<html>
  <head>
    <title>
</title>
</head>
  <body bgcolor="#ffffff"><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>UNITED
      STATES</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>SECURITIES
      AND EXCHANGE COMMISSION</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Washington,
      D.C. 20549</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
    <div>
      <hr style="COLOR: black" align="center" noshade size="1" width="15%">
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>FORM
      8-K</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>CURRENT
      REPORT</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Pursuant
      to Section 13 or 15(d) of</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>the
      Securities Exchange Act of 1934</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Date
      of
      Report (Date of earliest event reported): June 5, 2006</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>AEOLUS
      PHARMACEUTICALS, INC.</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Exact
      name of registrant as specified in its charter)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Delaware</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(State
      or
      other jurisdiction of incorporation)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td valign="top" width="27%" style="border-bottom: black thin solid;">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>0-50481</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
              </td>
              <td valign="top" width="27%">&#160;</td>
              <td valign="top" width="27%" style="border-bottom: black thin solid;">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>56-1953785</strong></font></div>
              </td>
            </tr>
            <tr>
              <td valign="top" width="27%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Commission
                  File Number)</font></div>
              </td>
              <td valign="top" width="27%">&#160;</td>
              <td valign="top" width="27%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(IRS
                  Employer Identification
                  No.)</font></div>
              </td>
            </tr>

        </table>
      </div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>23811
      Inverness Place</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Laguna
      Niguel, California 92677</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Address
      of Principal Executive Offices, Including Zip Code)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>949-481-9825
      </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Registrant&#8217;s
      Telephone Number, Including Area Code)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">
      <div>
        <hr style="COLOR: black" align="center" noshade size="1" width="15%">
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Check
      the
      appropriate box below if the Form 8-K filing is intended to simultaneously
      satisfy the filing obligation of the registrant under any of the following
      provisions:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 27pt;">
            </td>
            <td align="left" style="width: 9pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings 2">&#163;</font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;Written
                communications pursuant to Rule 425 under the Securities Act (17
                CFR
                230.425)</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 27pt;">
            </td>
            <td align="left" style="width: 9pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings 2">&#163;</font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;Soliciting
                material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
                240.14a-12)</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div>
          <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

              <tr valign="top" style="line-height: 1.25;">
                <td style="width: 27pt;">
                </td>
                <td align="left" style="width: 9pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings 2">&#163;</font></td>
                <td align="left">
                  <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;Pre-commencement
                    communications pursuant to Rule 14d-2(b) under the Exchange Act
                    (17 CFR
                    240.14d-2(b))</font></div>
                </td>
              </tr>

          </table>
        </div>
      </div>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 27pt;">
            </td>
            <td align="left" style="width: 9pt;">
              <div><font style="FONT-FAMILY: Wingdings 2" size="2">&#163;</font></div>
            </td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;Pre-commencement
                communications pursuant to Rule 13e-4(c) under the Exchange Act (17
                CFR
                240.13e-4(c))</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
        </div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">&#160;</div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      1.01.</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Entry
      into a Material Definitive Agreement. </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
      June
      5, 2006, Aeolus Pharmaceuticals, Inc. (the "Company") entered into a
      Subscription Agreement (the &#8220;Subscription Agreement&#8221;) with certain accredited
      investors (the &#8220;Investors&#8221;) pursuant to which the Company sold to the Investors
      an aggregate of 10,000,000 shares of the Company&#8217;s Common Stock (the &#8220;Shares&#8221;)
      at a purchase price of $0.50 per share for aggregate gross proceeds of
      $5,000,000, issued to the Investors warrants (the &#8220;Investor Warrants&#8221;) to
      purchase up to an aggregate of 7,000,000 shares of common stock of the Company
      with an exercise price of $0.75 per share and issued to Efficacy Biotech Master
      Fund Ltd. (&#8220;Efficacy Capital&#8221;) a warrant (the &#8220;Efficacy Warrant&#8221;) to purchase up
      to an aggregate of 4,000,000 shares of common stock of the Company with an
      exercise price of $0.50 per share (the "Financing"). The Investor Warrants
      are
      exercisable until June 5, 2011 and may be exercised by the holder only pursuant
      to a cash payment. . The Efficacy Warrant is exercisable until June 5, 2007
      and
      may be exercised by the holder only pursuant to a cash payment. The Subscription
      Agreement, the Form of Investor Warrant and the Efficacy Warrant are filed
      as
      Exhibit 10.1, Exhibit 10.3 and Exhibit 10.4, respectively, to this Current
      Report on Form 8-K and incorporated herein by this reference.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      connection with the Financing, the Company also granted registration rights
      to
      the Investors. Pursuant to the Subscription Agreement, the Company agreed to
      file a registration statement (the &#8220;Registration Statement&#8221;) with the Securities
      and Exchange Commission (the &#8220;SEC&#8221;) on or before September 3, 2006 covering the
      resale of the Shares and all shares of common stock issuable upon exercise
      of
      the Warrant. The Company also agreed to use commercially reasonable efforts
      to
      have the Registration Statement declared effective by the SEC within 120 days
      after it is filed with the SEC and to keep the Registration Statement effective
      for a specified period. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      the
      event the Registration Statement is not timely filed or declared effective
      by
      the SEC within the time periods described in the Subscription Agreement, and
      under certain other circumstances, the Company will be required to pay the
      Investor liquidated damages in the amounts prescribed in the Subscription
      Agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      net
      proceeds to the Company from the Financing, after deducting for expenses, were
      approximately $4.9 million. The Company intends to use the net proceeds from
      the
      Financing to finance the clinical development of AEOL 10150 and to fund ongoing
      operations of the Company.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      addition, the Company granted to Efficacy Capital the right to have one observer
      attend all meetings of the Board of Directors and all committees thereof subject
      to certain conditions. The Board Observer Letter dated June 5, 2006 by and
      among
      the Company and Efficacy Biotech Master Fund Ltd. are filed as Exhibit 10.5
      to
      this Current Report on Form 8-K and incorporated herein by this
      reference.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Company and Efficacy Capital also entered into a Right of First Offer agreement
      that provides that the Company will offer Efficacy Capital the right of first
      offer with respect to any future sales by the Company of its capital stock
      or
      debt securities. Under the terms of the agreement, Efficacy Capital will have
      the ability to participate in all or a portion of any offering of the Company&#8217;s
      capital stock or debt securities. The agreement expires on December 1, 2007.
      The
      Right of First Offer Agreement is filed as Exhibit 10.6 to this Current Report
      on Form 8-K and incorporated herein by this reference.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      accordance with the terms of the Certificate of Designations, Preferences and
      Rights of Series A Convertible Preferred Stock, the conversion price of the
      Company&#8217;s Series A Convertible Preferred Stock (the &#8220;Series A Preferred Stock&#8221;)
      and the exercise price of the warrants previously issued to the Series A
      Preferred Stock holders in November 2005 were each automatically reduced to
      $0.50 per share, the purchase price of the common stock issued in the Financing.
      Pursuant to a Conversion Agreement (the &#8220;Conversion Agreement&#8221;) by and among the
      Company, the holders of the Series A Preferred and the Investors entered into
      in
      connection with the Financing, all of the Series A Preferred outstanding was
      automatically converted to common stock following the closing of the Financing.
      The Conversion Agreement is filed as Exhibit 10.2 to this Current Report on
      Form
      8-K and incorporated herein by this reference.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
      June
      6, 2006, the Company issued a press release announcing the completion Financing.
      The text of the press release is set forth in Exhibit 99.1 attached to this
      Current Report on Form 8-K and incorporated herein by this reference.
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      3.02. </strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Unregistered
      Sales of Equity Securities.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      securities described in Item 1.01 above were offered and sold in reliance upon
      exemptions from registration pursuant to Section 4(2) under the Securities
      Act
      of 1933, as amended (the &#8220;Securities Act&#8221;), and Rule 506 promulgated thereunder.
      The agreements executed in connection with the Financing contain representations
      to support the Company&#8217;s reasonable belief that the Investor had access to
      information concerning the Company&#8217;s operations and financial condition, the
      Investor acquired the securities for its own account and not with a view to
      the
      distribution thereof in the absence of an effective registration statement
      or an
      applicable exemption from registration, and that the Investor is sophisticated
      within the meaning of Section 4(2) of the Securities Act and an &#8220;accredited
      investor&#8221; (as defined by Rule 501 under the Securities Act). In addition, the
      issuances did not involve any public offering; the Company made no solicitation
      in connection with the Financing other than communications with the Investor;
      the Company obtained representations from the Investor regarding its investment
      intent, experience and sophistication; and the Investor either received or
      had
      access to adequate information about the Company in order to make informed
      investment decisions.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">At
      the
      time of their issuance, the securities were deemed to be restricted securities
      for purposes of the Securities Act, and the certificates representing the
      securities bear legends to that effect.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      information set forth in Item 1.01 of this Current Report on Form 8-K is
      incorporated into this Item 3.02 by reference. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      9.01. Financial Statements and Exhibits.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(c)&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exhibits</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td valign="top" width="13%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Exhibit
                #</strong></font></div>
            </td>
            <td align="left" valign="top" width="2%">
            </td>
            <td valign="bottom" width="60%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Description</strong></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="13%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.1</font></div>
            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="60%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Subscription
                Agreement dated June 5, 2006 by and between the Company and the investors
                whose names appear on the signature pages thereof.</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="13%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.2</font></div>
            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="60%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Conversion
                Agreement dated June 5, 2006 by and among the Company, the Company&#8217;s
                Series A Preferred Stockholders, Efficacy Biotech Master Fund Ltd.
                and
                Ronin Capital, LLC.</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="13%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.3</font></div>
            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="60%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
                of Warrant to Purchase Common Stock dated June 5, 2006.</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="13%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.4</font></div>
            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="60%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Warrant
                to Purchase Common Stock dated June 5, 2006.by and among the Company
                and
                Efficacy Biotech Master Fund Ltd.</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="13%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.5</font></div>
            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="60%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Right
                of First Offer Agreement dated June 5, 2006 by and among the Company
                and
                Efficacy Biotech Master Fund Ltd.</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="13%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.6</font></div>
            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="60%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Board
                Observer Letter dated June 5, 2006 by and among the Company and Efficacy
                Biotech Master Fund Ltd.</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="13%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">99.1</font></div>
            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="60%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Press
                Release dated June 6, 2006</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="13%">&#160;</td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="60%">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">&#160;</div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>SIGNATURE</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pursuant
      to the requirements of the Securities Exchange Act of 1934, the Registrant
      has
      duly caused this Report to be signed on its behalf by the undersigned hereunto
      duly authorized.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <table align="center" bgcolor="#ffffff" border="0" cellpadding="0" cellspacing="0" width="100%">

          <tr valign="top" bgcolor="#ffffff">
            <td width="50%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
            <td width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
            <td width="49%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
          </tr>
          <tr valign="top" bgcolor="#ffffff">
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
            <td colspan="2"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">AEOLUS
              PHARMACEUTICALS, INC.</font></td>
          </tr>
          <tr valign="top" bgcolor="#ffffff">
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;<br>&#160;</font></td>
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;<br>&#160;</font></td>
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;<br>&#160;</font></td>
          </tr>
          <tr valign="top" bgcolor="#ffffff">
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">Date:&#160;June
              6,
              2006</font></td>
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;&#160;</font></td>
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">/s/&#160;Michael
              P. McManus</font></td>
          </tr>
          <tr valign="top" bgcolor="#ffffff">
            <td colspan="2"><font style="FONT-FAMILY: " size="1">&#160;</font></td>
            <td align="left">
              <hr style="COLOR: black" align="left" noshade size="2" width="80%"><font size="2">Michael
              P. McManus</font></td>
          </tr>
          <tr valign="top" bgcolor="#ffffff">
            <td colspan="2"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">Chief
              Accounting Officer, Treasurer and
              Secretary&#160;</font></td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 180pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">&#160;</div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Exhibit
      Index</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td valign="top" width="13%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Exhibit
                #</strong></font></div>
            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td valign="top" width="60%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Description</strong></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="13%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.1</font></div>
            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="60%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Subscription
                Agreement dated June 5, 2006 by and between the Company and the investors
                whose names appear on the signature pages thereof.</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="13%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.2</font></div>
            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="60%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Conversion
                Agreement dated June 5, 2006 by and among the Company, the Company&#8217;s
                Series A Preferred Stockholders, Efficacy Biotech Master Fund Ltd.
                and
                Ronin Capital, LLC.</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="13%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.3</font></div>
            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="60%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
                of Warrant to Purchase Common Stock dated June 5, 2006.</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="13%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.4</font></div>
            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="60%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Warrant
                to Purchase Common Stock dated June 5, 2006.by and among the Company
                and
                Efficacy Biotech Master Fund Ltd.</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="13%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.5</font></div>
            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="60%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Right
                of First Offer Agreement dated June 5, 2006 by and among the Company
                and
                Efficacy Biotech Master Fund Ltd.</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="13%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.6</font></div>
            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="60%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Board
                Observer Letter dated June 5, 2006 by and among the Company and Efficacy
                Biotech Master Fund Ltd.</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="13%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">99.1</font></div>
            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="60%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Press
                Release dated June 6, 2006</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="13%">&#160;</td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="60%">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">&#160;</div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">&#160;</div>
      <div id="HDR">&#160;</div>
    </div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">&#160;</div>
      <div id="PN">&#160;</div>
      <div id="HDR">&#160;</div>
    </div>
  </body>
</html>
{"company-data": {"conformed-name": "AEOLUS PHARMACEUTICALS, INC.", "cik": "0001261734", "assigned-sic": "2834", "irs-number": "561953785", "state-of-incorporation": "DE", "fiscal-year-end": "0930"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "000-50481", "film-number": "06888281"}, "business-address": {"street1": "23811 INVERNESS PLACE", "city": "LAGUNA NIGUEL", "state": "CA", "zip": "92677", "phone": "9494819825"}, "mail-address": {"street1": "23811 INVERNESS PLACE", "city": "LAGUNA NIGUEL", "state": "CA", "zip": "92677"}, "former-company": [{"former-conformed-name": "INCARA PHARMACEUTICALS CORP", "date-changed": "20031205"}, {"former-conformed-name": "INCARA INC", "date-changed": "20030828"}]}
UNITED
      STATES
SECURITIES
      AND EXCHANGE COMMISSION
Washington,
      D.C. 20549
FORM
      8-K
CURRENT
      REPORT
Pursuant
      to Section 13 or 15(d) of
the
      Securities Exchange Act of 1934
Date
      of
      Report (Date of earliest event reported): June 5, 2006
AEOLUS
      PHARMACEUTICALS, INC.
(Exact
      name of registrant as specified in its charter)
Delaware
(State
      or
      other jurisdiction of incorporation)
0-50481
56-1953785
(Commission
                  File Number)
(IRS
                  Employer Identification
                  No.)
23811
      Inverness Place
Laguna
      Niguel, California 92677
(Address
      of Principal Executive Offices, Including Zip Code)
949-481-9825
(Registrant's
      Telephone Number, Including Area Code)
Check
      the
      appropriate box below if the Form 8-K filing is intended to simultaneously
      satisfy the filing obligation of the registrant under any of the following
      provisions:
£
Written
                communications pursuant to Rule 425 under the Securities Act (17
                CFR
                230.425)
£
Soliciting
                material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
                240.14a-12)
£
Pre-commencement
                    communications pursuant to Rule 14d-2(b) under the Exchange Act
                    (17 CFR
                    240.14d-2(b))
£
Pre-commencement
                communications pursuant to Rule 13e-4(c) under the Exchange Act (17
                CFR
                240.13e-4(c))
Item
      1.01.
Entry
      into a Material Definitive Agreement.
On
      June
      5, 2006, Aeolus Pharmaceuticals, Inc. (the "Company") entered into a
      Subscription Agreement (the "Subscription Agreement") with certain accredited
      investors (the "Investors") pursuant to which the Company sold to the Investors
      an aggregate of 10,000,000 shares of the Company's Common Stock (the "Shares")
      at a purchase price of $0.50 per share for aggregate gross proceeds of
      $5,000,000, issued to the Investors warrants (the "Investor Warrants") to
      purchase up to an aggregate of 7,000,000 shares of common stock of the Company
      with an exercise price of $0.75 per share and issued to Efficacy Biotech Master
      Fund Ltd. ("Efficacy Capital") a warrant (the "Efficacy Warrant") to purchase up
      to an aggregate of 4,000,000 shares of common stock of the Company with an
      exercise price of $0.50 per share (the "Financing"). The Investor Warrants
      are
      exercisable until June 5, 2011 and may be exercised by the holder only pursuant
      to a cash payment. . The Efficacy Warrant is exercisable until June 5, 2007
      and
      may be exercised by the holder only pursuant to a cash payment. The Subscription
      Agreement, the Form of Investor Warrant and the Efficacy Warrant are filed
      as
      Exhibit 10.1, Exhibit 10.3 and Exhibit 10.4, respectively, to this Current
      Report on Form 8-K and incorporated herein by this reference.
In
      connection with the Financing, the Company also granted registration rights
      to
      the Investors. Pursuant to the Subscription Agreement, the Company agreed to
      file a registration statement (the "Registration Statement") with the Securities
      and Exchange Commission (the "SEC") on or before September 3, 2006 covering the
      resale of the Shares and all shares of common stock issuable upon exercise
      of
      the Warrant. The Company also agreed to use commercially reasonable efforts
      to
      have the Registration Statement declared effective by the SEC within 120 days
      after it is filed with the SEC and to keep the Registration Statement effective
      for a specified period.
In
      the
      event the Registration Statement is not timely filed or declared effective
      by
      the SEC within the time periods described in the Subscription Agreement, and
      under certain other circumstances, the Company will be required to pay the
      Investor liquidated damages in the amounts prescribed in the Subscription
      Agreement.
The
      net
      proceeds to the Company from the Financing, after deducting for expenses, were
      approximately $4.9 million. The Company intends to use the net proceeds from
      the
      Financing to finance the clinical development of AEOL 10150 and to fund ongoing
      operations of the Company.
In
      addition, the Company granted to Efficacy Capital the right to have one observer
      attend all meetings of the Board of Directors and all committees thereof subject
      to certain conditions. The Board Observer Letter dated June 5, 2006 by and
      among
      the Company and Efficacy Biotech Master Fund Ltd. are filed as Exhibit 10.5
      to
      this Current Report on Form 8-K and incorporated herein by this
      reference.
The
      Company and Efficacy Capital also entered into a Right of First Offer agreement
      that provides that the Company will offer Efficacy Capital the right of first
      offer with respect to any future sales by the Company of its capital stock
      or
      debt securities. Under the terms of the agreement, Efficacy Capital will have
      the ability to participate in all or a portion of any offering of the Company's
      capital stock or debt securities. The agreement expires on December 1, 2007.
      The
      Right of First Offer Agreement is filed as Exhibit 10.6 to this Current Report
      on Form 8-K and incorporated herein by this reference.
In
      accordance with the terms of the Certificate of Designations, Preferences and
      Rights of Series A Convertible Preferred Stock, the conversion price of the
      Company's Series A Convertible Preferred Stock (the "Series A Preferred Stock")
      and the exercise price of the warrants previously issued to the Series A
      Preferred Stock holders in November 2005 were each automatically reduced to
      $0.50 per share, the purchase price of the common stock issued in the Financing.
      Pursuant to a Conversion Agreement (the "Conversion Agreement") by and among the
      Company, the holders of the Series A Preferred and the Investors entered into
      in
      connection with the Financing, all of the Series A Preferred outstanding was
      automatically converted to common stock following the closing of the Financing.
      The Conversion Agreement is filed as Exhibit 10.2 to this Current Report on
      Form
      8-K and incorporated herein by this reference.
On
      June
      6, 2006, the Company issued a press release announcing the completion Financing.
      The text of the press release is set forth in Exhibit 99.1 attached to this
      Current Report on Form 8-K and incorporated herein by this reference.
2
Item
      3.02.
Unregistered
      Sales of Equity Securities.
The
      securities described in Item 1.01 above were offered and sold in reliance upon
      exemptions from registration pursuant to Section 4(2) under the Securities
      Act
      of 1933, as amended (the "Securities Act"), and Rule 506 promulgated thereunder.
      The agreements executed in connection with the Financing contain representations
      to support the Company's reasonable belief that the Investor had access to
      information concerning the Company's operations and financial condition, the
      Investor acquired the securities for its own account and not with a view to
      the
      distribution thereof in the absence of an effective registration statement
      or an
      applicable exemption from registration, and that the Investor is sophisticated
      within the meaning of Section 4(2) of the Securities Act and an "accredited
      investor" (as defined by Rule 501 under the Securities Act). In addition, the
      issuances did not involve any public offering; the Company made no solicitation
      in connection with the Financing other than communications with the Investor;
      the Company obtained representations from the Investor regarding its investment
      intent, experience and sophistication; and the Investor either received or
      had
      access to adequate information about the Company in order to make informed
      investment decisions.
At
      the
      time of their issuance, the securities were deemed to be restricted securities
      for purposes of the Securities Act, and the certificates representing the
      securities bear legends to that effect.
The
      information set forth in Item 1.01 of this Current Report on Form 8-K is
      incorporated into this Item 3.02 by reference.
Item
      9.01. Financial Statements and Exhibits.
(c)
Exhibits
Exhibit
                #
Description
10.1
Subscription
                Agreement dated June 5, 2006 by and between the Company and the investors
                whose names appear on the signature pages thereof.
10.2
Conversion
                Agreement dated June 5, 2006 by and among the Company, the Company's
                Series A Preferred Stockholders, Efficacy Biotech Master Fund Ltd.
                and
                Ronin Capital, LLC.
10.3
Form
                of Warrant to Purchase Common Stock dated June 5, 2006.
10.4
Warrant
                to Purchase Common Stock dated June 5, 2006.by and among the Company
                and
                Efficacy Biotech Master Fund Ltd.
10.5
Right
                of First Offer Agreement dated June 5, 2006 by and among the Company
                and
                Efficacy Biotech Master Fund Ltd.
10.6
Board
                Observer Letter dated June 5, 2006 by and among the Company and Efficacy
                Biotech Master Fund Ltd.
99.1
Press
                Release dated June 6, 2006
3
SIGNATURE
Pursuant
      to the requirements of the Securities Exchange Act of 1934, the Registrant
      has
      duly caused this Report to be signed on its behalf by the undersigned hereunto
      duly authorized.
AEOLUS
              PHARMACEUTICALS, INC.
Date: June
              6,
              2006
/s/ Michael
              P. McManus
Michael
              P. McManus
Chief
              Accounting Officer, Treasurer and
              Secretary
4
Exhibit
      Index
Exhibit
                #
Description
10.1
Subscription
                Agreement dated June 5, 2006 by and between the Company and the investors
                whose names appear on the signature pages thereof.
10.2
Conversion
                Agreement dated June 5, 2006 by and among the Company, the Company's
                Series A Preferred Stockholders, Efficacy Biotech Master Fund Ltd.
                and
                Ronin Capital, LLC.
10.3
Form
                of Warrant to Purchase Common Stock dated June 5, 2006.
10.4
Warrant
                to Purchase Common Stock dated June 5, 2006.by and among the Company
                and
                Efficacy Biotech Master Fund Ltd.
10.5
Right
                of First Offer Agreement dated June 5, 2006 by and among the Company
                and
                Efficacy Biotech Master Fund Ltd.
10.6
Board
                Observer Letter dated June 5, 2006 by and among the Company and Efficacy
                Biotech Master Fund Ltd.
99.1
Press
                Release dated June 6, 2006
5