|     X__ | QUARTERLY REPORT PURSUANT TO      SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF      1934 |
|-----------------------------|---------------------------------------------------------------------------------------------------|

| _____ | TRANSITION REPORT PURSUANT TO      SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF      1934 |
|-------|----------------------------------------------------------------------------------------------------|

|   | Commission      File Number |
|--------|-----------------------------|

|   | 0-50481 |
|--------|---------|

|   | AEOLUS      PHARMACEUTICALS, INC. |
|--------|-----------------------------------|

|   | (Exact      Name of Registrant as Specified in ItsCharter) |
|--------|------------------------------------------------------------|

|   |    |
|--------|--------------|

| Delaware                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |  56-1953785                                 |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|
|  (State      or Other Jurisdiction of Incorporation or    Organization)                                                                                                                                                                                                                                                                                                                                                                   |   |        (I.R.S. Employer Identification No.) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                             |
|                                       23811 Inverness Place                                    Laguna Niguel, California |   |   92677                                |
| (Address      of Principal Executive Offices)                                                                                                                                                                                                                                                                                                                                                                                                  |   |        (Zip Code)                           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                             |
|  (Registrant’s      Telephone Number, Including Area Code)949-481-9825                                                                                                                                                                                                                                                                                                                                                              |

|   |   |
|--------|--------|

|  Class                                       |  Outstanding      as ofFebruary 6,      2008 |
|---------------------------------------------------|---------------------------------------------------|
|  Common      Stock, par value $.01 per share |  31,952,749      shares                      |

----

|                                                                                                                                                                                                                                         |             |                                                                                                                           | Page   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------|--------------------------------------------------------------------------------------------------------------------------------|--------|
|  PART      I.                                FINANCIAL      INFORMATION |
|                                                                                                                                                                                                                                         | Item 1.          | Financial      Statements                                                                                                      |   |
|                                                                                                                                                                                                                                         |             |                                                                                                                           |   |
|                                                                                                                                                                                                                                         |             | Statement Regarding Financial      Information                                                                                 | 3      |
|                                                                                                                                                                                                                                         |             |                                                                                                                           |   |
|                                                                                                                                                                                                                                         |             | Condensed Consolidated Balance      Sheets as of December 31, 2007 (unaudited)      and September 30, 2007                | 4      |
|                                                                                                                                                                                                                                         |             |                                                                                                                           |   |
|                                                                                                                                                                                                                                         |             | Condensed Consolidated Statements      of Operations for the Three Months ended December 31, 2007 and 2006    (unaudited) | 5      |
|                                                                                                                                                                                                                                         |             |                                                                                                                           |   |
|                                                                                                                                                                                                                                         |             | Condensed Consolidated Statements      of Cash Flows for the Three Months ended December 31, 2007 and 2006    (unaudited)      | 6      |
|                                                                                                                                                                                                                                         |             |                                                                                                                           |   |
|                                                                                                                                                                                                                                         |             | Notes to Condensed Consolidated      Financial Statements                                                                      | 7      |
|                                                                                                                                                                                                                                         |             |                                                                                                                           |   |
|                                                                                                                                                                                                                                         | Item 2.          | Management’s Discussion and      Analysis of Financial Condition and Results of      Operations                          | 11     |
|                                                                                                                                                                                                                                         |             |                                                                                                                           |
|                                                                                                                                                                                                                                         | Item 3.          | Quantitative and Qualitative      Disclosures About Market Risk                                                                | 12     |
|                                                                                                                                                                                                                                         |             |                                                                                                                           |   |
|                                                                                                                                                                                                                                         | Item 4.          | Controls and      Procedures                                                                                                   | 12     |
|                                                                                                                                                                                                                                         |             |                                                                                                                           |   |
| PART      II.                                OTHER      INFORMATION          |
|                                                                                                                                                                                                                                         | Item 1.          | Legal      Proceedings                                                                                                         | 12     |
|                                                                                                                                                                                                                                         |             |                                                                                                                           |   |
|                                                                                                                                                                                                                                         | Item 1A.         | Risk    Factors                                                                                                                | 12     |
|                                                                                                                                                                                                                                         |             |                                                                                                                           |   |
|                                                                                                                                                                                                                                         | Item 2.          | Unregistered Sales of Equity      Securities and Use of Proceeds                                                               | 12     |
|                                                                                                                                                                                                                                         |             |                                                                                                                           |   |
|                                                                                                                                                                                                                                         | Item 3.          | Defaults      Upon Senior Securities                                                                                           | 12     |
|                                                                                                                                                                                                                                         |             |                                                                                                                           |   |
|                                                                                                                                                                                                                                         | Item 4.          | Submission of Matters to a Vote      of Security Holders                                                                       | 13     |
|                                                                                                                                                                                                                                         |             |                                                                                                                           |   |
|                                                                                                                                                                                                                                         | Item    5.  | Other      Information                                                                                                         | 13     |
|                                                                                                                                                                                                                                         |             |                                                                                                                           |
|                                                                                                                                                                                                                                         | Item 6.          | Exhibits                                                                                                                       | 13     |
|                                                                                                                                                                                                                                         |             |                                                                                                                           |   |
|                                                                                                                                                                                                                                         | SIGNATURES       | 13                                                                                                                             |

----

----

| AEOLUS      PHARMACEUTICALS, INC.                                                                                    |
|----------------------------------------------------------------------------------------------------------------------|
|                                                                                                                 |   |   |   |   |
| CONDENSED      CONSOLIDATED BALANCE SHEETS                                                                           |
| (In      thousands, except shares and per share data)                                                                |
|                                                                                                                 |   |   |   |   |
|                                                                                                                 | December      31, |   | September      30, |   |
|                                                                                                                 | 2007 |   | 2007 |   |
|                                                                                                                 | (Unaudited) |   |   |   |
| ASSETS                                                                                                               |
| Current      assets:                                                                                                 |   |   |   |   |
| Cash      and cash equivalents                                                                                       |   | $ | 1,127 |   | $ | 1,727 |   |
| Prepaids      and other current assets                                                                               |   |   | 41 |   |   | 79 |   |
| Total      current assets                                                                                            |   |   | 1,168 |   |   | 1,806 |   |
|                                                                                                                 |   |   |   |   |   |   |   |
| Investments                                                                                                          |   |   | 125 |   |   | 125 |   |
| Total      assets                                                                                                    |   | $ | 1,293 |   | $ | 1,931 |   |
|                                                                                                                 |   |   |   |   |   |   |   |
| LIABILITIES      AND STOCKHOLDERS' EQUITY                                                                            |
| Current      liabilities:                                                                                            |   |   |   |   |   |   |   |
| Accounts      payable                                                                                                |   | $ | 106 |   | $ | 266 |   |
| Accrued      expenses                                                                                                |   |   | 5 |   |   | 2 |   |
| Total      current liabilities                                                                                       |   |   | 111 |   |   | 268 |   |
|                                                                                                                 |   |   |   |   |   |   |   |
| Long-term      note payable                                                                                          |   |   | 495 |   |   | 483 |   |
| Total      liabilities                                                                                               |   |   | 606 |   |   | 751 |   |
|                                                                                                                 |   |   |   |   |   |   |   |
| Commitments      and contingences (Note F)                                                                           |   |   |   |   |   |   |   |
|                                                                                                                 |   |   |   |   |   |   |   |
| Stockholders'      equity:                                                                                           |   |   |   |   |   |   |   |
| Preferred      stock, $.01 par value per share, 10,000,000 shares      authorized:                                   |   |   |   |   |   |   |   |
| Series      B nonredeemable convertible preferred stock, 600,000      shares                                         |   |   |   |   |   |   |   |
| authorized;      475,087 shares issued and outstanding at December31,                                                |   |   |   |   |   |   |   |
| 2007      and September 30, 2007                                                                                     |   |   | 5 |   |   | 5 |   |
| Common      stock, $.01 par value per share, 150,000,000 shares      authorized;                                     |   |   |   |   |   |   |   |
|          31,952,749 shares issued and outstanding at December 31, 2007      and                       |   |   |   |   |   |   |   |
|    September      30, 2007                                                                            |   |   | 320 |   |   | 320 |   |
| Additional      paid-in capital                                                                                      |   |   | 156,929 |   |   | 156,781 |   |
| Accumulated      deficit                                                                                             |   |   | (156,567 | ) |   | (155,926 |  ) |
| Total      stockholders' equity                                                                                      |   |   | 687 |   |   | 1,180 |   |
| Total      liabilities and stockholders' equity                                                                      |   | $ | 1,293 |   | $ | 1,931 |   |
|                                                                                                                 |   |   |   |   |   |   |   |
| The      accompanying notes are an integral part of these unaudited condensed      consolidated financialstatements. |

----

| AEOLUS      PHARMACEUTICALS, INC. CONDENSED      CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)(In      thousands, except per share data) |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                             |   |   |   |   |   |   |
|                                                                                                                                             |   | Three      Months Ended |   |
|                                                                                                                                             |   | December      31, |   |
|                                                                                                                                             |   | 2007 |   |   | 2006 |   |
| Revenue                                                                                                                                          |   |   |   |   |   |   |
|     Grant      income                                                                                                        |   | $ | - |   |   | $ | - |   |
|                                                                                                                                             |   |   |   |   |   |   |   |   |
| Costs      and expenses:                                                                                                                         |   |   |   |   |   |   |   |   |
|     Research      and development                                                                                            |   |   | 254 |   |   |   | 336 |   |
|     General      and administrative                                                                                          |   |   | 395 |   |   |   | 629 |   |
|          Total      costs and expenses                                                              |   |   | 649 |   |   |   | 965 |   |
|                                                                                                                                             |   |   |   |   |   |   |   |   |
| Loss      from operations                                                                                                                        |   |   | (649 | ) |   |   | (965 | ) |
| Interest      income (expense), net                                                                                                              |   |   | 8 |   |   |   | 16 |   |
|                                                                                                                                             |   |   |   |   |   |   |   |   |
| Net      loss                                                                                                                                    |   | $ | (641 | ) |   | $ | (949 | ) |
|                                                                                                                                             |   |   |   |   |   |   |   |   |
| Net      loss per weighted share attributable to common    stockholders:                                                                         |   |   |   |   |   |   |   |   |
|    (basic      and diluted)                                                                                                       |   | $ | (0.02 | ) |   | $ | (0.03 | ) |
|                                                                                                                                             |   |   |   |   |   |   |   |   |
| Weighted      average common shares outstanding:                                                                                                 |   |   |   |   |   |   |   |   |
|    Basic      and diluted                                                                                                         |   |   | 31,953 |   |   |   | 29,269 |   |
|                                                                                                                                             |   |   |   |   |   |   |   |   |

----

| AEOLUS      PHARMACEUTICALS, INC.                                                                                  |                    |
|--------------------------------------------------------------------------------------------------------------------|-------------------------|
|                                                                                                               |                    |   |   |   |
| CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS                                                               |                    |
| (Unaudited)                                                                                                        |                    |
| (In      thousands)                                                                                                |                    |
|                                                                                                               |                    |   |   |   |
|                                                                                                               | Three      Months Ended |   |
|                                                                                                               | December      31,       |   |
|                                                                                                               | 2007                    |   | 2006 |   |
| Cash      flows from operating activities:                                                                         |                    |   |   |   |
| Net      loss                                                                                                      |                    | $ | (641 | ) |   | $ | (949 | ) |
| Adjustments      to reconcile net loss to net cash used in operating      activities:                              |                    |   |   |   |   |   |   |   |
| Noncash      compensation                                                                                     |                    |   | 147 |   |   |   | 238 |   |
| Noncash      interest and financing costs                                                                          |                    |   | 12 |   |   |   | 38 |   |
| Change      in assets and liabilities:                                                                        |                    |   |   |   |   |   |   |   |
|    Accounts      receivable, prepaids and other assets                                              |                    |   | 38 |   |   |   | 49 |   |
|    Accounts      payable and accrued expenses                                                       |                    |   | (157 | ) |   |   | (303 | ) |
| Net      cash used in operating activities                                                                         |                    |   | (600 | ) |   |   | (927 | ) |
|                                                                                                               |                    |   |   |   |   |   |   |   |
| Cash      flows from financing activities:                                                                         |                    |   |   |   |   |   |   |   |
| Proceeds      from exercise of stock options                                                                       |                    |   | - |   |   |   | 21 |   |
| Net      cash provided by financing activities                                                                     |                    |   | - |   |   |   | 21 |   |
|                                                                                                               |                    |   |   |   |   |   |   |   |
| Net      decrease in cash and cash equivalents                                                                     |                    |   | (600 | ) |   |   | (906 | ) |
| Cash      and cash equivalents at beginning of period                                                              |                    |   | 1,727 |   |   |   | 3,324 |   |
| Cash      and cash equivalents at end of period                                                                    |                    | $ | 1,127 |   |   | $ | 2,418 |   |
|                                                                                                               |                    |   |   |   |   |   |   |   |
|                                                                                                               |                    |   |   |   |   |   |   |   |
| The      accompanying notes are integral part of these unaudited condensed      consolidated financial statements. |                    |

----

----

| Number of Shares                    |   | Exercise Price |                                                                    | Expiration Date |
|-------------------------------------|--------|----------------|-------------------------------------------------------------------------|-----------------|
| 50,000                              |   |           |        $    0.50 |            | May      2011 |
| 2,500,000                           |   |           |        $    0.50 |            | November      2010 |
| 2,186,668                           |   |           |        $    0.75 |            | May      2012 |
| 7,000,000                           |   |           |        $    0.75 |            | June      2011 |
| 50,000                              |   |           |        $    1.00 |            | May      2011 |
| 35,000                              |   |           |        $    1.00 |            | July      2008 |
| 50,000                              |   |           |        $    1.50 |            | May      2011 |
| 50,000                              |   |           |        $    2.00 |            | May      2011 |
| 50,000                              |   |           |        $    2.50 |            | May      2011 |
| 410,400                             |   |           |        $    2.50 |            | April      2009 |
| 1,641,600                           |   |           |        $    4.00 |            | April      2009 |
|      1,759 |   |           |        $  19.90            |            | October      2008 |
| 14,025,427                          |   |           |        $    1.15 |            |   |

----

|                                              |   | Shares |      |   | Weighted      Average Exercise Price |   | Weighted      Average Remaining Contractual Term |   | Aggregate      Intrinsic Value |   |
|---------------------------------------------------|--------|--------|-----------|--------|--------------------------------------|--------|--------------------------------------------------|--------|--------------------------------|--------|
| Outstanding      at September 30, 2007            |   |   | 3,873,617 |   |                                 | $      | 2.72                                             |   | 7.3      years                 |   | $ | 2 |   |
| Granted                                           |   |   | 50,000    |   |                                 | $      | 0.45                                             |   |                           |   |   |   |   |
| Exercised                                         |   |   | ---       |   |                                 | $      | ---                                              |   |                           |   |   |   |   |
| Forfeited                                         |   |   | (98,336   | )      |                                 | $      | 0.95                                             |   |                           |   |   |   |   |
| Outstanding      at December 31, 2007 (unaudited) |   |   | 3,825,281 |   |                                 | $      | 2.73                                             |   | 7.1      years                 |   | $ | --- |   |
| Exercisable      at December 31, 2007 (unaudited) |   |   | 3,412,781 |   |                                 | $      | 2.98                                             |   | 6.8      years                 |   | $ | --- |   |

|                          |   | Options      Outstanding                     |                           | Options      Exercisable             |
|-------------------------------|--------|----------------------------------------------|--------------------------------|--------------------------------------|
| Range      of Exercise Prices |   | Number      Outstanding at December 31, 2007 |                           | Weighted      Average Exercise Price |   | Weighted      Average Remaining Contractual Life |   | Number      Exercisable at December 31, 2007 |   | Weighted      Average Exercise Price |
|                          |   |                                         |                           |                                 |   |   |   |   |   |   |   |   |
| $0.38      - 0.60             |   | 491,050                                      |       | $                                    | 0.55 |       | 9.0      years |       | 276,883 |       | $ | 0.56 |
| $0.68      - $0.80            |   | 464,161                                      |       | $                                    | 0.75 |       | 8.5      years |       | 464,161 |       | $ | 0.75 |
| $0.81      - $0.89            |   | 388,035                                      |                           | $                                    | 0.85 |   | 7.9      years |   | 388,035 |   | $ | 0.85 |
| $0.90                         |   | 392,050                                      |                           | $                                    | 0.90 |   | 8.9      years |   | 246,217 |   | $ | 0.90 |
| $0.91      - $1.45            |   | 224,500                                      |                           | $                                    | 1.04 |   | 8.3      years |   | 172,000 |   | $ | 1.05 |
| $1.50                         |   | 1,256,015                                    |                           | $                                    | 1.50 |   | 5.6      years |   | 1,256,015 |   | $ | 1.50 |
| $1.52      - $5.10            |   | 394,391                                      |                           | $                                    | 2.86 |   | 6.4      years |   | 394,391 |   | $ | 2.86 |
| $6.25      - $31.88           |   | 166,280                                      |                           | $                                    | 20.48 |   | 3.4      years |   | 166,280 |   | $ | 20.48 |
| $50.9375                      |   | 2,999                                        |                           | $                                    | 50.94 |   | 2.3      years |   | 2,999 |   | $ | 50.94 |
| $51.25                        |   | 45,800                                       |                           | $                                    | 51.25 |   | 2.3      years |   | 45,800 |   | $ | 51.25 |
| $0.38      - $51.25           |   | 3,825,281                                    |                           | $                                    | 2.73 |   | 7.1      years |   | 3,412,781 |   | $ | 2.98 |

|                                        |   | For      the three monthsDecember      31, |   |
|---------------------------------------------|--------|--------------------------------------------|--------|
|                                        |   | 2007                                       |   |   | 2006 |   |
| Research      and development expenses      |   | $                                          | 20     |   |   | $ | 73 |   |
| General      and administrative expenses    |   |                                       | 127    |   |   |   | 165 |   |
| Total      stock-based compensation expense |   | $                                          | 147    |   |   | $ | 238 |   |

----

|                                              |   | For      the three months December 31, |
|---------------------------------------------------|--------|----------------------------------------|
|                                              |   | 2007                                   |   | 2006 |
| Dividend      yield                               |   | 0%                                     |   | 0% |
| Expected      volatility                          |   | 197%                                   |   | 191% |
| Risk-free      interest rate                      |   | 4.6%                                   |   | 4.5%      - 5.0% |
| Expected      option life after shares are vested |   | 10      years                          |   | 10      years |

----

----

----

| Exhibit      # |   | Description                                                                                                                                                                                    |
|----------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|           |   |                                                                                                                                                                                           |
| 31.1           |   | Certification      of the Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a)      and 15d-14(a).                                                                                 |
|           |   |                                                                                                                                                                                           |
| 31.2      |   | Certification      of the Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a)      and 15d-14(a).                                                                                 |
| 32.1           |   | Certification      by the Chief Executive Officer and Chief Financial Officer pursuant to 18      U.S.C. §1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act      of 2002. |

| Date:                         February 6, 2008 | By:    | /s/      John L. McManus                                                                                                      |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                        |   | John      L. McManusPresident      and Chief Executive Officer(Principal      Executive Officer)                              |
|                                                                                                                                                                        |   |                                                                                                                          |
| Date:                         February 6, 2008 | By:    | /s/      Michael P. McManus                                                                                                   |
|                                                                                                                                                                        |   | Michael      P. McManusChief      Financial Officer, Treasurer and Secretary(Principal      Financial and Accounting Officer) |