Edgar Filing: ARBIOS SYSTEMS INC

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2009

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from ___________ to __________

Commission file number: 000-32603

ARBIOS SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Delaware	91-1955323
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

80 Commerce Drive, Allendale, NJ	07401
(Address of principal executive offices)	(Zip Code)

(201) 995-1919

(Registrant's telephone number, including area code)

530 S. Lake Avenue, Unit 363, Pasadena, CA 91101

(Former name, former address and former fiscal year, if changed since last report)

______________________________

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated filer o	Accelerated filer o
Non-accelerated filer o (do not check if a smaller reporting company)	Smaller reporting company x

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

On September 30, 2009, there were 50,000,000 shares of common stock, $.001 par value per share, issued and outstanding.

ARBIOS SYSTEMS, INC.

FORM 10-Q

TABLE OF CONTENTS

PAGE NO.

PART I. FINANCIAL INFORMATION


Item 1.	Financial Statements:

	Condensed Balance Sheets as of September 30, 2009 (unaudited) and
	December 31, 2008 (audited)	4

	Condensed Statements of Operations for the three and nine months ended
	September 30, 2009 and 2008 and from August 23, 2000 (inception) through
	September 30, 2009 (unaudited)	5

	Condensed Statements of Cash Flows for the nine months ended
	September 30, 2009 and 2008 and from August 23, 2000 (inception) through
	September 30, 2009 (unaudited)	6

	Condensed Statement of Stockholders’ Equity (Deficit) from August 23, 2000 (inception)
	through September 30, 2009 (unaudited)	7

	Notes to Condensed Financial Statements	12

Item 2.	Management's Discussion and Analysis of Financial Condition and Results
	of Operations	19

Item 3.	Qualitative and Quantitative Disclosures About Market Risk...............................	23

Item 4T.	Controls and Procedures	23

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	23

Item 1A.	Risk Factors	24

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24

Item 3.	Defaults Upon Senior Securities	24

Item 4.	Submission of Matters to a Vote of Security Holders	24

Item 5.	Other Information	24

Item 6.	Exhibits	24

SIGNATURES		25

PART I - FINANCIAL INFORMATION

ITEM 1. Condensed Financial Statements

ARBIOS SYSTEMS, INC.
(A Development Stage Company)
CONDENSED BALANCE SHEETS


	Successor			Predecessor
	September 30, 2009			December 31,
ASSETS	(Unaudited)			2008

Current assets
Cash	$	193,815		$	370,686
Cash held in attorney trust		270,323			-
Prepaid expenses		-			21,506
Total current assets		464,138			392,192

Receivable		-			200,000
Property and equipment, net		-			6,177
Investment		-			86,209
Other assets		-			750

Total assets	$	464,138		$	685,328

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable	$	470,870		$	194,046
Accrued expenses		-			286,888
Total current liabilities		470,870			480,934

Long term contract obligations		-			150,000
Total liabilities		470,870			630,934

Stockholders' equity (deficit)
Successor common stock, $.001 par value; 100,000,000 shares authorized; 50,000,000
shares issued and outstanding at September 30, 2009		50,000			-
Predecessor common stock, $.001 par value; 100,000,000 shares authorized; 25,792,747
shares issued and outstanding at December 31, 2008		-			25,792
Additional paid-in capital		143,256			21,617,075
Receivable for stock issuance		(199,988	)		-
Deficit accumulated during the development stage		-			(21,588,473	)
Total stockholders' equity (deficit)		(6,732	)		54,394

Total liabilities and stockholders' equity (deficit)	$	464,138		$	685,328

The accompanying notes are an integral part of these condensed financial statements.

ARBIOS SYSTEMS, INC.

(A Development Stage Company)

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

	Predecessor			Predecessor			Predecessor			Predecessor			Predecessor
	For the three months ended September 30,						For the nine months ended September 30,						Inception to
	2009			2008			2009			2008			September 30, 2009

Revenues	$	-		$	-		$	-		$	-		$	320,966

Operating expenses:
General and administrative		256,348			147,103			660,795			1,358,718			13,902,846
Research and development		-			164,350			-			1,220,747			9,325,632
Total operating expenses		256,348			311,453			660,795			2,579,465			23,228,478

Operating loss		(256,348	)		(311,453	)		(660,795	)		(2,579,465	)		(22,907,512	)

Other income (expense):
Loss from disposition of fixed assets		(3,120	)		-			(3,120	)		-			(3,120	)
Interest income		-			3,786			229			32,264			497,748
Gain on sale of HepatAssist program, net								-			-			404,863
Loss on investment		-			-			(86,209	)		-			(86,209	)
Interest expense		-			-			-			-			(244,138	)
Total other income (expense)		(3,120	)		3,786			(89,100	)		32,264			569,144

Loss before reorganization items, net		(259,468	)		(307,667	)		(749,895	)		(2,547,201	)		(22,338,368	)

Reorganization items, net		147,885			-			(111,243	)		-			(111,243	)

Net loss	$	(111,583	)	$	(307,667	)	$	(861,138	)	$	(2,547,201	)	$	(22,449,611	)

Net loss per share:
Basic and diluted	$	(0.00	)	$	(0.01	)	$	(0.03	)	$	(0.10	)

Weighted-average shares:
Basic and diluted		26,892,442			25,792,747			25,249,003			25,712,950

The accompanying notes are an integral part of these condensed financial statements.

ARBIOS SYSTEMS, INC.

(A Development Stage Company)

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	Predecessor			Predecessor			Predecessor
	For the nine months ended September 30,						Inception to
	2009			2008			September 30, 2009
Cash flows from operating activities:
Net loss	$	(861,138	)	$	(2,547,201	)	$	(22,449,611	)
Adjustments to reconcile net loss to net cash
used in operating activities:
Amortization of debt discount		-			-			244,795
Depreciation and amortization		2,757			32,190			338,794
Patent rights impairment		-			-			91,694
Issuance of common stock, options and warrants for compensation		-			441,055			4,071,460
Issuance of warrants for patent acquistion		-			-			74,570
Settlement of accrued expense		-			-			54,401
Deferred compensation costs		-			-			319,553
Loss on disposition of fixed assets		3,120			2,207			8,157
Loss on disposition of investment		86,209			-			86,209
Gain on sale of HepatAssist program, net		-			-			(404,863	)
Non-cash reorganization items, net		(226,103	)		-			(226,103	)
Changes in operating assets and liabilities:
Prepaid expenses		21,506			35,459			-
Deferred financing costs		-			16,757			-
Other assets		750			68,686			-
Accounts payable		322,927			(114,149	)		516,971
Accrued expenses		(106,888	)		(97,367	)		86,498
Other liabilities		-			-			64,695
Contract obligations		(150,000	)		(100,000	)		-
Net cash used in operating activities		(906,860	)		(2,262,363	)		(17,122,780	)

Cash flows from investing activities:
Additions of property and equipment		-			-			(149,467	)
Proceeds from sale of fixed assets		300			4,175			4,476
Proceeds from sale of HepatAssist program		200,000			-			450,000
Purchase of short term investments		-			-			(21,866,787	)
Maturities of short term investments		-			-			21,866,787
Net cash provided from investing activities		200,300			4,175			305,009

Cash flows from financing activities:
Proceeds from issuance of convertible debt		-			-			400,000
Proceeds from common stock option/warrant exercise		-			-			67,900
Net proceeds from issuance of common stock and warrants		800,012			-			16,597,092
Net proceeds from issuance of preferred stock		-			-			238,732
Payments on capital lease obligation, net		-			-			(21,815	)
Net cash provided by financing activities		800,012			-			17,281,909
Net (decrease) increase in cash		93,452			(2,258,188	)		464,138

Cash at beginning of period		370,686			2,735,944			-

Cash at end of period	$	464,138		$	477,756		$	464,138

Supplemental disclosures of non-cash financing activity
Issuance of securities for obligation related to finder's fees	$	-		$	-		$	47,500

The accompanying notes are an integral part of these condensed financial statements.

ARBIOS SYSTEMS, INC.

(A Development Stage Company)

CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

PERIOD FROM AUGUST 23, 2000 (INCEPTION) TO SEPTEMBER 30, 2009

(Unaudited)

																Deficit
																Accumulated
									Additional		Receivable					During the
	Preferred Stock				Common Stock				Paid-In		for Stock		Deferred			Development
	Shares		Amount		Shares		Amount		Capital		Issuance		Costs			Stage			Total

Balance, August 23,
2000 (inception) restated		-	$	-		-	$	-	$	-	$	-	$	-		$	-		$	-
for effect of reverse merger with Historical Autographs U.S.A. Inc.

Stock issuance
in exchange for cash						5,000,000		50		4,950										5,000

Net loss																	(9,454	)		(9,454	)

Balance, December 31,
2000, as restated		-		-		5,000,000		50		4,950		-		-			(9,454	)		(4,454	)

Issuance of junior preferred stock
for cash of $250,000 and in
exchange for $400,000 in patent rights,
research and development costs,
and employee loanout costs less
issuance expenses
of $11,268, June 29, 2001		681,818		7						958,278				(343,553	)					614,732

Issuance of common stock in exchange
for patent rights and deferred research
and development costs						362,669		4		547,284										547,288

Services receivable														(550,000	)					(550,000	)

Deferred employee
loan-out costs
receivable earned														82,888						82,888

Net loss																	(237,574	)		(237,574	)

Balance, December 31, 2001		681,818		7		5,362,669		54		1,510,512		-		(810,665	)		(247,028	)		452,880

The accompanying notes are an integral part of these condensed financial statements.

ARBIOS SYSTEMS, INC.

(A Development Stage Company)

CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

PERIOD FROM AUGUST 23, 2000 (INCEPTION) TO SEPTEMBER 30, 2009

(Unaudited)

																	Deficit
																	Accumulated
									Additional			Receivable					During the
	Preferred Stock				Common Stock				Paid-In			for Stock		Deferred			Development
	Shares		Amount		Shares		Amount		Capital			Issuance		Costs			Stage			Total

Amendment of December 31, 2001
agreement for the issuance of
common stock agreement in
exchange for research and
development services										(495,599	)				550,000						54,401

Deferred employee loan out
costs receivable earned															171,776						171,776

Issuance of common
stock for compensation						70,000		1		10,499											10,500

Issuance of common stock for cash						999,111		9		149,857											149,866

Net loss																		(494,780	)		(494,780	)

Balance, December 31, 2002		681,818		7		6,431,780		64		1,175,269			-		(88,889	)		(741,808	)		344,643

Issuance of common stock for cash
less issuance expense of $2,956						417,000		417		246,827											247,244

Issuance of common stock in private
placement for cash less
issuance expense of $519,230						4,000,000		4,000		3,476,770											3,480,770

Issuance of common stock
for convertible debenture less
issuance expense of $49,500						400,000		400		350,100											350,500

Shares issued in connection with
acquisition of Historical Autographs
U.S.A., Inc. on October 30, 2003						1,220,000		8,263		(8,263	)										-

The accompanying notes are an integral part of these condensed financial statements.

ARBIOS SYSTEMS, INC.

(A Development Stage Company)

CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

PERIOD FROM AUGUST 23, 2000 (INCEPTION) TO SEPTEMBER 30, 2009

(Unaudited)

Deficit

Accumulated

Additional

Receivable

During the

Preferred Stock

Common Stock

Paid-In

for Stock

Deferred

Development

Amount

Capital

Issuance

Costs

Stage

Total

Value of warrants and beneficial

conversion feature of bridge loan

244,795

Deferred employee loan-out