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 March 31, 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.)

200 E. Del Mar Blvd., Suite 320, Pasadena, CA	91105
(Address of principal executive offices)	(Zip Code)

(626) 356-3105

(Registrant's telephone number, including area code)

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 o 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 April 30, 2009, there were 24,356,247 shares of common stock, $.001 par value per share, issued and outstanding.

ARBIOS SYSTEMS, INC.

FORM 10-Q

		PAGE NO.
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements:

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

	Condensed Statements of Operations for the three months ended March 31, 2009 and 2008 and from August 23, 2000 (inception) through March 31, 2009 (unaudited)	5

	Condensed Statements of Cash Flows for the three months ended March 31, 2009 and 2008 and from August 23, 2000 (inception) through March 31, 2009 (unaudited)	6

	Condensed Statement of Stockholders’ Equity (Deficit) from August 23, 2000 (inception) through March 31, 2009 (unaudited)	7

	Notes to Condensed Financial Statements	12

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19

Item 4T.	Controls and Procedures	19

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	20

Item 1A.	Risk Factors	20

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20

Item 3.	Defaults Upon Senior Securities	20

Item 4.	Submission of Matters to a Vote of Security Holders	20

Item 5.	Other Information	20

Item 6.	Exhibits	20

SIGNATURES		21

ITEM 1. Condensed Financial Statements

ARBIOS SYSTEMS, INC.
(Debtor-in-Possession)
(A Development Stage Company)
CONDENSED BALANCE SHEETS

	March 31, 2009			December 31,
ASSETS	(Unaudited)			2008

Current assets
Cash and cash equivalents	$	116,700		$	370,686
Restricted Cash		100,000			-
Prepaid expenses		147,835			21,506
Receivable		200,000			-
Total current assets		564,535			392,192

Receivable		-			200,000
Property and equipment-Net		5,258			6,177
Investment		-			86,209
Other assets		750			750

Total assets	$	570,543		$	685,328

LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY

Current liabilities
Accounts payable	$	89,583		$	194,046
Deposit from Arbios Acquisition Partners, LLC		100,000			-
Accrued expenses		345,000			286,888
Total current liabilities		534,583			480,934

Liabilities subject to settlement under reorganization proceedings		111,029			-
Long term contract obligations		150,000			150,000
Total liabilities		795,612			630,934

Stockholders' (deficit) equity
Common stock, $.001 par value; 100,000,000 shares authorized; 24,356,247 and 25,792,747
shares issued and outstanding at March 31, 2009 and December 31, 2008, respectively		24,356			25,792
Additional paid-in capital		21,618,511			21,617,075
Deficit accumulated during the development stage		(21,867,936	)		(21,588,473	)
Total stockholders' (deficit) equity		(225,069	)		54,394

Total liabilities and stockholders' (deficit) equity	$	570,543		$	685,328

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

ARBIOS SYSTEMS, INC.

(Debtor-in-Possession)

(A Development Stage Company)

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

	For the three months ended March 31,						Inception to
	2009			2008			March 31, 2009

Revenues	$	-		$	-		$	320,966

Operating expenses:
General and administrative		119,619			719,494			13,361,670
Research and development		-			710,426			9,325,632
Total operating expenses		119,619			1,429,920			22,687,302

Loss before reorganization costs
and other income (expense)		(119,619	)		(1,429,920	)		(22,366,336	)

Reorganization costs and other income (expense):
Reorganization costs		(73,864	)		-			(73,864	)
Interest income		229			20,300			497,748
Gain on Sale of HepatAssist program (net)		-			-			404,863
Loss on investment		(86,209	)		-			(86,209	)
Interest expense		-			-			(244,138	)
Total reorganization costs and other income (expense)		(159,844	)		20,300			498,400


Net loss	$	(279,463	)	$	(1,409,620	)	$	(21,867,936	)

Net loss per share:
Basic and diluted	$	(0.01	)	$	(0.06	)

Weighted-average shares:
Basic and diluted		24,499,897			25,595,769

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

ARBIOS SYSTEMS, INC.

(Debtor-in-Possession)

(A Development Stage Company)

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the three months ended March 31,						Inception to
	2009			2008			March 31, 2009
Cash flows from operating activities:
Net loss	$	(279,463	)	$	(1,409,620	)	$	(21,867,936	)
Adjustments to reconcile net loss to net cash
used in operating activities:
Amortization of debt discount		-			-			244,795
Depreciation and amortization		919			10,796			336,956
Patent rights impairment		-			-			91,694
Issuance of common stock, options and warrants for compensation		-			305,362			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		-			-			5,037
Loss on disposition of investment		86,209			-			86,209
Gain on sale of HepatAssist program		-			-			(404,863	)
Changes in operating assets and liabilities:
Prepaid expenses		(126,329	)		9,881			(147,837	)
Other assets		-			20,939			(750	)
Accounts payable		(104,463	)		9,278			89,583
Accrued expenses		58,112			53,116			251,498
Other liabilities		-			-			64,695
Liabilities subject to settlement under reorganization proceedings		111,029			-			111,029
Contractual obligation		-			(100,000	)		150,000
Net cash used in operating activities		(253,986	)		(1,100,248	)		(16,469,906	)

Cash flows from investing activities:
Additions of property and equipment		-			-			(149,467	)
Proceeds from sale of fixed assets		-			-			4,176
Proceeds from sale of HepatAssist program		-			-			250,000
Purchase of short term investments		-			-			(21,866,787	)
Maturities of short term investments		-			-			21,866,787
Net cash provided from investing activities		-			-			104,709

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		-			-			15,797,080
Net proceeds from issuance of preferred stock		-			-			238,732
Payments on capital lease obligation, net		-			-			(21,815	)
Net cash provided by financing activities		-			-			16,481,897
Net (decrease) increase in cash		(253,986	)		(1,100,248	)		116,700

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

Cash at end of period	$	116,700		$	1,635,696		$	116,700

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.

(Debtor-in-Possession)

(A Development Stage Company)

CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

PERIOD FROM AUGUST 23, 2000 (INCEPTION) TO MARCH 31, 2009

(Unaudited)

														Deficit
														Accumulated
									Additional					During the
	Preferred Stock				Common Stock				Paid-In		Deferred			Development
	Shares		Amount		Shares		Amount		Capital		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, fresearch 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.

(Debtor-in-Possession)

(A Development Stage Company)

CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

PERIOD FROM AUGUST 23, 2000 (INCEPTION) TO MARCH 31, 2009

(Unaudited)

															Deficit
															Accumulated
									Additional						During the
	Preferred Stock				Common Stock				Paid-In			Deferred			Development
	Shares		Amount		Shares		Amount		Capital			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.

(Debtor-in-Possession)

(A Development Stage Company)

CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

PERIOD FROM AUGUST 23, 2000 (INCEPTION) TO MARCH 31, 2009

(Unaudited)

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

Value of warrants and beneficial conversion feature of bridge loan												244,795							244,795

Deferred employee loan-out costs receivable earned														88,889					88,889

Preferred Stock Converted to Common Stock		(681,818	)		(7	)		681,818		7

Net loss																(885,693	)		(885,693	)

Balance, December 31, 2003		-			-			13,150,598		13,151		5,485,498		-		(1,627,501	)		3,871,148

Issuance of common stock options and warrants for compensation												972,430							972,430

Exercise of common stock options								18,000		18		2,682							2,700

Issuance of securities for payable								47,499		47		47,451							47,498

Net loss																(3,327,827	)		(3,327,827	)

Balance, December 31, 2004		-			-			13,216,097		13,216		6,508,061		-		(4,955,328	)		1,565,949

Issuance of common stock in private placement for cash less issuance expense of $384,312								2,991,812		2,992		6,224,601							6,227,593

Issuance of common stock options and warrants for compensation												557,080							557,080

Exercise of common stock options								25,000		25		62,475							62,500

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

ARBIOS SYSTEMS, INC.

(Debtor-in-Possession)

(A Development Stage Company)

CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

PERIOD FROM AUGUST 23, 2000 (INCEPTION) TO MARCH 31, 2009

(Unaudited)

Deficit

Accumulated

Additional

During the

Preferred Stock

Common Stock

Paid-In

Deferred

Development

Amount

Capital

Costs

Stage

Total

Net loss

(3,823,903

)

(3,823,903

)

Balance, December 31, 2005

16,232,909

16,233

13,352,217

(8,779,231