AOLS Aeolus Pharmaceuticals Inc (CE)

Aeolus Pharmaceuticals, Inc. (OTCQB: AOLS) announced today financial results for the three months ended December 31, 2010. The Company reported a net loss of approximately $7,620,000, or $0.13 per share, which includes a non-cash charge of approximately $7,202,000 related to increases in the fair value of warrants that are included as a component of other income (expenses) in the statement of operations, for the three months ended December 31, 2010, compared to a net loss of $15,276,000, or $0.33 per share, which includes a non-cash charge of approximately $13,860,000 related to increases in the fair value of warrants that are included as a component of other income (expenses) in the statement of operations, for the three months ended December 31, 2009.

“I’m pleased with the progress we made last quarter in our development of AEOL 10150, releasing strong data supporting a survival benefit in non-human primates, and in solidifying our balance sheet,” stated John L. McManus, President and Chief Executive Officer. “We look forward to the remainder of 2011, when we expect to receive a decision on our proposals with BARDA, begin important studies in lung cancer and report key data from several ongoing studies.”

Revenue for the three months ended December 31, 2010 was approximately $337,000, which compares to zero revenue for the three months ended December 31, 2009. The revenue is from two grants awarded to the Company, each for approximately $244,000, under the Qualifying Therapeutic Discovery Grant Program administered by the IRS and the U.S. Department of Health and Human Services. The Company received payment in full for one grant in support of development of AEOL 10150 as a medical countermeasure for Lung-ARS in November and approximately $92,000 as a partial payment in support of our development of AEOL 11207 as a potential treatment for Parkinson’s Disease.

Research and development expenses increased about $6,000 for the three months ended December 31, 2010 over the prior year due to an increase in Lung-ARS related research activities. We currently have seven development programs in progress: the study of our drug candidates as a potential countermeasure against the effects of sulfur mustard gas on the lung and skin, as a protectant against the effects of radiation on the lungs and on the gastro-intestinal tract, as a countermeasure against the effects of chlorine gas, as a potential treatment for epilepsy and for the potential treatment for Parkinson’s disease.

General and administrative expenses increased about $144,000 for the three months ended December 31, 2010 over the prior year. Consulting Fees increased by $50,000 due to the engagement of consultants to provide financial and chemistry, manufacturing, and controls support during the period. Legal fees increased by approximately $35,000 as a result of higher reliance on our outside legal counsel for review and compliance related to financings and SEC filings during the current quarter, as well as contract reviews.

As of December 31, 2010, the Company had approximately $2,867,000 in cash and cash equivalents and 59,634,050 common shares outstanding. The company raised an additional $1.0 million through the issuance of equity and warrants in December 2010.

Aeolus is filing today with the SEC its Quarterly Report on Form 10-Q for the quarter ending December 31, 2010. Aeolus urges its investors to read this quarterly filing as well as its amended Annual Report on Form 10-K/A, also filed with the SEC, for further details concerning the Company. The Quarterly Report on Form 10-Q and the amended Annual Report on Form 10-K/A are also available on the Company's website, at http://www.aeoluspharma.com.

About AEOL 10150

AEOL 10150 is a broad-spectrum catalytic antioxidant specifically designed to neutralize reactive oxygen and nitrogen species. The neutralization of these species reduces oxidative stress, inflammation, and subsequent tissue damage-signaling cascades resulting from radiation exposure. AEOL 10150 could have a profound beneficial impact on people who have been exposed, or are about to be exposed, to high-doses of radiation in the treatment of oncology.

AEOL 10150 has already performed well in animal safety studies, was well-tolerated in two human clinical trials, and has demonstrated statistically significant survival efficacy in an acute radiation-induced lung injury model. AEOL 10150 is also currently in development for use as both a therapeutic and prophylactic drug in cancer patients.

About Aeolus Pharmaceuticals

Aeolus Pharmaceuticals is developing a new class of catalytic antioxidant compounds that protects healthy tissue from the damaging effects of radiation. Its first compound, AEOL 10150, is being developed for oncology indications, where it is used in combination with radiation therapy. It is also being developed, with funding by the US Government, as a medical countermeasure against chemical and radiological weapons, where its initial target indications are as a protective agent against the effects of acute radiation syndrome and delayed effects of acute radiation exposure. Aeolus' strategy is to leverage the substantial investment in toxicology, manufacturing, and preclinical and clinical studies made by US Government agencies in AEOL 10150 to efficiently develop the compound for use in oncology.

Forward-Looking Statements

The statements in this press release that are not purely statements of historical fact are forward-looking statements. Such statements include, but are not limited to, those relating to Aeolus' product candidates, as well as its proprietary technologies and research programs. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause Aeolus' actual results to be materially different from historical results or from any results expressed or implied by such forward-looking statements. Important factors that could cause results to differ include risks associated with uncertainties of progress and timing of clinical trials, scientific research and product development activities, difficulties or delays in development, testing, obtaining regulatory approval, the need to obtain funding for pre-clinical and clinical trials and operations, the scope and validity of intellectual property protection for Aeolus' product candidates, proprietary technologies and their uses, and competition from other biopharmaceutical companies. Certain of these factors and others are more fully described in Aeolus' filings with the Securities and Exchange Commission, including, but not limited to, Aeolus' amended Annual Report on Form 10-K/A for the year ended September 30, 2010. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.

 

AEOLUS PHARMACEUTICALS, INC.

  CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except shares and per share data)       December 31, September 30, 2010 2010 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 2,867 $ 2,355 Prepaids and other current assets 34 46 Total current assets 2,901 2,401   Investment in CPEC LLC 32   32 Total assets $ 2,933 $ 2,433     LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) Current liabilities: Accounts payable & accrued expenses $ 665 $ 957 Short-term debt 657 663 Total current liabilities 1,322 1,620   Warrant liability 34,955 27,549 Total liabilities 36,277 29,169  

Commitments and Contingencies

  Stockholders’ equity (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 as of December 31, 2010 and September 30, 2010, respectively 5 5 Common stock, $.01 par value per share, 200,000,000 shares authorized; 59,634,050 and 56,817,177 shares issued and outstanding at December 31, 2010 and September 30, 2010, respectively 596 568 Additional paid-in capital 156,387 155,402 Accumulated deficit (190,332 ) (182,711 ) Total stockholders’ equity (deficit) (33,344 )   (26,736 ) Total liabilities and stockholders’ equity (deficit) $ 2,933 $ 2,433      

AEOLUS PHARMACEUTICALS, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)

    Three Months Ended   December 31, 2010 2009 Revenue Miscellaneous income $ 337 $ -   Costs and expenses: Research and development 190 184 General and administrative   550   406   Total costs and expenses   740   590     Loss from operations (403 ) (590 ) Non-cash financing charges and change in fair value of warrants (7,202 ) (13,860 ) Interest income (expense), net   (15 ) (826 )   Net loss $ (7,620 ) $ (15,276 )   Net loss per weighted share attributable to common stockholders: Basic $ (0.13 ) $ (0.33 ) Diluted $ (0.13 ) $ (0.33 )   Weighted average common shares outstanding: Basic   57,026     46,527   Diluted   57,026     46,527      

AEOLUS PHARMACEUTICALS, INC.

      CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)   Three Months Ended December 31, 2010 2009 Cash flows from operating activities: Net loss $ (7,620 ) $ (15,276 ) Adjustments to reconcile net loss to net cash used in operating activities: Noncash compensation 187 190 Change in fair value of warrants 6,645 7,646 Noncash exercise of warrants 169 — Noncash consulting expense — 14 Noncash interest and warrant costs 382 6,986 Change in assets and liabilities: Prepaid and other assets 11 105 Accounts payable and accrued expenses   (291 )   (54 ) Net cash used in operating activities (517 ) (389 )   Cash flows from financing activities: Proceeds from issuance of common stock and warrants 1,000 1,650 Costs related to the issuance of common stock and warrants (13 ) (54 ) Proceeds from exercise of warrants   42     17   Net cash provided by financing activities 1,029 1,613   Net increase in cash and cash equivalents 512 1,224 Cash and cash equivalents at beginning of period   2,355     646   Cash and cash equivalents at end of period $ 2,867   $ 1,870     Supplemental disclosure of cash flow information: Cash payments of interest $ —   $ —     Supplemental disclosure of non-cash investing and financing activities: Common stock issued for payment of accounts payable $ —   $ 413   Common stock issued upon conversion of Senior Convertible Notes $ —   $ 1,000,000   Common stock issued for payment of interest on Senior Convertible Notes $ —   $ 13