X
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QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
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_____
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TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
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Commission
File Number
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0-50481
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AEOLUS
PHARMACEUTICALS, INC.
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(Exact
Name of Registrant as Specified in Its
Charter)
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Delaware
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56-1953785
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(State
or Other Jurisdiction of Incorporation or
Organization)
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(I.R.S. Employer Identification No.)
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23811 Inverness Place
Laguna Niguel, California
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92677
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(Address
of Principal Executive Offices)
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(Zip Code)
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(Registrant’s
Telephone Number, Including Area Code)
949-481-9825
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Class
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Outstanding
as of
April 30,
2008
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Common
Stock, par value $.01 per share
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31,952,749
shares
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Page
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PART
I. FINANCIAL
INFORMATION
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Item 1.
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Financial
Statements
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Statement Regarding Financial
Information
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3
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Condensed Consolidated Balance
Sheets as of March
31, 2008
(unaudited)
and September 30, 2007
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4
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Condensed Consolidated Statements
of Operations for the Three Months and Six Months ended March 31, 2008 and 2007
(unaudited)
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5
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Condensed Consolidated Statements
of Cash Flows for the Six Months ended March 31, 2008 and 2007
(unaudited)
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6
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Notes to Condensed Consolidated
Financial Statements
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7
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Item 2.
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Management’s Discussion and
Analysis of Financial Condition and Results of
Operations
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11
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Item 3.
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Quantitative and Qualitative
Disclosures About Market Risk
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14
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Item 4.
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Controls and
Procedures
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14
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PART
II. OTHER
INFORMATION
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Item 1.
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Legal
Proceedings
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14
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Item 1A.
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Risk
Factors
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14
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Item 2.
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Unregistered Sales of Equity
Securities and Use of Proceeds
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14
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Item 3.
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Defaults
Upon Senior Securities
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14
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Item 4.
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Submission of Matters to a Vote
of Security Holders
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15
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Item
5.
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Other
Information
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15
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Item 6.
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Exhibits
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15
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SIGNATURES
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15
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AEOLUS
PHARMACEUTICALS, INC.
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||||||||
CONDENSED
CONSOLIDATED BALANCE SHEETS
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||||||||
(In
thousands, except shares and per share data)
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||||||||
March
31,
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September
30,
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|||||||
2008
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2007
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|||||||
(Unaudited)
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||||||||
ASSETS
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||||||||
Current
assets:
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||||||||
Cash
and cash equivalents
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$ | 406 | $ | 1,727 | ||||
Prepaids
and other current assets
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113 | 79 | ||||||
Total
current assets
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519 | 1,806 | ||||||
Investments,
available-for-sale
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476 | - | ||||||
Other
Investments
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125 | 125 | ||||||
Total
assets
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$ | 1,120 | $ | 1,931 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
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||||||||
Current
liabilities:
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||||||||
Accounts
payable
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$ | 298 | $ | 266 | ||||
Accrued
expenses
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6 | 2 | ||||||
Current
maturity of long-term note payable
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508 | - | ||||||
Short-term
debt
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230 | - | ||||||
Total
current liabilities
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1,042 | 268 | ||||||
Long-term
note payable
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- | 483 | ||||||
Total
liabilities
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1,042 | 751 | ||||||
Commitments
and contingences (Note H)
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||||||||
Stockholders'
equity:
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||||||||
Preferred
stock, $.01 par value per share, 10,000,000 shares
authorized:
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||||||||
Series
B nonredeemable convertible preferred stock, 600,000
shares
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||||||||
authorized;
475,087 shares issued and outstanding at March 31,
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||||||||
2008
and September 30, 2007
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5 | 5 | ||||||
Common
stock, $.01 par value per share, 150,000,000 shares
authorized;
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||||||||
31,952,749 shares issued and outstanding at March 31, 2008
and
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||||||||
September
30, 2007
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320 | 320 | ||||||
Additional
paid-in capital
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157,017 | 156,781 | ||||||
Accumulated
deficit
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(157,264 | ) | (155,926 |
)
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Total
stockholders' equity
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78 | 1,180 | ||||||
Total
liabilities and stockholders' equity
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$ | 1,120 | $ | 1,931 | ||||
The
accompanying notes are an integral part of these unaudited condensed
consolidated financial
statements.
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CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
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||||||||||||||||
(Unaudited)
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||||||||||||||||
(In
thousands, except per share data)
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||||||||||||||||
Three
Months Ended
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Six
Months Ended
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|||||||||||||||
March
31,
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March
31,
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|||||||||||||||
2008
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2007
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2008
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2007
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Revenue
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||||||||||||||||
Grant
income
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$ | - | $ | - | $ | - | $ | - | ||||||||
Costs
and expenses:
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||||||||||||||||
Research
and development
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267 | 341 | 522 | 677 | ||||||||||||
General
and administrative
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382 | 447 | 777 | 1,076 | ||||||||||||
Total
costs and expenses
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649 | 788 | 1,299 | 1,753 | ||||||||||||
Loss
from operations
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(649 | ) | (788 | ) | (1,299 | ) | (1,753 | ) | ||||||||
Interest
income (expense), net
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1 | 19 | 10 | 35 | ||||||||||||
Other
income
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- | 225 | - | 225 | ||||||||||||
Other
than temporary impairment on marketable investments
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(49 | ) | - | (49 | ) | - | ||||||||||
Net
loss
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$ | (697 | ) | $ | (544 | ) | $ | (1,338 | ) | $ | (1,493 | ) | ||||
Net
loss per weighted share attributable to common
stockholders:
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||||||||||||||||
(basic
and diluted)
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$ | (0.02 | ) | $ | (0.02 | ) | $ | (0.05 | ) | $ | (0.05 | ) | ||||
Weighted
average common shares outstanding:
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||||||||||||||||
Basic
and diluted
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31,952 | 29,286 | 31,952 | 29,277 | ||||||||||||
The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
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AEOLUS
PHARMACEUTICALS, INC.
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||||||||
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
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||||||||
(Unaudited)
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(In
thousands)
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||||||||
Six
Months Ended
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||||||||
March
31,
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||||||||
2008
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2007
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Cash
flows from operating activities:
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Net
loss
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$ | (1,338 | ) | $ | (1,493 | ) | ||
Adjustments
to reconcile net loss to net cash used in operating
activities:
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Noncash
compensation
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236 | 403 | ||||||
Noncash
interest and financing costs
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25 | 28 | ||||||
Forgiveness
of Note Payable
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- | (225 | ) | |||||
Other
than Temporary Impairment charge
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49 | - | ||||||
Change
in assets and liabilities:
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||||||||
Accounts
receivable
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- | (199 | ) ) | |||||
Prepaids
and other assets
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(34 | ) | (44 | ) | ||||
Accounts
payable and accrued expenses
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36 | (602 | ) | |||||
Net
cash used in operating activities
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(1,026 | ) | (2,132 | ) | ||||
Cash
flows from investing activities:
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||||||||
Purchases
of marketable securities
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(525 | ) | - | |||||
Net
cash used in financing activities
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(525 | ) | - | |||||
Cash
flows from financing activities:
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Repayment
of Note Payable
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- | (300 | ) | |||||
Proceeds
from short term note payable
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230 | - | ||||||
Proceeds
from exercise of stock options
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- | 21 | ||||||
Net
cash provided by (used in) financing activities
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230 | (279 | ) | |||||
Net
decrease in cash and cash equivalents
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(1,321 | ) | (2,411 | ) | ||||
Cash
and cash equivalents at beginning of period
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1,727 | 3,324 | ||||||
Cash
and cash equivalents at end of period
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$ | 406 | $ | 913 | ||||
The
accompanying notes are integral part of these unaudited condensed
consolidated financial statements.
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Number of Shares
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Exercise Price
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Expiration Date
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50,000
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$ 0.50
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May
2011
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2,500,000
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$ 0.50
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November
2010
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2,186,668
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$ 0.75
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May
2012
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7,000,000
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$ 0.75
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June
2011
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50,000
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$ 1.00
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May
2011
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35,000
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$ 1.00
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July
2008
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50,000
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$ 1.50
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May
2011
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50,000
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$ 2.00
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May
2011
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50,000
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$ 2.50
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May
2011
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410,400
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$ 2.50
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April
2009
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1,641,600
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$ 4.00
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April
2009
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1,759
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$ 19.90
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October
2008
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14,025,427
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$ 1.15
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Shares
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Weighted
Average Exercise Price
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Weighted
Average Remaining Contractual Term
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Aggregate
Intrinsic Value
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||||||||||
Outstanding
at September 30, 2007
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3,873,617 | $ | 2.72 |
7.3
years
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$ | 2 | |||||||
Granted
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120,000 | $ | 0.42 | ||||||||||
Exercised
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--- | $ | --- | ||||||||||
Forfeited
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(113,336 | ) | $ | 0.87 | |||||||||
Outstanding
at March 31, 2008 (unaudited)
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3,880,281 | $ | 2.70 |
6.9
years
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$ | --- | |||||||
Exercisable
at March 31, 2008 (unaudited)
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3,584,448 | $ | 2.87 |
6.7
years
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$ | --- |
Options
Outstanding
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Options
Exercisable
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|||||||||||
Range
of Exercise Prices
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Number
Outstanding at March 31, 2008
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Weighted
Average Exercise Price
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Weighted
Average Remaining Contractual Life
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Number
Exercisable at March 31, 2008
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Weighted
Average Exercise Price
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|||||||
$0.40
- 0.60
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546,050
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$
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0.54
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9.1
years
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363,550
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$
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0.56
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$0.68
- $0.80
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464,161
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$
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0.75
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8.3
years
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464,161
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$
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0.75
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$0.81
- $0.89
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388,035
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$
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0.85
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7.6
years
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388,035
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$
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0.85
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|||||
$0.90
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392,050
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$
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0.90
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8.6
years
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308,717
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$
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0.90
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|||||
$0.91
- $1.45
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224,500
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$
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1.04
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8.1
years
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194,500
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$
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1.05
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|||||
$1.50
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1,256,015
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$
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1.50
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5.3
years
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1,256,015
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$
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1.50
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|||||
$1.52
- $5.10
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394,391
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$
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2.86
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6.2
years
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394,391
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$
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2.86
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|||||
$6.25
- $31.88
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166,280
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$
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20.48
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3.1
years
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166,280
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$
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20.48
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|||||
$50.9375
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2,999
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$
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50.94
|
2.0
years
|
2,999
|
$
|
50.94
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|||||
$51.25
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45,800
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$
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51.25
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2.0
years
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45,800
|
$
|
51.25
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|||||
$0.40
- $51.25
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3,880,281
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$
|
2.70
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6.9
years
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3,584,448
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$
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2.87
|
For
the six months
March
31,
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||||||||
2008
|
2007
|
|||||||
Research
and development expenses
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$ | 36 | $ | 130 | ||||
General
and administrative expenses
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200 | 248 | ||||||
Total
stock-based compensation expense
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$ | 236 | $ | 378 |
For
the six months March 31,
|
||||
2008
|
2007
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Dividend
yield
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0%
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0%
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Expected
volatility
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197%
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191%
– 195%
|
||
Risk-free
interest rate
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3.8%
- 4.6%
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4.5%
- 5.1%
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Expected
option life after shares are vested
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10
years
|
10
years
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(a)
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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:
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Nominee
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Votes
For
|
Votes
Withheld
|
Votes
Abstained
|
|||
David
C. Cavalier
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19,338,304
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134,726
|
0
|
|||
John
M. Farah, Jr.
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19,364,453
|
108,577
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0
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|||
Joseph
J. Krivulka
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19,363,453
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109,577
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0
|
|||
Amit
Kumar
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19,364,153
|
108,877
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0
|
|||
Michael
E. Lewis
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19,364,453
|
108,577
|
0
|
|||
Chris
A. Rallis
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19,364,153
|
108,877
|
0
|
|||
Peter
D. Suzdak
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19,364,453
|
108,577
|
0
|
(b)
|
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
2008, with 19,420,673 shares voting for approval, 4,955 shares voting
against and 47,401 shares
abstained.
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(c)
|
The
stockholders approved the amendment of the Company’s 2004 Stock Incentive
Plan to provide for the issuance of restricted stock awards under the
Plan, with 16,317,831 shares voting for approval, 223,735 shares voting
against, 21,750 shares abstained and 2,909,714 shares were broker
non-votes.
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Exhibit
#
|
Description
|
|
31.1
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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).
|
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32.1
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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.
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Date: May 9, 2008
|
By:
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/s/
John L. McManus
|
John
L. McManus
President
and Chief Executive Officer
(Principal
Executive Officer)
|
||
Date: May 9, 2008
|
By:
|
/s/
Michael P. McManus
|
Michael
P. McManus
Chief
Financial Officer, Treasurer and Secretary
(Principal
Financial and Accounting
Officer)
|