Aeolus completes $1.0M financing to initiate human clinical studies of AEOL 10150 for cancer

Aeolus Pharmaceuticals, Inc. (OTCBB: AOLS) ("Aeolus Pharmaceuticals" or the "Company") announced today that it has completed a $1.0 million financing with two existing institutional shareholders, both of which are affiliates of Xmark Opportunity Partners, LLC. Under the terms of the financing, Aeolus received $1.0 million in gross proceeds in exchange for 2,500,000 Units (the "Units"), with each Unit comprised of one share of Aeolus Pharmaceuticals common stock, and a seven-year warrant to purchase up to 0.75 additional shares of Aeolus Pharmaceuticals common stock at an initial exercise price of $0.50 per share, for a per Unit purchase price of $0.40. The proceeds from the transaction will be used to fund the manufacture of AEOL 10150, studies of the efficacy of AEOL 10150 in cancer patients and the pre-clinical development of other Aeolus compounds, as well as for general corporate purposes.

“In addition, these funds will allow the Company to develop some of the other compounds in our pipeline that have shown significant potential in animal models. These additional development programs will supplement the broad medical countermeasure development program currently being funded in partnership with the NIH.”

The Company also granted to the investors the option to acquire, collectively, up to an additional 2,500,000 Units at the $0.40 per Unit price (the "Call Option"). In addition, the investors granted to the Company the option to require the investors, severally and not jointly, to acquire up to an additional 2,500,000 Units, less any additional Units acquired under the Call Option, at the $0.40 per Unit price (the "Put Option"). The Call Option is exercisable at any time, commencing on October 1, 2010 and ending on and including December 31, 2010, up to the extent that the Company has not previously exercised the Put Option in full. The Put Option is exercisable at any time commencing on October 1, 2010 and ending on and including December 31, 2010, up to the extent that the investors have not previously exercised the Call Option in full. However, the investors shall have the right to terminate the Put Option if the investors reasonably determine that a material adverse event, condition or circumstance has occurred with respect to the prospects of the Company's AEOL 10150 drug candidate for acute radiation syndrome; provided that the Company's failure to receive a grant or financing shall not, by itself, constitute a material adverse event, condition or circumstance with respect thereto.

"This financing will allow Aeolus to initiate human clinical studies to test the safety and preliminary efficacy of AEOL 10150 as an adjunct to cancer radiation therapy. We have repeatedly seen the potential for our compound to improve side effects and potentially cure rates in various tumor types, and we are excited that this funding will provide an opportunity to begin testing in this area," stated John L. McManus, President and Chief Executive Officer of Aeolus Pharmaceuticals. "In addition, these funds will allow the Company to develop some of the other compounds in our pipeline that have shown significant potential in animal models. These additional development programs will supplement the broad medical countermeasure development program currently being funded in partnership with the NIH."