
Nominee
|
Votes
For
|
Votes
Withheld
|
Votes
Abstained
|
|||
David
C. Cavalier
|
29,130,357
|
72,769
|
0
|
|||
John
M. Farah, Jr., Ph.D.
|
29,130,558
|
72,568
|
0
|
|||
Joseph
J. Krivulka
|
29,181,043
|
22,083
|
0
|
|||
Amit
Kumar, Ph.D.
|
29,130,093
|
73,033
|
0
|
|||
Michael
E. Lewis, Ph.D.
|
29,181,043
|
22.083
|
0
|
|||
Chris
A. Rallis
|
29,130,598
|
72,528
|
0
|
|||
Peter
D. Suzdak, Ph.D.
|
28,181.043
|
22.083
|
0
|
(b)
|
The
stockholders approved the amendment of the Company’s Amended and Restated
Certificate of Incorporation to increase the authorized number of shares
of Common Stock of Aeolus from 150,000,000 shares to 200,000,000 shares,
with 29,058,765 shares voting for approval, 143,511 shares voting against
and 850 shares abstained.
|
(c)
|
The
stockholders approved the appointment by the Audit Committee of the Board
of Directors of Haskell & White LLP as the Company’s independent
public accountants to audit the Company’s financial statements for fiscal
2009, with 29,110,246 shares voting for approval, 91,011 shares voting
against and 1,868 shares abstained.
|
Exhibit
#
|
Description
|
|
4.1
|
Registration
Rights Agreement dated March 30, 2009 by and among the Company and the
investors whose names appear on the signature pages thereof (incorporated
by reference to Exhibit 4.1 to the Company's Form 8-K dated March 30,
2009).
|
|
10.1
|
Securities
Purchase Agreement dated March 30, 2009 by and among the Company and the
investors whose names appear on the signature pages thereof (incorporated
by reference to Exhibit 10.1 to the Company's Form 8-K dated March 30,
2009).
|
|
10.2
|
Form
of Warrant to Purchase Common Stock (incorporated by reference to Exhibit
10.2 to the Company's Form 8-K dated March 30,
2009).
|
|
10.3
|
Amendment
No. 2 dated March 30, 2009 to the Securities Purchase Agreement dated
August 1, 2008, as amended by Amendment No. 1 thereto, dated August 4,
2008, by and among the Company and the investors whose names appear on the
signature pages thereof (incorporated by reference to Exhibit 10.3 to the
Company's Form 8-K dated March 30, 2009).
|
|
10.4
|
Amendment
No. 1 To Convertible Promissory Note dated February 7, 2009 by and between
Aeolus Pharmaceuticals, Inc. and Elan Pharma International Limited
(incorporated by reference to Exhibit 10.1 to the Company's Form 8-K dated
February 7, 2009).
|
|
31.1
|
Certification
of the Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a)
and 15d-14(a).
|
|
31.2
|
Certification
of the Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a)
and 15d-14(a).
|
|
32.1
|
Certification
by the Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. §1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
|
Date: May 1,
2009
|
By:
|
/s/
John L. McManus
|
John
L. McManus
President
and Chief Executive Officer
(Principal
Executive Officer)
|
||
Date: May 1,
2009
|
By:
|
/s/
Michael P. McManus
|
Michael
P. McManus
Chief
Financial Officer, Treasurer and Secretary
(Principal
Financial and Accounting
Officer)
|