AspenBio Pharma, Inc. (Form: 10-Q, Received: 08/05/2010 16:16:27)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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

For the quarterly period ended June 30, 2010

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to __________

Commission file number: 001-33675

ASPENBIO PHARMA, INC.

(Exact name of registrant as specified in its charter)

Colorado	84-1553387
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1585 South Perry Street, Castle Rock, Colorado 80104

(Address of principal executive offices) (Zip Code)

(303) 794-2000

(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 o

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 (§232.405 of this chapter) 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 the definitions 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 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 o No x

The number of shares of no par value common stock outstanding as of August 2, 2010 was 40,138,324.

ASPENBIO PHARMA, INC.

		Page


PART I - Financial Information

Item 1.	Condensed Financial Statements

	Balance Sheets as of June 30, 2010 (unaudited) and December 31, 2009	3

	Statements of Operations for the Three and Six Months Ended June 30, 2010 and 2009 (unaudited)	4

	Statements of Cash Flows for the Six Months Ended June 30, 2010 and 2009 (unaudited)	5

	Notes to Condensed Financial Statements (unaudited)	6

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	14

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20

Item 4.	Controls and Procedures	20

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	**

Item 5.	Other Information	**

Item 6.	Exhibits	21

	Signatures	22

** - Item is none or not applicable

PART I — FINANCIAL INFORMATION

Item I. Condensed Financial Statements

AspenBio Pharma, Inc.

	June 30, 2010 (Unaudited)				December 31, 2009

ASSETS

Current assets:
Cash and cash equivalents		$	12,523,434			$	13,366,777
Short-term investments			3,874,531				510,120
Accounts receivable, net (Note 8)			22,140				47,959
Inventories (Note 2)			275,784				339,546
Prepaid expenses and other current assets			150,133				163,029

Total current assets			16,846,022				14,427,431

Property and equipment, net (Note 3)			3,270,187				3,310,844

Other long-term assets, net (Note 4)			1,775,392				1,639,836

Total assets		$	21,891,601			$	19,378,111

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable		$	834,085			$	1,545,549
Accrued expenses			686,502				807,907
Current portion of notes and other obligations (Note 5)			105,980				107,417
Deferred revenue, current portion (Note 8)			746,062				813,947

Total current liabilities			2,372,629				3,274,820

Notes and other obligations, less current portion (Note 5)			2,602,530				2,655,418
Deferred revenue, less current portion (Note 8)			669,167				634,145

Total liabilities			5,644,326				6,564,383

Commitments and contingencies

Stockholders' equity (Notes 6 and 7):
Common stock, no par value, 60,000,000 shares authorized;
40,138,324 and 37,467,642 shares issued and outstanding			65,010,359				54,283,126
Accumulated deficit			(48,763,084	)			(41,469,398	)

Total stockholders' equity			16,247,275				12,813,728

Total liabilities and stockholders' equity		$	21,891,601			$	19,378,111

See Accompanying Notes to Unaudited Condensed Financial Statements

AspenBio Pharma, Inc.

Statements of Operations

Periods Ended June 30,

	Three Months Ended								Six Months Ended
	2010				2009				2010				2009
Sales (Note 8)		$	59,132			$	70,892			$	201,265			$	153,039
Cost of sales			33,960				170,663				99,526				286,889

Gross profit (loss)			25,172				(99,771	)			101,739				(133,850	)

Other revenue - fee (Note 8)			16,876				15,986				32,863				31,973

Operating expenses:
Selling, general and administrative
(includes non-cash compensation
of $724,924; $417,870; $1,319,676
and $805,997)			2,117,906				1,504,204				4,001,583				2,825,793
Research and development			1,311,235				2,241,840				3,355,432				3,658,320

Total operating expenses			3,429,141				3,746,044				7,357,015				6,484,113

Operating loss			(3,387,093	)			(3,829,829	)			(7,222,413	)			(6,585,990	)

Other income (expense):
Interest income			11,848				67,332				24,157				143,626
Interest expense			(47,005	)			(47,083	)			(95,430	)			(100,974	)
Other, net			—				30,135				—				43,135

Total other income (expense)			(35,157	)			50,384				(71,273	)			85,787

Net loss		$	(3,422,250	)		$	(3,779,445	)		$	(7,293,686	)		$	(6,500,203	)

Basic and diluted net loss per share		$	(.09	)		$	(.12	)		$	(.19	)		$	(.21	)

Basic and diluted weighted average number
of shares outstanding			39,174,507				31,727,422				38,342,121				31,668,904

See Accompanying Notes to Unaudited Condensed Financial Statements

AspenBio Pharma, Inc.

Statements of Cash Flows

Six Months Ended June 30, 2010 and 2009

	2010				2009
Cash flows from operating activities:
Net loss		$	(7,293,686	)		$	(6,500,203	)
Adjustments to reconcile net loss to
net cash used by operating activities
Depreciation and amortization			234,889				189,953
Amortization of license fee			(32,863	)			(31,973	)
Stock based compensation for services			1,319,676				805,997
Write-down of assets			56,225				4,338
(Increase) decrease in:
Accounts receivable			25,819				45,624
Inventories			63,762				(77,676	)
Prepaid expenses and other current assets			12,896				598,338
Increase (decrease) in:
Accounts payable			(711,464	)			(71,683	)
Accrued liabilities			(107,073	)			120,759
Accrued compensation			(14,332	)			(72,424	)

Net cash used by operating activities			(6,446,151	)			(4,988,950	)

Cash flows from investing activities:
Purchases of short-term investments			(3,909,994	)			(2,307,248	)
Sales of short-term investments			545,583				5,221,768
Purchases of property and equipment			(150,189	)			(67,663	)
Patent and trademark acquisition costs			(235,824	)			(160,283	)

Net cash provided by (used in) investing activities			(3,750,424	)			2,686,574

Cash flows from financing activities:
Repayment of notes payable			(54,325	)			(216,357	)
Proceeds from exercise of stock warrants and options			291,028				227,940
Net proceeds from issuance of common stock			9,116,529				—

Net cash provided by financing activities			9,353,232				11,583

Net decrease in cash and cash equivalents			(843,343	)			(2,290,793	)
Cash and cash equivalents at beginning of period			13,366,777				11,819,505

Cash and cash equivalents at end of period		$	12,523,434			$	9,528,712

Supplemental disclosure of cash flow information:
Cash paid during the period for interest		$	93,110			$	100,844

See Accompanying Notes to Unaudited Condensed Financial Statements

AspenBio Pharma, Inc.

Notes to Condensed Financial Statements

INTERIM FINANCIAL STATEMENTS

The accompanying financial statements of AspenBio Pharma, Inc. (the “Company,” “AspenBio” or “AspenBio Pharma”) have been prepared in accordance with the instructions to quarterly reports on Form 10-Q. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and changes in financial position at June 30, 2010, and for all periods presented have been made. Certain information and footnote data necessary for fair presentation of financial position and results of operations in conformity with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted. It is therefore suggested that these financial statements be read in conjunction with the summary of significant accounting policies and notes to financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, as amended. The results of operations for the periods ended June 30, 2010 are not necessarily an indication of operating results for the full year.

Note 1. Significant Accounting Policies:

Cash, cash equivalents and investments:

The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. From time to time, the Company’s cash account balances exceed the balances as covered by the Federal Deposit Insurance System. The Company has never suffered a loss due to such excess balances.

The Company invests excess cash from time to time in highly-liquid debt and equity investments of highly-rated entities which are classified as trading securities. The purpose of the investments is to fund research and development, product development, United States Food and Drug Administration (the “FDA”) approval-related activities and general corporate purposes. Such amounts are recorded at market values using Level 1 inputs in determining fair value and are classified as current, as the Company does not intend to hold the investments beyond twelve months. Investment securities classified as trading are those securities that are bought and held principally for the purpose of selling them in the near term with the objective of preserving principal and generating profits. These securities are reported at fair value with unrealized gains and losses reported as an element of other income (expense) in current period earnings. The Company’s Board of Directors (the “Board”) has approved an investment policy covering the investment parameters to be followed with the primary goals being the safety of principal amounts and maintaining liquidity of the fund. The policy provides for minimum investment rating requirements as well as limitations on investment duration and concentrations. During late 2008, based upon market conditions, the investment guidelines were temporarily tightened to raise the minimum acceptable investment ratings required for investments and shorten the maximum investment term, which criteria remain in effect. As of June 30, 2010, 73% of the investment portfolio was in cash equivalents, which is included with cash on the accompanying balance sheet, and the remaining funds were invested in short-term marketable securities with none individually representing more than 6% of the portfolio and none with maturities past February 2011. To date the Company’s cumulative market loss from the investments has not been significant.

Fair value of financial instruments:

The Company accounts for financial instruments under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic (“ASC”) 820 (formerly - Statement of Financial Accounting Standard (“SFAS”) No. 157), Fair Value Measurements . This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements, ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:

Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 — observable inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and

Level 3 — assets and liabilities whose significant value drivers are unobservable.

Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on the Company’s market assumptions. Unobservable inputs require significant management judgment or estimation. In some cases, the inputs used to measure an asset or liability may fall into different levels of the fair value hierarchy. In those instances, the fair value measurement is required to be classified using the lowest level of input that is significant to the fair value measurement. Such determination requires significant management judgment. There were no financial assets or liabilities measured at fair value, with the exception of cash, cash equivalents and short-term investments as of June 30, 2010 and December 31, 2009.

The carrying amounts of the Company’s financial instruments (other than cash, cash equivalents and investments as discussed above) approximate fair value because of their variable interest rates and / or short maturities combined with the recent historical interest rate levels.

Income (loss) per share:

Basic earnings (loss) per share includes no dilution and is computed by dividing net earnings (loss) available to stockholders by the weighted number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the Company’s earnings. The effect of the inclusion of the dilutive shares would have resulted in a decrease in loss per share. Accordingly, the weighted average shares outstanding have not been adjusted for dilutive shares. Outstanding stock options and warrants are not considered in the calculation, as the impact of the potential common shares (totaling approximately 6,488,000 shares for the six months ended June 30, 2010, and approximately 4,834,000 shares for the six months ended June 30, 2009) would decrease loss per share.

Recently issued and adopted accounting pronouncements:

In October 2009, the FASB issued ASU 2009-13, “Revenue Recognition (Topic 605) — Multiple-Deliverable Revenue Arrangements.” This ASU eliminates the requirement that all undelivered elements must have objective and reliable evidence of fair value before a company can recognize the portion of the consideration that is attributable to items that already have been delivered. This may allow some companies to recognize revenue on transactions that involve multiple deliverables earlier than under the current requirements. Additionally, under the new guidance, the relative selling price method is required to be used in allocating consideration between deliverables and the residual value method will no longer be permitted. This ASU is effective prospectively for revenue arrangements entered into or materially modified beginning in fiscal 2011. A company may elect, but will not be required, to adopt the amendments in this ASU retrospectively for all prior periods. The Company is currently evaluating the requirements of this ASU and has not yet determined the impact, if any, that it will have on the financial statements.

In April 2010, the FASB issued ASU 2009-13, “Revenue Recognition – Milestone Method (Topic 605): Milestone Method of Revenue Recognition.” This ASU is effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted. If a vendor elects early adoption and the period of adoption is not the beginning of the entity’s fiscal year, the entity should apply the amendments retrospectively from the beginning of the year of adoption. The Company does not expect the provisions of ASU 2010-17 to have a material effect on the financial statements.

Note 2. Inventories:

Inventories consisted of the following:

	June 30, 2010 (Unaudited)		December 31, 2009
Finished goods	$	84,968	$	146,412
Work in process		11,375		11,375
Raw materials		179,441		181,759

	$	275,784	$	339,546

Note 3. Property and Equipment:

Property and equipment consisted of the following:

	June 30, 2010 (Unaudited)		December 31, 2009
Land and improvements	$	1,107,508	$	1,107,508
Building		2,589,231		2,589,231
Building improvements		235,946		234,942
Laboratory equipment		1,189,443		1,111,570
Office and computer equipment		354,909		283,597

Total cost		5,477,037		5,326,848
Less accumulated depreciation		2,206,850		2,016,004

	$	3,270,187	$	3,310,844

Note 4. Other Long-Term Assets:

Other long-term assets consisted of the following:

	June 30, 2010 (Unaudited)		December 31, 2009
Patents and trademarks and applications, net of
accumulated amortization of $140,785 and $99,597	$	1,369,924	$	1,231,514
Goodwill		387,239		387,239
Other, net		18,229		21,083

	$	1,775,392	$	1,639,836

The Company capitalizes legal costs and filing fees associated with obtaining patents on its new discoveries. Once the patents have been issued, the Company amortizes these costs over the shorter of the legal life of the patent or its estimated economic life using the straight-line method. Based upon the current status of the above intangible assets, the aggregate amortization expense is estimated to be approximately $50,000 for each of the next five fiscal years.

Note 5. Mortgage Notes and Other Obligations:

Mortgage notes payable and other obligations consisted of the following:

	June 30, 2010 (Unaudited)		December 31, 2009
Mortgage notes	$	2,704,515	$	2,754,176
Other installment obligation		3,995		8,659

		2,708,510		2,762,835
Less current portion		105,980		107,417

	$	2,602,530	$	2,655,418

The Company has a permanent mortgage facility on its land and building. The mortgage is held by a commercial bank and includes approximately 36% that is guaranteed by the U. S. Small Business Administration (“SBA”). The loan is collateralized by the real property and is also personally guaranteed by a stockholder of the Company. The interest rate on the bank portion is one percentage over the Wall Street Journal Prime Rate (minimum 7%), with 7% being the approximate effective rate for 2010 and 2009, and the SBA portion bears interest at the rate of 5.86%. The commercial bank portion of the loan requires total monthly payments of approximately $14,200, which includes approximately $10,500 per month in contractual interest, through June 2013 when the then remaining principal balance is due which is estimated to be approximately $1,588,000 at that time. The SBA portion of the loan requires total monthly payments of approximately $9,200 through July 2023, which includes approximately $4,600 per month in contractual interest and fees.

Other Installment Obligations:

The Company has capitalized certain obligations under leases that meet the requirements of capital lease obligations. At June 30, 2010, such obligations totaled $3,995, and is due in 2010.

The Company’s debt obligations require minimum annual principal payments of approximately $54,000 for the balance of 2010, $108,000 in 2011, $114,000 in 2012, $1,670,000 in 2013, $65,000 in 2014 and $698,000 thereafter, through the terms of the agreements.

Note 6. Stockholders’ Equity:

In May 2010, the Company completed a registered direct offering consisting of 2,409,639 units (“Units”) for a negotiated price of $4.15 per Unit, generating approximately $9,117,000 in net proceeds to the Company. Fees and expenses totaled $883,000, including a placement fee of 6.5%. Each Unit consisted of one share of the Company’s no par value common stock and one warrant to purchase 0.285 shares of common stock. Accordingly, a total of 2,409,639 common shares and warrants to purchase 686,746 shares of common stock were issued. The exercise price of the warrants is $4.82 per common share, and they are exercisable at any time and expire in January 2011.

During the six months ended June 30, 2010, advisors exercised options outstanding under the Company’s 2002 Stock Incentive Plan (“Plan”) as amended and approved by the Company’s stockholders, to purchase 261,043 shares of common stock generating $291,028 in cash proceeds to the Company.

During the six months ended June 30, 2009, advisors exercised options to purchase 38,000 shares of common stock generating $29,940 in cash proceeds to the Company, and a former employee exercised options to purchase 330,000 shares of common stock generating $198,000 in cash proceeds. An advisor’s options for 50,000 shares expired upon the advisor’s termination from the Company during 2009. Also during the six months ended June 30, 2009, the holders of 670,924 warrants that were issued for investor relations services elected to exercise those warrants on a cashless basis as provided in the agreements and as a result, were issued 493,835 common shares in consideration for the surrender of the 670,924 warrants.

Note 7. Stock Options and Warrants:

The Company currently provides stock-based compensation to employees, directors and consultants under the Company’s Plan under which 6,100,000 common shares have been reserved. The Company estimates the fair value of the share-based awards on the date of grant using the Black-Scholes option-pricing model (“Black-Scholes model”). Using the Black-Scholes model, the value of the award that is ultimately expected to vest is recognized over the requisite service period in the statement of operations. Option forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company attributes compensation to expense using the straight-line single option method for all options granted.

The Company’s determination of the estimated fair value of share based payment awards on the date of grant is affected by the following variables and assumptions:

·	The grant date exercise price – the closing market price of the Company’s common stock on the date of the grant;
·	Estimated option term – based on historical experience with existing option holders;
·	Estimated dividend rates – based on historical and anticipated dividends over the life of the option;
·	Term of the option – based on historical experience grants have lives of approximately 5 years;
·	Risk-free interest rates – with maturities that approximate the expected life of the options granted;
·	Calculated stock price volatility – calculated over the expected life of the options granted, which is calculated based on the daily closing price of the Company’s common stock over a period equal to the expected term of the option; and
·	Option exercise behaviors – based on actual and projected employee stock option exercises and forfeitures.

The Company utilized assumptions in the estimation of fair value of share based compensation during the six months ended June 30, 2010 and 2009 as follows:

	2010		2009

Dividend yield		0%		0%
Expected price volatility	110 to 115%		117 to 119%
Risk free interest rate	2.06 to 2.62%		1.59 to 2.55%
Expected term	5 years		5 years

The Company recognized stock-based compensation during the periods ended June 30, as follows:

	Three Months Ended						Six Months Ended
	2010			2009			2010			2009
Stock options to employees and directors		$	670,180		$	392,824		$	1,120,338		$	744,511
Stock options to advisory board members and contractors (1)			16,003			7,196			138,164			20,196
Stock options to consultants			38,741			17,850			61,174			41,290

Total stock-based compensation		$	724,924		$	417,870		$	1,319,676		$	805,997

(1) Amounts relate to animal health services and activities.

A summary of stock option activity of options to employees, directors and advisors, for the six months ended June 30, 2010, is presented below:

	Shares Under Option		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Outstanding at January 1, 2010	4,425,532		$	2.06
Granted	1,307,500			2.22
Exercised	(261,043	)		1.11
Forfeited	(18,000	)		2.10

Outstanding at June 30, 2010	5,453,989		$	2.14	7.6	$	129,000
Exercisable at June 30, 2010	2,770,973		$	2.02	6.2	$	129,000

The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the Company’s closing stock price on June 30, 2010 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders, had all option holders been able to and in fact, had exercised their options on June 30, 2010.

During the six months ended June 30, 2010, 1,307,500 stock options were granted under the Plan to employees, officers, directors and consultants exercisable at the then market price which averaged $2.22 per share, a weighted average fair value at the grant date of $1.77 per option. Existing directors and officers were granted a total of 675,000 options at $2.20 per share and existing employees were granted 118,500 options at $2.19 per share, all vesting over a three-year period annually in arrears and expiring in ten years. The Company also issued 400,000 options to a newly hired officer exercisable at $2.28 per share which vest over a three-year period annually in arrears and expire in ten years. Out of the 400,000 options, vesting of 100,000 options was accelerated, under their terms when performance achievements were reached. A consultant was granted 40,000 options at $2.04 per share vesting in equal amounts after six months, twelve months, twenty-four months and thirty-six months from the date of grant and expiring in ten years and a consultant was granted 50,000 options at $2.23 per share vested at the grant date and expiring in five years. Four newly-hired employees were granted a total of 24,000 options at an average exercise price of $2.01 per share, all vesting over a three-year period annually in arrears and expiring in ten years.

During the six months ended June 30, 2010, advisors exercised 261,043 options outstanding under the Company’s Plan generating $291,028 in cash and which had an intrinsic value when exercised of $371,130. During the six months ended June 30, 2010, a total of 18,000 options were forfeited, 10,000 of which were vested and 8,000 were unvested. The options were exercisable at an average of $2.10 per share and were forfeited upon the employees’ terminations from the Company.

During the six months ended June 30, 2009, 1,617,500 stock options were granted under the Plan to employees, officers and directors exercisable at the then market price which averaged $1.54 per share, a weighted average fair value at the grant date of $1.27 per option and all vesting over a three-year period annually in arrears and expiring in ten years. Existing employees and directors were granted a total of 698,000 options at $1.33 per share. The Company also issued a total of 800,000 stock options to two newly hired officers, 500,000 are exercisable at $1.69 per share and 300,000 are exercisable at $1.80 per share. In addition, five newly hired employees were granted a total of 119,500 options exercisable at an average of $1.48 per shares, all vesting annually over three years in arrears and expiring in ten years.

During the six months ended June 30, 2009, a former employee exercised 330,000 options outstanding under the Plan generating $198,000 in cash proceeds and advisors exercised 38,000 options outstanding under the Plan generating $29,940 in cash. The options when exercised had an intrinsic value totaling $829,000.

During the six months ended June 30, 2009, 29,466 options which were exercisable at an average of $2.75 per share terminated upon the employee’s resignation from the Company and an advisor’s options for 50,000 shares exercisable at $0.75 per share were forfeited upon the advisor’s termination from the Company.

The total fair value of stock options granted to employees, officers, directors, consultants and advisors that vested and became exercisable during the six month periods ended June 30, 2010 and 2009 was $1,631,000 and $853,000, respectively. Based upon the Company’s experience, approximately 86% of the outstanding stock options, or approximately 4,690,000 options, are expected to vest in the future, under their terms.

A summary of the status of non-vested options to acquire common shares under the Company’s Plan granted to employees, officers, directors, consultants and advisors and changes during the six months ended June 30, 2010 is presented below:

Nonvested Shares	Nonvested Shares Under Option			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value
Nonvested at January 1, 2010		2,364,916		$	2.43	$	1.78
Granted		1,307,500			2.22		1.77
Vested		(981,400	)		2.40		1.82
Forfeited		(8,000	)		2.27		2.59
Nonvested at June 30, 2010		2,683,016		$	2.28	$	1.74

At June 30, 2010, based upon employee, director and advisor options granted to that point there was approximately $3,017,000 of additional unrecognized compensation cost related to stock options that will be recorded over a weighted average future period of less than three years.

Other common stock purchase options and warrants:

As of June 30, 2010, in addition to the stock options discussed above, the Company had outstanding 1,034,276 non-qualified options and warrants in connection with consulting services for investor relations and placement agent services. The following is a summary of such outstanding options and warrants for the six months ended June 30, 2010:

	Shares Under Options / Warrants		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value

Outstanding at January 1, 2010	332,530		$	6.98
Granted	716,746			4.70
Exercised	—			—
Forfeited	(15,000	)		5.00
Outstanding and exercisable at June 30, 2010	1,034,276		$	5.43	0.7	$	—

On May 5, 2010, the Company closed on a $10 million registered direct offering consisting of 2,409,639 shares of the Company’s no par value common stock and 686,746 warrants. The warrants which are included in the table above were exercisable when issued at $4.82 per common share and expire eight months from the date of closing.

During the six months ended June 30, 2010, 30,000 warrants to acquire common shares were granted to a consultant in consideration for investor relations services, 15,000 of the warrants are exercisable at $1.80 per share and 15,000 of the warrants are exercisable at $2.14 per share. The warrants vested upon grant and expire three years from the date granted. In June 2010, the Company terminated its relationship with the consultant. During the six months ended June 30, 2010, 15,000 outstanding warrants to acquire common shares exercisable at $5.00 per share granted to a consultant in consideration for investor relations services expired and were forfeited. Subsequent to June 30, 2010, 30,000 outstanding warrants to acquire common shares exercisable at $5.00 per share granted to a consultant in consideration for investor relations services expired and were forfeited.

At June 30, 2010, there was no unrecognized cost for non-qualified options and warrants. The total fair value of non-qualified options and warrants that vested during the six months ended June 30, 2010, was $81,000.

Operating expenses for the three months ended June 30, 2010 and 2009 include $38,741 and $17,850, respectively, and for the six months ended June 30, 2010 and 2009 include $61,174 and $41,290, respectively, for the value of the investor relations consulting warrants. The fair value of warrants, recorded as a consulting expense related to investor relations services at the grant date has been estimated utilizing the Black-Scholes model, with the following assumptions:

	2010		2009

Dividend yield		0%		0%
Expected price volatility		128 to 130%		71 to 127%
Risk free interest rate		1.26 to 1.70%		1.00 to 1.52%
Expected term	3 years		3 years

Note 8. Concentrations, Commitments and Contingencies:

Customer Concentration:

At June 30, 2010, four customers accounted for approximately 59% of total accounts receivable, accounting for approximately 19%, 16%, 13% and 11%, respectively. For the six months ended June 30, 2010, five customers represented more than 10% of the Company’s sales, accounting for approximately 17%, 15%, 15%, 12% and 10%, respectively, of the sales for the period. For the three months ended June 30, 2010, four customers represented more than 10% of the Company’s sales, accounting for approximately 24%, 15% 14% and 12%, respectively, of the sales for the period. At December 31, 2009, two customers accounted for 63% and 20% of total accounts receivable. For the six months ended June 30, 2009, two customers represented more than 10% of the Company’s sales, accounting for approximately 30% and 10%, respectively, of the sales for the period. For the three months ended June 30, 2009, three customers represented more than 10% of the Company’s sales, accounting for approximately 22%, 21% and 12%, respectively, of the sales for the period.

In April 2008, the Company entered into a long-term exclusive license and commercialization agreement with Novartis Animal Health, Inc. (“Novartis”), to develop and launch the Company’s novel recombinant single-chain products for use in bovines, BoviPure LH™ and BoviPure FSH™. The Exclusive License Agreement (“Novartis License Agreement”) between AspenBio and Novartis was entered into effective April 2, 2008, and grants Novartis a license to AspenBio technology and a sublicense to The Washington University (“WU”), technology (each as defined under the Novartis License Agreement) for use in bovine species products worldwide. The term of the Novartis License Agreement continues until the expiration of the last-to-expire of the licensed patent rights, product sales are terminated, or, generally, ten years after the initial product sales if licensed patent rights are not available on a country-by-country basis. The Novartis License Agreement provides that Novartis and AspenBio share development expenses and product sales margins under a splitting arrangement. AspenBio’s share of development expenses is in the low double-digit range. AspenBio’s share of the product sales margins varies depending upon the level of patent protection and competition on a country-by-country basis and varies from the very low to low double-digit range.

AspenBio received an upfront cash payment of $2,000,000 under the Novartis License Agreement, of which 50% was non-refundable upon signing the agreement, and the balance is subject to certain conditions which we expect to be substantially achieved in 2010. The Novartis License Agreement contains customary terms for confidentiality, prosecution and infringement provisions for the license patent rights, indemnification and insurance coverage. The Novartis License Agreement is cancelable by Novartis with 180 days advance notice; immediately if a change in control transaction occurs and Novartis’ rights are not accommodated in good faith by the successor entity; or with 30 days notice on a country-by-country basis in the event designated legal or regulatory issues arise. Novartis has the right to terminate the agreement if the pilot study (as defined in the agreement) is not successful; this pilot study is currently in process and expected to be completed during 2010. AspenBio can terminate the agreement immediately if Novartis challenges the validity or enforceability of licensed patent rights or other licensed intellectual property. Either party may terminate if the other party materially breaches the Novartis License Agreement, and fails to cure such breach, becomes insolvent or if either party disposes of substantially all of the assets necessary for its performance under the terms of the agreement. In the event there is a change of ownership in AspenBio, Novartis may choose to assume all obligations under the agreement and generally remit net excess royalty amounts to the successor entity.

In 2004, the Company entered into an agreement with WU, under which the Company obtained exclusive proprietary rights to WU’s patent portfolio for use in the animal health industry. The Exclusive License Agreement (“WU License Agreement”) between AspenBio and WU was entered into effective May 1, 2004, and grants AspenBio an exclusive license and right to sublicense WU’s technology (as defined under the WU License Agreement) for veterinary products worldwide, except where such products are prohibited for export under U. S. laws. The term of the WU License Agreement continues until the expiration of the last of WU’s patents (as defined in the WU License Agreement) to expire. AspenBio has agreed to pay minimum annual royalties of $20, 000 during the term of the WU License Agreement and such amounts are creditable against future royalties. Royalties payable to WU under the WU License Agreement for covered product sales by AspenBio carry a mid-single digit royalty rate and for sublicense fees received by AspenBio carry a low double-digit royalty rate. The WU License Agreement contains customary terms for confidentiality, prosecution and infringement provisions for licensed patents, publication rights, indemnification and insurance coverage. The WU License Agreement is cancelable by AspenBio with ninety days advance notice at any time and by WU with sixty days advance notice if AspenBio materially breaches the WU License Agreement and fails to cure such breach. Under the terms of the WU License Agreement, a portion of license fees and royalties AspenBio receives from sublicensing agreements will be paid to WU. The obligation for such front end fees, totaling $440,000, was recorded upon receipt of the Novartis license fees and in 2008, $190,000 was paid to WU and the remaining $220,000, net of ongoing minimum annually royalty payments, is included with accrued expenses on the accompanying balance sheet.

For financial reporting purposes, the up-front license fees received from this agreement, net of the amounts due to WU, have been recorded as deferred revenue and are amortized over the term of the Novartis license agreement. Milestone revenue is or will be recognized into income commencing with the date such milestones are achieved. During the six months ended June 30, 2010, milestones totaling $100,000 were achieved, triggering the commencement of amortization of $100,000 of deferred revenue. As of June 30, 2010, deferred revenue of $746,062 has been classified as a current liability and $669,167 has been classified as a long-term liability. The current liability includes the remaining milestone revenue that is subject to achievement conditions and also includes the next twelve months’ portion of the amortizable milestone revenue. During each of the six month periods ended June 30, 2010 and 2009, $32,863 and $31,973 was recorded as the amortized license fee revenue arising from the Novartis License Agreement.

During January 2008, the Company entered into an amendment of its existing animal health industry license agreement with WU. The amendment provides for the human therapeutic use of certain of WU’s products. As consideration for this amendment, the Company paid a total of $125,000 in cash. The existing royalty rate was extended to cover these new products and uses.

During the six months ended June 30, 2010, the Company entered into an employment agreement with a newly-elected officer providing annual compensation of $275,000 and with two officers, who previously had consulting relationships with the Company, providing minimum annual compensation of $225,000 to one and $150,000 to the other for an aggregate annual minimum commitment totaling $650,000. The agreements automatically renew at the end of each year unless terminated by either party and contain customary confidentiality and benefit provisions. In connection with the employment agreement with the newly elected officer, a total of 400,000 stock options were granted under the Company’s Plan.

The Company periodically enters into generally short term consulting and development agreements primarily for product development, testing services and in connection with clinical trials conducted as part of the Company’s FDA clearance process. Such commitments at any point in time may be significant but the agreements typically contain cancellation provisions.

In the ordinary course of business and in the general industry in which the Company is engaged, it is not atypical to periodically receive a third party communication which may be in the form of a notice, threat, or ‘cease and desist’ letter concerning certain activities. For example, this can occur in the context of the Company’s pursuit of intellectual property rights. This can also occur in the context of operations such as the using, making, having made, selling, and offering to sell products and services, and in other contexts. The Company intends to make a rational assessment of each situation on a case-by-case basis as such may arise. The Company periodically evaluates its options for trademark positions and considers a full spectrum of alternatives for trademark protection and product branding.

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

Results of Operations:

Comparative Results for the Six Months Ended June 30, 2010 and 2009

Sales of the Company’s antigen products for the six months ended June 30, 2010 totaled $201,000, which is a $48,000 or 32% increase from the 2009 period. This increase in sales is primarily attributable to the timing of customer orders in the six months ended June 30, 2010 considering the Company’s strategic decision in late 2009 to suspend antigen production and focus available scientific resources on the appendicitis project and single-chain animal product development.

In April 2008, the Company entered into a long term exclusive license and commercialization agreement with Novartis to develop and launch the Company’s novel recombinant single-chain products for bovine species. The total payments received under this agreement were recorded as deferred revenue and are being recognized over future periods, with $33,000 and $32,000 of such license fee recognized in each of the six months ended June 30, 2010 and 2009.

Cost of sales for the six months ended June 30, 2010 totaled $100,000 which is an $187,000 or 65% decrease as compared to the 2009 period. As a percentage of sales, there was a gross profit of 51% as compared to a gross loss of 87% in the 2009. Cost of sales for the six months ended June 30, 2009 was higher than that for the 2010 period as a result of the application of certain fixed overhead production costs as production runs of antigen products were made in 2009.

Selling, general and administrative expenses in the six months ended June 30, 2010, totaled $4,002,000, which is a $1,176,000 or 42% increase as compared to the 2009 period. Hiring of additional management personnel to advance the AppyScore™ product in clinical trials and regulatory activities resulted in approximately $338,000 of additional expenses in the 2010 period. Approximately $514,000 in additional stock based compensation expense was recorded in 2010 over 2009 amounts. Included in the stock based compensation increase is $118,000 related to options granted to animal health advisors. Selling, general and administrative expenses also increased by $109,000 in insurance related costs primarily due to increased medical benefits costs and an increase in the Company’s insurance limits.

Research and development expenses in the 2010 period totaled $3,355,000, which is a $303,000 or 8% decrease as compared to the 2009 period. Development efforts and advances on the appendicitis test, including product development advances, clinical trial and regulatory related activities comprised the primary expenses. Clinical trial and regulatory related expenses were approximately $569,000 higher in the six months ended June 30, 2010 primarily due to the AppyScore clinical trial that was completed earlier in 2010, which was not commenced until the second half of 2009. Development expenses incurred for advances on the cassette and reader program were approximately $443,000 lower in 2010 as compared to 2009, primarily due to lower development costs incurred from product development firms. Expenses incurred in connection with product and market related studies were approximately $250,000 lower in 2010 as compared to 2009. Hiring of additional scientific personnel to advance the AppyScore product in clinical trials and regulatory activities resulted in approximately $131,000 of additional expenses in the 2010 period. The development expenses on the single-chain animal health products decreased approximately $251,000.

Primarily as a result of lower average cash and investment balances in 2010 as compared to 2009, interest income of approximately $24,000 was earned in 2010 as compared to $144,000 in 2009.

No income tax benefit was recorded on the loss for the six months ended June 30, 2010, as management was unable to determine that it was more likely than not that such benefit would be realized.

Comparative Results for the Three Months Ended June 30, 2010 and 2009

Sales of the Company’s antigen products for the three months ended June 30, 2010 totaled $59,000, which is a $12,000 or 17% decrease from the 2009 period. This decrease in sales is primarily attributable to the timing of customer orders in the three months ended June 30, 2010 considering the Company’s strategic decision in late 2009 to suspend antigen production and focus available scientific resources on the appendicitis product and single-chain animal product development.

Cost of sales for the three months ended June 30, 2010 totaled $34,000; a $137,000 or 80% decrease as compared to the 2009 period. As a percentage of sales, there was a gross profit of 43% as compared to a gross loss of 141% in the 2009. Cost of sales for the three months ended June 30, 2009 was higher than that for the 2010 period as a result of the application of certain fixed overhead production costs as production runs of antigen products were made in 2009.

Selling, general and administrative expenses in the three months ended June 30, 2010, totaled $2,118,000, which is a $614,000 or 41% increase as compared to the 2009 period. Hiring of additional management personnel to advance the AppyScore product in clinical trials and regulatory activities resulted in approximately $178,000 of additional expenses in the 2010 period. Approximately $307,000 in additional stock based compensation expense was recorded in 2010 over 2009 amounts. Selling, general and administrative expenses also increased by $58,000 in insurance related costs primarily due to increased medical benefits costs and an increase in the Company’s insurance limits.

Research and development expenses in the 2010 period totaled $1,311,000, which is a $931,000 or 42% decrease as compared to the 2009 period. Development efforts and advances on the appendicitis test, including product development advances, clinical trial and regulatory related activities comprised the primary expenses. Development expenses incurred for advances on the cassette and reader program were approximately $343,000 lower in 2010 as compared to 2009, primarily due to lower development costs incurred from product development firms. Expenses incurred in connection with product and market related studies were approximately $250,000 lower in 2010 as compared to 2009. Hiring of additional scientific personnel to advance the AppyScore product in clinical trials and regulatory activities resulted in approximately $21,000 of additional expenses in the 2010 period. The development expenses on the single-chain animal health products decreased approximately $243,000.

Primarily as a result of lower average cash and investment balances in 2010 as compared to 2009, interest income of approximately $12,000 was earned in 2010 as compared to $67,000 in 2009.

Liquidity and Capital Resources

We reported a net loss of $7,294,000 during the six months ended June 30, 2010, which included $1,578,000 in non-cash expenses relating to stock-based compensation totaling $1,320,000 and depreciation, amortization and other totaling $258,000. At June 30, 2010, we had working capital of $14,473,000. We believe that our current working capital position is sufficient to continue with the technology development activities and support the current level of operations for the near term. Our primary focus currently is to continue the development activities on the appendicitis and single-chain animal health hormone products in order to attempt to continue to secure near-term value from these products from either generating revenues directly from sales of the products or entering licensing agreements for their rights.

Capital expenditures, primarily for production, laboratory and facility improvement costs for the remainder of the fiscal year ending December 31, 2010 are anticipated to total $100,000 to $300,000. We anticipate these capital expenditures to be financed through working capital.

We anticipate that expenditures for research and development for the fiscal year ending December 31, 2010 will generally be consistent with or decrease slightly as compared to the amounts expended in the three months ended June 30, 2010, primarily due to lower expenses based on the recently completed AppyScore clinical trial. Development and testing costs in support of the current pipeline products as well as costs to file patents and revise and update previous filings on our technologies will continue to be substantial. Our principal development products consist of the AppyScore test and the single-chain animal health hormone products. As we continue towards commercialization of these products, including evaluation of alternatives for possible product management and distribution alternatives and implications of product manufacturing and associated carrying costs such evaluation and related decisions will impact our future capital needs. Certain costs such as manufacturing and license / royalty agreements have different financial, logistical and operational implications depending upon the ultimate strategic commercialization path determined.

We expect that our primary development expenditures will be to continue to advance development of the cassette and instrument version of AppyScore. During the six months ended June 30, 2010 and 2009, we expended approximately $2,376,000 and $2,500,000, respectively in direct costs for the appendicitis test development and related efforts. Steps to achieve commercialization of the appendicitis product will be an ongoing and evolving process with subsequent generations and expected improvements being made in the test. Should we be unable to achieve FDA clearance of the AppyScore test and generate revenues from the product, we would need to rely on other product opportunities to generate revenues and costs that we have incurred for the appendicitis patent may be deemed impaired.

In May 2003, AspenBio entered into an Assignment and Consultation Agreement (the “Bealer Agreement”) with Dr. John Bealer related to the appendicitis diagnosis technology. The Bealer Agreement transferred to AspenBio ownership rights from Dr. Bealer for inventions and related improvements to technology associated with human appendicitis diagnostics involving protein antigens. The purchase price was the payment of a future royalty to Dr. Bealer based upon a very low double digit rate applied to revenues, all as defined under the agreement. The Bealer Agreement contains customary terms for confidentiality, patent assignment to AspenBio and restrictions on assignability of the agreement. The Bealer Agreement continues for the longer of twenty years or the last AspenBio patent to expire. AspenBio may terminate the Bealer Agreement if AspenBio in its reasonable judgment decides it has no interest in pursuing the opportunity as defined under the agreement.

In April 2008, the Company entered into a long term exclusive license and commercialization agreement with Novartis Animal Health, Inc. (“Novartis”), to develop and launch the Company’s novel recombinant single-chain products for use in bovines, BoviPure LH™ and BoviPure FSH™. The Exclusive License Agreement (“Novartis License Agreement”) between AspenBio and Novartis was entered into effective April 2, 2008, and grants Novartis a license to AspenBio technology and a sublicense to WU’s technology (each as defined under the Novartis License Agreement) for use in bovine species products worldwide. The term of the Novartis License Agreement continues until the expiration of the last to expire of the licensed patent rights, product sales are terminated, or, generally, ten years after the initial product sales if licensed patent rights are not available on a country-by-country basis. The Novartis License Agreement provides that Novartis and AspenBio share development expenses and product sales margins under a splitting arrangement. AspenBio’s share of development expenses is in the low double digit range. AspenBio’s share of the product sales margins varies depending upon the level of patent protection and competition on a country-by-country basis and varies from the very low to low double digit range. AspenBio received an upfront cash payment of $2,000,000 under the Novartis License Agreement, of which 50% was non-refundable upon signing the agreement, and the balance is subject to certain conditions which we expect to be substantially achieved in 2010. Please see “Liquidity and Capital Resources” for disclosure regarding our expenditures under the agreement. The Novartis License Agreement contains customary terms for confidentiality, prosecution and infringement provisions for the license patent rights, indemnification and insurance coverage. The Novartis License Agreement is cancelable by Novartis on 180 days advance notice; immediately if a change in control transaction occurs and Novartis’ rights are not accommodated in good faith by the successor entity; or on 30 days notice on a country-by-country basis in the event designated legal or regulatory issues arise. Novartis has the right to terminate the agreement if the pilot study (as defined in the agreement) is not successful; this pilot study is currently in process and expected to be completed during 2010. AspenBio can terminate the agreement immediately if Novartis challenges the validity or enforceability of licensed patent rights or other licensed intellectual property. Either party may terminate if the other party materially breaches the Novartis License Agreement, and fails to cure such breach, becomes insolvent or if either party disposes of substantially all of the assets necessary for its performance under the terms of the agreement. In the event there is a change of ownership in AspenBio, Novartis may choose to assume all obligations under the agreement and generally remit net excess royalty amounts to the successor entity.

In 2004, the Company entered into an agreement with The Washington University (“WU”), under which the Company obtained exclusive proprietary rights to WU’s patent portfolio for use in the animal health industry. The Exclusive License Agreement (“WU License Agreement”) between AspenBio and WU was entered into effective May 1, 2004, and grants AspenBio exclusive license and right to sublicense WU’s technology (as defined under the WU License Agreement) for veterinary products worldwide, except where such products are prohibited under U.S. laws for export. The term of the WU License Agreement continues until the expiration of the last of WU’s patents (as defined in the WU License Agreement) to expire. AspenBio has agreed to pay minimum annual royalties of $20,000 during the term of the WU License Agreement and such amounts are creditable against future royalties. Royalties payable to WU under the WU License Agreement for covered product sales by AspenBio carry a mid-single digit royalty rate and for sublicense fees received by AspenBio carry a low double-digit royalty rate. The WU License Agreement contains customary terms for confidentiality, prosecution and infringement provisions for licensed patents, publication rights, indemnification and insurance coverage. The WU License Agreement is cancelable by AspenBio with ninety days advance notice at any time and by WU with sixty days advance notice if AspenBio materially breaches the WU License Agreement and fails to cure such breach. Under the terms of the WU License Agreement, a portion of license fees and royalties AspenBio receives from sublicensing agreements will be paid to WU. The obligation for such front end fees, totaling $440,000, was recorded upon receipt of the Novartis license fees and in 2008 $190,000 was paid to WU and the remaining $220,000, net of ongoing minimum annually royalty payments, is included with accrued expenses on the accompanying balance sheet.

For financial reporting purposes, the up-front license fees received from this agreement, net of the amounts due to WU, have been recorded as deferred revenue and will be amortized over the term of the Novartis License Agreement. Milestone revenue is or will be recognized into income commencing with the date such milestones are achieved. During the six months ended June 30, 2010, milestones totaling $100,000 were achieved triggering the commencement of amortization of $100,000 of deferred revenue. As of June 30, 2010, deferred revenue of $746,062 has been classified as a current liability and $669,167, has been classified as a long-term liability. The current liability includes the remaining milestone revenue that is subject to achievement conditions and also includes the next twelve months’ portion of the amortizable milestone revenue. During each of the six month periods ended June 30, 2010 and 2009, $32,863 and $31,973 was recorded as the amortized license fee revenue arising from the Novartis License Agreement.

We have entered and expect to continue to enter into additional agreements with contract manufacturers for the development / manufacture of certain of our products for which we are seeking FDA approval. The ultimate goal of this development process is to establish current good manufacturing practices (“cGMP”) manufacturing methods required for those products for which we are seeking FDA approval. We continue in discussions with other potential manufacturers who meet full cGMP requirements, and are capable of large-scale manufacturing batches of our medical devices who can economically manufacture them to produce products at an acceptable cost. These development and manufacturing agreements generally contain transfer fees and possible penalty and /or royalty provisions should we transfer our products to another contract manufacturer. We expect to continue to evaluate, negotiate and execute additional development and manufacturing agreements, some of which may be significant commitments during 2010. We may also consider acquisitions of development technologies or products, should opportunities arise that we believe fit our business strategy and would be appropriate from a capital standpoint.

We have a permanent mortgage facility on our land and building that commenced in July 2003. The mortgage is held by a commercial bank and includes a portion guaranteed by the U. S. Small Business Administration. The loan is collateralized by the real property and is also personally guaranteed by a stockholder (our former president). The interest rate on the bank portion is one percentage over the Wall Street Journal Prime Rate (minimum 7%), with 7% being the approximate effective rate for 2010 and 2009, and the SBA portion bears interest at the rate of 5.86%. The commercial bank portion of the loan requires total monthly payments of approximately $14,200, which includes approximately $10,500 per month in contractual interest, through June 2013 when the then remaining principal balance is due which is estimated to be approximately $1,588,000 at that time. The SBA portion of the loan requires total monthly payments of approximately $9,200 through July 2023, which includes approximately $4,600 per month in contractual interest and fees.

In May 2010, the Company completed a registered direct offering consisting of 2,409,639 units (“Units”) for a negotiated price of $4.15 per Unit, generating approximately $9,117,000 in net proceeds to the Company. Fees and expenses totaled $883,000, including a placement fee of 6.5%. Each Unit consisted of one share of the Company’s no par value common stock and one warrant to purchase 0.285 shares of common stock. Accordingly, a total of 2,409,639 common shares and warrants to purchase 686,746 shares of common stock were issued. The exercise price of the warrants is $4.82 per common share and they are exercisable at any time and expire eight months from the date of closing.

During the six months ended June 30, 2010, we received cash proceeds of $291,028 from the exercise of 261,043 options.

In April 2008 the Board authorized a stock repurchase plan to purchase shares of our common stock up to a maximum of $5.0 million. Purchases may be made in routine, open market transactions, when management determines to effect purchases and any purchased common shares are thereupon retired. Management may elect to purchase less than $5.0 million. The repurchase program allows us to repurchase our shares in accordance with the requirements of the Securities and Exchange Commission on the open market, in block trades and in privately negotiated transactions, depending upon market conditions and other factors. The repurchase program is funded using our working capital. A total of approximately 232,000 common shares were purchased and retired in 2008 at a total cost of approximately $992,000 and no repurchases have been made since 2008.

We expect to continue to incur losses from operations for the near-term and these losses could be significant as we incur product development, contract consulting and product related expenses. We have also increased our overhead expenses with the hiring of additional management personnel. We believe that our current working capital position will be sufficient to meet our near-term needs. Our investments are maintained in relatively short term, high quality investments instruments, to ensure we have ready access to cash as needed.

With the recent changes in market conditions, combined with our conservative investment policy and lower average investable balances due to cash consumption, we expect that our investment earnings in 2010 will be lower than in 2009. The Board of Directors has approved an investment policy covering the investment parameters to be followed with the primary goals being the safety of principal amounts and maintaining liquidity of the fund. The policy provides for minimum investment rating requirements as well as limitations on investment duration and concentrations. Commencing in the fourth quarter of 2008, based upon market conditions, the investment guidelines were temporarily tightened to raise the minimum acceptable investment ratings required for investments and shorten the maximum investment term. Current investment guidelines require investments to be made in investments with minimum ratings purchasing commercial paper with an A1/P1 rating, longer-term bonds with an A- rating or better, a maximum maturity of nine months and a concentration guideline of 10% (no security or issuer representing more than 10% of the portfolio). As of June 30, 2010, 73% of the investment portfolio was in cash equivalents which are included with cash and the remaining funds were invested in short term marketable securities with none individually representing more than 6% of the portfolio and none maturing past February 2011. To date we have not experienced a cumulative market loss from the investments that has exceeded $5,000.

Due to recent market events that have adversely affected all industries and the economy as a whole, management has placed increased emphasis on monitoring the risks associated with the current environment, particularly the investment parameters of the short term investments, the recoverability of receivables and inventories, the fair value of assets, and the Company’s liquidity. At this point in time, there has not been a material impact on the Company’s assets and liquidity. Management will continue to monitor the risks associated with the current environment and their impact on the Company’s results.

Operating Activities:

Net cash consumed by operating activities was $6,446,000 during the six months ended June 30, 2010. Cash was consumed by the loss of $7,294,000, less non-cash expenses relating to stock-based compensation totaling $1,320,000 and depreciation, amortization and other totaling $258,000. A decrease in accounts receivable of $26,000 resulting from lower base antigen sales levels provided cash. Inventory levels decreased by $64,000, from net sales activities associated with management’s decision late in 2009 to substantially suspend the production of antigen products as a result of its strategic decision to focus available scientific resources on appendicitis and single-chain animal product development. Cash provided in operations was increased by the net decrease of $832,000 in accounts payable and accrued expenses, primarily due to the decrease in expenses related to the recent completion of the Company’s AppyScore clinical trial.

Net cash consumed by operating activities was $4,989,000 during the six months ended June 30, 2009. Cash was consumed by the loss of $6,500,000, less non-cash expenses of $806,000 for stock-based compensation and $162,000 for depreciation and amortization and other non-cash items. Our base antigen business is generally fairly constant from year to year and therefore does not generally impact operating cash flows. As of June 30, 2009 inventories had increased by $78,000 due to receipt of a recent raw material supply order and prepaid expenses and other current assets generated cash of $598,000 primarily related to shared costs incurred under the Novartis License Agreement, payable by Novartis, in the amount of $369,000.

Investing Activities:

Net cash outflows from investing activities consumed $3,750,000 during the six months ended June 30, 2010. Net purchases of marketable securities totaled approximately $3,364,000. A $386,000 use of cash was attributable to additional costs incurred from patent filings and equipment additions.

Net cash inflows from investing activities generated $2,687,000 during the six months ended June 30, 2009. Marketable securities investments acquired totaled approximately $2,307,000 and sales of marketable securities totaled approximately $5,222,000. A $228,000 use of cash was attributable to additional costs incurred from patent filings and equipment additions for upgrades and expansion of equipment.

Financing Activities:

Net cash inflows from financing activities generated $9,353,000 during the six months ended June 30, 2010. The Company received net proceeds of $9,117,000 from the sale of common stock and $291,000 in proceeds from the exercise of stock warrants and options. The Company repaid $54,000, in scheduled payments under its debt agreements.

Net cash inflows from financing activities generated $12,000 during the six months ended June 30, 2009. The Company received proceeds of $228,000 from the exercise of common stock options and $216,000 was consumed for repayments under existing debt agreements.

Recently Issued and Recently Adopted Accounting Pronouncements

See Note 1 to the accompanying financial statements in Part I, Item 1 of this report regarding recently issued and recently adopted accounting pronouncements.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results inevitably will differ from those estimates, and such differences may be material to the financial statements. The most significant accounting estimates inherent in the preparation of our financial statements include estimates associated with revenue recognition, impairment analysis of intangibles and stock-based compensation.

The Company’s financial position, results of operations and cash flows are impacted by the accounting policies the Company has adopted. In order to get a full understanding of the Company’s financial statements, one must have a clear understanding of the accounting policies employed. A summary of the Company’s critical accounting policies follows:

Investments: The Company invests excess cash from time to time in highly liquid debt and equity securities of highly rated entities which are classified as trading securities. Such amounts are recorded at market and are classified as current, as the Company does not intend to hold the investments beyond twelve months. Such excess funds are invested under the Company’s investment policy but an unexpected decline or loss could have an adverse and material effect on the carrying value, recoverability or investment returns of such investments. Our Board has approved an investment policy covering the investment parameters to be followed with the primary goals being the safety of principal amounts and maintaining liquidity of the fund. The policy provides for minimum investment rating requirements as well as limitations on investment duration and concentrations.

Inventories: Inventories are stated at the lower of cost or market. Cost is determined on the first-in, first-out (FIFO) method. The elements of cost in inventories include materials, labor and overhead. The Company does not have supply agreements in place for the antigen business raw material purchases but believes that there are multiple suppliers for our antigen raw material; however historically substantially all of our purchases were made from one supplier. Management believes that its relationship with this supplier is strong; however if necessary this relationship can be replaced. If the relationship was to be replaced there may be a short term disruption to the base antigen business and operations, a period of time in which products would not be available and additional expenses may be incurred.

Long-Lived Assets: The Company records property and equipment at cost. Depreciation of the assets is recorded on the straight-line basis over the estimated useful lives of the assets. Dispositions of property and equipment are recorded in the period of disposition and any resulting gains or losses are charged to income or expense when the disposal occurs. The carrying value of the Company’s long-lived assets is reviewed at least annually to determine that such carrying amounts are not in excess of estimated market value. Goodwill is reviewed annually for impairment by comparing the carrying value to the present value of its expected cash flows or future value. The required annual testing resulted in no impairment charges being recorded to date.

Revenue Recognition : The Company’s revenues are recognized when products are shipped or delivered to unaffiliated customers. The Securities and Exchange Commission’s Staff Accounting Bulletin (SAB) No. 104, provides guidance on the application of generally accepted accounting principles to select revenue recognition issues. The Company has concluded that its revenue recognition policy is appropriate and in accordance with SAB No. 104. Revenue is recognized under development and distribution agreements only after the following criteria are met: (i) there exists adequate evidence of the transactions; (ii) delivery of goods has occurred or services have been rendered; and (iii) the price is not contingent on future activity and collectability is reasonably assured.

Stock-based Compensation: ASC 718 (formerly - SFAS No. 123(R)), Share-Based Payment, defines the fair-value-based method of accounting for stock-based employee compensation plans and transactions used by the Company to account for its issuances of equity instruments to record compensation cost for stock-based employee compensation plans at fair value as well as to acquire goods or services from non-employees. Transactions in which the Company issues stock-based compensation to employees, directors and advisors and for goods or services received from non-employees are accounted for based on the fair value of the equity instruments issued. The Company utilizes pricing models in determining the fair values of options and warrants issued as stock-based compensation. These pricing models utilize the market price of the Company’s common stock and the exercise price of the option or warrant, as well as time value and volatility factors underlying the positions.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS

Certain statements contained in this report that are not historical facts constitute forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, and are intended to be covered by the safe harbors created by that Act. Reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties, and other factors, which may cause actual results, performance, or achievements to differ materially from those expressed or implied. Any forward-looking statement speaks only as of the date made. We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which they are made.

These forward-looking statements are not guarantees of the future as there are a number of meaningful factors that could cause AspenBio’s actual results to vary materially from those indicated by such forward-looking statements. These statements are based on certain assumptions made based on experience, expected future developments and other factors AspenBio believes are appropriate in the circumstances. Meaningful factors, which could cause actual results to differ from expectations, many of which are beyond the control of AspenBio, include, but are not limited to, actual trial results, our ability to successfully complete the clinical trial data assessments required for FDA submission, obtain FDA approval for, cost effectively manufacture and generate revenues from, the appendicitis test in development, as well as the animal health products and other new products developed by AspenBio, and our ability to retain the scientific management team to advance the products in development, execute agreements to provide AspenBio with rights to meet its objectives, overcome adverse changes in market conditions and the regulatory environment, obtain and enforce intellectual property rights, obtain adequate financing in the future through product licensing, co-promotional arrangements, public or private equity or debt financing or otherwise; general business conditions; competition; business abilities and judgment of personnel; and availability of qualified personnel; and other factors referenced herein and in “Risk Factors” in the Company’s Form 10-K, for the year ended December 31, 2009, as amended.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

AspenBio has limited exposure to market risks from instruments that may impact the Balance Sheets , Statements of Operations , and Statements of Cash Flows , with such exposure associated primarily with changing interest rates on its mortgage notes and investments. Approximately 36% of the total mortgage balance is guaranteed by the U. S. Small Business Administration (“SBA”). While we periodically expend funds for products and services that are denominated in foreign country currencies we do not have any long term commitments for such purchases.

Investment Interest Rates

The primary objective for our investment activities is to preserve principal while maximizing yields without significantly increasing risk. This is accomplished by investing in diversified short-term interest bearing investments of high grade companies. We have no investments denominated in foreign country currencies and therefore our investments are not subject to foreign currency exchange risk.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Management of the Company, including the Chief Executive Officer and the Chief Financial Officer, has conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rule 13a-15(e)) as of the last day of the period of the accompanying financial statements. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of June 30, 2010.

Changes in Internal Control Over Financial Reporting.

There was no change in the Company’s internal control over financial reporting that occurred during the fiscal quarter to which this report relates that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are not a party to any legal proceedings, the adverse outcome of which would, in our management’s opinion, have a material adverse effect on our business, financial condition and results of operations .

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2009.

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

(a) The following sets forth the equity securities we sold during the period covered by this report, not previously reported on Forms 10-Q or 8-K, which were not registered under the Securities Act.

On a monthly basis during the three months ended June 30, 2010, 15,000 warrants (5,000 per month) to acquire common shares were granted to a consultant in consideration for investor relations services exercisable at $2.14 per share.. The warrants vested upon grant and expire in three years. The Company relied on the exemption under section 4(2) of the Securities Act of 1933 (the “Act”) for the above issuance because we: (i) did not engage in any public advertising or general solicitation in connection with the warrant issuance; (ii) made available to the recipient disclosure regarding all aspects of our business including our reports filed with the SEC and our press releases, and other financial, business, and corporate information; and (iii) believed that the recipient obtained all information regarding the Company requested (or believed appropriate) and received answers to all questions posed by the recipient, and otherwise understood the risks of accepting our securities for investment purposes. No commission or other remuneration was paid on this issuance.

(c) During the quarter by this report, the Company did not make any purchases of its common shares under the previously announced authorized common stock repurchase program of up to $5 million that may be made from time to time at prevailing prices as permitted by securities laws and other requirements, and subject to market conditions and other factors and no purchases are anticipated in the near-term. The program is administered by management and may be discontinued at any time.

EXHIBIT

DESCRIPTION

Confidential treatment has been requested for exhibits marked with an exclamation point (!).

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, thereunto duly authorized.

	AspenBio Pharma, Inc. (Registrant)
	By:	/s/ Jeffrey G. McGonegal
Dated: August 5, 2010		Jeffrey G. McGonegal, Chief Financial Officer and duly authorized officer

THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH [* * *] AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

EXCLUSIVE LICENSE AGREEMENT

Between

Washington University

Licensor

And

AspenBio, Inc.

Licensee

Introduction: This Agreement is made and entered into this 1 st day of May, 2004 by and between The Washington University, a corporation established by special act of the Missouri General Assembly approved February 22, 1853 and acts amendatory thereto, having its principal office at One Brookings Drive, St. Louis, Missouri 63130, [through its School of Medicine] (hereinafter “WU”) and AspenBio, Inc. with its principal offices at 1585 South Perry St., Castle Rock, CO 80104, hereinafter “Aspen”. WU and Aspen may be referred to individually as a “Party” or collectively as the “Parties”.

Background . WU is the owner of certain Patent Rights, Tangible Research Property and Technical Information (collectively, Intellectual Property as defined below, which relates to and includes the items described on Exhibit A ) developed in the laboratory of Dr Irving Boime relating to animal fertility hormones and DNA constructs thereof and WU has the right to grant licenses thereto. WU wishes to allow the Intellectual Property to be used to further scientific research and for new product development and other applications in the public interest and is willing to grant a license for such uses. Aspen represents to WU that it has the necessary product development, manufacturing and marketing capabilities to commercialize products based on such Intellectual Property. Aspen desires to obtain a license to use these properties and information for its own commercial research and development endeavors upon the terms and conditions set forth in this Agreement. In consideration of these premises and the mutual promises contained herein, the Parties further agree as follows.

2.	Definitions . For the purposes of this Agreement, the following words and phrases will have the meanings assigned to them below.

2.1	Agreement : This Exclusive License Agreement.

2.2	Calendar Half : Each six-month period, or portion thereof, beginning on January 1 or July 1.

2.3

Combination Product : Any product that is comprised in part of a Licensed Product and in part of one or more other components which are not themselves Licensed Products (the “Other Components”). Other Components do not include surfactants, diluents and carriers and are not licensed products subject to fees under a license from a third party.

2.4	Development Plan : Aspen’s documentary plan for the development, manufacture, promotion, importation, sale and/or marketing of Licensed Products, as more fully described in Article 4.1.

2.5	Effective Date : May 1, 2004

2.6	Field : Production for Veterinary Use of Washington University Intellectual and Tangible Property.

2.7

First Commercial Sale : The date of first transfer by Aspen and/or its Sublicensees to an unrelated third party of a Licensed Product for compensation (including equivalent cash value for trades or other non-cash payments). The transfer of Licensed Products by Aspen or its Sublicensees strictly for their own laboratory research and development purposes, beta-testing and/or clinical testing does not constitute a First Commercial Sale for the purposes of this Agreement, provided that Aspen or its Sublicensees receive no payment for such Licensed Product in excess of the fully burdened ( i.e., direct and indirect) costs of producing and transporting such materials.

2.8	Intellectual Property : Patent Rights patents and patent applications, trademarks, service marks, copyrights, mask works, trade secrets, Tangible Research Property and Technical Information, including but not limited to the items listed on Exhibit A.

2.9

Licensed Product : Any product which is made, made for, used, sold or imported by Aspen and any Sublicensees which: (a) in the absence of this License Agreement would infringe at least one Valid Claim, or (b) uses a process covered by a Valid Claim. Licensed Product includes any product made, and method or process used, in whole or in part using Tangible Research Property or Technical Information.

2.10

Aspen and its affiliates. Affiliate means any person or entity which, directly or indirectly, owns or controls Aspen, or which is controlled by or under common control with Aspen. For purposes of this definition, control means a person or entity's direct or indirect ownership of more than 50% of the outstanding voting securities of a corporation, the direct or indirect ownership by a person or entity of more than 50% of the outstanding voting shares of another entity, the right to receive more than 50% of the earnings of a person, corporation or other entity, or the right to control the business decisions of a person, corporation or other entity.

2.11	Gross Sales : Amounts received by Aspen for Sales of Licensed Products prior to reduction for qualifying costs or taxes but after deductions for returns and discounts and after deductions for non-collectible amounts.

2.12

Patent Rights : The patents and patent applications listed in Exhibit A, attached hereto and incorporated by reference herein, and all foreign counterparts, continuations, continuations-in-part, divisions, extensions, reexaminations and reissues thereof, which trace their earliest priority filing date by unbroken lineage to a patent or patent application listed in Exhibit A.

2.13	Sale : Any transaction in which a Licensed Product is exchanged for value. A Sale of a Licensed Product will be deemed to have been made at the time Aspen or its Sublicensee invoices, ships, or receives value for, whichever occurs first, a Licensed Product.

2.14	Sublicensee : A person or entity to which Aspen has granted a sublicense under the license rights granted to Aspen in Article 3 of this Agreement.

2.15

Sublicensing Revenue : All value received by Aspen from its Sublicensees for the importation, manufacture, sale, or use of Licensed Products anywhere in the world during the Term of this Agreement. This will include, by way of non-limiting examples: all fees, milestones, and cash equivalent for securities, equipment and other property or rights received by Aspen as sublicensing value from any Sublicensee.

2.16	Tangible Research Property : The physical embodiments of Patent Rights and Technical Information.

2.17

Technical Information : All ideas, data, know-how, trade secrets, research information, methods, procedures or processes, owned by WU, resulting from research performed by or under the direction of Dr Irving Boime, and not in the public domain, which contribute to the practice of the inventions in the Patent Rights and the commercialization of Licensed Products, including those identified in Exhibit C attached hereto and incorporated by reference herein. Delivery will be made in accordance with the terms set forth in the Exhibit.

2.18	Term : Commences on the Effective Date and continues until the expiration of the last of the patents included in the Patent Rights to expire, unless earlier terminated in accordance with this Agreement. A patent will be understood to expire at midnight on the day of its expiration.

2.19	Territory : Anywhere in the world except for countries to which export of technology or goods is prohibited by applicable U.S. export control laws or regulations.

2.20

Valid Claim : A claim (a) of a pending Patent Rights patent application which claim has not been pending for longer than fifteen years, or (b) of an issued and unexpired Patent Rights patent which has not been held invalid or unenforceable by a court or other governmental agency of competent jurisdiction in a decision or order that is not subject to an appeal.

3.	License Grant . Subject to the terms and conditions set forth in this Agreement, WU hereby grants to Aspen and Aspen hereby accepts, the following license during the Term in the Territory:

3.1	An exclusive, fee- and royalty-bearing license, including the right to grant sublicenses, under the Patent Rights, to make, have made, sell, offer for sale, use, and import or export Licensed Products in the Field.

3.2

A nonexclusive, fee- and royalty-bearing license, including the right to grant sublicenses, to Tangible Research Property and Technical Information, to make, have made, sell, offer for sale, use and import or export Licensed Products in the Field. This license includes the right, revocable by WU, to bring actions in Aspen’s name against third parties for unfair trade practices concerning Tangible Research Property or Technical Information (alone or in conjunction with actions to enforce the Patent Rights) or to defend in Aspen’s name against unfair trade practice claims by third parties premised on Aspen’s use of Tangible Research Property or Technical Information in Licensed Products (alone or in conjunction with subject matter described and claimed in the Patent Rights) subject to the terms and conditions set forth below in this Agreement.

3.3	The right to grant sublicenses granted to Aspen under this Agreement is subject to the following conditions:

3.3.1

In each sublicense, Aspen must prohibit the Sublicensee from further sublicensing and require that the Sublicensee is subject to the terms and conditions of the license granted to Aspen under this Agreement.

3.3.2

Within thirty days of the effective date of any sublicense, Aspen must send to WU a complete copy of the sublicense. If the original sublicense is written in a language other than English, then Aspen must also send to WU within the allotted time a translation of the sublicense written in English.

3.3.3

If Aspen enters bankruptcy or receivership, voluntarily or involuntarily, Sublicensing Revenue then or thereafter due to Aspen will, upon notice from WU to any Sublicensee, become owed directly to WU for the account of Aspen. WU will remit to Aspen any amounts received which exceed the sum actually owed by Aspen to WU.

3.3.4

Any sublicense granted by Aspen under this Agreement will remain in effect in the event that this Agreement is terminated prior to expiration. Any Sublicensee will automatically become a direct licensee of WU under the rights originally sublicensed to it by Aspen provided the Sublicensee did not cause the termination of this Agreement and the Sublicensee agrees to comply with all the terms of this Agreement and to fulfill all the responsibilities of Aspen hereunder. Any Sublicensee income amounts so received by WU will have the effect of offsetting any amounts due from Aspen to WU.

3.3.5

Aspen will be primarily liable to WU for all of Aspen’s obligations contained in this Agreement. Any act or omission by a Sublicensee that would be a material breach of this Agreement if imputed to Aspen will be deemed to be a breach by Aspen of this Agreement if not cured within 45 days.

3.4

The license "to have made" granted in Sections 3.1 and 3.2 means that Aspen may contract with a third party or parties to manufacture Licensed Products for Aspen for sale or offer for sale by Aspen or Sublicensees within the scope of its (or their) sales operations. Aspen will require any contractors to assume confidentiality obligations consonant with Article 7 of this Agreement.

3.5	WU may use and practice the inventions and subject matter described and claimed in the Patent Rights for its own research and collaborations, and may permit others to do the same as required for such sponsored research and collaborations. Appropriate confidentiality obligations will be required.

3.6	WU may use, and grant nonexclusive licenses to others to use, subject matter embodied or contained in Tangible Research Property and Technical Information, so long as it shall not conflict with the rights under this Agreement. Appropriate confidentiality obligations will be required.

3.7

Aspen and Sublicensees have no ownership rights of any kind in the Intellectual Property licensed under this Agreement. All ownership rights remain the property of WU. WU will retain all original versions of Tangible Research Property and Technical Information licensed and will retain control over the same at all times. The delivery of Tangible Research Property and Technical Information and grant of license rights thereto under this Agreement do not constitute a sale of the same.

3.8

In accordance with Public Laws 96-517, 97-256 and 98-620, codified at 35 U.S.C. §§ 200-212, the United States government retains certain rights to inventions arising from federally supported research or development. Under these laws and implementing regulations, the government may impose requirements on such inventions. Licensed Products embodying inventions subject to these laws and regulations sold in the United States must be substantially manufactured in the United States. The license rights granted in this Agreement are expressly made subject to these laws and regulations as they may be amended from time to time. WU shall hold Aspen harmless from any claims by the United States government under this Article 3.8.

3.9	The Parties agree that new Intellectual Property developed or acquired by WU during the term of this Agreement, which has applicability in the Field, shall be optioned first to Aspen for a license under the same terms and conditions as provided by the Agreement.

Diligence. Aspen agrees to use its best efforts, consistent with its prudent business judgment, to develop, manufacture, promote and sell Licensed Products as soon as practical in accordance with the Development Plan. Aspen also agrees that it will require its Sublicensees to be diligent uniformly to the standards and obligations of Aspen set forth herein.

4.1	Within sixty days of the Effective Date of this Agreement, Aspen will provide to WU a Development Plan describing Aspen’s plans for commercializing Licensed Products. Each Development Plan will contain the following minimum information:

4.1.1

A definition and/or specification of each Licensed Product planned for development.

4.1.2

Tasks to be performed by Aspen, its contractors and/or Sublicensees to develop each Licensed Product to the point of commercialization, including estimated time schedules for specific tasks such as prototype development, beta testing, trials, product development, and market surveys and testing.

4.1.3

Tasks to be performed to achieve regulatory approval or other certification of each Licensed Product including estimated time schedules.

4.1.4

Good faith estimate of time of First Commercial Sale of each Licensed Product by country in North America, Europe, and Asia/Pacific Basin.

4.1.5

Good faith estimates of Sales and income by Calendar Half for the next five calendar years including the first calendar year or partial calendar year following the Effective Date.

4.2

Aspen will update the Development Plan and report progress against the Plan in writing to WU no later than January 31 and July 31 of the first two calendar years following the calendar year in which the Effective Date falls, and no later than January 31 of each subsequent calendar year. The updates and reports will summarize in reasonable detail the progress achieved and any problems encountered in the development, prototyping, evaluation, testing, manufacture, sale, and/or marketing of each Licensed Product. Upon reasonable request by WU, Aspen will consult with WU about tasks, schedules and progress.

4.3	Prior to the First Commercial Sale of each Licensed Product, Aspen will be considered to be diligent regarding the development of such respective Licensed Product as long as Aspen provides the required Development Plan and updates and reports progress against the Plan and as long as Aspen:

4.3.1

Continues to provide financial and other resources required to maintain progress in accomplishing the Plan as it relates to each Licensed Product.

4.3.2

Conducts and/or enables others to conduct all activities required to maintain scheduled progress for accomplishing the Plan as it relates to each Licensed Product.

4.4

Within three years after the First Commercial Sale of a Licensed Product Aspen will be considered diligent if Aspen sells sufficient quantities of Licensed Products or earned sufficient revenues from Sublicensee Agreements, that earned royalties equal or exceed the minimum royalty payments required under Article 5. Should Aspen fail to meet this requirement, WU may declare that Aspen is not diligent.

4.5	Should WU conclude in its reasonable judgment that Aspen is not diligent in development or sales of a Licensed Product based on the standards set forth in Sections 4.1, 4.3 and 4.4 above as applicable, for reasons other than:

4.5.1

Withholding of regulatory approval by a government agency notwithstanding Aspen’s diligent efforts to obtain such approval;

4.5.2

Encountering unanticipated technical or scientific problems which have been promptly reported in writing to WU; or

4.5.3

Other causes beyond the reasonable control of Aspen notwithstanding its diligent efforts to overcome them, and which have been promptly reported in writing to WU; then WU may notify Aspen of its conclusions and the bases therefor and, upon request of WU, Aspen must show cause why the license granted for such Licensed Product should not be terminated.

5.	Fees, Payments and Royalties .

5.1

Within forty-five days of the Effective Date of the Agreement, Aspen will pay to WU a non-refundable, non-creditable license issue fee of $ 190,000 (one hundred ninety thousand USD). This will be paid as $ 60,000 in cash and $130,000 in Aspen common stock at current value (with current value defined as the closing price of Aspen’s common stock on the day of signing this Agreement).

5.2

Aspen must pay to WU a non-refundable minimum royalty for Licensed Products sold by Aspen or its Sublicensees. The first calendar period for which the minimum royalty will be paid will begin on the first day of the Calendar Half following the effective date of this agreement. Payments under this Section 5.2 will be due in the following amounts for the corresponding calendar periods:

5.2.1	Period	Minimum Royalty
	1 st & 2 nd Calendar Halves	$10,000
	3 rd & 4 th Calendar Halves	$10,000
	Fifth and Each	$10,000
	Subsequent Half

5.2.2

Minimum royalties will be paid on January 31 and July 31 of each respective Calendar Half.

5.4	Aspen must pay to WU an earned royalty of [* * ]% ([ * *] percent) of the Gross Sales of Licensed Product(s) made, made for, used, imported or sold by Aspen and any Sublicensee for any Calendar Half following Aspen’s First Commercial Sale.

5.4.1

Earned royalties are fully creditable against minimum royalties called for in Section 5.2, above, or vice versa .

5.4.2

Earned royalties will be accumulated and reported on a Calendar Half basis. Aspen will pay to WU earned royalties accumulated during the preceeding Calendar Half on the February 28 or August 31 immediately following the end of that Calendar Half.

5.5	Licensee will pay WU [* * ]% ([ * *] percent) of Sublicense Revenue (sublicense fees) in addition to the royalties set forth in Section 5.4.

5.5.1

Sublicense fees to WU are fully creditable against minimum royalties called for in Section 5.2, and vice versa .

5.5.2

Sublicense fees will be accumulated and reported on a Calendar Half basis. Aspen will pay to WU sublicense fees accumulated during the preceding Calendar Half on the February 28 or August 31 immediately following the end of that Calendar Half.

5.5.3

Licensed Products may be made, used, imported or sold in combination with or as part of other products which are covered by a claim of a third party's patent or by other intellectual property rights of a third party, requiring a license to enable Aspen or Sublicensees to make, use, sell or offer for sale, or import Combination Products. To calculate the value of Net Sales of Combination Products, the gross sales of such Products will be multiplied by the fraction A/(A + B) where A is the fair market value of the Licensed Product when sold separately, and B is the fair market value of the Other Agent [Component] when sold separately. Allowed deductions may then be subtracted from the proportion of gross sales attributable to the Licensed Product to compute Gross Sales.

5.6	No multiple royalty will be required to be paid because a Licensed Product or its manufacture, use, sale or importation is covered by more than one Valid Claim or patent or patent application within the Patent Rights.

5.7

Should Aspen enter into a license agreement with a third party to avoid or settle a claim of infringement or unfair trade practice due to Aspen’s use of Intellectual Property in commercializing any Licensed Product, Aspen may offset [* * *]% of any royalty payments made in accordance with such third party licenses against the royalties and fees owed to WU under Sections 5.4 and 5.5, provided, however, that in no event will the royalty and fee payments due to WU under those sections be reduced by more than [* * *]% for any Calendar Half. Unused credits may be carried over by Aspen from one Calendar Half to the next until exhausted.

6.	Place and Method of Payment; Reports and Records; Audit; Interest .

6.1

All dollar ($) amounts referred to in this Agreement are expressed in United States dollars. All payments to WU under this Agreement must be made in United States dollars by check or electronic transfer payable to "Washington University". Any Sales revenues for Licensed Products received by Aspen in currency other than United States dollars will be converted to United States dollars at the conversion rate for the foreign currency as published in the Eastern edition of The Wall Street Journal as of the last business day in the United States of the applicable Calendar Half.

6.2	Checks will be dispatched to WU's correspondence address given in Section 16 below. Electronic transfers will be made to a bank account designated by WU.

6.3	Aspen must deliver to WU within forty-five days of the end of each Calendar Half in which earned royalties and/or sublicense fees are owed and payable a written report setting forth the calculation of the payments made to WU for that Calendar Half, including at least the following:

6.3.1

The number of Licensed Products and volume of Sales by country.

6.3.2

Gross receipts for Sales of Licensed Products including total amounts invoiced, billed or received.

6.3.3

Allowed deductions as defined in Section 2.11, giving totals by each type.

6.3.4

Royalties, fees and payments due to WU giving totals for each category.

6.3.6

Earned royalty amounts credited against minimum royalty payments or vice versa.

6.4

Aspen must maintain, and require its Sublicensees to maintain complete and accurate books of accounts and records which would enable an independent auditor to verify the amounts paid as royalties, fees and payments under this Agreement. Aspen must also require its Sublicensees to file reports to Aspen to enable Aspen to comply with all record keeping and reporting obligations in this Agreement. The books and records must be maintained for three years following the Calendar Half after submission of the reports required by this Article. Upon reasonable notice by WU, Aspen must give WU (or auditors or inspectors appointed by and representing WU) access to all books and records relating to Sales of Licensed Products by Aspen and its Sublicensees to conduct an audit or review of those books and records. This access must be available at least once during each calendar year, for a reasonable time, during regular business hours, during the Term of the Agreement and for the three calendar years following the year in which termination or expiration occurs. If WU determines that Aspen has underpaid royalties by 5% or more for any Calendar Half, then Aspen must pay WU the actual outside costs and expenses of its accountants and auditors in connection with the review and audit.

6.5	Any amounts that are not paid by Aspen to WU when due will accrue interest from the due date until payment is made at an annual rate equal to two percent above prime or the maximum allowed by law, if less.

7	Confidentiality .

7.1	All Patent Rights patent applications, Tangible Research Property and Technical Information designated by WU as confidential at the time it is delivered to Aspen are Confidential Information.

7.2

Aspen will maintain in secrecy and not disclose to any third party any of WU's Confidential Information. Aspen will ensure that its employees have access to WU's Confidential Information only on a need-to-know basis and are obligated by written agreement to keep Aspen’s confidentiality obligations under this Agreement.

7.3	The obligations of confidentiality specified in this Article will not extend to Confidential Information which:

7.3.1

Becomes part of the public domain through no fault of Aspen.

7.3.2

Was known to Aspen before disclosure to Aspen by WU as established by clear and convincing documentary evidence;

7.3.3

Comprises identical subject matter to that which had been originally and independently developed by Aspen personnel without knowledge or use of any WU Confidential Information; or

7.3.4

Was disclosed to Aspen by a third party having a right to make the disclosure.

7.4

Notwithstanding the other terms of this Article 6, Aspen may, to the extent necessary, use Confidential Information to secure governmental approval to clinically test or market a Licensed Product, to secure patent protection for an invention within the Patent Rights, to comply with a court order or governmental rule or regulation (including regulations under the Securities and Exchange Commission), or to show to a potential sublicensee or contractor subject to an appropriate confidentiality agreement. Aspen will, in any such use, take all reasonably available steps to maintain confidentiality of the disclosed Information and to guard against any further disclosure.

8	Publication

8.1

Aspen recognizes WU’s mission to disseminate the results of WU research through scholarly publication and agrees that Dr. Boime shall be permitted to present, at symposia, national and international meetings, and to publish in journals, theses, dissertations, or otherwise of his own choosing, methods and results of the Project. WU research personnel shall at all times have the opportunity to publish results of the Project. Aspen shall have 30 days to review manuscripts and materials prior to publication to protect patentable information.

8.2	Dr Boime shall have the right to review any publications that may be generated by Aspen or a third party prior to publication and will have authority to make final changes that are consistent with the contributions of WU and Aspen.

9	Representations and Warranties .

9.1	WU represents and warrants that:

9.1.1

WU is a corporation organized, existing and in good standing under the laws of Missouri.

9.1.2

It has the authority to enter into this Agreement and that the person signing on its behalf has the authority to do so.

9.1.3

To the best of its knowledge, it is the owner (subject to any rights retained by the U.S. government by operation of law) of the Intellectual Property licensed in this Agreement and that it has the authority to grant the licenses set forth herein.

9.1.4

To the best of its knowledge, as of the Effective Date of the Agreement, there are no actions, suits or claims pending against WU challenging WU's ownership or control of the Intellectual Property licensed in this Agreement.

9.1.5

To the best of its knowledge, all inventors named in patent applications within the Patent Rights have, unless indicated otherwise to the contrary, entered into agreements with WU promising to assign to WU their right, title and interest in and to the patent application(s) describing and claiming their invention(s) or have already made such an assignment.

9.2	Aspen represents and warrants that:

9.2.1

It is a corporation duly organized, existing, and in good standing under the laws of Colorado. .

9.2.2

The execution, delivery and performance of this Agreement have been authorized by all necessary corporate action on the part of Aspen and that the person signing the Agreement on behalf of Aspen has the authority to do so.

9.2.3

The making or performance of this Agreement would not violate any separate agreement it has with any other person or entity.

9.2.4

It is not a party to any agreement or arrangement that would prevent it from performing its duties and fulfilling its obligations to WU under this Agreement.

9.3	Nothing in this Agreement is or will be construed as:

9.3.1

A warranty or representation by WU as to the validity or scope of its Patent Rights, Tangible Research Property or Technical Information.

9.3.2

Granting by implication, estoppel or otherwise any licenses or rights under patents or other intellectual property rights of WU or other persons, other than the rights expressly granted above to Intellectual Property identified on the attached Exhibits.

9.3.3

An obligation to furnish any technology or technological information other than that identified in the attached Exhibits.

9.3.3 1

A grant of rights to either Party to use the name of the other in advertising, publicity, or otherwise, except as expressly authorized herein, without the permission of the other Party.

9.4

THE INTELLECTUAL PROPERTY IS PROVIDED "AS IS" AND WU MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED. THERE ARE NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS OF ANY LICENSED PRODUCT FOR A PARTICULAR PURPOSE, OR THAT THE USE OF ANY LICENSED PRODUCT WILL NOT INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK OR OTHER RIGHTS, OR ANY OTHER EXPRESS OR IMPLIED WARRANTES. WU WILL NOT BE LIABLE TO ASPEN ITS SUCCESSORS, ASSIGNS, CONTRACTORS OR SUBLICENSEES OR ANY THIRD PARTY REGARDING ANY CLAIM ARISING FROM ASPEN’S USE OF LICENSED INTELLECTUAL PROPERTY OR ANY LICENSED PRODUCT OR FROM THE MANUFACTURE, USE, IMPORTATION OR SALE OF LICENSED PRODUCTS, OR ANY CLAIM FOR LOSS OF PROFITS, LOSS OR INTERRUPTION OF BUSINESS, OR FOR INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES OF ANY KIND.

10	Application, Prosecution and Maintenance of Patent Rights .

10.1

WU has the sole right to control the preparation, filing, prosecution, issue and maintenance of Patent Rights patents and applications. WU will select qualified outside patent counsel reasonably acceptable to Aspen and corresponding foreign associates to prepare, file, prosecute and maintain U.S. patents/applications and foreign counterparts within the Patent Rights. WU will consult with Aspen regarding the prosecution of Patent Rights patent applications including, without limitation, by providing Aspen a reasonable opportunity to review and comment on proposed submissions to any patent office before the papers are filed. WU will keep Aspen reasonably informed of the status of Patent Rights patents and applications by timely giving Aspen copies of communications relating to such Patent Rights that are received from any patent office or outside patent counsel of record or foreign associate.

10.2

During the Term of the Agreement, Aspen will reimburse WU for all reasonable and documented costs and expenses incurred by WU in the preparation, filing, prosecution, issue and maintenance of patents and applications within the Patent Rights within thirty days of receipt from WU of copies of billing invoices for such costs and expenses. Such costs and related reimbursement shall be limited to that portion associated with the limited Field under this License Agreement.

10.3

As long as Aspen satisfies its reimbursement obligations hereunder in a timely manner, WU agrees that it will diligently prosecute and maintain the applications and patents within the Patent Rights. WU will prepare, file and prosecute additional applications within the Patent Rights as Aspen may request, in WU's name at Aspen’s sole expense.

10.4

If Aspen at any time informs WU in writing that it no longer wishes to reimburse WU for expenses relating to any Patent Rights applications or patents in any country, WU will be free upon receipt of such notice, and without further obligation to Aspen whatsoever, to abandon the applications or patents subject to the notice or to continue prosecution or maintenance, at its option. Any application or patent for which WU assumes responsibility for the expenses of preparation, filing, prosecution, issue or maintenance will be removed from the Patent Rights and the license granted to Aspen under Sections 3.1 and 3.2 for the same will terminate immediately.

11	Infringement, Enforcement, and Defense .

11.1	The license granted herein includes the revocable right to bring actions in WU’s name to enforce the Patent Rights against third parties or to defend the Patent Rights in WU”s name against claims by third parties, subject to the terms and conditions set forth in this Agreement

11.2	WU and Aspen will promptly give to the other written notice of any known or suspected infringement of the Patent Rights or unauthorized use of the Tangible Research Property or Technical Information by third parties.

11.3

Aspen at its sole expense will attempt to abate any infringement of the Patent Rights or unauthorized use of Tangible Research Property or Technical Information by third parties as it relates to the rights provided under this Agreement. Aspen will have the right to institute and conduct actions against third parties for infringement and unfair trade practices through outside counsel of its choice who are reasonably acceptable to WU. Aspen will keep WU informed of all proceedings and provide copies of all pleadings and other papers related to such actions. WU will provide reasonable assistance to Aspen in prosecuting any such actions.

11.4

Aspen at its sole expense will defend third party claims of patent or intellectual property infringement and injury, death or product liability brought against Aspen and/or WU. Aspen will have the right to conduct the defense of such actions through outside counsel of its choice who are reasonably acceptable to WU. WU will provide all reasonable assistance for the defense of such claims and Aspen will keep WU informed of all proceedings and provide copies of all pleadings and other papers related to such actions.

11.5	Notwithstanding anything stated herein to contrary, Aspen will not be permitted to settle or compromise any claim or action in a manner that may impose restrictions or obligations on WU or grant rights or concessions to Intellectual Property or Licensed Products without WU's prior written consent.

11.6

Aspen will be entitled to offset 50% of its attorney's fees and expenses incurred in abating third party infringement or unfair trade practices or bringing or defending any action against third parties under this Article, against the royalties due under Section 5.4 and the fees due under Section 5.5, subject to the restriction of Section 5.7.

11.7

If Aspen fails or declines to take any action under Section 10.3 within a reasonable time after receiving notice of third party infringement or unfair trade practices, then WU will have the right, but not the obligation, to take appropriate actions against such third parties. If Aspen fails to defend a claim or action under Section 10.3 within thirty days of receiving notice of the same, WU may assume the defense for the account of and at the risk of Aspen and any resulting liability will be deemed conclusively to be a liability of Aspen. In either case, the failure or declination of Aspen to act will result in the immediate loss of Aspen’s license rights under this Agreement in the country or territory in which the unabated infringement or undefended third party claim or action pertains.

Indemnification . Aspen will indemnify, defend and hold harmless Dr Irving Boime and WU, its trustees, faculty, staff, students and agents from and against any and all liability, loss, damage, action, claim or expense (including attorney's fees and costs at trial and appellate levels) in connection with any claim, suit, action, demand or judgment arising out of (a) the use of any Intellectual Property in the design, development, production, manufacture, sale or offer for sale, use, importation, lease, marketing or promotion by Aspen or its contractors, Sublicensees or agents of any Licensed Product or (b) injury or death to person or damage to property, or (c) any third party claim that any use or licensing of the Intellectual Property under this Agreement violates or infringes that party's intellectual property rights.

13	Insurance .

13.1

Aspen or any Sublicensee as appropriate, will provide WU with a certificate of insurance and will provide a complete copy of the insurance policy to WU as soon as one becomes available and notices of subsequent renewals. The certificates must provide that Aspen’s carrier will notify WU in writing at least thirty days prior to cancellation or material change in coverage.

13.2

WU may periodically evaluate the adequacy of the minimum coverages of insurance specified in this Article. WU reserves the right to require Aspen to adjust the insurance coverages. The specified minimum coverages do not constitute a limitation on Aspen’s obligation to indemnify WU under this Agreement.

14	Termination .

14.1	Aspen may terminate this Agreement with or without cause on ninety days written notice to WU. The license rights granted hereunder terminate at the end of the ninety day period.

14.2

WU may terminate on sixty days written notice to Aspen upon material breach by Aspen of the Agreement, subject only to the provisions of Article 4.5.3. The termination becomes effective at the end of the sixty day period unless Aspen has fully cured the breach within the sixty days. Material breaches include the following:

14.2.1

Failure to use best efforts to commercialize Licensed Products under Section 4.

14.2.2

Failure to provide a Development Plan within the time allowed as required in Section 4.1 or the updates required in Section 4.2.

14.2.3

Non-compliance with Section 4.3.

14.2.4

Failure to pay any fee, payment or royalty required by Article 5 when due in the place and manner set forth in Article 6.

14.2.5

Failure to keep accurate and complete books and records and to cause Sublicensees to do the same, as required by Article 6. Also, failure to allow reasonable inspection and audit as required by Article 6.

14.2.6

Breach of confidentiality requirements of Article 7.

14.2.7

Failure to obtain, maintain and report levels of insurance required in Article 13.

14.3	If Aspen enters bankruptcy or receivership, voluntarily or involuntarily, all obligations of WU and all rights (but not obligations) of Aspen terminate immediately without the need for either WU or Aspen to take any action.

14.4	Upon termination of this Agreement for any reason, Aspen must return to WU all Confidential Information (as defined in Article 7) received from WU during the Term of this Agreement.

14.5

On termination by either Party for any reason, the license rights granted to Aspen under Article 3 terminate when termination of the Agreement is effective. Aspen’s obligations to pay fees, royalties or other payments and patent expenses (Article 10) accruing prior to termination survive termination

Use of Names . Neither Party may use the name of the other for any commercial, advertisement, or promotional purpose without the written consent of the other. WU acknowledges and understands that Aspen is required to make disclosure of the terms of this Agreement with the Securities and Exchange Commission and to issue a press release upon execution of this Agreement. WU agrees, after an opportunity to review the press release and the ability to comment thereon, to permit Aspen to release any information required under federal and state securities laws in a press release or filings with the Securities and Exchange Commission.

Assignment or Pledge of Agreement . Neither this Agreement nor any portion of it may be assigned by either Party to anyone else without the written consent of the other Party. Notwithstanding this, Aspen may assign the entire Agreement, without WU's consent, to an entity that succeeds to substantially all of its business or assets by way of merger, sale, acquisition or otherwise, provided that the successor agrees in writing to assume all the obligations and liabilities of Aspen to WU. The rights granted in this Agreement may not be pledged in any way by Aspen or any Sublicensee to secure any purchase, lease or loan.

Notice. Any required or permissive notice under this Agreement will be sufficient if in writing and delivered personally, by recognized national overnight courier, or by registered or certified mail, postage prepaid and return receipt requested, to the address below and will be deemed to have been given as of the date shown on the receipt if by certified or registered mail, or the day following dispatch if by overnight courier.

If to WU :

Washington University

Office of Technology Management

Campus Box 8013

660 South Euclid Avenue

St. Louis MO 63110

Fax (314/ 362-5872)

If to Aspen :

AspenBio, Inc.

1585 South Perry St.

Castle Rock, CO 80104

Fax: (303/798-8332)

18	Arbitration [Reserved].

19	General Provisions .

19.1	This Agreement will be governed and interpreted according to the laws of Missouri.

19.2	None of the terms of this Agreement can be waived except by mutual written consent of the Parties.

19.3	This instrument comprises the entire agreement and understanding of the Parties relating to the subject matter of the Agreement.

19.4	This Agreement cannot be changed, modified or amended except by a written instrument subscribed by authorized representatives of the respective Parties.

19.5	Neither Party is an agent or contractor of the other as a result of any transaction under or related to this Agreement. Neither Party may in any way pledge the other Party's credit or incur any obligation on behalf of the other Party.

19.6	Each Party is liable to the other only for actual damages for breach of this Agreement or any warranty contained herein, and not for any special, consequential, incidental, or indirect damages arising out of this Agreement, however caused, under any theory of liability.

19.7	The provisions of this Agreement are severable in that if any provision in the Agreement is determined to be invalid or unenforceable under any controlling body of law, that will not affect the validity or enforceability of the remaining provisions of the Agreement.

19.8

If the performance of any obligation under this Agreement is prevented or impaired by acts of war, riot, acts or defaults of common carriers, or governmental laws or regulations, a Party will be excused from performance so long as such cause continues to prevent or impair that Party's performance. The Party claiming force majeure excuse must promptly notify the other Party of the existence of the cause and must at all times use diligent efforts to resume and complete performance. This Section 18.8 will not excuse Aspen’s obligation to pay fees, payments and royalties under Article 5 of the Agreement.

19.9	WU has no responsibility for product design and development, servicing, distribution, or marketing, or any decisions made or strategies devised in areas related to Licensed Products.

19.10

Articles 5, 6, 7 above, 12, and 15 above will survive expiration or termination of this Agreement for a period of three years.

19.11

This Agreement will be executed in two original versions, one belonging to each Party. The originals are valid counterparts of each other.

Witness : The parties have caused this Agreement to be executed in duplicate by their duly qualified representatives.

Accepted by ( Aspen ):

ASPENBIO, INC

AUTHORIZED OFFICIAL

AspenBio, Inc.

Signature: /s/ Roger Hurst

Printed Name: Roger Hurst

Title: President

Date: May 1, 2004

Provided by ( WU ):

WASHINGTON UNIVERSITY

AUTHORIZED OFFICIAL

Washington University

Signature: / s/ Michael G. Douglas

Printed Name: Michael G. Douglas

Title: Associate Vice Chancellor, Technology Management

Date: May 1, 2004

First Amendment

This First Amendment (“Amendment #01”) is made effective on this 18 th day of January, 2008 (“Effective Date”) by and between The Washington University, a corporation established by special act of the Missouri General Assembly, approved February 22, 1853 and acts amendatory thereto, having its principal office at One Brookings Drive, St. Louis, Missouri 63130 ("WU"), and AspenBio Pharma, Inc., previously known as AspenBio Inc., having a principal office at 1585 South Perry Street, Castle Rock, Colorado 80104 (“Aspen”). WU and Aspen may be referred to individually as a “Party” or collectively as the “Parties”.

WHEREAS, WU and Aspen entered into an Exclusive License Agreement (“Agreement”) dated May 1, 2004; and

WHEREAS, WU and Aspen desire to amend the Agreement, as provided under Article 19.4, under the following terms and conditions.

NOW, THEREFORE, in consideration of the promises herein and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the Parties hereto agree as follows:

1.	Article 2.6 Field is amended by replacing 2.6 in its entirety with the following:

2.6 Field : Veterinary use and diagnostic use in humans. For clarity, diagnostic use in humans shall be limited to the Patent Rights included in the Agreement and the use of single-chain constructs of follicle-stimulating hormone, luteinizing hormone, thyrotropin or thyroid-stimulating hormone, and human chorionic gonadotropin in various aspects of human in-vitro diagnostics such as use in reagent or assay development and manufacturing, manufacturing of reagent test strips or ELISA type kits, production of antibodies, quality control products, calibration and standards material. This shall not include any internal or therapeutic use in humans.

Within fifteen (15) days of the Effective Date of this Amendment #01 and upon receipt of an invoice from WU to Aspen, Aspen shall pay WU Sixty-five Thousand Dollars ($65,000). Additionally, within fifteen (15) days and upon receipt of an invoice from WU to Aspen, Aspen shall pay WU four (4) equal payments of Fifteen Thousand Dollars ($15,000) payable at the end of each 90-day period from the Effective Date of this Amendment #01. All payments shall be made according to the provisions of Section 6 of the Agreement.

3.	All other terms and provisions of the Agreement shall remain in full force and effect.

IN WITNESS WHEREOF the authorized representatives of the Parties have executed this Amendment #01 as of the Effective Date written above.

AspenBio Pharma, Inc.:

By: /s/ Richard Donnelly

Name: Richard Donnelly

Title: President and CEO

Date: January 18, 2008

The Washington University:

By: /s/ Bradley J. Castanho

Name: Bradley J. Castanho

Title: Assistant Vice Chancellor

Date: January 18, 2008

Second Amendment

This Second Amendment (“Amendment #02”) is made effective on this 17 th day of September, 2008 (“Effective Date”) by and between The Washington University, a corporation established by special act of the Missouri General Assembly, approved February 22, 1853 and acts amendatory thereto, having its principal office at One Brookings Drive, St. Louis, Missouri 63130 ("WU"), and AspenBio Pharma, Inc., previously known as AspenBio Inc., having a principal office at 1585 South Perry Street, Castle Rock, Colorado 80104 (“Aspen”). WU and Aspen may be referred to individually as a “Party” or collectively as the “Parties”.

WHEREAS, WU and Aspen entered into an Exclusive License Agreement (“Agreement”) dated May 1, 2004 and First Amendment (“Amendment #01”) dated January 18, 2008; and

WHEREAS, WU and Aspen desire to amend the Agreement, as provided under Article 19.4 thereof, under the following terms and conditions.

NOW, THEREFORE, in consideration of the premises herein and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the Parties hereto agree as follows:

1.	A new Section 10.5 is added to the Agreement to read as follows:

“10.5 The Patent Rights listed in Exhibit A of this Amendment #02 are added to the Agreement. Aspen agrees to pay WU, within thirty (30) days of invoice from WU, the amount of $52,885.32 for patent costs previously paid by WU. In addition, Aspen shall reimburse all reasonable future patent costs to WU for the preparation, filing, fees and prosecution of the Patent Rights listed in Exhibit A of this Amendment #02 within thirty (30) days of receiving an invoice from WU. All patent payments made by Aspen to WU under this Section 10.5 are non-refundable and non-creditable.”

4.	Section 10.4 is replaced in it entirety to read as follows:

“10.4

If Aspen at any time and at it’s sole discretion informs WU in writing that it no longer wishes to reimburse WU for expenses related to any Patent Rights in any country, WU will be free upon receipt of such notice, and without obligation to Aspen whatsoever, to abandon the patent application or patent subject to the notice or to continue prosecution or maintenance, at its sole option. Any Patent Rights application or patent for which WU assumes responsibility for the expenses of preparation, filing, prosecution, issue and/or maintenance will be removed from the Patent Rights and the licenses granted to Aspen under Sections 3.1 and 3.2 of the Agreement and any amendments to the Agreement related to such Patent Rights will terminate immediately.”

5.	All other terms and provisions of the Agreement and Amendment #01 shall remain in full force and effect.

IN WITNESS WHEREOF the authorized representatives of the Parties have executed this Amendment #02 as of the Effective Date written above.

AspenBio Pharma, Inc.:

By: /s/ Richard Donnelly

Name: Richard Donnelly

Title: President and CEO

Date: September 17, 2008

The Washington University:

By: /s/ Bradley J. Castanho

Name: Bradley J. Castanho

Title: Assistant Vice Chancellor

Date: September 17, 2008

I, Stephen T. Lundy, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of AspenBio Pharma, Inc.;


August 5, 2010
	/s/ Stephen T. Lundy
	Stephen T. Lundy Chief Executive Officer and President


August 5, 2010
	/s/ Stephen T. Lundy
	Stephen T. Lundy, Chief Executive Officer and President