Summary of Potential Payments Upon Termination or Change of
Control
|
|
Termination
without Cause
|
|
|
Name
|
|
|
Value of Options
with Accelerated Vesting
|
|
|
John L.
McManus
|
$
474,143
|
$
32,712
|
$
—
(3)
|
—
|
____________________
(1)
This amount
reflects a lump sum payment equal to the remaining term of the
Named Executive Officer’s employment agreement with the
Company, assuming notice of termination was given on September 30,
2016.
(2)
The amounts in this
column reflect the estimated value of health, dental, life and
disability insurance that would be provided to the Named Executive
Officer pursuant to his employment agreement with the
Company.
(3)
Pursuant to the
Named Executive Officer’s employment agreement with the
Company, in the event the Named Executive Officer was terminated
without cause on September 30, 2016, options to purchase 1,000,000
shares would have vested. The zero balance in this column is
calculated based on the difference between $0.28, the closing
market price per share of the Common Stock on September 30, 2016,
the last trading day of fiscal year 2016, and the exercise price
per share of $0.40 for the options subject to accelerated
vesting.
|
|
Immediately upon
a Change of
Control
|
Termination
without Cause in Connection
with a Change of
Control
|
|
Name
|
|
Value of
Options
with
Accelerated
Vesting
|
|
|
Value of
Options
with
Accelerated
Vesting
|
|
John L.
McManus
|
$
474,143
|
$
—
(5)
|
$
474,143
|
$
32,712
|
$
—
(5)
|
____________________
(4)
The amounts in this
column reflect the lump sum payment payable upon a change of
control pursuant to the Named Executive Officer’s employment
agreement with the Company in effect on September 30, 2016 assuming
a change of control of the Company occurred on September 30,
2016.
(5)
Pursuant to the
2004 Plan, all outstanding options shall vest in connection with a
change of control of the Company. The amounts in this column are
calculated based on the difference between $0.19, the closing
market price per share of the Common Stock on September 30, 2016,
the last trading day of fiscal year 2016, and the $0.19 exercise
price per share of the 125,000 options subject to accelerated
vesting.
(6)
The amounts in this
column reflect the lump sum payment payable pursuant to a
termination upon a change of control pursuant to the Named
Executive Officer’s employment agreement with the Company in
effect on September 30, 2016 assuming a change of control of the
Company occurred on September 30, 2016.
(7)
The amounts in this
column reflect the estimated value of health, dental, life and
disability insurance that would be provided to the Named Executive
Officer pursuant to his employment agreement with the Company for
the period from October 1, 2016 to September 30, 2017.
Summary of Actual Payments Upon Termination of
Employment
No
payments were made to any Named Executive Officer in connection
with a termination of employment during fiscal 2016.
Item
12.
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
The
following tables set forth certain information regarding the
ownership of shares of Aeolus’ Common Stock and Series C
Preferred as of the close of business on September 30, 2016,
by:
●
each person known
by Aeolus to beneficially own more than 5% of the outstanding
shares of each class of our stock;
●
each of our Named
Executive Officers (as defined under “Executive
Compensation” above); and
●
all of our
directors and executive officers as a group
|
|
|
|
|
Identity of
Owner or Group (1)(2)
|
|
|
|
|
|
|
|
|
|
|
|
Directors:
|
|
|
|
|
|
David C.
Cavalier
|
-
|
-
|
97,064,694
(6)
|
63.8
%
|
|
John M. Farah, Jr.,
Ph.D. (7)
|
-
|
-
|
607,424
|
*
|
|
Mitchell D. Kaye,
J.D. (8)
|
-
|
-
|
97,081,944
|
63.8
%
|
|
Amit Kumar, Ph.D.
(7)
|
-
|
-
|
638,583
|
*
|
|
John M. Clerici
(7)
|
-
|
-
|
250,000
|
*
|
|
Chris A. Rallis
(7)
|
-
|
-
|
638,583
|
*
|
|
Jeffrey A. Scott,
M.D. (7)
|
-
|
-
|
250,000
|
*
|
|
|
|
|
|
|
|
Named Executive Officers:
|
|
|
|
|
|
John L. McManus
(9)
|
-
|
-
|
3,413,713.6
|
2.2
%
|
|
David C. Cavalier
(6)
|
-
|
-
|
97,064,694
|
*
|
|
All directors and
executive officers as a group (8 persons)
|
-
|
-
|
106,468,751
(10)
|
68.0
%
|
|
|
|
|
|
|
|
Greater than 5% Stockholders:
|
|
|
|
|
|
BVF Partners, L.P.
and its affiliates
|
4,500
|
100.0
%(3)
|
15,205,106
(11)
|
9.99
%(12)
|
|
900 N. Michigan
Avenue,
Suite
1100
Chicago, IL
60611
|
|
|
|
|
|
Xmark Opportunity
Partners, LLC and its affiliates
|
-
|
-
|
97,214,694
(13)
|
63.8.0
%
|
|
90 Grove
Street
Ridgefield, CT
06877
|
|
|
|
|
* Less
than one percent
(1)
Unless otherwise
indicated, the address of all the owners is: c/o Aeolus
Pharmaceuticals, Inc., 26361 Crown Valley Parkway, Suite 150,
Mission Viejo, California 92691.
(2)
This table is based
upon information supplied by our executive officers, directors and
principal stockholders and Schedule 13Ds and 13Gs, as amended,
filed with the SEC. Unless otherwise indicated in the footnotes to
this table and subject to community property laws where applicable,
we believe that each of the stockholders named in this table has
sole voting and investment power with respect to the shares
indicated as beneficially owned.
(3)
Percent of shares
beneficially owned by the person listed above is calculated by
dividing the number of shares of each class of preferred stock
beneficially owned by that person by the number of shares of each
class of preferred stock outstanding. BVF Partners, L.P. and its
affiliates own 100% of the outstanding shares of Series C Preferred
Stock.
(4)
The number of
shares of common stock beneficially owned includes any shares
issuable pursuant to stock options or warrants that are currently
exercisable or may be exercised within 60 days after December 31,
2016 as well as shares of preferred stock convertible into common
stock. Shares issuable pursuant to such options or warrants and
shares issuable upon conversion of such preferred stock are deemed
outstanding for computing the ownership percentage of the person
holding such options but are not deemed to be outstanding for
computing the ownership percentage of any other
person.
(5)
Applicable
percentages are based on 152,085,825 shares outstanding on
September 30, 2016, plus the number of shares such stockholder can
acquire within 60 days after September 30, 2016. All percentages
are rounded.
(6)
Consists of 132,750
shares of Common Stock issuable upon exercise of options held by
David C. Cavalier; 29,095,831 shares of Common Stock beneficially
owned by Xmark Opportunity Fund, L.P., a Delaware limited
partnership (“Opportunity LP”) (including 957,326
shares held by Goodnow Capital L.L.C. (L.P.)); 63,680,083 shares of
Common Stock owned by Xmark Opportunity Fund, Ltd., a Cayman
Islands exempted company (“Opportunity Ltd”) (including
2,475,490 shares held by Goodnow Capital L.L.C. (Ltd.)); 1,508,567
shares of Common Stock owned by Xmark JV Investment Partners, LLC,
a Delaware limited liability company (“JV Partners”);
and another 2,647,463 shares of Common Stock owned by Goodnow
Capital, L.L.C. (“Goodnow”), a Delaware limited
liability company that are not reflected above. Mr. Cavalier shares
voting and dispositive power over the shares listed above (other
than shares subject to options) with Mr. Kaye.
(7)
Consists solely of
shares of Common Stock issuable upon exercise of
options.
(8)
Consists of 150,000
shares of Common Stock issuable upon exercise of options held by
Mitchell D. Kaye. Also consists of shares beneficially owned as
referenced in footnote 6 above, including: 29,095,831 shares of
Common Stock beneficially owned by Opportunity LP; 63,680,083
shares of Common Stock beneficially owned by Opportunity Ltd;
1,508,567 shares of Common Stock beneficially owned by JV Partners;
and 2,647,463 shares of Common Stock owned by Goodnow. Mr. Kaye
shares voting and dispositive power over these shares with Mr.
Cavalier. Mr. Kaye does not possess voting or investment power over
Aeolus securities held or beneficially owned by BVF Partners, L.P.
and its affiliates, as described below in footnote 12. Mr. Kaye is
a Managing Director of Biotechnology Value Fund, L.P. which is
affiliated with BVF Partners, L.P.
(9)
Consists of 70,300
shares owned directly, 10,000 shares owned directly by Mr.
McManus’ spouse and 3,333,414 shares issuable upon exercise
of options.
(10)
Consists of shares
of Common Stock beneficially owned by our directors and the
following executive officers: Mr. McManus and Mr. Cavalier. See
footnotes (5), (6), (7), and (9) above, the shares held by
Opportunity LP, Opportunity Ltd, JV Partners and Goodnow, which are
deemed to be beneficially owned by Messrs. Cavalier and Kaye have
been counted only once for purposes of this calculation. Consists
of 9,456,507 shares subject to options.
(11)
Consists of
14,561,580 shares of issued and outstanding Common Stock owned
directly by the entities listed below plus 643,526 shares of Common
Stock that may be acquired upon the exercise of certain warrants or
Series C Preferred Stock held by such entities up to the exercise
and conversion limitations described in footnote 13. In light of
such exercise and conversion limitations, the beneficial ownership
of the number of shares of Common Stock listed in the table does
not reflect all Common Stock subject to certain warrants and Series
C Preferred Stock presented below that are held by affiliates of
BVF Partners, L.P. that are listed below. The following beneficial
ownership information is presented for informational purposes
assuming no such limitation on the exercise of warrants or
conversion of Series C Preferred Stock.
As of
September 30, 2016, (i) Biotechnology Value Fund, L.P.
(“BVF”) beneficially owned 30,354,209 shares of Common
Stock, including 14,978,167 shares of Common Stock issuable upon
the exercise of certain warrants held by it and 8,677,273 shares of
common stock that may be acquired upon conversion of Series C
Preferred Stock, (ii) Biotechnology Value Fund II, L.P.
(“BVF2”) beneficially owned 17,634,516 shares of Common
Stock, including 8,689,565 shares of Common Stock issuable upon the
exercise of certain warrants held by it and 5,213,636 shares of
common stock that may be acquired upon conversion of Series C
Preferred Stock, (iii) BVF Investments, L.L.C.
(“BVLLC”) beneficially owned 352,980 shares of Common
Stock, (iv) Investment 10, L.L.C. (“ILL10”)
beneficially owned 5,537,241 shares of Common Stock, including
2,725,971 shares of Common Stock issuable upon the exercise of
certain warrants held by it and 1,186,364 shares of common stock
that may be acquired upon conversion of Series C Preferred Stock,
(v) MSI BVF SPV, L.L.C. (“MSI BVF”) beneficially owned
8,833,399 shares of Common Stock, including 4,388,495 shares of
Common Stock issuable upon the exercise of certain warrants held by
it and 2,290,909 shares of common stock that may be acquired upon
conversion of Series C Preferred Stock, and (vi) Biotechnology
Value Trading Fund OS, L.P. (“Fund OS”) beneficially
owned 6,172,728 shares of Common Stock, including 3,086,364 shares
of Common Stock issuable upon the exercise of certain warrants held
by it and 3,086,364 shares of common stock that may be acquired
upon conversion of Series C Preferred Stock.
BVF
Partners L.P. (“Partners”), as the general partner of
BVF and BVF2, the manager of BVLLC, the investment adviser of
ILL10, the attorney-in-fact of MSI BVF and the investment manager
of Fund OS, may be deemed to beneficially own 68,885,074 shares of
Common Stock, including 54,323,494 shares of Common Stock currently
issuable upon the exercise of certain warrants and conversion of
Series C Preferred Stock, beneficially owned in the aggregate by
BVF, BVF2, BVLLC, ILL10, MSI BVF, and Fund OS.
BVF
Inc., as the general partner of Partners, may be deemed to
beneficially own the 68,885,074 shares of Common Stock, including
54,323,494 shares of Common Stock currently issuable upon the
exercise of certain warrants and conversion of Series C Preferred
Stock, beneficially owned by Partners.
Mark N.
Lampert, as a director and officer of BVF Inc., may be deemed to
beneficially own the 68,885,074 shares of Common Stock, including
54,323,494 shares of Common Stock currently issuable upon the
exercise of certain warrants, beneficially owned by BVF
Inc.
The
foregoing should not be construed in and of itself as an admission
by any of Partners, BVF Inc. or Mark N. Lampert as to beneficial
ownership of any shares of Common Stock owned by BVF, BVF2, BVLLC,
ILL10, MSI BVF, and Fund OS. Each of Partners, BVF Inc. and Mr.
Lampert disclaims beneficial ownership of the shares of Common
Stock beneficially owned by BVF, BVF2, BVLLC, ILL10, MSI BVF, and
Fund OS and this filing shall not be construed as an admission that
any such person or entity is the beneficial owner of any such
securities.
(12)
The terms of the
warrants and Series C Preferred Stock held by BVF, BVF2, BVLLC,
ILL10, MSI BVF, and Fund OS each contain an issuance limitation
prohibiting the holder from exercising such warrants and converting
such Series C Preferred Stock to the extent that, after giving
effect to such exercise or conversion thereof, the holder,
including any of its affiliates, would beneficially own more than
9.99% of the Common Stock of the Company then issued and
outstanding.
(13)
Consists of:
132,750 shares of Common Stock issuable upon exercise of options
held by David C. Cavalier; 150,000 shares of Common Stock issuable
upon exercise of options held by Mitchell D. Kaye; 29,095,831
shares of Common Stock owned by Xmark Opportunity Fund, L.P., a
Delaware limited partnership (“Opportunity LP”);
63,680,083 shares of Common Stock owned by Xmark Opportunity Fund,
Ltd., a Cayman Islands exempted company (“Opportunity
Ltd”); 1,508,567 shares of Common Stock owned by Xmark JV
Investment Partners, LLC, a Delaware limited liability company
(“JV Partners”); and 2,647,463 shares of Common Stock
owned by Goodnow Capital, L.L.C. (“Goodnow”), a
Delaware limited liability company. Mr. Cavalier shares voting and
dispositive power over these shares with Mr. Kaye.
Equity
Compensation Plan and Additional Equity Information as of September
30, 2016
|
|
(a)Number of
securities to be issued upon exercise of outstanding options,
warrants and rights
|
(b)Weighted-average
exercise price of outstanding options, warrants and
rights
|
(c)Number of
securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
|
|
|
|
|
|
|
Equity compensation
plans approved by our stockholders:
|
|
|
|
|
2004 Stock Option
Plan
|
12,204,000
|
$
0.38
|
—
|
|
2016 Stock Option
Plan
|
250,000
|
|
24,750,000
|
|
|
|
|
|
|
Equity compensation
plans and securities not approved by our stockholders:
|
|
|
|
|
Warrants to
Purchase Common Stock Issued to Dan Delmonico
|
50,000
|
$
0.49
|
|
|
Warrants to
Purchase Common Stock Issued to Roberts Mitani, LLC
|
300,000
|
$
0.258
|
|
|
Total –
Common Stock
|
12,804,000
|
|
24,750,000
|
|
|
|
|
|
Since
the foregoing presentation
is presented as of
September 30, 2015, consistent with
SEC rules, it does not reflect the issuance of warrants in
connection with the 2015 Securities Placement and the conversion of
the BVF Notes.
Description of Equity Compensation Plans and Equity Securities Not
Approved by Our Stockholders
The
warrant to purchase shares of our Common Stock issued to Roberts
Mitani, LLC have not been approved by our stockholders. In June
2012, we entered into an advisory agreement with Roberts Mitani,
LLC whereby we engaged Roberts Mitani, LLC to serve as an advisor
to provide strategic advisory services to us on a non-exclusive
basis. For these services, on June 26, 2012, we issued a warrant to
purchase up to 300,000 shares of our Common Stock with a per share
exercise price of $0.258. The warrant is exercisable for seven
years from the date of grant and contains standard adjustment
provisions in the event we declare a stock dividend or engage in a
recapitalization, reclassification or reorganization of our capital
stock.
The
warrants to purchase shares of our Common Stock issued to Columbia
Capital Securities, Inc. and Monarch Bay Associates, LLC have not
been approved by our stockholders. In August 2012, we entered into
an advisory agreement with Columbia Capital Securities, Inc. and
Monarch Bay Associates, LLC whereby we engaged them to serve as an
advisor to provide strategic advisory services to us on a
non-exclusive basis. For these services, we have agreed to pay each
of Columbia Capital Securities, Inc. and Monarch Bay Associates,
LLC a monthly retainer in the form of a warrant to purchase up to
an aggregate of 17,500 shares of Common Stock, commencing on August
17, 2012 and continuing monthly thereafter during the term of their
engagement under the advisory agreement. Each of these warrants has
an exercise price equal to the closing price of the Common Stock on
the date of issuance, is deemed fully vested upon issuance, is
exercisable at any time on or before the five year anniversary of
the date of issuance and contains standard adjustment provisions in
the event we declare a stock dividend or engage in a
recapitalization, reclassification or reorganization of our capital
stock. On August 17, 2012, we issued a warrant to purchase up to an
aggregate of 17,500 shares of Common Stock with a per share
exercise price of $0.30 to each of Columbia Capital Securities,
Inc. and Monarch Bay Associates, LLC. On September 17, 2012, we
issued a warrant to purchase up to an aggregate of 17,500 shares of
Common Stock with a per share exercise price of $0.44 to each of
Columbia Capital Securities, Inc. and Monarch Bay Associates,
LLC.
For a
description of compensatory warrants issued before June of 2012 and
included in the numbers in the table above, please refer to Item 12
in our Annual Report on Form 10-K for the period ended September
30, 2012.
The
information set forth under the headings “Security Ownership
of Certain Beneficial Owners and Management” in our
Information Statement is incorporated herein by
reference.
Item
13.
Certain
Relationships and Related Transactions, and Director
Independence.
Director Independence and Board Meetings
The
business of Aeolus is under the general management of the Board, as
provided by the laws of Delaware and the Bylaws of Aeolus. During
the fiscal year ended September 30, 2016, the Board held five
formal meetings, excluding actions by unanimous written consent.
Each member of the Board attended at least 75% of the fiscal 2015
meetings of the Board and Board committees of which he was a
member. Aeolus does not have a policy with regard to Board members'
attendance at annual meetings. We did not hold an Annual Meeting of
Stockholders in fiscal year 2016.
After
review of all relevant transactions or relationships between each
director, or any of his family members, and the Company, our senior
management and its independent registered public accounting firm,
the Board has affirmatively determined that all of our directors
are independent directors within the meaning of the applicable
Nasdaq Stock Market, LLC ("Nasdaq") listing standards, as currently
in effect, with the exception of Mr. Cavalier, who also is an
executive officer of Aeolus.
The
Board has established an Audit Committee in accordance with section
3(a)(58)(A) of the Exchange Act and a Compensation
Committee.
Audit Committee
The
Audit Committee currently consists of Mr. Rallis, Chairman, Dr.
Kumar and Dr. Farah. During fiscal 2016, the Audit Committee held
four formal meetings and met with Aeolus' independent registered
public accounting firm prior to the release of financial results
for the first three quarters and full year of fiscal 2016. The
Audit Committee reviews the results and scope of the audit and
other services provided by Aeolus' independent registered public
accounting firm. The Audit Committee has adopted a written charter,
which can be obtained from our website at www.aolsrx.com. The Board
has determined that Mr. Rallis is an "audit committee financial
expert," as defined in Item 407(d)(5) of Regulation S-K promulgated
by the SEC ("Regulation S-K"). The Board has determined that all of
the members of the Audit Committee meet the Nasdaq Audit Committee
independence standards, as currently in effect.
Compensation Committee
The
Compensation Committee currently consists of Dr. Kumar, Chairman,
Mr. Clerici and Dr. Scott. During fiscal 2016, the Compensation
Committee held no formal meetings. The Compensation Committee makes
recommendations to the Board regarding salaries and incentive
compensation for officers of Aeolus, makes determinations
concerning equity incentives granted to participants under the
Aeolus' 2004 Stock Incentive Plan, as amended (the "2004 Plan") and
determines the amount and type of equity incentives granted to
participants in Aeolus' 2016 Stock Incentive Plan .
Nominating Committee
The
Board does not have a standing nominating committee. The Board does
not believe a nominating committee is necessary based on Aeolus'
size and the beneficial ownership (beneficial ownership assumes the
exercise of all warrants and options by the respective holder) by
Xmark Opportunity Partners, LLC of more than 63% of our outstanding
Common Stock as of September 30, 2016. The Board will consider
establishing a nominating committee at the appropriate
time.
The
entire Board participates in the consideration of director
nominees. To date, the Board has not formally established any
criteria for Board membership. Candidates for director nominees are
reviewed in the context of the current composition of the Board,
our operating requirements and the long-term interests of our
stockholders. In conducting this assessment, the Board considers
skills, diversity, age, and such other factors as it deems
appropriate given the current needs of the Board and the Company,
to maintain a balance of knowledge, experience and
capability.
The Board's
process for identifying and evaluating nominees for director,
including nominees recommended by stockholders, involves compiling
names of potentially eligible candidates, conducting background and
reference checks, conducting interviews with the candidate and
others (as schedules permit), meeting to consider and approve the
final candidates and, as appropriate, preparing an analysis with
regard to particular recommended candidates.
Aeolus
has adopted a policy that all transactions between Aeolus and its
executive officers, directors and other affiliates must be approved
by a majority of the members of the Board and by a majority of the
disinterested members of the Board, and must be on terms no less
favorable to Aeolus than could be obtained from unaffiliated third
parties.
September 2015 Bridge Loan Financing
On
September 29, 2015, we received funding in the form of convertible
promissory notes (the "BVF Notes") from Biotechnology Value Fund,
L.P. and other affiliates of BVF Partners, L.P. One of our
directors, Mitchell Kaye, is a Managing Director of Biotechnology
Value Fund.
The BVF
Notes had an aggregate principal balance of $1,000,000, accrue
interest at a rate of 6% per annum and have a scheduled maturity
date of September 28, 2016 (the "Maturity Date"). The terms of the
BVF Notes provided that the outstanding principal and accrued
interest on the BVF Notes shall automatically convert into Company
equity securities issued in a Qualified Financing (as defined
below) at a conversion rate carrying a 15% discount to the lowest
price per share (or share equivalent) issued in a Qualified
Financing (an "Automatic Conversion"). If, prior to the Maturity
Date, the Company enters into an agreement pertaining to a
Corporate Transaction (as defined below) and the BVF Notes had not
been previously converted pursuant to an Automatic Conversion,
then, the outstanding principal balance and unpaid accrued interest
of the BVF Notes shall automatically convert in whole into the
right of the holder to receive, in lieu of any other payment and in
cancellation of the BVF Notes, an amount in cash upon closing of
the Corporate Transaction (as defined below) equal to two times the
outstanding principal amount of the BVF Notes.
For
purposes of the foregoing: "Qualified Financing" means a bona fide
new money equity securities financing on or before the Maturity
Date with total proceeds to the Company of not less than four
million dollars. and "Corporate Transaction" means a sale, lease or
other disposition of all or substantially all of the Company's
assets or a consolidation or merger of the Company with or into any
other corporation or other entity or person, or any other corporate
reorganization, in which the stockholders of the Company
immediately prior to such consolidation, merger or reorganization
own less than fifty percent (50%) of the voting power of the
surviving entity immediately after such consolidation, merger or
reorganization.
In
connection with the 2015 Securities Placement, the BVF Notes were
converted pursuant to an Automatic Conversion and the holders of
the BVF Notes received the securities described below under "BVF
Convert."
2015 Securities Placement
On
December 10, 2015, we entered into securities purchase agreements
with certain accredited investors to sell and issue (i) an
aggregate of 10,215,275 common units issued at a purchase price of
$0.22 per unit, and (ii) 4,500 preferred stock units issued to
Biotechnology Value Fund, L.P. and certain other affiliates of BVF
Partners, L.P., for an aggregate purchase price of $4.5 million,
resulting in aggregate gross proceeds to the Company of
approximately $6.75 million (the "2015 Securities Placement"). Each
common unit consisted of one share of the Company's common stock
and a five year warrant to purchase one share of the Company's
common stock, subject to adjustment. The preferred stock units
collectively consisted of (i) 4,500 shares of our Series C
Preferred Stock that are collectively convertible into an aggregate
of 20,454,546 shares of the Company's common stock and (ii)
warrants to purchase an aggregate of 20,454,546 shares of our
common stock, in each case subject to adjustment. Each of the
foregoing warrants has an initial exercise price of $0.22 per
share.
Following the
completion of the 2015 Securities Placement, the principal and
accrued interest amounts under the BVF Notes were converted into
5,414,402 shares of our common stock and warrants to purchase an
additional 5,414,402 shares of our common stock at an exercise
price per share of $0.22 subject to adjustment (the "BVF Convert").
As a result, the BVF Notes are no longer outstanding as of the date
of this prospectus. As described above, one of our directors,
Mitchell Kaye, is a Managing Director of Biotechnology Value
Fund.
Certain Relationships And Related Party Transactions
2013 Warrant Repricing, Exercise and Lockup Agreement
Effective February
15, 2013, Aeolus and each of Xmark JV Investment Partners ("JV
Partners"), Xmark Opportunity Fund, Ltd. ("Opportunity Ltd.") and
Xmark Opportunity Fund, L.P. ("Opportunity LP" and, together with
JV Partners and Opportunity Ltd., the "Xmark Entities") entered
into a Warrant Repricing, Exercise and Lockup Agreement (the "Xmark
Warrant Agreement") pursuant to which the Company agreed to reduce
the exercise price of outstanding warrants to purchase an aggregate
of up to 59,149,000 shares of our common stock held by the Xmark
Entities (the "Xmark Warrants") to $0.01 per share. Prior to the
entry into the Xmark Warrant Agreement, the exercise price of the
Xmark Warrants covering an aggregate of 55.4 million shares of
Aeolus' common stock was $0.28 per share, and the exercise price
covering an aggregate of 3.8 million shares of Aeolus' common stock
was $0.50 per share. In consideration for the reduction of the
exercise price of the Xmark Warrants, each of the Xmark Entities
agreed to immediately exercise all of the Xmark Warrants by
cashless exercise. The Xmark Warrant Agreement also provides that
the Xmark Entities will not transfer the shares issuable upon
exercise of the Xmark Warrants (the "Xmark Warrant Shares") until
the Company either (i) declares a cash dividend on its common stock
or otherwise makes a cash distribution or (ii) effects a Change of
Control, subject in each case to the terms of the Xmark Warrant
Agreement. Xmark Opportunity Partners, LLC ("Opportunity Partners")
is the investment manager of JV Partners and the sole member of the
investment manager of each of Opportunity Ltd. and Opportunity LP,
and, as such, possesses the sole power to vote and the sole power
to direct the disposition of all securities of the Company held by
each of the Xmark Entities. Mitchell Kaye and David C. Cavalier,
the Co-Managing Members of Xmark Capital Partners, LLC, a Delaware
limited liability company, the Managing Member of Opportunity
Partners, share voting and dispositive power with respect to all
securities of the Company beneficially owned by Opportunity
Partners. The foregoing description of the Xmark Warrant Agreement
(and the transactions effected thereunder) does not purport to be
complete and is qualified in its entirety by reference to the Xmark
Warrant Agreement, a copy of which is attached as Exhibit 10.4 to
Form 8-K filed with the SEC on February 19, 2013.
Director Independence
After
review of all relevant transactions or relationships between each
director, or any of his family members, and the Company, our senior
management and its independent registered public accounting firm,
the Board of Directors has affirmatively determined that all of our
directors are independent directors within the meaning of the
applicable Nasdaq Stock Market, LLC ("Nasdaq") listing standards,
as currently in effect, excluding Mr. Cavalier, who serves as an
executive officer of Aeolus.
2016 Stock Incentive Plan
Purpose
The
purpose of the Company's 2016 Stock Incentive Plan (the "2016
Plan") is to assist us in recruiting and retaining qualified
employees, consultants, advisors and non-employee directors and to
allow us to build a satisfying long-term relationship with these
individuals through recognition of their contributions to our
affiliates and to us. The 2016 Plan provides for the grant of
non-statutory stock options ("NSOs"), options intended to qualify
as incentive stock options ("ISOs") under Section 422 of the Code,
and restricted stock awards.
Board Approval and Stockholder Approval
Our
Board approved the 2016 Plan in March of 2016, and a majority of
our stockholders entitled to vote on the 2016 Plan approved the
2016 Plan on April 19, 2016.
Administration
The
2016 Plan is administered by the Board and the Compensation
Committee (the "Plan Administrator"). Subject to the limitations
set forth in the 2016 Plan, the Plan Administrator selects who will
receive awards under the 2016 Plan, and determines the amount,
exercise or purchase price, vesting requirements and other
conditions of each award. In addition, the Plan Administrator
establishes the guidelines and forms for implementing the 2016 Plan
and is responsible for interpreting and making all decisions
regarding the operation of the 2016 Plan. The Plan Administrator's
decisions are final and binding upon all participants in the 2016
Plan.
Eligibility and Shares Subject to the 2016 Plan
Under
the 2016 Plan, 25,000,000 shares of our Common Stock have currently
been reserved for issuance either by direct sale or upon exercise
of options granted to our employees (including our officers and
directors who are also employees), non-employee directors, and
consultants and advisors who provide services to us as independent
contractors. ISOs may be granted only to our employees who are paid
from our payroll. NSOs and restricted stock awards may be granted
to our employees, consultants and non-employee
directors.
The
2016 Plan provides that grants made to any person in a single
calendar year may not cover more than 10,000,000 shares of Common
Stock. Any shares subject to outstanding options or restricted
stock awards granted under the 2016 Plan that expire, terminate or
are canceled without having been exercised or vested in full shall
again become available for further grant under the 2016 Plan. If
shares issued under the 2016 Plan are forfeited, they also become
available for new grants.
As
of September 30, 2016, we had four employees, one consultant and
six non-employee directors eligible to participate under the 2016
Plan.
As
of September 30, 2016, 250,000 options were outstanding under the
2016 Plan. All past and future stock options will be granted with
exercise prices equal to or greater than the fair market value of
our Common Stock on the date of grant. On September 30, 2016,
the closing price for our Common Stock on the OTCQB was $0.19 per
share.
Pursuant
to the terms of the 2016 Plan, the Board will determine the number
of options and restricted stock awards to be allocated to our
employees, non-employee directors and consultants under the 2016
Plan in the future, and such allocations may only be made in
accordance with the provisions of the 2016 Plan as described
herein.
Terms of the Options
The
Board or the Plan Administrator will determine the terms for each
option granted under the 2016 Plan. The maximum term of each option
to be granted under the 2016 Plan is ten years (five years in the
case of an ISO granted to any key employee of ours who, together
with certain family members, owns more than 10% of our outstanding
voting stock (a "10% stockholder").
The
exercise price of ISOs and NSOs to be granted under the 2016 Plan
will not be less than 100% of the fair market value of our Common
Stock on the date of the grant (110% in the case of an ISO granted
to a 10% stockholder). The exercise price of NSOs granted under the
2016 Plan will not be less than 85% of the fair market value of our
Common Stock on the date of grant (110% in the case of NSOs granted
to a 10% stockholder). The fair market value is deemed to be the
closing price of our Common Stock, as reported on the
OTCQB.
Under
the 2016 Plan, the exercise price is payable in cash or by
check.
Terms of the Restricted Stock Awards
The
Plan Administrator has discretion to : grant awards of restricted
stock to eligible individuals; and determine the time of the grant,
whether the award is a performance-based restricted stock award,
the number of shares of Common Stock subject to an award, the
vesting schedule applicable to the award and other terms and
conditions applicable to the award.
As
a general rule, shares of our Common Stock that are subject to a
restricted stock award will be held by the Plan Administrator for
the benefit of the award recipient until vested and, when vested,
are transferred to the award recipient. Unless the Plan
Administrator determines otherwise with respect to any restricted
stock award, before the shares subject to a restricted stock award
are vested and transferred to the award recipient, the Plan
Administrator will exercise any voting or tender rights in its
discretion and hold and accumulate any dividends or distributions
for distribution at the same time and terms as the underlying
shares. In the alternative, the Plan Administrator may authorize
the immediate distribution of the restricted stock to the award
recipient in the form of a stock certificate bearing a legend
containing the applicable vesting restrictions or the immediate
distribution of dividends paid on the underlying
shares.
All
restricted stock awards will be subject to a vesting schedule to be
specified by the Plan Administrator when the award is made.
Unless the Plan Administrator determines otherwise with respect to
any restricted stock award, upon termination of a participant's
employment for any reason, any awards that are unvested at
termination of employment will be forfeited, with the award
recipient receiving a refund equal to the lesser of the fair market
value of the unvested shares at termination of employment or the
amount (if any) paid when the award was made.
The
Plan Administrator has the power to designate a restricted stock
award as a performance-based restricted stock award and establish,
in addition to or in lieu of service-based vesting requirements,
one or more performance goals, which must be attained as a
condition of retention of the shares. Attainment of the performance
goals are measured over a performance measurement period specified
by the Plan Administrator when the award was made.
The
Plan Administrator will determine in its discretion whether the
award recipient has attained the goals. If they have been attained,
the Plan Administrator will certify that fact in writing. If the
performance goals are not satisfied during the performance
measurement period, the relevant awards will be forfeited. If the
performance goals and any service-based vesting schedule are
satisfied, the award will be distributed (or any vesting-related
legend removed from any stock certificates previously delivered to
the award recipient).
Duration, Amendment and Termination
The
Plan Administrator may amend, suspend or terminate the 2016 Plan at
any time, except that any such amendment, suspension or termination
shall not affect any award previously granted. Any amendment of the
2016 Plan is subject to approval of our stockholders only to the
extent required by applicable law.
Effect
of Certain Corporate Events
All
outstanding options under the 2016 Plan shall become fully
exercisable for a period of 60 days following the occurrence of any
of the following events:
●
the date on which
shares of Common Stock are first purchased pursuant to a tender
offer or exchange offer;
●
the date we acquire
knowledge that any person or group has become the beneficial owner
of our securities entitling the person or group to 30% or more of
all votes to which all of our stockholders would be entitled in the
election of the Board were an election held on such
date;
●
the date, during
any period of two consecutive years, when individuals who at the
beginning of such period constitute the Board cease for any reason
to constitute at least a majority thereof; and
●
the date on which
our stockholders approve an agreement for a merger or sale of
substantially all of our assets.
The
Plan Administrator will have the discretion to determine the effect
that any of the foregoing events will have on restricted stock
awards, and may make such determination before the occurrence of
such an event or specify the effect of any such event in the
applicable award agreement.
In
addition, in the event we merge with, or sell substantially all of
our assets to, another entity as a result of which we are not the
surviving entity, and the other entity does not assume outstanding
awards under the 2016 Plan, all of the outstanding awards under the
2016 Plan shall immediately vest and become exercisable, in the
case of options, for a period 30 days after the Board notifies our
option holders that these options have been accelerated. Any
options that are not exercised by the end of this 30-day period
shall automatically terminate in their entirety.
In
the event of a subdivision of our outstanding Common Stock, a
combination or consolidation of our outstanding Common Stock (by
reclassification or otherwise) into a lesser number of shares, a
declaration of a dividend payable in Common Stock or in a form
other than Common Stock in an amount that has a material effect on
the price of our shares, a recapitalization, spinoff,
reclassification, or a similar occurrence, the Board will make
adjustments in the number and/or exercise price of options, stock
awards and/or the number of shares available under the 2016 Plan,
as appropriate.
Federal Income Tax Consequences of Awards Under the 2016
Plan
The
following discussion is intended to be a summary and is not a
comprehensive description of the federal tax laws, regulations and
policies affecting the Company and recipients of restricted stock
awards or stock option grants that may be granted under the 2016
Plan. Any descriptions of the provisions of any law, regulation or
policy are qualified in their entirety by reference to the
particular law, regulation or policy. Any change in applicable law
or regulation or in the policies of various taxing authorities may
have a significant effect on this summary. The 2016 Plan is not a
qualified plan under Section 401(a) of the Code.
Restricted Stock
Awards
. The federal income tax
consequences of restricted stock awards depends on whether the
recipient has made a timely election under Section 83(b) of the
Code. If a Section 83(b) election is not made, the grant of
restricted stock to the recipient under the 2016 Plan will not
result at the time of grant in federal income tax consequences to
us or to the award recipient. Once the award vests and the shares
subject to the award are distributed, the award recipient will
generally be required to include in ordinary income, for the
taxable year in which the vesting date occurs, an amount equal to
the fair market value of the shares on the vesting date. We will
generally be allowed to claim a deduction, for compensation
expense, in a like amount. If dividends are paid on unvested shares
held under the 2016 Plan, such dividend amounts will also be
included in the ordinary income of the recipient. We will generally
be allowed to claim a deduction for compensation expense for this
amount as well.
If
the recipient of a restricted stock award makes a timely Section
83(b) election, the value of the shares subject to a restricted
stock award will be included in the recipient's income for federal
income tax purposes when the award is made instead of when it
vests. In that case, we will generally be allowed to claim a
deduction, for compensation expense, in a like amount. The
recipient will also recognize dividend income in the amount of any
dividends paid to the recipient with respect to the restricted
stock when the dividend is paid.
If
the recipient of a restricted stock award sells the shares covered
by the award after the award vests, the recipient will have a
capital gain (or loss) equal to the difference between the sales
price and the value of the common stock included in the recipient's
income as described above. The gain (or loss) is a short-term
or a long-term capital gain (or loss) depending on how long the
recipient held the shares.
Stock
Options
. ISOs will not create
federal income tax consequences when they are granted. If they are
exercised during employment or within three months after
termination of employment (one year for termination due to death or
disability), the exercise will not create federal income tax
consequences either. When the shares acquired on exercise of an ISO
are sold, the seller must pay federal income taxes on the amount by
which the sales price exceeds the purchase price. This amount will
be taxed at capital gains rates if the sale occurs at least two
years after the ISO was granted and at least one year after the ISO
was exercised. Otherwise, the sale of the ISO shares would
constitute a disqualifying disposition and be taxed as ordinary
income. We will generally not be allowed to claim a deduction, for
compensation expense, upon the sale of ISO shares unless there is a
disqualifying disposition by the stockholder.
ISOs
that are exercised more than one year after termination of
employment due to death or disability or more than three months
after termination of employment for reasons other than death or
disability are automatically treated as NSOs. NSOs will not create
federal income tax consequences when they are granted. When an NSO
is exercised, federal income tax at ordinary income tax rates must
be paid on the amount by which the fair market value of the shares
acquired upon exercise exceed the exercise price. When an option
holder sells shares acquired by exercising an NSO, the option
holder must pay federal income tax on the amount by which the sales
proceeds exceed his or her tax cost basis in the shares. The
option holder's tax cost basis is the exercise price of the NSO
plus the ordinary income the option holder recognized upon exercise
of the NSO. This amount will be taxed at capital gain rates,
which will vary depending upon the amount of time that has elapsed
since exercise of the option.
When
a NSO is exercised, we may be allowed a federal income tax
deduction equal to the amount that the option holder includes in
his or her ordinary income.
Deduction
Limits
. The Code places an
annual limit of $1 million each on the tax deduction which we may
claim in any fiscal year for the compensation of our chief
executive officer and any other executive officers named in the
summary compensation table included in our annual proxy statement
or information statement (other than the Chief Financial Officer).
There is an exception to this limit for "qualified
performance-based compensation." We have designed the 2016 Plan
with the intention that the options and restricted stock awards
that we grant after obtaining stockholder approval will constitute
qualified performance-based compensation. As a result, we do not
believe that the $1 million limit will impair our ability to claim
federal income tax deductions for compensation attributable to
future performance-based restricted stock awards and stock options
granted under the 2016 Plan. However, the $1 million limit would
apply to future restricted stock awards, if any, made to covered
employees that are not designated as performance-based restricted
stock awards.
Excise
Taxes
. Under certain
circumstances, the accelerated vesting of an award in connection
with a change in control of the Company might be deemed an "excess
parachute payment" for purposes of the golden parachute tax
provisions of Section 280G of the Code. To the extent
accelerated vesting results in an excess parachute payment, the
award holder may be subject to a 20% excise tax on the amount of
the excess parachute payment and the Company may be denied a tax
deduction in an amount equal to the excess parachute
payment.
Withholding of
Tax.
The Company has the
right deduct from any settlement or award made under the Plan a
sufficient amount to cover withholding of any federal, state or
local taxes required by law, or to take such other action as may be
necessary to satisfy any such withholding obligations. The
methods by which these withholding obligations may be satisfied are
specified in the Plan and in the recipient's award
agreement.
The
preceding statements are intended to summarize the general
principles of current federal income tax law applicable to awards
that may be granted under the 2016 Plan. State and local tax
consequences may also be significant. Because of the
complexities involved in the application of federal, state, local,
and foreign tax laws to specific circumstances and the
uncertainties as to possible future changes in the tax laws,
recipients should consult their personal tax advisors regarding the
tax consequences of receiving options or common stock under the
Plan and exercising options or selling common stock that the
recipients received under the Plan or upon exercise of
options.
2004 Stock Incentive Plan
The
following description of the 2004 Stock Incentive Plan is provided
due to the fact that options remain outstanding under such
plan.
Purpose
The
purpose of the 2004 Plan is to assist us in recruiting and
retaining qualified employees, consultants, advisors and
non-employee directors and to allow us to build a satisfying
long-term relationship with these individuals through recognition
of their contributions to our affiliates and to us. The 2004 Plan
provides for the grant of non-statutory stock options ("NSOs"),
options intended to qualify as incentive stock options ("ISOs")
under Section 421(b) of the Code, and restricted stock
awards.
Administration
The
2004 Plan is administered by the Board and the Compensation
Committee (the "Plan Administrator"). Subject to the limitations
set forth in the 2004 Plan, the Plan Administrator selects who will
receive awards under the 2004 Plan, and determines the amount,
exercise or purchase price, vesting requirements and other
conditions of each award. In addition, the Plan Administrator
establishes the guidelines and forms for implementing the 2004 Plan
and is responsible for interpreting and making all decisions
regarding the operation of the 2004 Plan. The Plan Administrator's
decisions are final and binding upon all participants in the 2004
Plan.
Eligibility and Shares Subject to the 2004 Plan
Under
the 2004 Plan, as amended by written consent in 2012, 25,000,000
shares of our Common Stock were reserved for issuance either by
direct sale or upon exercise of options granted to our employees
(including our officers and directors who are also employees),
non-employee directors, and consultants and advisors who provide
services to us as independent contractors. ISOs were granted only
to our employees who are paid from our payroll. NSOs and restricted
stock awards may be granted to our employees, consultants and
non-employee directors.
The
2004 Plan provides that grants made to any person in a single
calendar year may not cover more than 25,000,000 shares of Common
Stock. Any shares subject to outstanding options or restricted
stock awards granted under the 2004 Plan that expire, terminate or
are canceled without having been exercised or vested in full shall
again become available for further grant under the 2004 Plan. If
shares issued under the 2004 Plan are forfeited, they also become
available for new grants.
As of
September 30, 2015, we had four employees, one consultant and six
non-employee directors participating under the 2004
Plan
As of
September 30, 2015, options to purchase an aggregate of 11,014,591
shares of our Common Stock at a weighted average exercise price of
$0.43 per share were outstanding under the 2004 Plan. No other
awards were outstanding under the 2004 Plan as of that date. All
stock options have been granted with exercise prices equal to or
greater than the fair market value of our Common Stock on the date
of grant. On September 30, 2015, the last trading day of the fiscal
year ended September 30, 2015, the closing price for our Common
Stock on the OTCQB was $0.24 per share.
Terms of the Option
The
maximum term of each option granted under the 2004 Plan is ten
years (five years in the case of an ISO granted to any key employee
of ours who, together with certain family members, owns more than
10% of our outstanding voting stock (a "10%
stockholder")
The
exercise price of ISOs and NSOs granted under the 2004 Plan were
not less than 100% of the fair market value of our Common Stock on
the date of the grant (110% in the case of an ISO granted to a 10%
stockholder). The exercise price of NSOs granted under the 2004
Plan were not less than 85% of the fair market value of our Common
Stock on the date of grant (110% in the case of NSOs granted to a
10% stockholder). The fair market value is deemed to be the closing
price of our Common Stock, as reported on the OTCQB.
Under
the 2004 Plan, the exercise price is payable in cash or by
check.
Terms of the Restricted Stock Awards
The
Plan Administrator had discretion to grant awards of restricted
stock to eligible individuals. The Plan Administrator determined
the time of the grant, whether the award was a performance-based
restricted stock award, the number of shares of Common Stock
subject to an award, the vesting schedule applicable to the award
and other terms and conditions applicable to the
award.
As a
general rule, shares of our Common Stock that are subject to a
restricted stock award will be held by the Plan Administrator for
the benefit of the award recipient until vested and, when vested,
are transferred to the award recipient. Unless the Plan
Administrator determines otherwise with respect to any restricted
stock award, before the shares subject to a restricted stock award
are vested and transferred to the award recipient, the Plan
Administrator will exercise any voting or tender rights in its
discretion and hold and accumulate any dividends or distributions
for distribution at the same time and terms as the underlying
shares. In the alternative, the Plan Administrator may authorize
the immediate distribution of the restricted stock to the award
recipient in the form of a stock certificate bearing a legend
containing the applicable vesting restrictions or the immediate
distribution of dividends paid on the underlying
shares.
All
restricted stock awards are subject to a vesting schedule that was
specified by the Plan Administrator when the award is made. Unless
the Plan Administrator determined or determines otherwise with
respect to any restricted stock award, upon termination of a
participant's employment for any reason, any awards that are
unvested at termination of employment will be forfeited, with the
award recipient receiving a refund equal to the lesser of the fair
market value of the unvested shares at termination of employment or
the amount (if any) paid when the award was made.
The
Plan Administrator had the power to designate a restricted stock
award as a performance-based restricted stock award and establish,
in addition to or in lieu of service-based vesting requirements,
one or more performance goals that must be attained as a condition
of retention of the shares. Attainment of the performance goals are
measured over a performance measurement period specified by the
Plan Administrator when the award was made.
The
Plan Administrator will determine in its discretion whether the
award recipient has attained the goals. If they have been attained,
the Plan Administrator will certify that fact in writing. If the
performance goals are not satisfied during the performance
measurement period, the relevant awards will be forfeited. If the
performance goals and any service-based vesting schedule are
satisfied, the award will be distributed (or any vesting-related
legend removed from any stock certificates previously delivered to
the award recipient).
Effect of Certain Corporate Events
All
outstanding options under the 2004 Plan shall become fully
exercisable for a period of 60 days following the occurrence of any
of the following events:
●
the date on which
shares of Common Stock are first purchased pursuant to a tender
offer or exchange offer;
●
the date we acquire
knowledge that any person or group has become the beneficial owner
of our securities entitling the person or group to 30% or more of
all votes to which all of our stockholders would be entitled in the
election of the Board were an election held on such
date;
●
the date, during
any period of two consecutive years, when individuals who at the
beginning of such period constitute the Board cease for any reason
to constitute at least a majority thereof; and
●
the date on which
our stockholders approve an agreement for a merger or sale of
substantially all of our assets.
The
Plan Administrator will have the discretion to determine the effect
that any of the foregoing events will have on restricted stock
awards, and may make such determination before the occurrence of
such an event or specify the effect of any such event in the
applicable award agreement.
In
addition, in the event we merge with, or sell substantially all of
our assets to, another entity as a result of which we are not the
surviving entity, and the other entity does not assume outstanding
awards under the 2004 Plan, all of the outstanding awards under the
2004 Plan shall immediately vest and become exercisable, in the
case of options, for a period 30 days after the Board notifies our
option holders that these options have been accelerated. Any
options that are not exercised by the end of this 30-day period
shall automatically terminate in their entirety.
In the
event of a subdivision of our outstanding Common Stock, a
combination or consolidation of our outstanding Common Stock (by
reclassification or otherwise) into a lesser number of shares, a
declaration of a dividend payable in Common Stock or in a form
other than Common Stock in an amount that has a material effect on
the price of our shares, a recapitalization, spinoff,
reclassification, or a similar occurrence, the Board will make
adjustments in the number and/or exercise price of options, stock
awards and/or the number of shares available under the 2004 Plan,
as appropriate.
Federal Income Tax Consequences of Awards Under the 2004
Plan
The
following discussion is intended to be a summary and is not a
comprehensive description of the federal tax laws, regulations and
policies affecting the Company and recipients of restricted stock
awards or stock option grants that may be granted under the 2004
Plan. Any descriptions of the provisions of any law, regulation or
policy are qualified in their entirety by reference to the
particular law, regulation or policy. Any change in applicable law
or regulation or in the policies of various taxing authorities may
have a significant effect on this summary. The 2004 Plan is not a
qualified plan under Section 401(a) of the Code.
Restricted Stock Awards
. The grant of
restricted stock awards under the 2004 Plan will not result in
federal income tax consequences to either us or the award
recipient. Once the award is vested and the shares subject to the
award are distributed, the award recipient will generally be
required to include in ordinary income, for the taxable year in
which the vesting date occurs, an amount equal to the fair market
value of the shares on the vesting date. We will generally be
allowed to claim a deduction, for compensation expense, in a like
amount. If dividends are paid on unvested shares held under the
2004 Plan, such dividend amounts will also be included in the
ordinary income of the recipient. We will generally be allowed to
claim a deduction for compensation expense for this amount as
well.
In
certain cases, a recipient of a restricted stock award may elect to
include the value of the shares subject to a restricted stock award
in income for federal income tax purposes when the award is made
instead of when it vests. In that case, we will generally be
allowed to claim a deduction, for compensation expense, in a like
amount.
Stock Options
. ISOs will not create
federal income tax consequences when they are granted. If they are
exercised during employment or within three months after
termination of employment (one year for termination due to death or
disability), the exercise will not create federal income tax
consequences either. When the shares acquired on exercise of an ISO
are sold, the seller must pay federal income taxes on the amount by
which the sales price exceeds the purchase price. This amount will
be taxed at capital gains rates if the sale occurs at least two
years after the ISO was granted and at least one year after the ISO
was exercised. Otherwise, the sale of the ISO shares would
constitute a disqualifying disposition and be taxed as ordinary
income. We will generally not be allowed to claim a deduction, for
compensation expense upon the sale of ISO shares unless there is a
disqualifying disposition by the stockholder.
ISOs
that are exercised more than one year after termination of
employment due to death or disability or three months after
termination of employment for other reasons are automatically
treated as NSOs. NSOs will not create federal income tax
consequences when they are granted. When they are exercised,
federal income taxes at ordinary income tax rates must be paid on
the amount by which the fair market value of the shares acquired by
exercising the option exceeds the exercise price. When an option
holder sells shares acquired by exercising an NSO, he or she must
pay federal income taxes on the amount by which the sales price
exceeds the purchase price plus the amount included in ordinary
income at option exercise. This amount will be taxed at capital
gains rates, which will vary depending upon the time that has
elapsed since the exercise of the option.
When a
NSO is exercised, we may be allowed a federal income tax deduction
for the same amount that the option holder includes in his or her
ordinary income.
Deduction Limits
. The Code places an
annual limit of $1 million each on the tax deduction which we may
claim in any fiscal year for the compensation of our chief
executive officer and any other executive officers named in the
summary compensation table included in our annual proxy statement
or information statement (other than the Chief Financial Officer).
There is an exception to this limit for "qualified
performance-based compensation." We have designed the 2004 Plan
with the intention that the options and restricted stock awards
that we grant after obtaining stockholder approval will constitute
qualified performance-based compensation. As a result, we do not
believe that the $1 million limit will impair our ability to claim
federal income tax deductions for compensation attributable to
future performance-based restricted stock awards and stock options
granted under the 2004 Plan. The $1 million limit would apply to
(i) future restricted stock awards, if any, made to covered
employees that are not designated as performance-based restricted
stock awards and (ii) all options and all restricted stock grants
outstanding under the 2004 Plan on the date of this Information
Statement.
The
preceding statements are intended to summarize the general
principles of current federal income tax law applicable to awards
that may be granted under the 2004 Plan. State and local tax
consequences may also be significant.
Item
14.
Principal
Accounting Fees and Services.
Independent Registered Public Accounting Firm –
Fees
The
following table shows the aggregate fees accrued by us for audit
and other services for the fiscal years ended September 30, 2016
and September 30, 2015 provided by Haskell & White LLP and
Grant Thornton LLP, respectively.
|
|
|
|
Fiscal Year
2016
|
|
|
Audit Fees
(1)
|
$
48,425
|
|
Audit-Related
Fees
|
-
|
|
Tax
Fees
|
-
|
|
All Other
Fees
|
$
8,000
|
|
Total Fees Fiscal
Year 2016
|
$
56,425
|
|
|
|
|
|
|
|
Fiscal Year
2015
|
|
|
Audit Fees
(1)
|
$
125,451
|
|
Audit-Related
Fees
|
-
|
|
Tax
Fees
|
-
|
|
All Other
Fees
|
-
|
|
Total Fees Fiscal
Year 2015
|
$
125,451
|
(1)
Represents fees
billed for professional services rendered for the audit and/or
reviews of our financial statements and in connection with our
statutory and regulatory filings or engagements.
All
fees described above were approved by our Audit Committee. Pursuant
to its Charter, the Audit Committee may establish pre-approval
policies and procedures, subject to SEC and Nasdaq rules and
regulations, to approve audit and permissible non-audit services.
However, it has not yet done so.
PART
IV
Item
15.
Exhibits
and Financial Statement Schedules.
(1)
Exhibits.
|
|
|
|
|
Incorporated by Reference To
|
|
|
|
Exhibit
Number
|
|
Description of Document
|
|
Registrant’s
Form
|
|
Date Filed with
the SEC
|
|
Exhibit
Number
|
|
Filed
Herewith
|
|
2.1
|
|
Agreement and Plan
of Merger and Reorganization dated September 16, 2003 between
Incara, Inc. and Incara Pharmaceuticals Corporation
|
|
S-4
|
|
09/19/03
|
|
2.1
|
|
|
|
3.1
|
|
Amended
and Restated Certificate of Incorporation
|
|
10-K
|
|
12/31/12
|
|
3.1
|
|
|
|
3.2
|
|
Certificate of
Designation for Series C Preferred Stock
|
|
8-K
|
|
12/15/15
|
|
10.1
|
|
|
|
3.3
|
|
Bylaws
|
|
8-K
|
|
10/27/15
|
|
3.1
|
|
|
|
4.1
|
|
Form of
Common Stock Certificate
|
|
10-Q
|
|
08/11/04
|
|
4.1
|
|
|
|
4.2
|
|
Form of
Series B Preferred Stock Certificate
|
|
S-4
|
|
09/19/03
|
|
4.8
|
|
|
|
4.3
|
|
Form of
Warrant to Purchase Common Stock dated June 5,
2006.
|
|
8-K
|
|
06/06/06
|
|
10.3
|
|
|
|
4.4
|
|
Registration Rights
Agreement dated May 22, 2007 by and among the Company and each
of the Purchasers whose names appear on the Schedule attached
thereto.
|
|
8-K
|
|
5/23/07
|
|
4.1
|
|
|
|
4.5
|
|
Registration Rights
Agreement dated October 6, 2009 by and among the Company and
the investors whose names appear on the signature pages
thereof.
|
|
8-K
|
|
10/06/09
|
|
4.1
|
|
|
|
4.6
|
|
Form of
Warrant to Purchase Common Stock dated May 22,
2007.
|
|
8-K
|
|
5/23/07
|
|
10.2
|
|
|
|
4.7
|
|
Form of
Warrant to Purchase Common Stock
|
|
8-K
|
|
10/06/09
|
|
10.2
|
|
|
|
4.8
|
|
Registration Rights
Agreement dated September 16, 2003 among Incara
Pharmaceuticals Corporation, Incara, Inc. and Goodnow Capital,
L.L.C.
|
|
S-4
|
|
09/19/03
|
|
10.101
|
|
|
|
4.9
|
|
Registration Rights
Agreement dated August 11, 2010 by and among Aeolus
Pharmaceuticals, Inc. and the investors listed therein
|
|
8-K
|
|
8/12/10
|
|
4.1
|
|
|
|
4.10
|
|
Registration Rights
Agreement dated March 4, 2013 by and among Aeolus
Pharmaceuticals, Inc. and the investors listed therein
|
|
8-K
|
|
03/06/13
|
|
10.2
|
|
|
|
4.11
|
|
Form of
Warrant to Purchase Common Stock dated March 4,
2013.
|
|
8-K
|
|
03/06/13
|
|
10.3
|
|
|
|
4.12
|
|
Warrant
Repricing, Exercise and Lockup Agreement dated February 19,
2013 by and among the Company, Xmark JV Investment Partners, LLC
and affiliates
|
|
8-K
|
|
02/19/13
|
|
10.4
|
|
|
|
4.13
|
|
Form of
Series C Preferred Stock Certificate
|
|
10-K
|
|
12/20/2016
|
|
4.13
|
|
|
|
4.14
|
|
Form of
Warrant
|
|
8-K
|
|
12/15/15
|
|
10.2
|
|
|
|
10.1*
|
|
License
Agreement between Duke University and Aeolus Pharmaceuticals, Inc.,
dated July 21, 1995
|
|
S-1
|
|
12/08/95
|
|
10.4
|
|
|
|
10.2
|
|
Amended
and Restated Limited Liability Company Agreement of CPEC LLC dated
July 15, 1999, among CPEC LLC, Intercardia, Inc. and
Interneuron Pharmaceuticals, Inc.
|
|
8-K
|
|
07/23/99
|
|
10.42
|
|
|
|
10.3
|
|
Assignment,
Assumption and License Agreement dated July 15, 1999, between
CPEC LLC and Intercardia, Inc.
|
|
8-K
|
|
07/23/99
|
|
10.43
|
|
|
|
10.4*
|
|
License
Agreement dated January 19, 2001 between Incara
Pharmaceuticals Corporation and Incara Development,
Ltd.
|
|
10-Q
|
|
02/13/01
|
|
10.59
|
|
|
|
10.5*
|
|
License
Agreement dated January 19, 2001 between Elan Corporation,
plc, Elan Pharma International Ltd. and Incara Development,
Ltd.
|
|
10-Q
|
|
02/13/01
|
|
10.60
|
|
|
|
10.6
|
|
Intentionally left
blank
|
|
|
|
|
|
|
|
|
|
10.7
|
|
Agreement and
Amendment, effective as of January 22, 2001, by and among
Incara Pharmaceuticals Corporation, Elan International Services,
Ltd. and Elan Pharma International Limited
|
|
10-Q
|
|
05/14/01
|
|
10.64
|
|
|
|
10.8
|
|
Second
Agreement and Amendment, effective as of January 22, 2001, by
and among Incara Pharmaceuticals Corporation, Elan International
Services, Ltd. and Elan Pharma International Limited
|
|
10-Q
|
|
05/14/01
|
|
10.65
|
|
|
|
10.9
|
|
Third
Agreement and Amendment, effective as of January 22, 2001, by
and among Incara Pharmaceuticals Corporation, Elan International
Services, Ltd. and Elan Pharma International Limited
|
|
8-K
|
|
06/01/01
|
|
10.66
|
|
|
|
|
|
|
|
Incorporated by Reference To
|
|
|
|
Exhibit
Number
|
|
Description of Document
|
|
Registrant’s
Form
|
|
Date Filed with
the SEC
|
|
Exhibit
Number
|
|
Filed
Herewith
|
|
10.10
|
|
Agreement and
Fourth Amendment, effective February 13, 2002, by and among
Incara Pharmaceuticals Corporation, Elan International Services,
Ltd., Elan Pharma International Limited and Elan Pharmaceutical
Investments III, Ltd.
|
|
10-Q
|
|
02/14/02
|
|
10.75
|
|
|
|
10.11*
|
|
License
Agreement dated June 25, 1998 between Duke University and
Aeolus Pharmaceuticals, Inc.
|
|
10-Q
|
|
05/15/02
|
|
10.82
|
|
|
|
10.12*
|
|
License
Agreement dated May 7, 2002 between Duke University and Aeolus
Pharmaceuticals, Inc.
|
|
10-Q
|
|
05/15/02
|
|
10.83
|
|
|
|
10.13*
|
|
License
Agreement dated November 17, 2000 between National Jewish
Medical and Research Center and Aeolus Pharmaceuticals,
Inc.
|
|
10-Q
|
|
02/13/01
|
|
10.56
|
|
|
|
10.14
|
|
Exclusive License
Agreement, dated January 15, 2009, by and between the Company and
National Jewish Health
|
|
10-Q
|
|
05/16/11
|
|
10.7
|
|
|
|
10.15*
|
|
Securities Purchase
Agreement dated as of May 15, 2002, among Incara
Pharmaceuticals Corporation, Aeolus Pharmaceuticals, Inc., Elan
Pharma International Limited and Elan International Services,
Ltd.
|
|
8-K/A
|
|
07/03/02
|
|
10.84
|
|
|
|
10.16*
|
|
Development and
Option Agreement dated May 15, 2002, among Elan Pharma
International Limited, Incara Pharmaceuticals Corporation and
Aeolus Pharmaceuticals, Inc.
|
|
8-K/A
|
|
07/03/02
|
|
10.85
|
|
|
|
10.17
|
|
Intentionally left
blank
|
|
|
|
|
|
|
|
|
|
10.18
|
|
Amendment
No. 1 to License Agreement dated May 14, 2002, between
Aeolus Pharmaceuticals, Inc. and Duke University (amending License
Agreement dated July 21, 1995)
|
|
8-K/A
|
|
07/03/02
|
|
10.87
|
|
|
|
10.19
|
|
Amendment
No. 1 to License Agreement dated May 14, 2002, between
Aeolus Pharmaceuticals, Inc. and Duke University (amending License
Agreement dated June 25, 1998)
|
|
8-K/A
|
|
07/03/02
|
|
10.88
|
|
|
|
10.20
|
|
Amendment
No. 1 to License Agreement dated May 14, 2002, between
Aeolus Pharmaceuticals, Inc. and National Jewish Medical and
Research Center (amending License Agreement dated November 17,
2000)
|
|
8-K/A
|
|
07/03/02
|
|
10.89
|
|
|
|
10.21*
|
|
Subaward Agreement,
dated March 16, 2011, by and between the Company and the Office of
Research and Development of the University of Maryland,
Baltimore
|
|
10-Q
|
|
05/16/11
|
|
10.4
|
|
|
|
10.22
|
|
Letter
dated May 17, 2004 from Elan International Services, Limited
and Elan Pharma International Limited to Incara Pharmaceuticals
Corporation
|
|
10-Q
|
|
08/11/04
|
|
10.106
|
|
|
|
10.23+
|
|
Aeolus
Pharmaceuticals, Inc. 1994 Stock Option Plan, as
amended
|
|
10-Q
|
|
08/11/04
|
|
10.109
|
|
|
|
10.24+
|
|
Aeolus
Pharmaceuticals, Inc. Amended and Restated 2004 Stock Incentive
Plan
|
|
14-C
|
|
11/16/12
|
|
D
|
|
|
|
|
|
|
|
Incorporated by Reference To
|
|
|
|
Exhibit
Number
|
|
Description of Document
|
|
Registrant’s
Form
|
|
Date Filed with
the SEC
|
|
Exhibit
Number
|
|
Filed
Herewith
|
|
10.25+
|
|
Amended
and Restated Employment Agreement dated July 30, 2010 between
Aeolus Pharmaceuticals, Inc. and John L. McManus
|
|
8-K
|
|
08/02/10
|
|
10.4
|
|
|
|
10.26+
|
|
Letter
Agreement dated July 10, 2006 between Aeolus Pharmaceuticals,
Inc. and McManus & Company, Inc.
|
|
8-K
|
|
07/10/06
|
|
10.2
|
|
|
|
10.27+
|
|
Form of
Indemnity Agreement
|
|
10-K
|
|
12/27/11
|
|
10.27
|
|
|
|
10.28
|
|
Terms
of Outside Director Compensation
|
|
10-K
|
|
12/17/04
|
|
10.114
|
|
|
|
10.29+
|
|
Form of
Incentive Stock Option Agreement
|
|
10-Q
|
|
02/08/05
|
|
10.115
|
|
|
|
10.30+
|
|
Form of
Nonqualified Stock Option Agreement
|
|
10-Q
|
|
02/08/05
|
|
10.116
|
|
|
|
10.31
|
|
Subscription
Agreement dated June 5, 2006 by and between the Company and
the investors whose names appear on the signature pages
thereof.
|
|
8-K
|
|
06/06/06
|
|
10.1
|
|
|
|
10.32
|
|
Board
Observer Letter dated June 5, 2006 by and among the Company
and Efficacy Biotech Master Fund Ltd.
|
|
8-K
|
|
06/06/06
|
|
10.6
|
|
|
|
10.33+
|
|
Consulting
Agreement, dated December 1, 2010, between Aeolus
Pharmaceuticals, Inc. and Brian J. Day
|
|
8-K
|
|
12/03/10
|
|
10.1
|
|
|
|
10.34*
|
|
Sponsored Research
Agreement (Non-Clinical), dated April 12, 2011, by and between the
Company and Duke University
|
|
10-Q
|
|
05/16/11
|
|
10.5
|
|
|
|
10.35
|
|
Securities Purchase
Agreement dated August 11, 2010 by and among Aeolus
Pharmaceuticals, Inc. and the investors listed therein
|
|
8-K
|
|
8/12/10
|
|
10.1
|
|
|
|
10.36
|
|
Form of
Warrant pursuant to Securities Purchase Agreement dated
August 11, 2010 by and among Aeolus Pharmaceuticals, Inc. and
the investors listed therein
|
|
8-K
|
|
8/12/10
|
|
10.2
|
|
|
|
10.37
|
|
Convertible
Promissory Note dated February 7, 2007 issued by Aeolus
Pharmaceuticals, Inc. to Elan Pharma International
Ltd.
|
|
S-1
|
|
06/04/07
|
|
10.43
|
|
|
|
10.38
|
|
Amendment
No. 1 To Convertible Promissory Note dated February 7,
2009 by and between Aeolus Pharmaceuticals, Inc. and Elan Pharma
International Limited
|
|
8-K
|
|
3/16/09
|
|
10.1
|
|
|
|
10.39+
|
|
Form of
Restricted Share Award Agreement
|
|
S-8
POS
|
|
3/31/08
|
|
99.2
|
|
|
|
10.40
|
|
Securities Purchase
and Exchange Agreement dated October 6, 2009 by and among the
Company and the investors whose names appear on the signature pages
thereof
|
|
8-K
|
|
10/06/09
|
|
10.1
|
|
|
|
10.41
|
|
Amendment Agreement
to the Securities Purchase and Exchange Agreement, dated December
24, 2009, by and among the Company and the investors whose names
appear on the signature pages thereof
|
|
8-K
|
|
12/28/09
|
|
10.1
|
|
|
|
10.42+
|
|
Intentionally
Omitted
|
|
8-K
|
|
02/16/11
|
|
10.1
|
|
|
|
10.43*
|
|
Contract No.
HHSO100201100007C, dated February 11, 2011, by and between the
Company and the U.S. Department of Health and Human Services
Biomedical Advanced Research and Development Authority
|
|
10-Q
|
|
05/16/11
|
|
10.1
|
|
|
|
|
|
|
|
Incorporated by Reference To
|
|
|
|
Exhibit
Number
|
|
Description of Document
|
|
Registrant’s
Form
|
|
Date Filed with
the SEC
|
|
Exhibit
Number
|
|
Filed
Herewith
|
|
10.44*
|
|
Research and
Manufacturing Agreement, dated February 18, 2011 (the “JMPS
Agreement”), by and between the Company and Johnson Matthey
Pharmaceutical Materials, Inc. (d/b/a Johnson Matthey Pharma
Services).
|
|
10-Q
|
|
05/16/11
|
|
10.2
|
|
|
|
10.45*
|
|
Appendix 2 to the
JMPS Agreement, dated February 18, 2011
|
|
10-Q
|
|
8/14/12
|
|
10.4
|
|
|
|
10.46*
|
|
Appendix 3 to the
JMPS Agreement, dated April 30, 2012
|
|
10-Q
|
|
8/14/12
|
|
10.5
|
|
|
|
10.47*
|
|
Appendix 4 to the
JMPS Agreement, dated April 30, 2012
|
|
10-Q
|
|
8/14/12
|
|
10.6
|
|
|
|
10.48*
|
|
Appendix 5 to the
JMPS Agreement, dated April 30, 2012
|
|
10-Q
|
|
8/14/12
|
|
10.7
|
|
|
|
10.49*
|
|
Appendix 6 to the
JMPS Agreement, dated April 30, 2012
|
|
10-Q
|
|
8/14/12
|
|
10.8
|
|
|
|
10.50*
|
|
General
Management Consulting Assignment, dated February 23, 2011, by and
between the Company and Booz Allen Hamilton Inc.
|
|
10-Q
|
|
05/16/11
|
|
10.3
|
|
|
|
10.51
|
|
Form of
Securities Purchase Agreement by and among the Company and the
investors whose names appear on the signature pages
thereof
|
|
8-K
|
|
4/5/12
|
|
10.1
|
|
|
|
10.52
|
|
Form of
Registration Rights Agreement by and among the Company and the
investors party thereto
|
|
8-K
|
|
4/5/12
|
|
10.2
|
|
|
|
10.53
|
|
Form of
Warrant issued to investors in March and April 2012
|
|
8-K
|
|
4/5/12
|
|
10.3
|
|
|
|
10.54
|
|
Amended
and Restated Employment Agreement by and between the Company and
John L. McManus
|
|
8-K
|
|
03/05/13
|
|
10.1
|
|
|
|
10.55
|
|
Form of
Registration Rights Agreement
|
|
8-K
|
|
12/15/15
|
|
10.2
|
|
|
|
21.1
|
|
List of
Subsidiaries
|
|
10-K
|
|
12/20/2016
|
|
21.1
|
|
|
|
23.1
|
|
Consent
of Haskell & White LLP, Independent Registered Public
Accounting Firm
|
|
10-K
|
|
12/20/2016
|
|
23.1
|
|
|
|
23.2
|
|
Consent
of Grant Thornton LLP, Independent Registered Public Accounting
Firm
|
|
10-K
|
|
12/20/2016
|
|
23.2
|
|
|
|
31.1
|
|
Certification of
the Principal Executive Officer pursuant to Rule 13a-14(a) and
15d-14(a)
|
|
|
|
|
|
|
|
X
|
|
31.2
|
|
Certification of
the Principal Financial and Accounting Officer pursuant to Rule
13a-14(a) and 15d-14(a)
|
|
|
|
|
|
|
|
X
|
|
32.1
|
|
Certification by
the Principal Executive Officer and Principal Financial and
Accounting Officer pursuant to 18 U.S.C. 1350 as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
|
X
|
|
101.INS†
|
|
XBRL
Instance Document
|
|
10-K
|
|
12/20/2016
|
|
101.INS
|
|
|
|
101.SCH†
|
|
XBRL
Taxonomy Extension Schema Document
|
|
10-K
|
|
12/20/2016
|
|
101.SCH
|
|
|
|
101.CAL†
|
|
XBRL
Taxonomy Extension Calculation Linkbase Document
|
|
10-K
|
|
12/20/2016
|
|
101.CAL
|
|
|
|
101.DEF†
|
|
XBRL
Taxonomy Extension Definition Linkbase Document
|
|
10-K
|
|
12/20/2016
|
|
101.DEF
|
|
|
|
101.LAB†
|
|
XBRL
Taxonomy Extension Label Linkbase Document
|
|
10-K
|
|
12/20/2016
|
|
101.LAB
|
|
|
|
101.PRE†
|
|
XBRL
Taxonomy Extension Presentation Linkbase Document
|
|
10-K
|
|
12/20/2016
|
|
101.PRE
|
|
|
* The
Company has received confidential treatment of certain portions of
this agreement which have been omitted and filed separately with
the U.S. Securities and Exchange Commission.
+
Indicates management contract or compensatory plan or
arrangement.
SIGNATURES
Pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
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AEOLUS
PHARMACEUTICALS, INC.
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|
|
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Date:
January 30, 2017
|
By:
|
/s/
John L.
McManus
|
|
|
|
|
John L.
McManus
|
|
|
|
|
President and Chief
Executive Officer
|
|
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