DISCONTINUED OPERATIONS

12 Months Ended

Sep. 30, 2012

DISCONTINUED OPERATIONS

NOTE 5. DISCONTINUED OPERATIONS

Unidym, Inc.

Founded by Arrowhead in 2005, Unidym is developing electronic applications of carbon nanotubes. Arrowhead sold its ownership interest in Unidym to Wisepower, a Korean corporation, in January 2011. The consideration included $2.5 million in Wisepower stock, a convertible bond with a face value of $2.5 million, a percentage of certain revenue streams, as well as contingent payments up to $140 million based on revenue milestones over a ten-year period. The consideration received in the form of Wisepower stock has been liquidated. The consideration received in the form of a bond is currently held as a current asset. The bond which bears no interest, became convertible on January 17, 2012, is redeemable in cash on January 17, 2013, and becomes due on January 17, 2014.

In conjunction with the disposition of Unidym, the gain on the sale and the results of historical operations are recorded as discontinued operations in the Company’s Statements of Operations. Additionally, the cash flows from Unidym are reflected separately as cash flows from discontinued operations in the Company’s Consolidated Statement of Cash Flows. Any future cash flows as discussed above will also be reflected as a part of cash flows from discontinued operations.

Tego Biosciences, Inc.

On April 20, 2007, Tego, a wholly-owned subsidiary of Arrowhead, acquired the assets of C Sixty, Inc., a Texas-based company developing protective products based on the anti-oxidant properties of fullerenes.

In December 2009, Tego completed the sale of all of its intellectual property assets to Luna Innovations, Inc. The consideration included an upfront purchase price of $350,000 and reimbursements of patent and license expenses of $80,000, as well as contingent payments based on milestones and royalties for each fullerene product developed by Luna and covered by Tego intellectual property. Due to the sale of substantially all of Tego’s assets, the operations of Tego ceased and the gain on the sale and the results of historical operations are recorded as discontinued operation in the Company’s Statements of Operations. Additionally, the cash flows from Tego are reflected separately as cash flows from discontinued operations. Any future cash flows as discussed above will be reflected as a part of cash flows from discontinued operations in the Company’s Consolidated Statements of Cash Flows.