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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF
1934
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o |
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF
1934
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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
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||
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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Class
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Outstanding
as of January 31, 2006
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Common
Stock, par value $.01 per share
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14,077,263
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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||
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Statement
Regarding Financial Information.
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3
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Consolidated
Balance Sheets as of December 31, 2005 (unaudited) and September
30,
2005.
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4
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||
Consolidated
Statements of Operations for the Three Months ended December 31,
2005 and
2004 (unaudited)
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5
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||
Consolidated
Statements of Cash Flows for the Three Months ended December 31,
2005 and
2004 (unaudited) .
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6
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Notes
to 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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12
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Item
3
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Quantitative
and Qualitative Disclosures About Market Risk.
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16
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Item
4
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Controls
and Procedures
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17
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PART
II. OTHER
INFORMATION
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Item
1.
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Legal
Proceedings
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17
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Item
1A
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Risk
Factors
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17
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Item
2.
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Unregistered
Sales of Equity Securities and Use of Proceeds
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17
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Item
3.
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Defaults
Upon Senior Securities
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17
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Item
4.
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Submission
of Matters to a Vote of Security Holders
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17
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Item
5.
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Other
Information
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17
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Item
6.
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Exhibits
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18
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SIGNATURES
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.
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19
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December
31,
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September
30,
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||||||
2005
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2005
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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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$
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2,135
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$
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626
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|||
Accounts
receivable
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14
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14
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|||||
Prepaids
and other current assets
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262
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289
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|||||
Total
current assets
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2,411
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929
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|||||
Other
assets
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8
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8
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|||||
Total
assets
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$
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2,419
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$
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937
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LIABILITIES
AND STOCKHOLDERS' EQUITY
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|||||||
Current
liabilities:
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|||||||
Accounts
payable
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$
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1,552
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$
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712
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|||
Accrued
expenses
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177
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290
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|||||
current
maturity of long-term note payable
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889
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-
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|||||
Total
current liabilities
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2,618
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1,002
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|||||
Common
stock warrants
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1,893
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-
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|||||
Long-term
note payable
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-
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867
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|||||
Total
liabilities
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4,511
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1,869
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|||||
Series
A cumulative convertible preferred stock, $.01 par value per share,
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|||||||
liquidation
value $3.00 per share, 1,250,000 shares authorized, issued and
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|||||||
outstanding
at December 31, 2005 and no shares authorized, issued,
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|||||||
outstanding
at September 30, 2005
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354
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-
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|||||
Stockholders'
equity:
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|||||||
Preferred
stock, $.01 par value per share, 3,000,000 shares
authorized:
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|||||||
Series
B nonredeemable convertible preferred stock, 600,000 shares
authorized;
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|||||||
475,087
shares issued and outstanding at December 31, 2005 and
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|||||||
September
30, 2005
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5
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5
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|||||
Common
stock, $.01 par value per share, 50,000,000 shares
authorized;
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|||||||
14,059,092
and 14,038,259 shares issued and outstanding at December 31,
2005
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|||||||
and
September 30, 2005, respectively
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141
|
140
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|||||
Additional
paid-in capital
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146,024
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146,016
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|||||
Accumulated
deficit
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(148,616
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)
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(147,093
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)
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Total
stockholders' equity
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(2,446
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)
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(932
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)
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Total
liabilities and stockholders' equity
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$
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2,419
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$
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937
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The
accompanying notes are an integral part of these unaudited consolidated
financial statements.
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AEOLUS
PHARMACEUTICALS, INC.
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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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|||||||
December
31,
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|||||||
2005
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2004
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||||||
Revenue
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|||||||
Grant
income
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$
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1
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$
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109
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Costs
and expenses:
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|||||||
Research
and development
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1,293
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1,620
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|||||
General
and administrative
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491
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450
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Total
costs and expenses
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1,784
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2,070
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Loss
from operations
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(1,783
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)
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(1,961
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)
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Interest
expense, net
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(12
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)
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(2
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)
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Other
income
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18
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6
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Decrease
in fair value of common stock warrants
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254
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-
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Net
loss attributable to common stockholders
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$
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(1,523
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)
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$
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(1,957
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)
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Net
loss per weighted share attributable to common
stockholders:
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(basic
and diluted)
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$
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(0.11
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)
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$
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(0.14
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)
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Weighted
average common shares outstanding:
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Basic
and diluted
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14,038
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13,947
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The
accompanying notes are an integral part of these unaudited consolidated
financial statements.
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Three
Months Ended
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|||||||
December
31,
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|||||||
2005
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2004
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Cash
flows from operating activities:
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Net
loss
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$
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(1,523
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)
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$
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(1,957
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)
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Adjustments
to reconcile net loss to net cash used in operating
activities:
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Depreciation
and amortization
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-
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3
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Noncash
compensation
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76
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32
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Noncash
interest and financing costs
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22
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19
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Decrease
in fair value of common stock warrants
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(254
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)
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-
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Change
in assets and liabilities:
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Accounts
receivable
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-
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53
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Prepaids
and other assets
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27
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5
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|||||
Accounts
payable and accrued expenses
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727
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(489
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)
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Net
cash used in operating activities
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(925
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)
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(2,334
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)
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Cash
flows from financing activities:
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Proceeds
from issuance of Series A Preferred Stock
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2,413
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-
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Proceeds
from exercise of stock options
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21
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-
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Net
cash provided by financing activities
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2,434
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-
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Net
increase (decrease) in cash and cash equivalents
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1,509
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(2,334
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)
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Cash
and cash equivalents at beginning of period
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626
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7,381
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Cash
and cash equivalents at end of period
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$
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2,135
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$
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5,047
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The
accompanying notes are integral part of these unaudited consolidated
financial statements.
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· |
amend
any of the provisions of the Certificate of Incorporation or Bylaws
of the
Company or the Certificate of
Designations;
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· |
authorize,
create, designate, issue or sell any class or series of capital stock
which is senior to or pari
passu
with the Series A Preferred Stock;
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· |
increase
the number of authorized shares of Series A Preferred Stock or authorize
the issuance of or issue any shares of Series A Preferred
Stock;
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· |
increase
or decrease the number of authorized shares of any class of capital
stock
of the Company;
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· |
declare
or pay any dividend, except with respect to the Series A Preferred
Stock
as set forth above;
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· |
materially
change the nature or scope of the business of the
Company;
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· |
consummate
or agree to make any sale, transfer, assignment, pledge, lease, license
or
similar transaction by which the Company grants on an exclusive basis
any
rights to any of the Company’s intellectual property;
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· |
approve
the annual budget of the Company or any changes
thereto;
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· |
incur
any indebtedness for borrowed money in excess of $50,000.00;
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· |
create,
incur, assume or suffer to exist, any material lien, charge or other
encumbrance on any of the Company’s properties or assets; or
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· |
increase
the compensation or benefits payable or to become payable to the
Company’s
directors or executives, subject to certain
exceptions.
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Shares
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Weighted
Average Exercise Price
|
||||||
Outstanding
at September 30, 2005
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2,394,091
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$
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4.05
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Granted
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46,350
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$
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1.04
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Exercised
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(20,833
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)
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$
|
1.00
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Forfeited
|
-
|
-
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|||||
Outstanding
at December 31, 2005
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2,419,608
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$
|
4.02
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Exercisable
at December 31, 2005
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2,337,107
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$
|
4.13
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Research
and development expenses
|
$
|
12
|
||
General
and administrative expenses
|
$
|
64
|
||
Total
stock-based compensation expense
|
$
|
76
|
Dividend
yield
|
0
|
%
|
||
Expected
volatility
|
189
|
%
|
||
Risk-free
interest rate
|
4.3%
- 4.6
|
%
|
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Expected
option life after shares are vested
|
10
years
|
Net
loss attributable to common stockholders as reported
|
$
|
(1,957
|
)
|
|
Pro
forma adjustment for stock-based compensation
|
(202
|
)
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||
Pro
forma net loss attributable to common stockholders
|
$
|
(2,159
|
)
|
|
Basic
and diluted net loss per weighted share attributable to common
stockholders:
|
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As
reported
|
$
|
(0.14
|
)
|
|
Pro
forma - adjusted for stock-based compensation.......
|
$
|
(0.15
|
)
|
Dividend
yield
|
0
|
%
|
||
Expected
volatility
|
195
|
%
|
||
Risk-free
interest rate
|
2.9%
- 4.3
|
%
|
||
Expected
option life (in years from vesting)
|
3
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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
|
|
3.1
|
Certificate
of Incorporation, as amended (incorporated by reference to Exhibit
3.1 of
the Company’s Form 10-Q dated June 30, 2004).
|
|
3.2
|
Certificate
of Designations, Preferences and Rights of Series A Convertible Preferred
Stock of the Company dated November 18, 2005 (incorporated by reference
to
Exhibit 3.1 to the Company's Current Report on Form 8-K filed November
23,
2005).
|
|
3.3
|
Amended
and Restated Bylaws (incorporated by reference to Exhibit 3.1 to
the
Company’s Current Report on Form 8-K filed October 27,
2005).
|
|
4.1
|
Form
of Common Stock Certificate (incorporated by reference to Exhibit
4.1 to
the Company’s Quarterly Report on Form 10-Q filed August 11,
2004).
|
|
4.2
|
Form
of Warrant to Purchase Common Stock of Aeolus Pharmaceuticals, Inc.
dated
November 21, 2005 issued to investors (incorporated by reference
to
Exhibit 10.2 to the Company's Current Report on Form 8-K filed November
23, 2005).
|
|
4.3
|
Registration
Rights Agreement dated November 21, 2005 by and among the Company
and each
of the Purchasers whose names appear on the Schedule attached thereto
(incorporated by reference to Exhibit 4.1 to the Company's Form 8-K
filed
November 23, 2005).
|
|
10.1
|
Purchase
Agreement dated November 21, 2005 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 filed November
23,
2005).
|
|
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
Accounting Officer
pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a).
|
|
32.1
|
Certification
by the Chief Executive Officer and Chief Accounting 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: February
16, 2006
|
By:
|
/s/
Richard P. Burgoon, Jr.
|
Richard
P. Burgoon, Jr.
Chief
Executive Officer
(Principal
Executive Officer)
|
||
Date: February
16, 2006
|
By:
|
/s/
Michael P. McManus
|
Michael
P. McManus
Chief
Accounting Officer and Treasurer
(Principal
Financial and Accounting Officer)
|