Rendering
Component: (Network and Table) |
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Network | 0018 - Disclosure - A. Organization, Business and Summary of Significant Accounting Policies (Policies) (http://aols.com/role/A.OrganizationBusinessAndSummaryOfSignificantAccountingPoliciesPolicies) |
Table | (Implied) |
Slicers (applies to each fact value in each table cell)
Reporting Entity [Axis] | 0001261734 (http://www.sec.gov/CIK) |
A. Organization Business And Summary Of Significant Accounting Policies Policies | Period [Axis] |
---|
2011-10-01 - 2012-09-30 |
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A. Organization Business And Summary Of Significant Accounting Policies Policies | |
Basis of Presentation |
Basis of
Presentation
The consolidated
financial statements include the accounts of Aeolus and its wholly owned subsidiary. All significant intercompany accounts and
transactions have been eliminated. The Company uses the equity method to account for its 35.0% ownership interest in CPEC.
|
Use of Estimates |
Use of Estimates
The preparation
of financial statements in conformity with accounting principles generally accepted in the United States of America requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Such estimates include revenue recognition, warrant liability, allowance for doubtful accounts, stock-based compensation
and warrant expense. Actual results could differ from those estimates.
|
Cash and Cash Equivalents |
Cash and
Cash Equivalents
The Company
invests available cash in short-term bank deposits. Cash and cash equivalents include investments with maturities of three months
or less at the date of purchase. The carrying value of cash and cash equivalents approximate their fair market value at September 30,
2012 and 2011 due to their short-term nature.
|
Significant customer and accounts receivable |
Significant
customers and accounts receivable
For the year
ended September 30, 2012, the Companys primary customer was BARDA. For the year ended September 30, 2012, revenues
from BARDA comprised 100% of total revenues. As of September 30, 2012, the Companys receivable balances were comprised 100%
from this customer. Unbilled accounts receivable, included in accounts receivable, totaling $558,000 as of September 30, 2012 relate
to work that has been performed, though invoicing has not yet occurred. All of the unbilled receivables are expected to be billed
and collected within the next 12 months. Accounts receivable are stated at invoice amounts and consist primarily of amounts due
from HHS as well as amounts due under reimbursement contracts with other government entities and non-government and philanthropic
organizations. If necessary, the Company records a provision for doubtful receivables to allow for any amounts which may be unrecoverable.
This provision is based upon an analysis of the Companys prior collection experience, customer creditworthiness and current
economic trends. As of September 30, 2012 and 2011, an allowance for doubtful accounts was not recorded as the collection history
from the Companys customers indicated that collection was probable.
|
Concentrations of credit risk |
Concentrations
of credit risk
Financial instruments
that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts
receivable. The Company places its cash and cash equivalents with high quality financial institutions. Management believes that
the financial risks associated with its cash and cash equivalents and investments are minimal. Because accounts receivable consist
primarily of amounts due from the U.S. federal government agencies, management deems there to be minimal credit risk.
|
Revenue Recognition |
Revenue
Recognition
Aeolus recognizes
revenue in accordance with the authoritative guidance for revenue recognition. Revenue is recognized when all of the
following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery (or passage of title) has occurred
or services have been rendered, (iii) the sellers price to the buyer is fixed or determinable, and (iv) collectability is
reasonably assured.
The BARDA Contract
is classified as a cost-plus-fixed-fee contract. Aeolus recognizes government contract revenue in accordance
with the authoritative guidance for revenue recognition including the authoritative guidance specific to federal government contracts.
Reimbursable costs under the contract primarily include direct labor, subcontract costs, materials, equipment, travel, and indirect
costs. In addition, we receive a fixed fee under the BARDA Contract, which is unconditionally earned as allowable costs are incurred
and is not contingent on success factors. Reimbursable costs under this BARDA Contract, including the fixed fee, are generally
recognized as revenue in the period the reimbursable costs are incurred and become billable.
|
Fair Value of Financial Instruments |
Fair Value
of Financial Instruments
The carrying
amounts of our short-term financial instruments, which include cash and cash equivalents, accounts receivable, accounts payable,
and accrued liabilities approximate their fair values due to their short maturities.
|
Fair Value Measurements |
Fair
Value Measurements
The
Company adopted Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements and Disclosures, for financial
and non-financial assets and liabilities.
ASC
820 discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value
of future income or cash flow) and the cost approach (cost to replace the service capacity of an asset or replacement cost). The
Company utilizes the market approach. The statement utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques
used to measure fair value into three broad levels. The following is a brief description of those three levels:
· |
Level 1:
Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. |
· |
Level 2:
Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include
quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities
in markets that are not active. |
· |
Level 3:
Unobservable inputs that reflect the reporting entitys own assumptions. |
The
warrant liability is measured at fair market value on a recurring basis as of September 30, 2012 and 2011 and is summarized below
(in thousands):
Fair
value at September 30, 2012 |
|
|
Fair
value at September 30, 2011 |
|
Level
1 |
|
|
Level
2 |
|
|
Level
3 |
|
|
Level
1 |
|
|
Level
2 |
|
|
Level
3 |
|
$ |
|
|
|
$ |
|
|
|
$ |
19,319 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
23,405 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
following table summarizes, as of September 30, 2012, the warrant activity subject to Level 3 inputs which are measured on a recurring
basis:
Fair
value measurements of warrants using significant unobservable inputs (Level 3) |
|
Balance at September 30,
2011 |
|
$ |
23,405 |
|
Warrants exercised |
|
|
(17 |
) |
Change in fair value of warrant liability |
|
|
(4,069 |
) |
Balance at September 30, 2012 |
|
$ |
19,319 |
|
|
Research and Development |
Research and Development
Research and
development costs are expensed in the period incurred.
|
Leases |
Leases
The Company
leases office space and office equipment under month to month operating lease agreements. For the years ended September 30, 2012
and 2011, total rent expense was approximately $36,000 and $18,000, respectively.
|
Income Taxes |
Income Taxes
The Company
recognizes liabilities or assets for the deferred tax consequences of temporary differences between the tax bases of assets or
liabilities and their reported amounts in the financial statements. These temporary differences will result in taxable or deductible
amounts in future years when the reported amounts of the assets or liabilities are recovered or settled. A valuation allowance
is established when management determines that is more likely than not that all or a portion of a deferred tax asset will not be
realized. Management evaluates the Companys ability to realize its net deferred tax assets on a quarterly basis and valuation
allowances are provided, as necessary. During this evaluation, management reviews its forecasts of income in conjunction with other
positive and negative evidence surrounding the Companys ability to realize its deferred tax assets to determine if
a valuation allowance is required. Adjustments to the valuation allowance will increase or decrease the Companys income
tax provision or benefit. Management also applies the relevant guidance to determine the amount of income tax expense or benefit
to be allocated among continuing operations, discontinued operations, and items charged or credited directly to stockholders
equity (deficit).
A tax position
must meet a minimum probability threshold before a financial statement benefit is recognized. The minimum threshold is a tax position
that is more likely than not be sustained upon examination by the applicable taxing authority, including resolution of any related
appeals or litigation process, based on the technical merits of the position. The Company recognizes interest and penalties related
to uncertain tax positions in income tax expense.
|
Net Income (Loss) Per Common Share |
Net Income (Loss) Per Common
Share
The Company
computes basic net income (loss) per weighted average share attributable to common stockholders using the weighted average number
of shares of common stock outstanding during the period. The Company computes diluted net income (loss) per weighted average share
attributable to common stockholders using the weighted average number of shares of common and dilutive potential common shares
outstanding during the period. Potential common shares outstanding consist of stock options, convertible debt, warrants and convertible
preferred stock using the treasury stock method and are excluded if their effect is anti-dilutive. Diluted weighted average common
shares included incremental shares of approximately 11,156,000 and 22,828,000 shares for the fiscal years ended September 30,
2012 and 2011 issuable upon the exercise or conversion of convertible debt, stock options to purchase common stock, convertible
preferred stock and warrants to purchase common stock. Diluted weighted average common shares excluded incremental shares of approximately
61,847,000 and 48,577,000, respectively, for the fiscal year 2012 and 2011, due to their anti-dilutive effect.
|
|
Fiscal year ended September 30, |
|
|
|
|
2012 |
|
|
|
2011 |
|
Numerator: |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
1,698 |
|
|
$ |
299 |
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
Weighted-average number of shares basic |
|
|
61,593 |
|
|
|
59,474 |
|
Dilutive securities equity awards |
|
|
11,156 |
|
|
|
22,828 |
|
Weighted-average number of shares diluted |
|
|
72,749 |
|
|
|
82,302 |
|
|
|
|
|
|
|
|
|
|
Earnings per share basic |
|
$ |
0.03 |
|
|
$ |
0.01 |
|
Earnings per share diluted |
|
$ |
0.02 |
|
|
$ |
0.00 |
|
|
Accounting for Stock-Based Compensation |
Accounting for Stock-Based Compensation
The Company
recognizes stock based compensation expense in the statement of operations based upon the fair value of the equity award amortized
over the vesting period.
|
Segment Reporting |
Segment Reporting
The Company
currently operates in one segment.
|
Warrant Liability |
Warrant Liability
The Company
has warrants with an embedded feature that do not meet the requirements of derivative accounting per Accounting Standards Codification
(ASC) Topic 815. The Company records these warrants at their fair value in accordance with Accounting Standards Codification
(ASC) Topic 820, Fair Value Measurements and Disclosures.
Increases or
decreases in fair value of the warrants are included as a component of other income (expense) in the accompanying statement of
operations for the respective period. As of September 30, 2012, the liability for warrants decreased to approximately $19,319,000
from approximately $23,405,000 as of September 30, 2011, as a result of warrant exercises of $17,000 and a gain to the statements
of operations for the fiscal year ended September 30, 2012 of approximately $4,069,000. The warrant liability and revaluations
have not and will not have any impact on the Companys working capital, liquidity or business operations. Some of the Company's
warrants contain terms that limit the number of shares the Company would be required to issue thereunder unless the warrant holder
agrees to increase the limit prior to exercise. If the warrants outstanding as of September 30, 2012 were exercised in full without
regard to any current exercise limits contained therein, the Company would be required to issue a maximum of 59,149,999 shares
of common stock.
|
Fair
Value Measurements
The
Company adopted Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements and Disclosures, for financial
and non-financial assets and liabilities.
ASC
820 discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value
of future income or cash flow) and the cost approach (cost to replace the service capacity of an asset or replacement cost). The
Company utilizes the market approach. The statement utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques
used to measure fair value into three broad levels. The following is a brief description of those three levels:
· |
Level 1:
Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. |
· |
Level 2:
Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include
quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities
in markets that are not active. |
· |
Level 3:
Unobservable inputs that reflect the reporting entitys own assumptions. |
The
warrant liability is measured at fair market value on a recurring basis as of September 30, 2012 and 2011 and is summarized below
(in thousands):
Fair
value at September 30, 2012 |
|
|
Fair
value at September 30, 2011 |
|
Level
1 |
|
|
Level
2 |
|
|
Level
3 |
|
|
Level
1 |
|
|
Level
2 |
|
|
Level
3 |
|
$ |
|
|
|
$ |
|
|
|
$ |
19,319 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
23,405 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
following table summarizes, as of September 30, 2012, the warrant activity subject to Level 3 inputs which are measured on a recurring
basis:
Fair
value measurements of warrants using significant unobservable inputs (Level 3) |
|
Balance at September 30,
2011 |
|
$ |
23,405 |
|
Warrants exercised |
|
|
(17 |
) |
Change in fair value of warrant liability |
|
|
(4,069 |
) |
Balance at September 30, 2012 |
|
$ |
19,319 |
|
Segment Reporting
The Company
currently operates in one segment.
Concentrations
of credit risk
Financial instruments
that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts
receivable. The Company places its cash and cash equivalents with high quality financial institutions. Management believes that
the financial risks associated with its cash and cash equivalents and investments are minimal. Because accounts receivable consist
primarily of amounts due from the U.S. federal government agencies, management deems there to be minimal credit risk.
Leases
The Company
leases office space and office equipment under month to month operating lease agreements. For the years ended September 30, 2012
and 2011, total rent expense was approximately $36,000 and $18,000, respectively.
Revenue
Recognition
Aeolus recognizes
revenue in accordance with the authoritative guidance for revenue recognition. Revenue is recognized when all of the
following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery (or passage of title) has occurred
or services have been rendered, (iii) the sellers price to the buyer is fixed or determinable, and (iv) collectability is
reasonably assured.
The BARDA Contract
is classified as a cost-plus-fixed-fee contract. Aeolus recognizes government contract revenue in accordance
with the authoritative guidance for revenue recognition including the authoritative guidance specific to federal government contracts.
Reimbursable costs under the contract primarily include direct labor, subcontract costs, materials, equipment, travel, and indirect
costs. In addition, we receive a fixed fee under the BARDA Contract, which is unconditionally earned as allowable costs are incurred
and is not contingent on success factors. Reimbursable costs under this BARDA Contract, including the fixed fee, are generally
recognized as revenue in the period the reimbursable costs are incurred and become billable.
Basis of
Presentation
The consolidated
financial statements include the accounts of Aeolus and its wholly owned subsidiary. All significant intercompany accounts and
transactions have been eliminated. The Company uses the equity method to account for its 35.0% ownership interest in CPEC.
Cash and
Cash Equivalents
The Company
invests available cash in short-term bank deposits. Cash and cash equivalents include investments with maturities of three months
or less at the date of purchase. The carrying value of cash and cash equivalents approximate their fair market value at September 30,
2012 and 2011 due to their short-term nature.
Fair Value
of Financial Instruments
The carrying
amounts of our short-term financial instruments, which include cash and cash equivalents, accounts receivable, accounts payable,
and accrued liabilities approximate their fair values due to their short maturities.
Accounting for Stock-Based Compensation
The Company
recognizes stock based compensation expense in the statement of operations based upon the fair value of the equity award amortized
over the vesting period.
Significant
customers and accounts receivable
For the year
ended September 30, 2012, the Companys primary customer was BARDA. For the year ended September 30, 2012, revenues
from BARDA comprised 100% of total revenues. As of September 30, 2012, the Companys receivable balances were comprised 100%
from this customer. Unbilled accounts receivable, included in accounts receivable, totaling $558,000 as of September 30, 2012 relate
to work that has been performed, though invoicing has not yet occurred. All of the unbilled receivables are expected to be billed
and collected within the next 12 months. Accounts receivable are stated at invoice amounts and consist primarily of amounts due
from HHS as well as amounts due under reimbursement contracts with other government entities and non-government and philanthropic
organizations. If necessary, the Company records a provision for doubtful receivables to allow for any amounts which may be unrecoverable.
This provision is based upon an analysis of the Companys prior collection experience, customer creditworthiness and current
economic trends. As of September 30, 2012 and 2011, an allowance for doubtful accounts was not recorded as the collection history
from the Companys customers indicated that collection was probable.
Research and Development
Research and
development costs are expensed in the period incurred.
Income Taxes
The Company
recognizes liabilities or assets for the deferred tax consequences of temporary differences between the tax bases of assets or
liabilities and their reported amounts in the financial statements. These temporary differences will result in taxable or deductible
amounts in future years when the reported amounts of the assets or liabilities are recovered or settled. A valuation allowance
is established when management determines that is more likely than not that all or a portion of a deferred tax asset will not be
realized. Management evaluates the Companys ability to realize its net deferred tax assets on a quarterly basis and valuation
allowances are provided, as necessary. During this evaluation, management reviews its forecasts of income in conjunction with other
positive and negative evidence surrounding the Companys ability to realize its deferred tax assets to determine if
a valuation allowance is required. Adjustments to the valuation allowance will increase or decrease the Companys income
tax provision or benefit. Management also applies the relevant guidance to determine the amount of income tax expense or benefit
to be allocated among continuing operations, discontinued operations, and items charged or credited directly to stockholders
equity (deficit).
A tax position
must meet a minimum probability threshold before a financial statement benefit is recognized. The minimum threshold is a tax position
that is more likely than not be sustained upon examination by the applicable taxing authority, including resolution of any related
appeals or litigation process, based on the technical merits of the position. The Company recognizes interest and penalties related
to uncertain tax positions in income tax expense.
Use of Estimates
The preparation
of financial statements in conformity with accounting principles generally accepted in the United States of America requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Such estimates include revenue recognition, warrant liability, allowance for doubtful accounts, stock-based compensation
and warrant expense. Actual results could differ from those estimates.
Warrant Liability
The Company
has warrants with an embedded feature that do not meet the requirements of derivative accounting per Accounting Standards Codification
(ASC) Topic 815. The Company records these warrants at their fair value in accordance with Accounting Standards Codification
(ASC) Topic 820, Fair Value Measurements and Disclosures.
Increases or
decreases in fair value of the warrants are included as a component of other income (expense) in the accompanying statement of
operations for the respective period. As of September 30, 2012, the liability for warrants decreased to approximately $19,319,000
from approximately $23,405,000 as of September 30, 2011, as a result of warrant exercises of $17,000 and a gain to the statements
of operations for the fiscal year ended September 30, 2012 of approximately $4,069,000. The warrant liability and revaluations
have not and will not have any impact on the Companys working capital, liquidity or business operations. Some of the Company's
warrants contain terms that limit the number of shares the Company would be required to issue thereunder unless the warrant holder
agrees to increase the limit prior to exercise. If the warrants outstanding as of September 30, 2012 were exercised in full without
regard to any current exercise limits contained therein, the Company would be required to issue a maximum of 59,149,999 shares
of common stock.
Net Income (Loss) Per Common
Share
The Company
computes basic net income (loss) per weighted average share attributable to common stockholders using the weighted average number
of shares of common stock outstanding during the period. The Company computes diluted net income (loss) per weighted average share
attributable to common stockholders using the weighted average number of shares of common and dilutive potential common shares
outstanding during the period. Potential common shares outstanding consist of stock options, convertible debt, warrants and convertible
preferred stock using the treasury stock method and are excluded if their effect is anti-dilutive. Diluted weighted average common
shares included incremental shares of approximately 11,156,000 and 22,828,000 shares for the fiscal years ended September 30,
2012 and 2011 issuable upon the exercise or conversion of convertible debt, stock options to purchase common stock, convertible
preferred stock and warrants to purchase common stock. Diluted weighted average common shares excluded incremental shares of approximately
61,847,000 and 48,577,000, respectively, for the fiscal year 2012 and 2011, due to their anti-dilutive effect.
|
|
Fiscal year ended September 30, |
|
|
|
|
2012 |
|
|
|
2011 |
|
Numerator: |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
1,698 |
|
|
$ |
299 |
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
Weighted-average number of shares basic |
|
|
61,593 |
|
|
|
59,474 |
|
Dilutive securities equity awards |
|
|
11,156 |
|
|
|
22,828 |
|
Weighted-average number of shares diluted |
|
|
72,749 |
|
|
|
82,302 |
|
|
|
|
|
|
|
|
|
|
Earnings per share basic |
|
$ |
0.03 |
|
|
$ |
0.01 |
|
Earnings per share diluted |
|
$ |
0.02 |
|
|
$ |
0.00 |
|