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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26361
Crown Valley Parkway, Suite 150
Mission Viejo, California
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92691
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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
February 5,
2009
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Common
Stock, par value $.01 per share
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32,030,874
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 December 31, 2008
(unaudited)
and September 30, 2008
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4
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||
Condensed Consolidated Statements
of Operations for the Three Months ended December 31, 2008 and 2007
(unaudited)
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5
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Condensed Consolidated Statements
of Cash Flows for the Three Months ended December 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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13
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Item 3.
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Quantitative and Qualitative
Disclosures About Market Risk
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15
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Item 4.
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Controls and
Procedures
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15
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PART
II. OTHER
INFORMATION
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|||
Item 1.
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Legal
Proceedings
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15
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Item 1A.
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Risk
Factors
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16
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Item 2.
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Unregistered Sales of Equity
Securities and Use of Proceeds
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16
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Item 3.
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Defaults
Upon Senior Securities
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16
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Item 4.
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Submission of Matters to a Vote
of Security Holders
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16
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Item
5.
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Other
Information
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16
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Item 6.
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Exhibits
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16
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SIGNATURES
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16
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AEOLUS
PHARMACEUTICALS, INC.
|
||||||||
CONDENSED
CONSOLIDATED BALANCE SHEETS
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||||||||
(In
thousands, except shares and per share data)
|
||||||||
December
31,
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September
30,
|
|||||||
2008
|
2008
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|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
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$ | 169 | $ | 399 | ||||
Prepaids
and other current assets
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113 | 156 | ||||||
Total
current assets
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282 | 555 | ||||||
Marketable
Investments (Note D)
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525 | 440 | ||||||
Investments
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125 | 125 | ||||||
Total
assets
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$ | 932 | $ | 1,120 | ||||
LIABILITIES
AND STOCKHOLDERS' DEFICIT
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||||||||
Current
liabilities:
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||||||||
Accounts
payable
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$ | 669 | $ | 991 | ||||
Margin
loan (Note E)
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367 | 366 | ||||||
Current
maturity of long-term note payable (Note E)
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548 | 534 | ||||||
Total
current liabilities
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1,584 | 1,891 | ||||||
Senior
convertible notes to related parties, net (redemption value of
$1,000,000 and $625,000 as of December 31, 2008 and September 30, 2008,
respectively (Note E))
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396 | 266 | ||||||
Total
liabilities
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1,980 | 2,157 | ||||||
Commitments
and contingences (Note B and 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 December
31,
|
||||||||
2008
and September 30, 2008
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5 | 5 | ||||||
Common
stock, $.01 par value per share, 150,000,000 shares
authorized;
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||||||||
32,030,874 shares issued and outstanding at December 31, 2008
and
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||||||||
31,952,749
shares issued and outstanding at September 30, 2008
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320 | 320 | ||||||
Additional
paid-in capital
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157,986 | 157,573 | ||||||
Unrealized
losses on investments, available for sale
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- | (36 |
)
|
|||||
Accumulated
deficit
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(159,359 | ) | (158,899 |
)
|
||||
Total
stockholders' deficit
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(1,048 | ) | (1,037 |
)
|
||||
Total
liabilities and stockholders' deficit
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$ | 932 | $ | 1,120 | ||||
The
accompanying notes are an integral part of these unaudited condensed
consolidated financial
statements.
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AEOLUS
PHARMACEUTICALS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In
thousands, except per share data)
|
||||||||
Three
Months Ended
|
||||||||
December
31,
|
||||||||
2008
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2007
|
|||||||
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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125 | 254 | ||||||
General
and administrative
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283 | 395 | ||||||
Total
costs and expenses
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408 | 649 | ||||||
Loss
from operations
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(408 | ) | (649 | ) | ||||
Change
in fair value of trading securities, net (Note D)
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49 | -- | ||||||
Interest
income (expense), net
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(100 | ) | 8 | |||||
Net
loss
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$ | (459 | ) | $ | (641 | ) | ||
Net
loss per weighted share attributable to common
stockholders:
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||||||||
Basic
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$ | (0.01 | ) | $ | (0.02 | ) | ||
Diluted
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$ | (0.02 | ) | $ | (0.02 | ) | ||
Weighted
average common shares outstanding:
|
||||||||
Basic
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31,988 | 31,953 | ||||||
Diluted
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34,472 | 31,953 | ||||||
AEOLUS
PHARMACEUTICALS, INC.
|
||||||||
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
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||||||||
(Unaudited)
|
||||||||
(In
thousands)
|
||||||||
Three
Months Ended
|
||||||||
December
31,
|
||||||||
2008
|
2007
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
loss
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$ | (459 | ) | $ | (641 | ) | ||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
Noncash
compensation
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65 | 147 | ||||||
Change
in fair value of trading securities
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(49 | ) | - | |||||
Noncash
consulting expense
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25 | - | ||||||
Noncash
interest and financing costs
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100 | 13 | ||||||
Change
in assets and liabilities:
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||||||||
Accounts
receivable, prepaids and other assets
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34 | 38 | ||||||
Accounts
payable and accrued expenses
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(322 | ) | (157 | ) | ||||
Net
cash used in operating activities
|
(606 | ) | (600 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Draws
on UBS margin loan
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3 | - | ||||||
Payments
on UBS margin loan
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(2 | ) | - | |||||
Proceeds
from issuance of Senior Convertible Notes
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375 | - | ||||||
Net
cash provided by financing activities
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376 | - | ||||||
Net
decrease in cash and cash equivalents
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(230 | ) | (600 | ) | ||||
Cash
and cash equivalents at beginning of period
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399 | 1,727 | ||||||
Cash
and cash equivalents at end of period
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$ | 169 | $ | 1,127 | ||||
Supplemental
disclosure of cash flow information:
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||||||||
Cash
payments of interest
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$ | 2 | $ | - | ||||
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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$ 0.35
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May
2011
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|||
2,500,000
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$ 0.35
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November
2010
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|||
2,186,668
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$ 0.35
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May
2012
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|||
1,000,000
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$ 0.50
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August
2013
|
|||
250,000
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$ 0.50
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September
2013
|
|||
250,000
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$ 0.50
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October
2013
|
|||
250,000
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$ 0.50
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November
2013
|
|||
250,000
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$ 0.50
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December
2013
|
|||
7,000,000
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$ 0.75
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June
2011
|
|||
50,000
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$ 1.00
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May
2011
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|||
50,000
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$ 1.50
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May
2011
|
|||
50,000
|
$ 2.00
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May
2011
|
|||
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
|
|||
15,988,668
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$ 0.99
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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
|
||||||||
Outstanding
at September 30, 2008
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4,235,281
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$
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2.50
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6.7
years
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$
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46
|
|||||
Granted
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194,000
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$
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0.41
|
||||||||
Exercised
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---
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$
|
---
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||||||||
Forfeited
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---
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$
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---
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||||||||
Outstanding
at December 31, 2008 (unaudited)
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4,429,281
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$
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2.40
|
6.6
years
|
$
|
8
|
|||||
Exercisable
at December 31, 2008 (unaudited)
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4,081,114
|
$
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2.58
|
6.3
years
|
$
|
4
|
Options
Outstanding
|
Options
Exercisable
|
|||||||||||
Range
of Exercise Prices
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Number
Outstanding at December 31, 2008
|
Weighted
Average Exercise Price
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Weighted
Average Remaining Contractual Life
|
Number
Exercisable at December 31, 2008
|
Weighted
Average Exercise Price
|
|||||||
$0.32
- 0.40
|
569,000
|
|
$
|
0.36
|
|
9.6
years
|
|
220,833
|
|
$
|
0.35
|
|
$0.44
- $0.60
|
526,050
|
|
$
|
0.55
|
|
8.4
years
|
|
526,050
|
|
$
|
0.55
|
|
$0.68
- $0.80
|
464,161
|
$
|
0.75
|
7.5
years
|
464,161
|
$
|
0.75
|
|||||
$0.81
- $0.90
|
780,085
|
$
|
0.88
|
7.4
years
|
780,085
|
$
|
0.88
|
|||||
$0.91
- $1.45
|
224,500
|
$
|
1.04
|
7.3
years
|
224,500
|
$
|
1.04
|
|||||
$1.50
|
1,256,015
|
$
|
1.50
|
4.6
years
|
1,256,015
|
$
|
1.50
|
|||||
$1.52
- $12.85
|
461,418
|
$
|
4.24
|
5.1
years
|
461,418
|
$
|
4.24
|
|||||
$14.50
- $31.88
|
99,253
|
$
|
25.97
|
1.9
years
|
99,253
|
$
|
25.97
|
|||||
$50.9375
|
2,999
|
$
|
50.94
|
1.3
years
|
2,999
|
$
|
50.94
|
|||||
$51.25
|
45,800
|
$
|
51.25
|
1.3
years
|
45,800
|
$
|
51.25
|
|||||
$0.32
- $51.25
|
4,429,281
|
$
|
2.40
|
6.6
years
|
4,081,114
|
$
|
2.58
|
For
the three months
December
31,
|
|||||||
2008
|
2007
|
||||||
Research
and development expenses
|
$
|
22
|
$
|
20
|
|||
General
and administrative expenses
|
43
|
127
|
|||||
Total
stock-based compensation expense
|
$
|
65
|
$
|
147
|
For
the three months December 31,
|
||||
2008
|
2007
|
|||
Dividend
yield
|
0%
|
0%
|
||
Expected
volatility
|
200%–
201%
|
197%
|
||
Risk-free
interest rate
|
2.6%
- 3.8%
|
4.6%
|
||
Expected
option life after shares are vested
|
10
years
|
10
years
|
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.
|
Date: February 6,
2009
|
By:
|
/s/
John L. McManus
|
John
L. McManus
President
and Chief Executive Officer
(Principal
Executive Officer)
|
||
Date: February 6,
2009
|
By:
|
/s/
Michael P. McManus
|
Michael
P. McManus
Chief
Financial Officer, Treasurer and Secretary
(Principal
Financial and Accounting
Officer)
|