Aeolus Announces Third Quarter Financial Results for Fiscal Year 2017

MISSION VIEJO, CA / ACCESSWIRE / August 14, 2017 / Aeolus Pharmaceuticals, Inc. (OTCQB: AOLS), a biotechnology company developing compounds to protect against fibrosis, inflammation, nerve damage and infection, announced today financial results for the three months ended June 30, 2017.

The company reported net loss of $949,000, or $0.01 per share, for the three months ended June 30, 2017. This compares to a net loss of $872,000, or $0.01 per share, for the three months ended March 31, 2017. The increase in net loss was primarily attributable to lower revenues from the Biomedical Advanced Research and Development Authority ("BARDA") and costs associated with the completion of a phase 1 study with AEOL 10150 in healthy volunteers.

"During the quarter, we completed the in-life phase of our phase 1 study in healthy subjects and received Fast Track Designation for the development of AEOL 10150 as a medical countermeasure against pulmonary damage from radiation exposure. Results from the phase 1 study will be reported shortly and we plan to amend that study protocol to allow expanded dosing out to seven to 28 days in healthy subjects, in accordance with guidance provided by the FDA Division of Medical Imaging Products," stated John L. McManus, President & Chief Executive Officer of Aeolus Pharmaceuticals, Inc. "We are fortunate that the National Institutes of Health - National Institute of Allergy and Infectious Disease has stepped in to help us continue the development of our product. We plan to initiate a pharmacokinetic study during the next three months, which will bridge our animal efficacy and human safety data and position us to file pre-Emergency Use Authorization documents and request a Special Protocol Assessment from the FDA for an 'adequate and well controlled' study to meet the efficacy requirements for an approval under the 'Animal Rule.' AEOL 10150 is the only product under development by the US Government to treat the delayed effects of radiation exposure. It has been safe and well tolerated in 48 patients and has demonstrated significant efficacy against radiation, sulfur mustard gas and nerve agent exposure - three major threats currently being used or contemplated in the world."

Results of Operations for the Three Months Ended June 30, 2017

Revenue for the three months ended June 30, 2017 was $13,000, which compares to $660,000 for the three months ended June 30, 2016. The decline in revenue is primarily attributable to a lower level of activity under the BARDA Contract.

Research and Development ("R&D") expenses decreased $479,000, or 53%, to $425,000 for the three months ended June 30, 2017, from $904,000 for the three months ended June 30, 2016. The decrease is primarily attributable to the timing of work related to the BARDA Contract.

General and administrative ("G&A") expenses decreased $92,000, or 15%, to $537,000 for the three months ended June 30, 2017, from $628,000 for the three months ended June 30, 2016. The decrease is primarily attributable to decreased board of director fees, investor relations costs and legal fees.

Results of Operations for the Nine Months Ended June 30, 2017

Revenue for the nine months ended June 30, 2017 was $225,000, which compares to $1,530,000 for the nine months ended June 30, 2016. The decline in revenue is primarily attributable to a lower level of activity under the BARDA Contract.

Research and Development ("R&D") expenses decreased $389,000, or 21%, to $1,508,000 for the nine months ended June 30, 2017 from $1,897,000 for the nine months ended June 30, 2016. The decrease is primarily attributable to the timing of work related to the BARDA Contract.

General and administrative ("G&A") expenses decreased $94,000, or 5%, to $1,788,000 for the nine months ended June 30, 2017 from $1,883,000 for the nine months ended June 30, 2016 due to lower legal fees, investor relations costs and consultant stock expenses.

As of June 30, 2017, the Company had approximately $403,000 in cash and cash equivalents and 152,085,825 common shares outstanding. The Company had accounts receivable of $313,000 and accounts payable of $587,000 on June 30, 2017.

Aeolus has filed today with the SEC its Quarterly Report on Form 10-Q for the quarter ended June 30, 2017. Aeolus urges its investors to read this quarterly filing, as well as its Annual Report on Form 10-K, also filed with the SEC, for further details concerning the Company. The Quarterly Report on Form 10-Q and the Annual Report on Form 10-K are also available on the Company's website at www.aolsrx.com.

About AEOL 10150

AEOL 10150 acts upstream by mimicking Super Oxide Dismutase (SOD) and Catalase, reducing oxidative stress and downregulating production of chemokines and growth factors associated with inflammation and fibrosis. The compound is being developed for the treatment/mitigation of lung damage from exposure to chemical and radiological insults and to reduce/prevent lung damage in patients with Idiopathic Pulmonary Fibrosis (IPF) and in cancer patients receiving radiation therapy. AEOL 10150 protects tissue from damage and increases survival in animal models of lung damage after exposure to radiation toxic chemicals, agents that induce inflammation, and trauma by mitigating and/or preventing cell death, inflammation and fibrosis through its action on oxidative stress (Reactive Oxygen Species, or "ROS") and regulation of growth factors and chemokines including PTEN, TGF-β1, HIF-1α, TNF-α and IL-6, as well as impacting subsequent signaling pathways associated with ROS production, apoptosis and fibrosis such as NADPH-oxidase (Nox-4), PTEN, PI3K/p-Akt and p53/Bax. AEOL 10150 has been shown to improve survival and mitigate pulmonary damage in rodent models of SMG, chlorine gas and radiation exposure and in a nonhuman primate (NHP) model of whole thorax lung irradiation (WTLI).

AEOL 10150 has performed well in animal safety studies, was well tolerated in two human clinical trials, and recently completed testing in a third human study. AEOL 10150 has been granted "Fast Track" designation for Lung ARS and "Orphan Drug" designation for use in treating Lung ARS, Idiopathic Pulmonary Fibrosis and Amyotrophic Lateral Sclerosis and has active IND's for the Lung ARS and ALS indications. Preparations are currently underway to make IND filings for Idiopathic Pulmonary Fibrosis, Cancer Radiation Therapy and Pulmonary Effects of Sulfur Mustard Gas Exposure.

About Aeolus Pharmaceuticals

Aeolus Pharmaceuticals is developing a platform of novel compounds, for use in biodefense, fibrosis, oncology, infectious disease and diseases of the central nervous system. Its lead compound, AEOL 10150, is being developed for the treatment of Idiopathic Pulmonary Fibrosis and as a treatment to reduce side effects caused by radiation toxicity and improve local tumor control in cancer therapy. These development efforts have been aided by substantial funding for toxicology, manufacturing, and preclinical and clinical studies from the US Department of Health and Human Services, for the development of AEOL 10150 as a medical countermeasure against chemical and radiological weapons, where its initial target indications are as a protective agent against the pulmonary effects of radiation exposure and sulfur mustard gas exposure. The Company is also developing AEOL 11114 as a treatment for Parkinson's Disease and AEOL 20415 as a treatment for cystic fibrosis and diseases that have developed a resistance to existing antibiotic and anti-viral therapies. For more information, please visit Aeolus's corporate website at www.aolsrx.com.

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, the phase 1 study in healthy normal volunteers, the status of discussions with BARDA regarding future option exercises under the BARDA Contract, and discussions with the National Institutes of Health - National Institute of Allergy and Infectious Disease regarding funding for our development programs in radiation and chemical gases. 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, and whether BARDA exercises one or more additional options under the BARDA Contract. 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' Annual Report on Form 10-K for the year ended September 30, 2016 and the Quarterly Report on Form 10-Q for the quarter ended June 30, 2017. 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
(In thousands, except share and per share data)

June 30, 2017 September 30,2016
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents$403$3,155
Accounts receivable313750
Prepaid expenses and other current assets46230
Total current assets7624,135
Investment in CPEC LLC3232
Total assets$794$4,167
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses$587$972
Total current liabilities587972
Total liabilities587972
Commitments and Contingencies (Note H)
Stockholders' equity:
Preferred stock, $.01 par value per share, 10,000,000 shares authorized:
Series A nonredeemable convertible preferred stock, 1,250,000 shares authorized as of June 30, 2017 and September 30, 2016, respectively; no shares issued and outstanding as of June 30, 2017 and September 30, 2016, respectively--
Series B nonredeemable convertible preferred stock, 1,600,000 shares authorized as of June 30, 2017 and September 30, 2016, respectively; no shares issued and outstanding as of June 30, 2017 and September 30, 2016, respectively--
Series C nonredeemable convertible preferred stock, 5,000 and zero shares authorized as of June 30, 2017 and September 30, 2016, respectively; 4,500 shares issued and outstanding as of June 30, 2017 and September 30, 2016, respectively--
Common stock, $.01 par value per share, 200,000,000 shares authorized; 152,085,825 and 152,085,825 shares issued and outstanding as of June 30, 2017 and September 30, 2016, respectively1,5201,520
Additional paid-in capital191,946191,863
Accumulated deficit(193,259)(190,188)
Total stockholders' equity2073,195
Total liabilities and stockholders' equity$794$4,167

AEOLUS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)

Three Months EndedJune 30, Nine Months EndedJune 30,
2017 2016 2017 2016
Revenue:
Contract revenue$13$660$225$1,530
Costs and expenses:
Research and development4259041,5081,897
General and administrative5376281,7881,883
Total costs and expenses9621,5323,2963,780
Loss from operations(949)(872)(3,071)(2,250)
Interest expense---(285)
Net loss(949)(872)(3,071)(2,535)
Deemed dividend on Series C preferred stock---2,486
Net loss attributable to common stockholders$(949)$(872)$(3,071)$(5,021)
Net loss per weighted share attributable to common stockholders:
Basic (Note E)$(0.01)$(0.01)$(0.02)$(0.03)
Diluted (Note E)$(0.01)$(0.01)$(0.02)$(0.03)
Weighted average common shares outstanding:
Basic (Note E)152,086151,652152,086147,521
Diluted (Note E)152,086151,652152,086147,521

AEOLUS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)

Nine Months EndedJune 30,
2017 2016
Cash flows from operating activities:
Net loss$(3,071)$(2,535)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of discount on note payable to shareholders-273
Accrued interest-12
Non-cash compensation83108
Change in assets and liabilities:
Accounts receivable437843
Deferred subcontractor cost-(5)
Prepaid expenses and other current assets184(272)
Accounts payable and accrued expenses(385)(937)
Deferred revenue-5
Net cash used in operating activities(2,752)(2,508)
Cash flows from financing activities:
Proceeds from issuance of common stock and common stock warrants, net-2,005
Proceeds from issuance of preferred stock and common stock warrants, net-4,165
Net cash provided by financing activities-6,170
Net (decrease) increase in cash and cash equivalents(2,752)3,662
Cash and cash equivalents at beginning of period3,15594
Cash and cash equivalents at end of period$403$3,756
Supplemental disclosure of non-cash financing activities:
Conversion of note payable to shareholders for common stock and warrants$-$1,000
Conversion of accrued interest on note payable to shareholders for common stock and warrants$-$12
Issuance of warrants for financing costs$-$266
Deemed dividend on Series C preferred stock$-$2,486
Conversion of Series B preferred stock to common stock$-$5

SOURCE: Aeolus Pharmaceuticals, Inc.

ReleaseID: 472569

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