Delaware
|
56-1953785
|
|
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
(I.R.S.
Employer
Identification
No.)
|
|
26361
Crown Valley Parkway,
Suite
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
May 14, 2010
|
Common
Stock, par value $.01 per share
|
48,224,320
shares
|
Page
|
|||
PART I. FINANCIAL
INFORMATION
|
|||
Item
1.
|
Financial
Statements
|
||
Statement
Regarding Financial Information
|
3
|
||
Condensed
Consolidated Balance Sheets as of March 31, 2010 (unaudited)
and September 30, 2009
|
4
|
||
Condensed
Consolidated Statements of Operations for the Three Months and Six Months
ended March 31, 2010 and 2009 (unaudited)
|
5
|
||
Condensed
Consolidated Statements of Cash Flows for the Six Months ended March 31,
2010 and 2009 (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
|
17
|
|
Item
4.
|
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
|
18
|
ITEM 1.
|
Financial
Statements.
|
March
31,
|
September
30,
|
|||||||
2010
|
2009
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 1,272 | $ | 646 | ||||
Prepaids
and other current assets
|
71 | 133 | ||||||
Total
current assets
|
1,343 | 779 | ||||||
Investment
in CPEC, LLC
|
32 | 32 | ||||||
Total
assets
|
$ | 1,375 | $ | 811 | ||||
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable and accrued expenses
|
$ | 504 | $ | 774 | ||||
Total
current liabilities
|
504 | 774 | ||||||
Non-current
liabilities:
|
||||||||
Warrant
liability
|
10,852 | - | ||||||
Senior convertible notes payable to related parties, net | - | 600 | ||||||
Long-term
note payable
|
627 | 594 | ||||||
Total
liabilities
|
11,983 | 1,968 | ||||||
Commitments
& Contingencies
|
||||||||
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, 2010 and September
30, 2009
|
5 | 5 | ||||||
Common
stock, $.01 par value per share, 200,000,000 shares authorized; 48,224,320
shares issued and outstanding at March 31, 2010 and 37,563,392
shares issued and outstanding at September 30, 2009
|
482 | 376 | ||||||
Additional
paid-in capital
|
154,106 | 159,657 | ||||||
Accumulated
deficit
|
(165,201 | ) | (161,195 | ) | ||||
Total
stockholders’ deficit
|
(10,608 | ) | (1,157 | ) | ||||
Total
liabilities and stockholders’ deficit
|
$ | 1,375 | $ | 811 |
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
March 31,
|
March 31,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Revenue
|
||||||||||||||||
Grant
income
|
$ | - | $ | - | $ | - | $ | - | ||||||||
Costs
and expenses:
|
||||||||||||||||
Research
and development
|
427 | 214 | 610 | 340 | ||||||||||||
General
and administrative
|
455 | 305 | 862 | 587 | ||||||||||||
Total
costs and expenses
|
882 | 519 | 1,472 | 927 | ||||||||||||
Loss
from operations
|
(882 | ) | (519 | ) | (1,472 | ) | (927 | ) | ||||||||
Interest
income (expense), net
|
(17 | ) | (108 | ) | (843 | ) | (208 | ) | ||||||||
Other
income (expense), net
|
7,817 | (38 | ) | (6,043 | ) | 11 | ||||||||||
Net
income (loss)
|
$ | 6,918 | $ | (665 | ) | $ | (8,358 | ) | $ | (1,124 | ) | |||||
Net
income (loss)
per weighted share attributable to common stockholders:
|
||||||||||||||||
Basic
|
$ | 0.14 | $ | (0.02 | ) | $ | (0.18 | ) | $ | (0.04 | ) | |||||
Diluted
|
$ | 0.07 | $ | (0.02 | ) | $ | (0.18 | ) | $ | (0.04 | ) | |||||
Weighted
average common shares outstanding:
|
||||||||||||||||
Basic
|
48,224 | 32,143 | 47,366 | 32,064 | ||||||||||||
Diluted
|
94,365 | 35,000 | 47,366 | 34,733 |
Six
Months Ended
|
||||||||
March 31,
|
||||||||
2010
|
2009
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
loss
|
$ | (8,358 | ) | $ | (1,124 | ) | ||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
Noncash
compensation
|
321 | 111 | ||||||
Change
in fair value of warrants
|
(170 | ) | - | |||||
Change
in fair value of trading securities
|
- | (49 | ) | |||||
Noncash
consulting expense
|
14 | 25 | ||||||
Noncash
interest and warrant charges
|
7,003 | 242 | ||||||
Change
in assets and liabilities:
|
||||||||
Prepaids
and other assets
|
62 | (14 | ) | |||||
Accounts
payable and accrued expenses
|
141 | (118 | ) | |||||
Net
cash used in operating activities
|
(987 | ) | (927 | ) | ||||
Cash
flows from investing activities:
|
||||||||
Sales
of marketable securities
|
- | 525 | ||||||
Net
cash provided by investing activities
|
- | 525 | ||||||
Cash
flows from financing activities:
|
||||||||
Repayment
of short term note payable
|
- | (368 | ) | |||||
Proceeds
from short term note payable
|
- | 3 | ||||||
Proceeds
from the issuance of common stock and warrants
|
1,650 | 1,500 | ||||||
Proceeds
from exercise of warrants
|
17 | - | ||||||
Proceeds
from issuance of Senior Convertible Notes
|
- | 375 | ||||||
Costs
related to the issuance of common stock and warrants
|
(54 | ) | (74 | ) | ||||
Net
cash provided by financing activities
|
1,613 | 1,436 | ||||||
Net
increase in cash and cash equivalents
|
626 | 1,034 | ||||||
Cash
and cash equivalents at beginning of period
|
646 | 399 | ||||||
Cash
and cash equivalents, end of period
|
$ | 1,272 | $ | 1,433 |
A.
|
Organization
and Business and Basis of
Presentation
|
B.
|
Liquidity
|
C.
|
Net
Income (Loss) Per
Common Share
|
D.
|
Warrant
Liability
|
E.
|
Note
Payable
|
F.
|
Stockholders’
Equity
|
Number of Shares
|
Exercise Price
|
Expiration Date
|
|||
350,000
|
$ | 0.28 |
November
2010
|
||
2,126,668
|
$ | 0.28 |
May
2012
|
||
43,614,285
|
$ | 0.28 |
October
2016
|
||
50,000
|
$ | 0.35 |
May
2011
|
||
20,000
|
$ | 0.39 |
September
2014
|
||
15,000
|
$ | 0.50 |
September
2014
|
||
15,000
|
$ | 0.60 |
September
2014
|
||
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
|
||
53,390,953
|
$ | 0.35 |
Weighted Average
|
||||||||||||||||
Remaining
|
||||||||||||||||
Contractual Term (in
|
Aggregrate
|
|||||||||||||||
Number of Shares
|
Exercise Price
|
Years)
|
Intrinsic Value
|
|||||||||||||
Outstanding
at September 30, 2009
|
27,379,525 | $ | 0.46 | 3.25 | $ | 1,051,247.76 | ||||||||||
Granted
|
43,614,285 | $ | 0.28 | 6.52 | $ | 872,285.70 | ||||||||||
Exercised
|
(60,000 | ) | $ | 0.28 | 2.14 | $ | 9,000.00 | |||||||||
Expired
or Canceled
|
(17,542,857 | ) | $ | 0.36 | 3.52 | $ | 43,000.00 | |||||||||
Forfeited
|
- | - | ||||||||||||||
Vested
|
- | - | ||||||||||||||
Outstanding
at March 31, 2010 (Unaudited)
|
53,390,953 | $ | 0.35 | 5.58 | $ | 921,819.06 | ||||||||||
Exercisable
at March 31, 2010 (Unaudited)
|
53,390,953 | $ | 0.35 | 5.58 | $ | 921,819.06 |
G.
|
Stock-Based
Compensation
|
Weighted Average
|
||||||||||||||||
Remaining
|
||||||||||||||||
Contractual Term (in
|
Aggregrate
|
|||||||||||||||
Number of Shares
|
Exercise Price
|
Years)
|
Intrinsic Value
|
|||||||||||||
Outstanding
at September 30, 2009
|
6,175,015 | $ | 1.58 | 6.96 | $ | 137,912.50 | ||||||||||
Granted
|
121,250 | $ | 0.33 | 9.63 | $ | 0.00 | ||||||||||
Exercised
|
- | - | ||||||||||||||
Expired
or Canceled
|
- | - | ||||||||||||||
Forfeited
|
(45,000 | ) | $ | 0.39 | $ | 0.00 | ||||||||||
Outstanding
at March 31, 2010 (Unaudited)
|
6,251,265 | $ | 1.57 | 6.51 | $ | 112.50 | ||||||||||
Exercisable
at March 31, 2010 (Unaudited)
|
5,836,272 | $ | 1.66 | 6.31 | $ | 112.50 |
Options Outstanding
|
Options Exercisable
|
|||||||||||||||||||||
Range of
Exercise Prices
|
Number
Outstanding at
March 31, 2010
|
Weighted
Average
Exercise Price
|
Weighted
Average
Remaining
Contractual
Life
|
Number
Exercisable at
March 31, 2010
|
Weighted
Average
Exercise
Price
|
|||||||||||||||||
$0.29-$0.32 | 1,526,250 | $ | 0.30 | 8.97 | 1,297,083 | $ | 0.30 | |||||||||||||||
$0.33-$0.44 | 967,750 | $ | 0.38 | 8.97 | 781,924 | $ | 0.38 | |||||||||||||||
$0.45-$0.73 | 558,611 | $ | 0.58 | 6.92 | 558,611 | $ | 0.58 | |||||||||||||||
$0.75-$0.89 | 762,835 | $ | 0.81 | 5.97 | 762,835 | $ | 0.81 | |||||||||||||||
$0.90-$1.25 | 612,750 | $ | 0.95 | 6.43 | 612,750 | $ | 0.95 | |||||||||||||||
$1.45 | 2,500 | $ | 1.45 | 4.58 | 2,500 | $ | 1.45 | |||||||||||||||
$1.50-$1.73 | 1,263,519 | $ | 1.50 | 3.33 | 1,263,519 | $ | 1.50 | |||||||||||||||
$1.85-$6.25 | 375,768 | $ | 2.92 | 4.13 | 375,768 | $ | 2.92 | |||||||||||||||
$8.12-$19.00 | 80,525 | $ | 13.12 | 1.62 | 80,525 | $ | 13.12 | |||||||||||||||
$19.38-$51.25 | 100,757 | $ | 33.72 | 0.45 | 100,757 | $ | 33.72 | |||||||||||||||
$0.29-$51.25 | 6,251,265 | $ | 1.57 | 6.51 | 5,836,272 | $ | 1.66 |
For the three months
ended March 31,
|
For the six months
ended March 31,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Research
and Development Expenses
|
10 | - | 33 | 23 | ||||||||||||
General
and Administrative Expenses
|
121 | 45 | 288 | 88 | ||||||||||||
131 | 45 | 321 | 111 |
For the six months
ended March 31,
|
||||||||
2010
|
2009
|
|||||||
Dividend
yield
|
0%
|
0%
|
||||||
Expected
volatility
|
96%
|
200%-209%
|
||||||
Risk-free
interest rate
|
3.36%
|
2.6%-3.8%
|
||||||
Expected
option life after shares have vested
|
10
years
|
10
years
|
H.
|
Commitments
|
I.
|
Subsequent
Events
|
ITEM 2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
|
ITEM 3.
|
Quantitative
and Qualitative Disclosures About Market
Risk.
|
ITEM 4.
|
Controls
and Procedures.
|
ITEM 1.
|
Legal
Proceedings.
|
ITEM
1A.
|
Risk
Factors.
|
ITEM 2.
|
Unregistered
Sales of Equity Securities and Use of
Proceeds.
|
ITEM 3.
|
Defaults
Upon Senior Securities.
|
ITEM 4.
|
Submission
of Matters to a Vote of Security
Holders.
|
ITEM 5.
|
Other
Information.
|
ITEM 6.
|
Exhibits
|
Exhibit #
|
Description
|
|
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.
|
AEOLUS
PHARMACEUTICALS, INC.
|
||
Date: May
14, 2010
|
By:
|
/s/ John L. McManus
|
John
L. McManus
|
||
President
and Chief Executive Officer
|
||
(Principal
Executive Officer)
|
||
Chief
Financial Officer, Treasurer and Secretary
|
||
(Principal
Financial and Accounting
Officer)
|