Aeolus Pharmaceuticals Announces First Quarter Fiscal Year 2011 Financial Results

MISSION VIEJO, Calif.--(BUSINESS WIRE)--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.

“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.”

“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