<html>
  <head>
    <title>
</title>
</head>
  <body bgcolor="#ffffff">
    <div>&#160;</div>
    <div>
      <hr style="MARGIN-TOP: -5px; COLOR: #000000" noshade size="4">
      <hr style="MARGIN-TOP: -10px; COLOR: #000000" noshade size="1">
    </div>
    <div>&#160;</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 style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <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="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): <strong>July 10,
      2006</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><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>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td valign="top" width="24%" 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 align="left" valign="top" width="24%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td valign="top" width="24%" 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="24%">
              <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 align="left" valign="top" width="24%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td valign="top" width="24%">
              <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>
    <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="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">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div>
        <hr style="COLOR: black" align="center" noshade size="1" width="15%"><br></div>
    </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 cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="4%">&#160;</td>
            <td align="left" valign="top" width="1%">
              <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: Wingdings 2, serif">&#163;</font></div>
            </td>
            <td align="left" valign="top" width="66%">
              <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">&#160;Written
                communications pursuant to Rule 425 under the Securities Act (17
                CFR
                230.425)</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%">&#160;</td>
            <td align="left" valign="top" width="1%">
              <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: Wingdings 2, serif">&#163;</font></div>
            </td>
            <td align="left" valign="top" width="66%">
              <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">&#160;Soliciting
                material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
                240.14a-12)</font></div>
            </td>
          </tr>

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

          <tr>
            <td align="left" valign="top" width="4%">&#160;</td>
            <td align="left" valign="top" width="1%">
              <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: Wingdings 2, serif">&#163;</font></div>
            </td>
            <td align="left" valign="top" width="66%">
              <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">&#160;Pre-commencement
                communications pursuant to Rule 14d-2(b) under the Exchange Act (17
                CFR
                240.14d-2(b))</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%">&#160;</td>
            <td align="left" valign="top" width="1%">
              <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: Wingdings 2, serif">&#163;</font></div>
            </td>
            <td align="left" valign="top" width="66%">
              <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">&#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 style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <hr style="MARGIN-TOP: -5px; COLOR: #000000" noshade size="1">
      <hr style="MARGIN-TOP: -13px; COLOR: #000000" noshade size="4">
    </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">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div><br><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 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
      July
      14, 2006, Aeolus Pharmaceuticals, Inc. (&#8220;Aeolus&#8221;) entered into an Employment
      Agreement with John L. McManus under which Mr. McManus was appointed President
      and Chief Operating Officer of Aeolus and will perform services related to
      duties and responsibilities commensurate with his titles. Pursuant to the
      agreement, Mr. McManus will be paid $20,850 a month. Aeolus will also grant
      John
      McManus a stock option to purchase 250,000 shares of Aeolus common stock with
      an
      exercise price equal to the closing price of Aeolus&#8217; common stock, as reported
      on the Over the Counter Bulletin Board, on the day of the grant, July 14, 2006.
      The options will vest at a rate of 20,833 per month from the grant date for
      twelve months, provided that John McManus is an employee or consultant of Aeolus
      on the applicable vesting date. In the event of a sale of Aeolus, through a
      merger or otherwise, all of the options shall be fully vested and immediately
      exercisable. In addition, the agreement provides that Mr. John McManus will
      be
      entitled to receive a cash bonus of not less than $100,000 if during the term
      of
      the agreement Aeolus enters into a definitive agreement for a development or
      partnership with another life sciences company for the joint development or
      commercialization of any of Aeolus&#8217; owned or in-licensed patent rights or for a
      change of control of Aeolus, including through an acquisition or merger. The
      initial term of the agreement runs until June 30, 2007 unless terminated
      earlier. The agreement will automatically renew for additional one-year periods,
      unless either party gives written notice at least 90 days prior to the
      commencement of the next year of the agreement term, of such party&#8217;s intent not
      to renew the agreement. If the agreement is terminated by Aeolus for any reason
      other than for cause, Aeolus shall pay John McManus all payments due and owing,
      if any, under this agreement. On each July 14th during the term of the
      employment agreement, John McManus shall receive an additional stock option
      to
      purchase 250,000 shares of Aeolus common stock with an exercise price equal
      to
      the closing price of Aeolus&#8217; common stock, as reported on the Over the Counter
      Bulletin Board, on the day of the grant. The additional options shall vest
      on
      the same terms set forth above. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      preceding description is not complete and is qualified in its entirety by
      reference to the Employment Agreement, a copy of which </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">is
      attached as Exhibit 10.1 to this Current Report on Form 8-K.</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
      July
      10, 2006, Aeolus amended and restated its Consulting Agreement, dated June
      16,
      2005, with McManus &amp; Company, Inc. (&#8220;M&amp;C&#8221;) under which M&amp;C provides
      services on behalf of Aeolus in certain areas, including: audit coordination,
      facilitation and administration; shareholder services; accounting; legal
      coordination; and financial statement preparation and reporting. In connection
      with the amendment and restatement of the agreement, Michael P. McManus,
      Executive Vice President of M&amp;C, was appointed Chief Financial Officer,
      Treasurer and Secretary of Aeolus on July 10, 2006. Under the Consulting
      Agreement, M&amp;C will be paid $25,000 per month. Aeolus will also grant
      Michael McManus a stock option to purchase 90,000 shares of Aeolus common stock
      with an exercise price equal to the closing price of Aeolus&#8217; common stock, as
      reported on the Over the Counter Bulletin Board, on the day of the grant, July
      10, 2006. The options will vest at a rate of 7,500 per month from the grant
      date
      for twelve months, provided that Michael McManus is an employee or consultant
      of
      Aeolus on the applicable vesting date. In the event of a sale of Aeolus, through
      a merger or otherwise, all of the options shall be fully vested and immediately
      exercisable. The agreement also provides for certain cash bonus payments to
      McManus &amp; Company, Inc. in connection with the occurrence of certain events
      as set forth in the agreement, including a $50,000 bonus in the event of a
      change of control of Aeolus. The initial term of the agreement runs until June
      30, 2008 unless terminated earlier. The agreement will automatically renew
      for
      additional one-year periods, unless either party gives written notice at least
      90 days prior to the commencement of the next year of the agreement term, of
      such party&#8217;s intent not to renew the agreement. If the agreement is terminated
      by Aeolus for any reason other than for cause, Aeolus shall pay M&amp;C all
      payments due and owing, if any, under this agreement. On each July 1st during
      the term of the consulting agreement, Michael McManus shall receive an
      additional stock option to purchase 90,000 shares of Aeolus common stock with
      an
      exercise price equal to the closing price of Aeolus&#8217; common stock, as reported
      on the Over the Counter Bulletin Board, on the day of the grant. The additional
      options shall vest on the same terms set forth above. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      preceding description is not complete and is qualified in its entirety by
      reference to the Consulting Agreement, a copy of which </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">is
      attached as Exhibit 10.2 to this Current Report on Form 8-K.</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, on July 10, 2006, the board of directors of Aeolus awarded Richard
      P.
      Burgoon, Jr., our Chief Executive Officer, a bonus of $5,719 to be used
      exclusively for the higher level of federal and state income and Medicare taxes
      payable by Mr. Burgoon for the bonus paid to Mr. Burgoon on March 31, 2006.
      The
      board of directors of Aeolus also increased the quarterly bonus payable to
      Mr.
      Burgoon by $5,282 to reflect the higher level of federal and state income and
      Medicare taxes payable by Mr. Burgoon. The gross quarterly bonus amount of
      $37,707 is used exclusively to exercise a portion of a stock option granted
      to
      Mr. Burgoon on July 12, 2005 by Aeolus ($20,833 to purchase 20,833 shares of
      Aeolus Common stock) and for the federal, state and Medicare taxes due on such
      bonus.</font></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" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">2</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
        </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"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      1.02 Termination of 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
      July
      10, 2006, in connection with the execution of the employment agreement between
      Aeolus and John McManus described under Item 1.01 of this Current Report on
      Form
      8-K, Aeolus and John McManus terminated their Consulting Agreement dated June
      20, 2005, under which Mr. McManus was appointed President of Aeolus and
      performed services related to duties and responsibilities commensurate with
      this
      title. Pursuant to the consulting agreement, John McManus was paid $10,000
      per
      month and Aeolus granted John McManus stock options. In addition, under the
      consulting agreement, Aeolus awarded John McManus a cash bonus of $75,000 upon
      Aeolus&#8217; execution of the definitive agreement for the equity financing completed
      by Aeolus in June 2006. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      preceding description is not complete and is qualified in its entirety by
      reference to the Consulting Agreement, a copy of which is attached as Exhibit
      10.119 to the Current Report on Form 8-K filed by Aeolus on June 21,
      2005.</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"><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
      5.02. Departure of Directors or Principal Officers; Election of Directors;
      Appointment of Principal Officers. </strong></font></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">As
      described under Item 1.01 above, John McManus was appointed President and Chief
      Operating Officer of Aeolus on July 14, 2006. Mr. McManus, age 40, has served
      as
      President of Aeolus since June 2005. In addition, Mr. John McManus has served
      as
      the President of M&amp;C and McManus Financial Consultants, Inc. (&#8220;MFC&#8221;), which
      provide strategic, financial and investor relations advice to senior managements
      and boards of directors of public companies. He has acted as President of
      M&amp;C and MFC since 1989. From 2001 to 2003, Mr. John McManus also served as
      Vice President, Finance and Strategic Planning of Spectrum Pharmaceuticals,
      Inc., where he had primary responsibility for restructuring Spectrum&#8217;s
      operations and finances, including the design and implementation of strategic
      and financial plans. Mr. John McManus received his degree in Business
      Administration from the University of Southern California. He is the brother
      of
      Michael McManus, Aeolus&#8217; Chief Financial Officer, Treasurer and Secretary. A
      summary of the terms Mr. John McManus&#8217; Employment Agreement with Aeolus is
      included under Item 1.01 above.</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">As
      set
      forth under Item 1.01 above, Michael McManus was appointed Chief Financial
      Officer, Treasurer and Secretary of Aeolus on July 10, 2006. Mr. Michael
      McManus, age 37, has served as Chief Accounting Officer, Treasurer and Secretary
      of Aeolus since June 2005. In addition, Mr. Michael McManus has served as the
      Executive Vice President of M&amp;C and MFC since 1995. Prior to joining
      M&amp;C, from 1991 to 1995, he worked at PricewaterhouseCoopers LLP as an audit
      manager for healthcare and financial services companies. Mr. Michael McManus
      is
      a retired Certified Public Accountant and holds a B.S. in Accounting from the
      University of Southern California. He is the brother of John McManus, Aeolus&#8217;
President and Chief Operating Officer. A summary of the terms of the Consulting
      Agreement between M&amp;C and Aeolus is included under Item 1.01
      above.</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 u</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">nder
      </font><a name="HH_27"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Item</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></a><a name="HH_28"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.01</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      of this
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Current
      Report on Form 8-K is incorporated herein by reference.</font></a></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 align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(c)</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><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">&#160;</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>Exhibit
                #</strong></font></div>
            </td>
            <td align="left" valign="top" width="2%">&#160;</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">Employment
                Agreement dated July 14, 2006 between Aeolus Pharmaceuticals, Inc.
                and
                John L. McManus</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">Consulting
                Agreement dated July 10, 2006 between Aeolus Pharmaceuticals, Inc.
                and
                McManus &amp; Company, Inc.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>&#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" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">3</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </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">&#160;</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>Date:
              July 14, 2006</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>&#160;</td>
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">By:&#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
              Financial Officer, Treasurer and
              Secretary</font></td>
          </tr>

      </table>
    </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: 8pt; FONT-FAMILY: ">4</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
        </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="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">&#160;</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>Exhibit
                #</strong></font></div>
            </td>
            <td align="left" valign="top" width="2%">&#160;</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">Employment
                Agreement dated July 14, 2006 between Aeolus Pharmaceuticals, Inc.
                and
                John L. McManus</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">Consulting
                Agreement dated July 10, 2006 between Aeolus Pharmaceuticals, Inc.
                and
                McManus &amp; Company, Inc.</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 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 style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">5</font></div>
      <div style="WIDTH: 100%; TEXT-ALIGN: center">
        <hr style="COLOR: black" noshade size="3">
      </div>
    </div>
    <div id="HDR">
      <div id="GLHDR" style="WIDTH: 100%" align="right">
      </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": "06962410"}, "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):
July 10,
      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
      July
      14, 2006, Aeolus Pharmaceuticals, Inc. ("Aeolus") entered into an Employment
      Agreement with John L. McManus under which Mr. McManus was appointed President
      and Chief Operating Officer of Aeolus and will perform services related to
      duties and responsibilities commensurate with his titles. Pursuant to the
      agreement, Mr. McManus will be paid $20,850 a month. Aeolus will also grant
      John
      McManus a stock option to purchase 250,000 shares of Aeolus common stock with
      an
      exercise price equal to the closing price of Aeolus' common stock, as reported
      on the Over the Counter Bulletin Board, on the day of the grant, July 14, 2006.
      The options will vest at a rate of 20,833 per month from the grant date for
      twelve months, provided that John McManus is an employee or consultant of Aeolus
      on the applicable vesting date. In the event of a sale of Aeolus, through a
      merger or otherwise, all of the options shall be fully vested and immediately
      exercisable. In addition, the agreement provides that Mr. John McManus will
      be
      entitled to receive a cash bonus of not less than $100,000 if during the term
      of
      the agreement Aeolus enters into a definitive agreement for a development or
      partnership with another life sciences company for the joint development or
      commercialization of any of Aeolus' owned or in-licensed patent rights or for a
      change of control of Aeolus, including through an acquisition or merger. The
      initial term of the agreement runs until June 30, 2007 unless terminated
      earlier. The agreement will automatically renew for additional one-year periods,
      unless either party gives written notice at least 90 days prior to the
      commencement of the next year of the agreement term, of such party's intent not
      to renew the agreement. If the agreement is terminated by Aeolus for any reason
      other than for cause, Aeolus shall pay John McManus all payments due and owing,
      if any, under this agreement. On each July 14th during the term of the
      employment agreement, John McManus shall receive an additional stock option
      to
      purchase 250,000 shares of Aeolus common stock with an exercise price equal
      to
      the closing price of Aeolus' common stock, as reported on the Over the Counter
      Bulletin Board, on the day of the grant. The additional options shall vest
      on
      the same terms set forth above.
The
      preceding description is not complete and is qualified in its entirety by
      reference to the Employment Agreement, a copy of which
is
      attached as Exhibit 10.1 to this Current Report on Form 8-K.
On
      July
      10, 2006, Aeolus amended and restated its Consulting Agreement, dated June
      16,
      2005, with McManus & Company, Inc. ("M&C") under which M&C provides
      services on behalf of Aeolus in certain areas, including: audit coordination,
      facilitation and administration; shareholder services; accounting; legal
      coordination; and financial statement preparation and reporting. In connection
      with the amendment and restatement of the agreement, Michael P. McManus,
      Executive Vice President of M&C, was appointed Chief Financial Officer,
      Treasurer and Secretary of Aeolus on July 10, 2006. Under the Consulting
      Agreement, M&C will be paid $25,000 per month. Aeolus will also grant
      Michael McManus a stock option to purchase 90,000 shares of Aeolus common stock
      with an exercise price equal to the closing price of Aeolus' common stock, as
      reported on the Over the Counter Bulletin Board, on the day of the grant, July
      10, 2006. The options will vest at a rate of 7,500 per month from the grant
      date
      for twelve months, provided that Michael McManus is an employee or consultant
      of
      Aeolus on the applicable vesting date. In the event of a sale of Aeolus, through
      a merger or otherwise, all of the options shall be fully vested and immediately
      exercisable. The agreement also provides for certain cash bonus payments to
      McManus & Company, Inc. in connection with the occurrence of certain events
      as set forth in the agreement, including a $50,000 bonus in the event of a
      change of control of Aeolus. The initial term of the agreement runs until June
      30, 2008 unless terminated earlier. The agreement will automatically renew
      for
      additional one-year periods, unless either party gives written notice at least
      90 days prior to the commencement of the next year of the agreement term, of
      such party's intent not to renew the agreement. If the agreement is terminated
      by Aeolus for any reason other than for cause, Aeolus shall pay M&C all
      payments due and owing, if any, under this agreement. On each July 1st during
      the term of the consulting agreement, Michael McManus shall receive an
      additional stock option to purchase 90,000 shares of Aeolus common stock with
      an
      exercise price equal to the closing price of Aeolus' common stock, as reported
      on the Over the Counter Bulletin Board, on the day of the grant. The additional
      options shall vest on the same terms set forth above.
The
      preceding description is not complete and is qualified in its entirety by
      reference to the Consulting Agreement, a copy of which
is
      attached as Exhibit 10.2 to this Current Report on Form 8-K.
In
      addition, on July 10, 2006, the board of directors of Aeolus awarded Richard
      P.
      Burgoon, Jr., our Chief Executive Officer, a bonus of $5,719 to be used
      exclusively for the higher level of federal and state income and Medicare taxes
      payable by Mr. Burgoon for the bonus paid to Mr. Burgoon on March 31, 2006.
      The
      board of directors of Aeolus also increased the quarterly bonus payable to
      Mr.
      Burgoon by $5,282 to reflect the higher level of federal and state income and
      Medicare taxes payable by Mr. Burgoon. The gross quarterly bonus amount of
      $37,707 is used exclusively to exercise a portion of a stock option granted
      to
      Mr. Burgoon on July 12, 2005 by Aeolus ($20,833 to purchase 20,833 shares of
      Aeolus Common stock) and for the federal, state and Medicare taxes due on such
      bonus.
2
Item
      1.02 Termination of a Material Definitive Agreement.
On
      July
      10, 2006, in connection with the execution of the employment agreement between
      Aeolus and John McManus described under Item 1.01 of this Current Report on
      Form
      8-K, Aeolus and John McManus terminated their Consulting Agreement dated June
      20, 2005, under which Mr. McManus was appointed President of Aeolus and
      performed services related to duties and responsibilities commensurate with
      this
      title. Pursuant to the consulting agreement, John McManus was paid $10,000
      per
      month and Aeolus granted John McManus stock options. In addition, under the
      consulting agreement, Aeolus awarded John McManus a cash bonus of $75,000 upon
      Aeolus' execution of the definitive agreement for the equity financing completed
      by Aeolus in June 2006.
The
      preceding description is not complete and is qualified in its entirety by
      reference to the Consulting Agreement, a copy of which is attached as Exhibit
      10.119 to the Current Report on Form 8-K filed by Aeolus on June 21,
      2005.
Item
      5.02. Departure of Directors or Principal Officers; Election of Directors;
      Appointment of Principal Officers.
As
      described under Item 1.01 above, John McManus was appointed President and Chief
      Operating Officer of Aeolus on July 14, 2006. Mr. McManus, age 40, has served
      as
      President of Aeolus since June 2005. In addition, Mr. John McManus has served
      as
      the President of M&C and McManus Financial Consultants, Inc. ("MFC"), which
      provide strategic, financial and investor relations advice to senior managements
      and boards of directors of public companies. He has acted as President of
      M&C and MFC since 1989. From 2001 to 2003, Mr. John McManus also served as
      Vice President, Finance and Strategic Planning of Spectrum Pharmaceuticals,
      Inc., where he had primary responsibility for restructuring Spectrum's
      operations and finances, including the design and implementation of strategic
      and financial plans. Mr. John McManus received his degree in Business
      Administration from the University of Southern California. He is the brother
      of
      Michael McManus, Aeolus' Chief Financial Officer, Treasurer and Secretary. A
      summary of the terms Mr. John McManus' Employment Agreement with Aeolus is
      included under Item 1.01 above.
As
      set
      forth under Item 1.01 above, Michael McManus was appointed Chief Financial
      Officer, Treasurer and Secretary of Aeolus on July 10, 2006. Mr. Michael
      McManus, age 37, has served as Chief Accounting Officer, Treasurer and Secretary
      of Aeolus since June 2005. In addition, Mr. Michael McManus has served as the
      Executive Vice President of M&C and MFC since 1995. Prior to joining
      M&C, from 1991 to 1995, he worked at PricewaterhouseCoopers LLP as an audit
      manager for healthcare and financial services companies. Mr. Michael McManus
      is
      a retired Certified Public Accountant and holds a B.S. in Accounting from the
      University of Southern California. He is the brother of John McManus, Aeolus'
President and Chief Operating Officer. A summary of the terms of the Consulting
      Agreement between M&C and Aeolus is included under Item 1.01
      above.
The
      information u
nder
Item
1.01
of this
Current
      Report on Form 8-K is incorporated herein by reference.
Item
      9.01. Financial Statements and Exhibits.
(c)
Exhibits
Exhibit
                #
Description
10.1
Employment
                Agreement dated July 14, 2006 between Aeolus Pharmaceuticals, Inc.
                and
                John L. McManus
10.2
Consulting
                Agreement dated July 10, 2006 between Aeolus Pharmaceuticals, Inc.
                and
                McManus & Company, Inc.
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:
              July 14, 2006
By:
/s/ Michael
              P. McManus
Michael
              P. McManus
Chief
              Financial Officer, Treasurer and
              Secretary
4
Exhibit
      Index
Exhibit
                #
Description
10.1
Employment
                Agreement dated July 14, 2006 between Aeolus Pharmaceuticals, Inc.
                and
                John L. McManus
10.2
Consulting
                Agreement dated July 10, 2006 between Aeolus Pharmaceuticals, Inc.
                and
                McManus & Company, Inc.
5