<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
----- Exchange Act of 1934 for the quarterly period ended June 30, 1997.
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 O-8092
OXIS INTERNATIONAL, INC.
A Delaware corporation
I.R.S. Employer Identification No. 94-1620407
6040 N. Cutter Circle, Suite 317
Portland, OR 97217
Telephone: (503) 283-3911
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
-------
At June 30, 1997, the issuer had outstanding the indicated number of shares of
common stock: 25,461,376
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
-------------------------- -------------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Product sales $ 717,000 $ 1,200,000 $ 1,844,000 $ 2,537,000
Royalties and license fees 24,000 28,000 59,000 58,000
----------- ----------- ----------- -----------
Total revenues 741,000 1,228,000 1,903,000 2,595,000
Costs and expenses:
Cost of sales 472,000 652,000 1,244,000 1,577,000
Research and development 883,000 1,179,000 1,989,000 2,361,000
Selling, general and administrative 728,000 881,000 1,332,000 1,626,000
----------- ----------- ----------- -----------
Total costs and expenses 2,083,000 2,712,000 4,565,000 5,564,000
----------- ----------- ----------- -----------
Operating loss (1,342,000) (1,484,000) (2,662,000) (2,969,000)
Interest income 20,000 13,000 23,000 21,000
Interest expense (42,000) (48,000) (72,000) (117,000)
----------- ----------- ----------- -----------
Net loss $(1,364,000) $(1,519,000) $(2,711,000) $(3,065,000)
=========== =========== =========== ===========
Net loss per share $ (.07) $ (.12) $ (.16) $ $(.25)
=========== =========== =========== ===========
Weighted average number of
shares used in computation 19,884,092 12,204,520 17,012,334 12,164,472
=========== =========== =========== ===========
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
<S> <C> <C>
June 30, December 31,
1997 1996
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 4,188,000 $ 422,000
Accounts receivable 589,000 861,000
Inventories 491,000 591,000
Prepaid and other 265,000 191,000
----------- ----------
Total current assets 5,533,000 2,065,000
Property and equipment, net 1,264,000 1,327,000
Assets under capital leases, net -- 309,000
Technology for developed products
and custom assays, net 3,424,000 3,782,000
Other assets 269,000 514,000
----------- ----------
Total assets $10,490,000 $7,997,000
=========== ==========
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
<S> <C> <C>
June 30, December 31,
1997 1996
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 1,143,000 $ 1,221,000
Accounts payable 751,000 1,386,000
Customer deposits 273,000 132,000
Accrued liabilities 667,000 655,000
Current portion of long-term obligations 17,000 76,000
------------ ------------
Total current liabilities 2,851,000 3,470,000
Other liabilities -- 2,000
Shareholders' equity:
Preferred stock - $.01 par value; 15,000,000 shares
authorized:
Series B - 642,583 shares issued and outstanding
(liquidation preference of $1,500,000) 6,000 6,000
Series C - 1,021,697 shares issued and
outstanding at June 30, 1997 10,000 17,000
Series D - 1,150 shares issued and
outstanding at June 30, 1997 -- --
Series E - 960 shares issued and
outstanding at June 30, 1997 -- --
Common stock - $.50 par value; 50,000,000 shares
authorized; 25,461,376 shares issued and outstanding
at June 30, 1997 12,731,000 6,895,000
Additional paid in capital 30,941,000 30,706,000
Accumulated deficit (35,734,000) (33,023,000)
Accumulated translation adjustments (315,000) (76,000)
------------ ------------
Total shareholders' equity 7,639,000 4,525,000
------------ ------------
Total liabilities and shareholders' equity $ 10,490,000 $ 7,997,000
============ ============
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<S> <C> <C>
Six Months Ended
June 30,
--------------------------
1997 1996
Cash flows from operating activities:
Net loss $(2,711,000) $(3,065,000)
Adjustments to reconcile net loss to cash provided
by (used for) operating activities:
Depreciation and amortization 702,000 712,000
Changes in assets and liabilities:
Accounts receivable 260,000 201,000
Inventories 94,000 227,000
Other current assets (76,000) 141,000
Accounts payable (595,000) (240,000)
Customer deposits 142,000 (125,000)
Accrued liabilities 44,000 27,000
----------- -----------
Net cash used for operating activities (2,140,000) (2,122,000)
----------- -----------
Cash flows from investing activities:
Purchases of equipment (17,000) (24,000)
Other, net (7,000) 59,000
----------- -----------
Net cash provided by (used for) investing activities (24,000) 35,000
Cash flows from financing activities:
Proceeds from issuance of short-term notes 872,000 65,000
Proceeds from issuance of stock, net of related cost 6,240,000 3,205,000
Repayment of short-term borrowings (950,000) (619,000)
Repayment of long-term debt and capital lease obligations (58,000) (162,000)
----------- -----------
Net cash provided by financing activities 6,104,000 2,489,000
Effect of exchange rate changes on cash (174,000) --
----------- -----------
Net increase in cash and cash equivalents 3,766,000 402,000
Cash and cash equivalents - beginning of period 422,000 727,000
----------- -----------
Cash and cash equivalents - end of period $ 4,188,000 $ 1,129,000
=========== ===========
</TABLE>
4
<PAGE>
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. FINANCIAL STATEMENTS AND CONDENSED NOTES
The unaudited consolidated financial statements, which have been prepared in
accordance with the instructions to Form 10-Q, do not include all of the
information and notes required by generally accepted accounting principles
for complete financial statements. All adjustments considered necessary by
management for a fair presentation have been included. Operating results for
interim periods are not necessarily indicative of the results that may be
expected for the full year.
An annual report (Form 10-K) has been filed with the Securities and Exchange
Commission ("Commission") for the year ended December 31, 1996. That report
contains, among other information, a description of the Company's business,
audited financial statements, notes to the financial statements, the report
of the independent auditors and management's discussion and analysis of
results of operations and financial condition. Readers of this report are
presumed to be familiar with that annual report.
NEW ACCOUNTING PRONOUNCEMENTS ISSUED BUT NOT ADOPTED
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 130, Reporting
---------
Comprehensive Income. SFAS No. 130 establishes standards for reporting and
--------------------
display of comprehensive income and its components (revenues, expenses,
gains, and losses) in a full set of general-purpose financial statements.
This Statement requires that all items that are required to be recognized
under accounting standards as components of comprehensive income be reported
in a financial statement that is displayed with the same prominence as other
financial statements. This Statement is effective for fiscal years beginning
after December 15, 1997. Management has not assessed whether its adoption
will have a material effect on its financial position or results of
operations.
In June 1997, FASB issued SFAS No. 131, Disclosures about Segments of an
--------------------------------
Enterprise and Related Information. SFAS No. 131 establishes standards for
----------------------------------
the way that public enterprises report information about operating segments
in annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial reports
issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas, and major
customers. This Statement is effective for fiscal years beginning after
December 15, 1997. Management has not assessed whether its adoption will
have a material effect on its financial position or results of operations.
5
<PAGE>
2. INVENTORIES
Inventories are stated at the lower of cost or market. Cost has been
determined by using the first-in, first-out and specific identification
methods. Inventories at June 30, 1997 and December 31, 1996, consisted of
the following:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
<S> <C> <C>
Raw materials $128,000 $148,000
Work in process 175,000 200,000
Finished goods 188,000 243,000
-------- --------
Total $491,000 $591,000
======== ========
</TABLE>
3. NOTES PAYABLE
During March and April 1997 the Company borrowed $808,000 from certain
shareholders pursuant to issuance of short-term unsecured promissory notes
with a 3% origination fee and bearing interest at an annual rate of 8%. All
of the notes were due in May 1997. The majority of the noteholders are
indebted to the Company under the terms of an indemnification agreement.
Payment of the notes has been deferred pending the outcome of ongoing
discussions with representatives of the noteholders.
4. SHAREHOLDERS' EQUITY
On May 20, 1997, the Company issued 9,000,000 shares of its common stock
pursuant to an underwriting agreement with certain underwriters in France.
The underwriters purchased the stock at a price of 4.60 French francs per
share (an aggregate of $7,328,000). The newly-issued shares have been listed
on the French stock market, Le Nouveau Marche, and on the NASDAQ National
Market System.
During the first six months of 1997, 625,460 shares of Series C Preferred
Stock, 500 shares of Series D Preferred Stock and 1,240 shares of Series E
Preferred Stock were converted into an aggregate of 2,670,640 shares of
common stock.
6
<PAGE>
5. PENDING ACQUISITION
In July 1997 the Company entered into a letter of intent to acquire 100% of
the capital stock of Innovative Medical Systems Corporation ("IMS"). IMS,
located near Philadelphia, Pennsylvania, is a privately-held company which
specializes in the development, engineering and manufacture of instruments
for the biomedical industry. The acquisition is subject to negotiating and
entering into a definitive purchase agreement, the approval of the boards of
directors of OXIS and IMS, and the satisfactory completion of OXIS' due
diligence investigation.
6. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings per Share." SFAS 128 changes the standards for computing and
presenting earnings per share ("EPS") and supersedes APB Opinion No. 15,
"Earnings per Share." SFAS 128 simplifies the standards for computing
earnings per share and makes them comparable to international EPS standards.
It replaces the presentation of primary EPS with a presentation of basic
EPS. It also requires dual presentation of basic and diluted EPS on the face
of the income statement for all entities with complex capital structures and
requires a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS computation.
SFAS 128 is effective for financial statements issued for periods ended
after December 15, 1997, including interim periods; earlier application is
not permitted. This Statement requires restatement of all prior-period EPS
data presented. Earnings per share reported for the six-month periods ended
June 30, 1996 and 1997 are not affected as a result of adopting SFAS 128 due
to the Company's losses.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital increased during the first half of 1997 from a
deficit of $1,405,000 at December 31, 1996 to positive working capital of
$2,682,000 at June 30, 1997. This increase in the Company's working capital
resulted primarily from the issuance of common stock (net proceeds of
$6,240,000), offset by the effect of the net loss for the first half of 1997
($2,711,000 less non-cash charges of $702,000).
Cash and cash equivalents increased from $422,000 at December 31, 1996 to
$4,188,000 at June 30, 1997.
The Company expects to continue to report losses in 1997 as the level of
expenses is expected to continue to exceed revenues. To continue operations
in accordance with its current plans, the Company must raise additional
capital during the remainder of 1997. Although the Company has continued to
raise additional funds through private placements and a public offering
(described below), it cannot predict the sources, terms, amount, form,
and/or availability of additional capital to fund its operations to the end
of the current year. Failure to raise such additional capital would cause
the Company to severely curtail or cease operations.
The Company can give no assurances as to when and if its revenues will
exceed its expenses. While the Company believes that its new products and
technologies show considerable promise, its ability to realize significant
revenues therefrom is dependent upon the Company's success in developing
business alliances with biotechnology and/or pharmaceutical companies that
have the required resources to develop and market certain of these products.
There is no assurance that the Company's effort to develop such business
alliances will be successful.
During March and April 1997, the Company has raised $808,000 through the
issuance of short-term notes to certain of its shareholders.
On May 20, 1997, the Company issued 9,000,000 shares of its common stock
pursuant to an underwriting agreement with certain underwriters in France.
The underwriters purchased the stock at a price of 4.60 French francs per
share (an aggregate of $7,328,000). The newly-issued shares have been listed
on the French stock market, Le Nouveau Marche, and on the NASDAQ National
Market System.
8
<PAGE>
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 1997 COMPARED WITH THREE
MONTHS ENDED JUNE 30, 1996
REVENUES
The Company's product sales for the quarters ended June 30, 1997 and 1996
were as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Diagnostic and research assays $611,000 $ 524,000
Bovine superoxide dismutase (bSOD)
for research and human use 3,000 613,000
Palosein(R) (bSOD for veterinary use) 77,000 63,000
Other 26,000 --
-------- ----------
$717,000 $1,200,000
======== ==========
</TABLE>
Sales of the Company's diagnostic and research assays increased from
$524,000 in the second quarter of 1996 to $611,000 in the second quarter of
1997. This increase of $87,000 consists primarily of increases in the sales
of the Company's therapeutic drug monitoring assays ($57,000) and assays for
measures of oxidative stress ($27,000). Increases in sales of therapeutic
drug monitoring assays in the second quarter of 1997 were primarily to
distributors in Europe and Japan.
Sales of bulk bSOD for research and human use decreased by $610,000 in the
second quarter of 1997 as compared to the second quarter of 1996. The
Company's sales of bulk bSOD in 1996 and 1997 have been almost entirely to
the Company's Spanish licensee. No shipments were made to the Spanish
licensee in the second quarter of 1997, but shipments are scheduled in the
third and fourth quarters. Future sales of bulk bSOD continue to be largely
dependent on the needs of the Company's Spanish licensee. The Company
expects its orders for 1997 from the Spanish licensee to be less than those
for 1996. The Company's sales of bulk bSOD beyond 1997 are uncertain and
difficult to predict and no assurances can be given with respect thereto.
9
<PAGE>
COSTS AND EXPENSES
Cost of sales was 54% of product sales for the second quarter of 1996 and
66% for the second quarter of 1997. Cost of sales of diagnostic and
research assays declined from 86% of the related sales in the second
quarter of 1996 to 72% in the second quarter of 1997, following the
consolidation of the Company's manufacturing operations into one location
in the third quarter of 1996. Cost of assay sales in both the second
quarter of 1996 and the second quarter of 1997 include approximately
$180,000 in amortization of purchase adjustments relating to 1994 business
acquisitions. Excluding such amortization the cost of diagnostic and
research assays for the second quarter of 1997 was approximately 41% of the
related sales. The average cost of sales for the second quarter of 1996
was lower than the second quarter of 1997 due to a sale of bSOD with a
lower than normal cost in the second quarter of 1996.
Research and development expenses decreased from $1,179,000 in the second
quarter of 1996 to $883,000 in the second quarter of 1997. The decrease in
research and development expenses resulted from cost reductions in the
second quarter of 1997 compared to the second quarter of 1996 of (1)
$36,000 in research and development costs of the Company's French
subsidiary, (2) $59,000 in costs of the former Therox operations (the
former Therox laboratory facility was closed in May 1996), (3) $75,000 in
research and development costs at the Company's Portland, Oregon facility,
and (4) $126,000 in expenses for outside development contracts primarily
relating to the preclinical development work and clinical trials on the
Company's glutathione peroxidase mimics program.
Selling, general and administrative expenses decreased from $881,000 in the
second quarter of 1996 to $728,000 in the second quarter of 1997. The
decrease is primarily the result of a decrease of $128,000 in the general
and administrative expenses of the Company's French subsidiary. In the
third quarter of 1996 all of the Company's manufacturing operations were
consolidated in the United States and the French subsidiary became a
research facility. In connection with this restructuring, two
administrative positions have been eliminated and certain other costs which
were previously charged to administrative expenses are now being classified
as research and development costs. The Company also experienced reductions
in smaller amounts at its Portland, Oregon headquarters. The cost
reductions were offset by an increase of $55,000 in foreign exchange losses
in the second quarter of 1997 as compared to the second quarter of 1996.
INTEREST INCOME AND EXPENSE
Interest income increased by $7,000 and interest expense decreased by
$6,000 in the second quarter of 1997 as compared with the second quarter of
1996, primarily due to a reduction in interest-bearing obligations and an
increase in funds available for short-term investments following the sale
of common stock in May.
10
<PAGE>
NET LOSS
The Company continued to experience losses in the second quarter of 1997.
The second quarter 1997 loss of $1,364,000 ($.07 per share) was $155,000
less than the $1,519,000 ($.12 per share) loss for the first quarter of
1996. The reduction in the net loss is primarily due to the decreased
research and development and selling, general and administrative expenses,
offset by a decline in product sales and gross margin from product sales.
The Company plans to continue to invest in research and development
activities and incur marketing, sales and administrative expenses in
amounts greater than its anticipated near-term product margins, and, as a
result, expects to incur a substantial net loss for 1997.
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1997 COMPARED WITH SIX MONTHS
ENDED JUNE 30, 1996
REVENUES
The Company's product sales for the six-month periods ended June 30, 1997
and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Diagnostic and research assays $1,159,000 $1,163,000
Bovine superoxide dismutase (bSOD)
for research and human use 415,000 1,233,000
Palosein(R) (bSOD for veterinary use) 231,000 141,000
Other 39,000 --
---------- ----------
$1,844,000 $2,537,000
========== ==========
</TABLE>
Sales of bSOD in 1996 and 1997 have been almost entirely to the Company's
Spanish licensee. The reduction in bSOD sales for the first six months of
1997 compared to 1996 is primarily the result of a reduction in volume of
product delivered to the Spanish licensee. The increase in Palosein/(R)/
sales is attributable to a substantial sale in the first quarter of 1997 to
a distributor in Germany.
11
<PAGE>
COSTS AND EXPENSES
Cost of sales as a percent of product sales increased from 62% in the first
half of 1996 to 67% in the first half of 1997. Cost of sales of diagnostic
and research assays declined from 82% of the related sales for the first
half of 1996 to 69% for the first half of 1997, following the consolidation
of the Company's manufacturing operations into one location in the third
quarter of 1996. Cost of sales for the first six months of 1996 was lower
than for the first six months of 1997 due largely to a sale of bSOD with a
lower than normal cost in the second quarter of 1996. Cost of sales in
both the first six months of 1996 and 1997 include approximately $360,000
in amortization of purchase adjustments relating to 1994 business
acquisitions. Excluding such amortization, cost of sales would have been
approximately 48% of product sales for the first half of both 1996 and
1997.
Research and development expenses decreased by $372,000 from $2,361,000 for
the first half of 1996 to $1,989,000 for the first half of 1997. The
decrease in research and development expenses resulted from cost reductions
in the first half of 1997 compared to the first half of 1996 of (1)
$131,000 in costs of the Company's French subsidiary, (2) $147,000 in costs
of the former Therox operations, and (3) $139,000 in research and
development costs at the Company's Portland, Oregon facility.
Selling, general and administrative expenses decreased from $1,626,000 for
the first six months of 1996 to $1,332,000 for the first six months of
1997, a decrease of $294,000. The decrease was primarily due to a
reduction of $272,000 in general and administrative expenses of the
Company's French subsidiary. Smaller cost reductions in general and
administrative expenses at the Company's Portland, Oregon headquarters were
offset by an increase of $28,000 in foreign exchange losses.
INTEREST EXPENSE
Interest expense decreased by $45,000 in the first six months of 1997 as
compared to the first six months of 1996, due to a reduction in interest-
bearing obligations.
NET LOSS
The Company's loss for the first six months of 1997 was $2,711,000 ($.16
per share) compared to a loss of $3,065,000 ($.25 per share) for the first
six months of 1996. The decrease in the net loss is primarily due to
reductions in research and development expenses ($372,000) and selling
general and administrative expenses ($294,000), offset by reduced profit
margins on product sales ($360,000)
12
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's 1997 Annual Meeting of Stockholders held on May 9, 1997
("1997 Stockholders Meeting"), the Company's stockholders elected the
following persons to the Company's Board of Directors:
<TABLE>
<CAPTION>
Common Series B Series B Series C Series C
Common shares Preferred Preferred Preferred Preferred
Name shares FOR WITHHELD FOR* WITHHELD* FOR* WITHHELD*
----- ---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Anna D. Barker, Ph.D. 11,640,828 477,927 642,583 0 801,482 0
Timothy G. Biro 11,087,129 1,031,626 428,389 214,194 801,482 0
Brenda D. Gavin 11,636,828 481,927 642,583 0 801,482 0
Stuart S. Lang 11,642,828 475,927 642,583 0 801,482 0
James D. McCamant 11,641,788 476,967 642,583 0 801,482 0
David A. Needham, Ph.D. 11,642,828 475,927 642,583 0 801,482 0
Ray R. Rogers 11,612,450 506,305 642,583 0 801,482 0
A.R. Sitaraman 11,691,988 426,767 642,583 0 801,482 0
</TABLE>
* In equivalent common votes.
At the 1997 Stockholders Meeting, the stockholders also approved (1) an
amendment of the Company's 1994 Stock Incentive Plan (as described in
greater detail in the Proxy Statement dated April 10, 1997) to increase the
number of shares of common stock available for issuance thereunder by
2,000,000 shares, to an aggregate of 4,200,000 shares (8,004,720 common
shares, Series B Preferred shares with 642,583 equivalent common votes and
Series C Preferred shares with 801,482 equivalent common votes voting for;
692,080 common shares voting against; 171,336 common shares abstaining; and
3,250,619 broker non-votes) and (2) an amendment of the Company's Restated
Certificate of Incorporation to increase the authorized number of shares of
OXIS common stock from 40,000,000 shares to 50,000,000 shares (11,731,565
common shares, Series B Preferred shares with 642,583 equivalent common
votes and Series C Preferred with 801,482 equivalent common votes voting
for; 257,562 common shares voting against; and 129,628 common shares
abstaining.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits - See Exhibit Index on page 15.
(b) Reports on Form 8-K.
The Company filed with the Commission Reports on Form 8-K on April 17,
April 29 and June 2, 1997 which report matters relating to the sale of
common stock in a underwritten public offering in France.
13
<PAGE>
SIGNATURE
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.
OXIS International, Inc.
August 11, 1997 By /s/ Anna D. Barker
------------------
Anna D. Barker, Ph.D.
President and Chief Executive Officer
August 11, 1997 By /s/ Jon S. Pitcher
------------------
Jon S. Pitcher
Chief Financial Officer
14
<PAGE>
EXHIBIT INDEX
Exhibit Page
Number Description of Document Number
10(a) Underwriting agreement
10(b) Listing advisor--market making agreement
27(a) Financial data schedule
----- ----------------------- ----
15
<PAGE>
EX-10.(A)
OXIS INTERNATIONAL, INC.
ADMISSION TO LISTING
ON THE NOUVEAU MARCHE
UNDERWRITING AGREEMENT
<PAGE>
UNDERWRITING AGREEMENT
BETWEEN:
- -------
OXIS INTERNATIONAL, INC. ("the Company")
represented by Mr. Ray R. Rogers
on the one hand
---------------
AND
- ---
CREDIT LYONNAIS ("Credit Lyonnais" or "the Underwriter")
represented by Mr. Pierre Walter
on the other hand
-----------------
(THE COMPANY AND CREDIT LYONNAIS ARE HEREAFTER
DESIGNATED COLLECTIVELY "THE PARTIES"
AND INDIVIDUALLY A "PARTY")
2
<PAGE>
WHEREAS:
1. The Company and Credit Lyonnais concluded on 15 October 1996 a contract (the
"Management Agreement") whereby the former has instructed the latter to prepare,
syndicate and complete the admission to listing of its common stock on the
Nouveau Marche of the Paris Bourse (hereafter the "Admission").
2. The Company and Credit Lyonnais have jointly filed an application for such
Admission to listing of the shares of the Company with Societe du Nouveau
Marche.
3. In accordance with the Company's Certificate of Incorporation, the
authorized share capital of the Company consists, as at the date of signature of
this Agreement, of 40 million shares of common stock with a par value of USD
0.50 and of 15 million shares of preferred stock with a par value of USD 0.01.
The capital issued and outstanding as at March 10, 1997 consists of
14,439,992 shares of common stock with a par value of USD 0.50 and 642,583
shares of Series B Preferred Stock, 1,262,543 shares of Series C Preferred
Stock, 1,550 shares of Series D Preferred Stock, and 2,220 shares of Series E
Preferred Stock.
In accordance with resolutions passed by the Board of Directors on January
22, 1997 and May 2, 1997, the issuance and sale of up to an aggregate of
11,500,000 shares of common stock of the Company with a par value of USD 0.50 to
be subscribed for in cash with no preferential subscription rights for
shareholders, was approved by the Company. For purposes of this Agreement,
9,000,000 of such shares are referred to as the "New Shares" and up to 1,350,000
of such shares are referred to as the "Additional Shares" (as further defined
below) and collectively, the New Shares and Additional Shares are referred to as
the "Shares".
4. The Admission will be effected by selling and issuing to the public, outside
the United States of America, the New Shares and Additional Shares of the
Company as approved by the Company's Board of Directors.
After issue, the Shares and the old shares of the Company's common stock
will carry the same rights, in accordance with the provisions of the Company's
Certificate of Incorporation.
The Shares, entirely fungible (except for the limitations set forth in
Article 4, hereof), will be listed on the same line in the Nouveau Marche
listing.
5. The Underwriter and the Company previously agreed to negotiate and establish
in good faith the price of the Shares to be sold in the Placement (the
"Placement Price") by the close of business in Paris on May 12, 1997. The
definitive Placement Price has now been established and is agreed to be FF 4.60
(Four French Francs and Sixty Centimes).
6. The purpose of this Agreement is to define the terms and conditions of the
Placement. Except as provided in Article 6 below, this Agreement supersedes and
replaces all prior agreements with respect to the subject matter hereof.
3
<PAGE>
WHEREBY THE FOLLOWING HAS BEEN AGREED
Article 1 - Management
- ----------------------
Credit Lyonnais will manage the Placement and carry out the related
administrative tasks, including without limitation, the determination of
allocations to participants in the syndicate.
Article 2 - Sale of securities
- ------------------------------
In furtherance of the aforementioned Placement, the Company hereby
agrees to sell and issue to the Underwriter the New Shares and the Additional
Shares at the Placement Price, as provided herein.
Article 3 - Underwriting and placing the New Shares
- ---------------------------------------------------
The Underwriter hereby agrees with the Company that it will cause
9,000,000 New Shares to be subscribed for or, failing this, will itself
subscribe for any such New Shares not subscribed for during the Placement at the
Placement Price.
Article 4 - Placing restrictions.
- --------------------------------
The Shares thus proposed for Placement hereunder have not been
registered under the terms of the US Securities Act of 1933 (as amended, the
"Securities Act"), and may not be offered, sold or delivered either directly or
indirectly in the United States of America or to any US person (as defined in
Regulation S promulgated in connection with the Securities Act), unless the said
Shares have been registered under the Securities Act, or unless an exemption
from the registration requirements of the Securities Act is applicable. The
Underwriter will ensure that all offering materials and documents (including any
advertisements) used by them in connection with the Placement will contain the
statement set forth in the immediately preceding sentence.
Furthermore, the Underwriter will not offer or sell the Shares for a
period of 40 days running from the date of closure of the Placement in the
United States or to a US person.
The Underwriter agrees that the Shares to be offered and sold in the
proposed Placement will not be offered to any person in the United States of
America, and at the time any buy order for the shares is originated, the buyer
will be outside the United States of America, or the Underwriter will reasonably
believe that such buyer is outside the United States of America. In addition,
the Underwriter agrees that all offers and sales of the Shares during the 40-day
period following the date of the closing of the Placement shall be made in
accordance with the provisions of Rule 903 or 904 of Regulation S; pursuant to
registration of the Shares under the Securities Act; or pursuant to an available
exemption from the registration requirements of the Securities Act. In
connection with the Placement, the Underwriter agrees not to engage in "directed
selling efforts: as such term is defined in Regulation S. The Underwriter also
agrees that with respect to
4
<PAGE>
sale of shares during such 40-day period to distributors (as defined in
Regulation S), dealers as defined by Section 2(12) of the Securities Act) or a
person receiving a selling concession, fee or other remuneration in respect of
the Shares sold, they will send a confirmation or other notice to the purchaser
stating that the purchaser is subject to the same restriction on offers and
sales that apply to the Underwriter as set forth in this Article 4.
The Underwriter agrees to ensure that any intermediary or distributor
(as defined in Regulation S) it may involve in the Placement complies with all
of the foregoing commitments set forth in this Article 4 and will obtain such
commitments in writing from all such intermediaries or distributors.
Article 5 - Green shoe clause
- -----------------------------
During the period between the date of this Agreement and thirty (30)
calendar days after the first date of trading in the Company's Shares on the
Nouveau Marche (hereafter the "Listing"), Credit Lyonnais will have the option
to make an over-allotment as part of the Placement procedure.
To enable Credit Lyonnais to cover any such over-allotments, the
Company agrees to carry out an additional issue of new shares of common stock in
order to make available to Credit Lyonnais, at the latter's express request and
as a supplement, 1,350,000 new shares of the common stock of the Company (the
"Additional Shares").
Credit Lyonnais may take up this option by giving notice in writing to
the Company within a maximum period of thirty (30) calendar days after the
Listing, in which case the Additional Shares will be purchased pursuant to the
same terms and conditions as the New Shares.
Article 6 - Fees and commissions
- --------------------------------
In consideration for the services provided by the Underwriter in
connection with the Underwriting and Placement of the Shares, the Company will
pay the Underwriter:
- a placement commission of 2.5% (before tax) of the proceeds obtained
by multiplying the Placement Price by the number of the Shares,
including any Additional Shares (the "Gross Issue Proceeds"); and
- an underwriting fee of 2.5% (before tax) of the Gross Issue Proceeds.
The provisions contained in this Article 6 supersede all prior
agreements and understandings (and in particular Article 3.2 of the Management
Agreement) of the Parties with respect to the subject matter hereof, except that
(a) in consideration of the interventions by Credit Lyonnais regarding the
introduction, the Company shall also pay Credit Lyonnais a fee equal to 2% of
the Gross Issue Proceeds (less FF 250,000 which has previously been paid by the
Company to Credit Lyonnais) as provided in Article 3.1 of the Management
Agreement, and (b) the
5
<PAGE>
Company shall continue to be liable for and shall pay the
other fees and costs contemplated by Article 3.3 of the Management Agreement.
The fees and commissions payable to the Underwriter as provided in this
Article 6 represent the gross payment to be made by the Company, inclusive of
Value Added Tax payable in France, if any.
Article 7 - Payment of the proceeds of subscription of the Shares
- -----------------------------------------------------------------
Payment for the Shares subscribed will be made to the Company, or in
its name, by transfer to such account on behalf of the Company as the Company
shall notify to Credit Lyonnais prior to the date of payment. Such payment will
be made in exchange for a certificate of the delivery of the shares subscribed
for the benefit of French American Banking Corporation, the New York
correspondent of the SICOVAM, by the organization responsible for managing the
Company's shares.
The funds will be paid by Credit Lyonnais at the latest three (3)
business days after the end of the Placement period (the Placement period shall
end on May 14, 1997), and, if Credit Lyonnais has invoked the green shoe clause
in full or in part, three (3) business days after notification of the exercise
of this option.
The commissions referred to in Article 6 above will be deducted from
the payment(s) made by Credit Lyonnais.
Article 8 - Commitment of the Company
- -------------------------------------
The Company agrees that, for a period of twelve (12) months from this
day (the "Blocking Period"), it will not without the prior written agreement of
Credit Lyonnais carry out or decide to carry out an issue, offer or sale,
whether direct or indirect, of shares or any other securities giving access to
the capital of the Company, other than the New Shares and Additional Shares,
provided, however, such written agreement will not be required with respect to
shares offered or issued in connection with the following transactions:
conversion of issued and outstanding shares of preferred stock, mergers,
acquisitions, strategic alliances, licensing arrangements, stock options,
co-development agreements and similar transactions.
The Company undertakes to ensure that no company which is or will be
affiliated to it may issue securities that make it possible to obtain, directly
or indirectly, the shares of the common stock of the Company by redemption,
exchange or in any other way so that the purposes of the immediately preceding
paragraph are defeated.
Article 9 - Other Commitments of Credit Lyonnais
- ------------------------------------------------
Credit Lyonnais agrees to abide by all applicable laws and regulations
in conducting the Placement in France and in any other jurisdiction in which it
places the Shares.
6
<PAGE>
Article 10 - Term
- -----------------
This Agreement will come into force on this day, and will terminate at
the end of the Blocking Period defined in Article 8 above.
Notwithstanding the above provision, Credit Lyonnais may, after
consulting the Company, terminate this Agreement with respect to its continuing
obligations hereunder by registered letter with return receipt (demande d'avis
de reception) prior to the Listing, if any of the following events occur, and
are so significant that they would render impossible or seriously and adversely
compromise the Listing or the delivery of the Shares:
(a) a political, economic or financial event (including an act of war)
in France or abroad,
(b) an event affecting the situation (whether financial or otherwise) of
the Company, as such situation is described in the information
documents on which the Commission des Operations de Bourse (COB)
issued its visa,
(c) a change in exchange rates or foreign exchange controls, or a
modification affecting the tax regime applicable to the Company, to
the shares of the Company, to the transfer of these shares, or to
Credit Lyonnais,
(d) an event that has a materially adverse impact on the equity market
of the Paris Bourse, the New York Stock Exchange or Nasdaq.
In the event of such termination, the Parties will be released from all
obligations arising from this Agreement, and no indemnity will be due from the
Parties.
Notwithstanding the foregoing, the Company will however be required to
reimburse Credit Lyonnais all cost and expenses incurred by the latter in
pursuit of the operations covered by this Agreement, and all costs and expenses
contemplated by Article 3.3 of the Management Agreement.
Article 11 - Regulatory condition
- ---------------------------------
If the Listing does not take place on or before 30 June 1997, this
Agreement will be terminated ipso jure without any Party being able to claim any
indemnity, provided that the failure to obtain the Listing or consummate the
Placement is not due to a Party's breach of the terms of this Agreement.
The Company will however be required to reimburse Credit Lyonnais all
costs and expenses incurred by the latter in pursuit of the operations by this
Agreement, and all costs and expenses contemplated by Article 3.3 of the
Management Agreement.
7
<PAGE>
Article 12 - Confidentiality
- ----------------------------
The Parties agree that this Agreement and the information it contains
are strictly confidential, and that, unless required by law (including, without
limitation, the Securities Act) or executive rules or for judicial or
administrative purposes, the terms of this Agreement and this information must
not be disclosed in any manner to third parties without the consent of the
Parties.
Article 13 - Notifications
- --------------------------
Any notice or other communication required or permitted to be given
hereunder shall not be valid unless delivered in person, transmitted by telecopy
or similar means of recorded electronic communication or sent by international
courier service or by registered mail, charges prepaid, addressed as follows:
(i) if to the Company
Oxis International, Inc.
6040 N. Cutter Circle, Suite 317
Portland, OR 97217-3935
USA
Tel: 00 1 503 283 3911
Fax: 00 1 503 283 4058
(ii) if to Credit Lyonnais
Credit Lyonnais
Direction des Marches d' Actions (DMA)
81 rue de Richelieu
75002 Paris
France
Tel: 01 42 95 70 00
Fax: 01 42 95 13 43
Any such notice or other communication shall be deemed to have been
given and received on the day on which such notice is actually received by the
addressee.
Any Party may at any time change its address for service from time to
time by giving notice to the other Party in accordance with this Article 13.
8
<PAGE>
Article 14 - Applicable law and jurisdiction
- --------------------------------------------
This Agreement will be governed by and interpreted in accordance with
French law.
Any dispute arising from this Agreement, its results or consequences
will be submitted to the Tribunal de Commerce de Paris (Paris Commercial Court).
Signed May , 1997
---
in the same number of copies as Parties
OXIS INTERNATIONAL, INC. CREDIT LYONNAIS
9
<PAGE>
EX-10.(B)
OXIS INTERNATIONAL, INC.
------------------------
ADMISSION TO LISTING
ON THE NOUVEAU MARCHE
LISTING ADVISOR - MARKET MAKING AGREEMENT
<PAGE>
LISTING ADVISOR - MARKET MAKING AGREEMENT
-----------------------------------------
BETWEEN:
- --------
OXIS INTERNATIONAL, INC.
represented by Mr. Ray R. Rogers
("the Company")
firstly
AND
- ---
Mr. Ray R. Rogers
Dr. Anna D. Barker
("the Shareholders")
secondly
AND:
- ----
Credit Lyonnais
represented by Mr.
----------------------
("CL" or "ITM")
thirdly
(THE COMPANY, THE SHAREHOLDERS AND THE ITM ARE HEREAFTER
DESIGNATED COLLECTIVELY "THE PARTIES"
AND INDIVIDUALLY A "PARTY")
<PAGE>
WHEREAS:
1. The Company and Credit Lyonnais concluded on 15 October 1996 a contract
whereby the former has instructed the latter to prepare, syndicate and complete
the admission to listing of its common stock on the Nouveau Marche of the Paris
Bourse (hereinafter the "Admission").
2. The Company and Credit Lyonnais have jointly filed an application for
such Admission to listing of the shares of the Company with Societe du Nouveau
Marche.
3. The shares will be placed and underwritten (the "Placement") in France
and abroad outside of the United States of America in accordance with the
procedure set out in article 3.2.3 of the Operating Regulations of the Nouveau
Marche. For this purpose, the Company, Credit Lyonnais and Nomura International
have today signed an Underwriting Agreement.
The purpose of this agreement is to define the respective obligations
of the Parties as regards the making of a market in respect of the Company's
shares.
WHEREBY THE FOLLOWING HAS BEEN AGREED
ARTICLE 1. DESIGNATION OF THE LISTING ADVISOR - MARKET MAKER
-------------------------------------------------
1.1. The Company instructs Credit Lyonnais, which was officially authorized
as a Listing Advisor - Market Maker on the Nouveau Marche on 14 February 1996,
and which accepts the task proposed, to make a market in respect of the
Company's shares of common stock from the data of Admission to listing on the
Nouveau Marche and until the end of a period of three (3) years (the "Period")
running from the same date.
1.2. Credit Lyonnais agrees to act as market maker for the shares of the
Company on the conditions stated in this agreement and in accordance with the
Operating Regulations of the Nouveau Marche and the instructions relating
thereto.
ARTICLE 2. - AVAILABILITY OF SHARES, SALES MANDATE
-------------------------------------
2.1. To enable Credit Lyonnais to make a market in respect of the Company's
shares during the Period, on the conditions stated in the Operating Regulations
of the Nouveau Marche and the instructions relating thereto,
(i) in the event that the Shareholders request the return of their Shares
supplied to Credit Lyonnais pursuant to the terms of Article 2.1(ii) hereof, the
Company agrees to carry out after the date of Admission to listing on the
Nouveau Marche an additional issue of new shares of common stock in order to
make available to Credit Lyonnais 150,000 new shares of common stock of the
Company (the "Company's Shares") during the period from the completion of the
above-mentioned additional issue of the Company's shares of common stock and
until the end of a period
<PAGE>
of three years (the "Second Period"); the Parties acknowledge that such shares
may only be issued after a registration statement registering the offer and sale
of such shares has been declared effective by the U.S. Securities and Exchange
Commission (the "Effective Date"); and
(ii) the Shareholders agree from the date commencing 40 days after the
Admission to listing on the Nouveau Marche and until they request the return of
their Shares and the registration statement covering the Company's Shares has
been declared effective on the Effective Date (the "First Period"), on the
conditions defined in this agreement, to place in trust with Credit Lyonnais
150,000 shares of common stock of the Company (hereinafter the "Shares of the
Shareholders") in the following proportions:
Shareholders Quantity
Ray R. Rogers 75,000
Anna D. Barker 75,000
The Company's Shares and the Shares of the Shareholders will hereafter be
designated as the "Shares". The Shares of the Shareholders shall be removed from
trust if other shares of the Company's common stock owned by other shareholders
are substituted for such Shares and such other shareholders enter into this
agreement.
2.2. The Shareholders during the First Period or the Company during the
Second Period irrevocably grants to Credit Lyonnais the powers and authority
required for selling during the respective periods, on its behalf and for its
account, at a price to be determined by Credit Lyonnais in its reasonable
discretion, all or part of the Shares, for the purposes contemplated by this
agreement only.
2.3.1. To cover the sales made under the terms of this mandate during the
Second Period, the Company irrevocably agrees to have transferred to France for
this purpose the number of shares requested by the ITM representing shares
covered by those sales, at the latest 3 business days after the request by the
ITM to such account opened in the name or for the benefit of Credit Lyonnais
(hereafter "CLSC").
2.3.2. To cover the sales made under the terms of this mandate during the First
Period, the Shareholders hereby irrevocably agree to the transfer of the Shares
of the Shareholders to such account opened in the name or for the benefit of
Credit Lyonnais (or CLSC) (subject to the terms of this Agreement) as the ITM
may designate. All sales of the Shares of the Shareholders made by Credit
Lyonnais during the First Period shall be made pro-rata with the proportions set
forth in Section 2.1 above. Immediately upon the expiration of the First Period
any Shares of the Shareholders which have not been sold by Credit Lyonnais
during the First Period will be returned to the Shareholders pro-rata with the
proportions set forth in Section 2.1 above.
2.3.3. The mandates conferred above by the Company and by each Shareholder on
Credit Lyonnais include the power to execute all deeds, enter into all
commitments, sign all documents, receive the selling price of the Shares and in
general take all necessary actions.
<PAGE>
2.3.4. Decisions to sell all or part of the Shares will be taken at the
discretion of Credit Lyonnais consistent with the terms of this agreement. All
decisions to sell the Shares (including, without limitation, the timing of such
sales and the price and quantity of the Shares to be sold) shall be made
exclusively by Credit Lyonnais without any consultation with or prior notice to,
the Shareholders or the Company. All voting rights of the Shares of the selling
Shareholders shall, to the extent practicable, be retained by the Shareholders
until such time as said Shares have been sold by Credit Lyonnais.
2.3.5. The Company agrees to retain during the Second Period the quantity of
Shares covered by the commitment, less those shares already delivered at the
request of CLSC. To the extent the Shareholders' Shares are sold by Credit
Lyonnais during the First Period, the Company shall not be required to supply
Company Shares during the Second Period.
ARTICLE 3. - COMMITMENTS OF THE LISTING ADVISOR - MARKET MAKER
-------------------------------------------------
Notwithstanding the terms of Article 1.1 of this agreement, Credit
Lyonnais agrees from today onwards to:
. assist the Company in drawing up the information documents
required for Admission and take necessary steps to verify that
the prospectus does not include any contradiction or
inaccuracies with regard to material points in relation to
information collected for the Admission;
. publish a financial analyzer's report on the Company at the time
of its Admission and at the close of the fiscal years 1997
through 1999.
ARTICLE 4. - DUTY OF THE COMPANY AND THE SELLING SHAREHOLDERS TO PROVIDE
-----------------------------------------------------------
INFORMATION
-----------
The Company will provide Credit Lyonnais with copies of the annual and
quarterly interim accounts established during the Period as soon as they are
available.
ARTICLE 5. - DUTY OF CREDIT LYONNAIS
-----------------------
Credit Lyonnais agrees to inform the Shareholders during the First
Period and the Company during the Second Period of any sales contemplated within
two (2) business days subsequent to their completion.
Credit Lyonnais agrees to deliver the proceeds of the sale of the
Shares made available to it by the Shareholders or by the Company to an account
designated by such shareholder concerned or by the Company promptly in
accordance with prevailing market practice after the completion of the sale.
Credit Lyonnais will be entitled to charge normal brokerage commissions and
related charges on the sale of the Shares.
Credit Lyonnais agrees as a listing advisor market maker to abide by
all applicable French laws and regulations. In particular Credit Lyonnais agrees
to use the Shares made available to it by the Shareholders or the Company only
for the purpose of ensuring the liquidity of the shares.
<PAGE>
ARTICLE 6. - TERM
----
This agreement will come into force on this day and will terminate at
the end of the Period, it being understood that the Shareholders will cease to
be party to this agreement as soon as the additional issue of the Company's
shares of common stock as described in Article 2.1 above is completed.
Notwithstanding the preceding provisions, this agreement will
terminated ipso jure on the date at which Credit Lyonnais ceases, in agreement
with the Company and the Societe du Nouveau Marche, to make a market in respect
of the Company's shares.
ARTICLE 7. - REGULATORY CONDITIONS
---------------------
If the listing has not taken place on or before 31 December 1997, this
agreement will be terminated ipso jure without either Party being able to claim
any Indemnity thereby, provided that the failure to obtain the listing or
consummate the Placement is not due to a party's breach of the terms of this
agreement.
ARTICLE 8. - CONFIDENTIALITY
---------------
The Parties agree that this agreement and the information it contains
are strictly confidential, and that, unless required by law or executive roles
or for judicial or administrative purposes, the terms of this agreement and this
information must not be disclosed in any manner to third parties without the
consent of the Company, Credit Lyonnais and a majority of the selling
Shareholders.
ARTICLE 9. - NOTIFICATION
------------
Any notice or other communications required or permitted to be given
hereunder shall not be valid unless delivered in person, transmitted by telecopy
or similar means of recorded electronic communication or sent by international
courier or by registered mail, charges prepaid, addressed as follows:
(i) if to the Company
Oxis International, Inc.
6040 N. Cutter Circle, Suite 317
Portland, OR 97217-3935
USA
Tel: 00 1 503 283 3911
Fax: 00 1 503 283 4058
(ii) if to the Shareholders
To their attention, in care of the Company as
provided above.
<PAGE>
(iii) if to Credit Lyonnais
Credit Lyonnais
Direction des Marshes d'Actions (DMA)
81 rue de Richelieu
75002 Paris
France
Tel: 01 42 95 70 00
Fax: 01 42 95.13.43
Any such notice or other communication shall be deemed to have been
given and received on the day on which such notice is actually received by the
addressee.
Any party may at any time change its address for service from time to
time by giving notice to the other party in accordance with this Article 9.
ARTICLE 10. - APPLICABLE LAW AND JURISDICTION
--------------------------------
This agreement will be governed by and interpreted in accordance with
French law.
Any dispute arising from this agreement, its results or consequences
will be submitted to the Tribunal de Commerce de Paris (Paris commercial court).
Signed in Paris, May , 1997
---
in the same number of copies as parties
Oxis International, Inc. Credit Lyonnais
Ray R. Rogers Anna D. Barker
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> APR-01-1997 JAN-01-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<CASH> 4,188,000 4,188,000
<SECURITIES> 0 0
<RECEIVABLES> 589,000 589,000
<ALLOWANCES> 0 0
<INVENTORY> 491,000 491,000
<CURRENT-ASSETS> 0 0
<PP&E> 1,264,000 1,264,000
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 10,490,000 10,490,000
<CURRENT-LIABILITIES> 2,851,000 2,851,000
<BONDS> 0 0
0 0
16,000 16,000
<COMMON> 12,731,000 12,731,000
<OTHER-SE> (315,000) (315,000)
<TOTAL-LIABILITY-AND-EQUITY> 10,490,000 10,490,000
<SALES> 717,000 1,844,000
<TOTAL-REVENUES> 741,000 1,903,000
<CGS> 472,000 1,244,000
<TOTAL-COSTS> 2,083,000 4,565,000
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 42,000 72,000
<INCOME-PRETAX> (1,364,000) (2,711,000)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,364,000) (2,711,000)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,364,000) (2,711,000)
<EPS-PRIMARY> (.07) (.16)
<EPS-DILUTED> 0 0
</TABLE>
