<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (date of earliest event reported) December 31, 1997
----------------------------
OXIS INTERNATIONAL, INC.
- -------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
Delaware 0-8092 94-1620407
- --------------------------------------------------------------------------------
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification Number)
6040 N. Cutter Circle, Suite 317 Portland, OR 97217-3935
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices)
Registrant's telephone number, including area code. (503) 283-3911
-----------------------------
- -------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
Total number of sequentially
numbered pages: 23
-----
Exhibit Index at page: 4
-----
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
---------------------------------
(a) and (b) Financial Statements and Pro Forma Financial Information
--------------------------------------------------------
On January 15, 1998 the Company filed a Report on Form 8-K reporting the
acquisition of Innovative Medical Systems Corp. ("IMS"). The Report on Form 8-K
indicated that additional financial information would be filed under cover of a
Form 8-K/A report. The additional financial information is provided herewith,
as follows.
* Financial statements of IMS as of, and for the years ended October 31, 1996
and 1997.
* Pro forma balance sheets for OXIS and IMS combined as of September 30, 1997.
* Pro forma statements of operations for OXIS and IMS combined for the year
ended December 31, 1996 and for the nine months ended September 30, 1997.
(c) Exhibits
--------
Exhibit 23(a) Independent auditors consent.
Exhibit 99(a) Audited financial statements of IMS as of, and for the two years
ended October 31, 1997.
Exhibit 99(b) Unaudited pro forma financial information including:
* A pro forma balance sheet for the two companies combined as of September 30,
1997.
* A pro forma statement of operations for the two companies combined for the
year ended December 31, 1996.
* A pro forma statement of operations for the two companies combined for the
nine months ended September 30, 1997.
2
<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 hereunto duly authorized.
March 12, 1998 OXIS International, Inc.
s/ Ray R. Rogers
----------------------
Ray R. Rogers
Chairman of the Board
3
<PAGE>
EXHIBIT INDEX
Page
Exhibit Number
- ------- ------
23(a) Independent auditors consent 5
99(a) Audited financial statements of IMS as of,
and for the two years ended October 31, 1997 6
99(b) Unaudited pro forma financial information
including: 17
* A pro forma balance sheet for the two
companies combined as of September 30, 1997.
* A pro forma statement of operations for the
two companies combined for the year ended
December 31, 1996.
* A pro forma statement of operations for the
two companies combined for the nine months
ended September 30, 1997.
4
<PAGE>
Exhibit 23(a)
Independent Auditors' Consent
Albertjohn DePalantino & Co.
350 South Main Street, Suite 117
Doylestown, PA 18901
We consent to the incorporation by reference in Registration Statement No 33-
64451 on Form S-8 of OXIS International, Inc and Registration Statement Nos. 33-
61087, 333-5921 and 333-18041 on Form S-3 of OXIS International, Inc of our
report dated January 31, 1998, on the financial statements of Innovative Medical
Systems Corp appearing in the Form 8-K/A Current Report of OXIS International
Inc, dated March 12, 1998.
/s/ DePalantino & Company
- -------------------------
DePalantino & Company
March 12, 1998
5
<PAGE>
Exhibit 99(a)
Innovative Medical Systems Corp. Audited Financial Statements
Albertjohn DePalantino & Co.
350 South Main Street, Suite 117
Doylestown, PA 18901
January 31, 1998
Board of Directors and Stockholders
INNOVATIVE MEDICAL SYSTEMS CORP
55 Steam Whistle Drive
Ivyland, PA 18974
We have audited the accompanying balance sheets of INNOVATIVE MEDICAL SYSTEMS
CORP as of October 31, 1997 and 1996, and the related statements of income,
changes in stockholders equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of INNOVATIVE MEDICAL SYSTEMS CORP
as of October 31, 1997 and 1996, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
/s/ DePalantino & Company
- --------------------------
DePalantino & Company
6
<PAGE>
INNOVATIVE MEDICAL SYSTEMS CORP
Balance Sheet
October 31, 1997 and 1996
<TABLE>
<CAPTION>
ASSETS
1997 1996
---------------------- ---------------------
<S> <C> <C>
Current assets
- --------------
Cash and cash equivalents $ 28,836 $ 376
Accounts receivable, less allowance for doubtful
accounts of $13,891 and $14,477 respectively 449,149 709,379
Inventories 1,022,660 985,836
Prepaid expenses and other 21,804 31,606
----------------- -----------------
Total current assets 1,522,449 1,727,197
----------------- -----------------
Property, plant and equipment, at cost
- --------------------------------------
Land 77,648 77,648
Building & improvements 1,780,213 1,780,213
Machinery & equipment 1,728,934 1,746,667
----------------- -----------------
3,586,795 3,604,528
Less: accumulated depreciation 1,784,736 1,622,735
----------------- -----------------
1,802,059 1,981,793
----------------- -----------------
Other assets
- ------------
Refinance cost, net of amortization of $4,677 and 65,484 70,161
$0 respectively
Covenant not-to-compete, net of amortization of
$225,000 and $175,000 respectively 0 75,000
----------------- -----------------
Total other assets 65,484 145,161
----------------- -----------------
TOTAL ASSETS $ 3,389,992 $ 3,854,151
================= =================
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
INNOVATIVE MEDICAL SYSTEMS CORP
Balance Sheet
October 31, 1997 and 1996
LIABILITIES AND STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>
1997 1996
---------------------- ---------------------
<S> <C> <C>
Current liabilities
- -------------------
Revolving loan agreement $ 389,345 $ 535,138
Current portion of long-term debt 216,007 123,129
Accounts payable 375,198 175,098
Payroll taxes due 2,594 1,758
Deferred income 175,000 0
Accrued expenses 118,074 50,270
----------------- -----------------
Total current liabilities 1,276,218 885,393
----------------- -----------------
Long-term liabilities
- ---------------------
Long-term debt, net of current portion 1,486,204 1,539,371
----------------- -----------------
Total long-term liabilities 1,486,204 1,539,371
----------------- -----------------
TOTAL LIABILITIES 2,762,422 2,424,764
----------------- -----------------
Stockholders' equity
- --------------------
Common stock, no par value, 1,000,000 shares
authorized; 627,600 21,087 21,087
Additional paid-in capital 717,795 717,795
Retained earnings 1,388,688 2,190,505
Less: treasury stock, 176,500 shares at cost (1,500,000) (1,500,000)
----------------- -----------------
Total stockholders' equity 627,570 1,429,387
----------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,389,992 $ 3,854,151
================= =================
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
INNOVATIVE MEDICAL SYSTEMS CORP
Statement of retained earnings
October 31, 1997 and 1996
1997 1996
---------------------- ---------------------
<S> <C> <C>
Balance - beginning $ 2,190,505 $ 2,393,333
Net loss for years ended
October 31, 1997 and 1996 (801,817) (202,828)
----------------- -----------------
Balance - ending $ 1,388,688 $ 2,190,505
================= =================
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
INNOVATIVE MEDICAL SYSTEMS CORP
Statement of cash flows
Years ended October 31, 1997 and 1996
1997 1996
---------------------- -----------------
<S> <C> <C>
Net loss after tax $ (801,817) $ (202,828)
Depreciation and amortization 259,411 291,210
Accounts receivable 260,230 205,281
Inventory (36,824) 263,158
Other current assets 9,802 15,010
Accounts payable 200,100 (12,036)
Accrued expenses 68,640 (25,377)
Income tax payable and deferred income taxes 0 (215,321)
Deferred income 175,000 0
----------------- -----------------
Operating cash flow 134,542 319,097
----------------- -----------------
Gross fixed assets 0 (33,418)
Intangible and other noncurrent assets 0 (70,161)
----------------- -----------------
Investing cash flow 0 (103,579)
----------------- -----------------
Cash flow before financing 134,542 215,518
----------------- -----------------
Short-term debt (52,915) (237,954)
Long-term debt (53,167) 22,147
----------------- -----------------
Financing cash flow $ (106,082) $ (215,807)
----------------- -----------------
Comprehensive cash flow
- -----------------------
Beginning cash $ 376 $ 665
Plus: Operating Cash Flow 134,542 319,097
Investing cash flow 0 (103,579)
Financing cash flow (106,082) (215,807)
----------------- -----------------
Ending cash $ 28,836 $ 376
================= =================
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
INNOVATIVE MEDICAL SYSTEMS CORP
Income statement
Years ended October 31, 1997 and 1996
1997 1996
AMOUNT AMOUNT
-------------------------- --------------------------
<S> <C> <C>
Net sales $ 2,212,723 $ 3,445,631
---------------------- ----------------------
Direct expenses
- ---------------
Cost of goods sold
Finished goods inventory, beginning 65,728 254,299
Cost of goods manufactured 1,718,771 2,048,841
---------------------- ----------------------
Cost of finished goods available 1,784,499 2,303,140
Finished goods inventory, ending 16,625 65,728
---------------------- ----------------------
Cost of goods sold 1,767,874 2,237,412
Development costs 0 308,487
Engineering salaries 208,200 358,489
---------------------- ----------------------
Total direct expenses 1,976,074 2,904,388
---------------------- ----------------------
Gross profit 236,649 541,243
---------------------- ----------------------
Operating expenses
- ------------------
Selling 51,462 106,138
Office and administrative 793,082 636,181
---------------------- ----------------------
Total operating expenses 844,544 742,319
---------------------- ----------------------
Income from operations before
other income and expenses (607,895) (201,076)
Other income and expense
- ------------------------
Interest expense (224,550) (231,700)
Finance charge income 0 73,664
Loss on sale of fixed assets 0 (5,182)
Corporate income tax 30,628 161,466
---------------------- ----------------------
NET LOSS $ (801,817) $ (202,828)
====================== ======================
Loss per share $ (1.28) $ (0.32)
====================== ======================
Weighted average number of shares
used in computation 627,600 627,600
====================== ======================
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
INNOVATIVE MEDICAL SYSTEMS CORP
- --------------------------------------------------------------------------------
Notes to financial statements
October 31, 1997 and 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
A summary of the company's significant accounting policies applied in the
preparation of the accompanying financial statements follows:
BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS
INNOVATIVE MEDICAL SYSTEMS CORP was incorporated under the laws of the State of
Pennsylvania on December 8, 1976. The corporation is a C Corporation.
INNOVATIVE MEDICAL SYSTEMS CORP is primarily engaged in the design and
manufacture of medical equipment. The company's financial statements are
presented in accordance with generally accepted accounting principles.
REVENUE RECOGNITION
Revenue from the manufacture of medical equipment is generally recognized when
products are shipped to the customer. Income is reported on the accrual method
for financial statement purposes.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
generally on a first-in, first-out (FIFO) method. Valuations are based on the
cost of material, direct labor and manufacturing overhead, and do not exceed net
realizable values. Inventories are comprised of the following components:
<TABLE>
<CAPTION>
October 31, 1997 October 31, 1996
--------------------- ---------------------
<S> <C> <C>
Raw materials $843,355 $794,097
Work in process 162,680 126,011
Finished goods 16,625 65,728
--------------------- ---------------------
$1,022,660 $985,836
===================== =====================
</TABLE>
Cost of work-in-process includes purchased materials, direct labor and allocated
overhead.
ACCOUNTS RECEIVABLE - TRADE
It is the management's policy to write-off uncollected accounts receivable at
the time their collection becomes doubtful. A provision for doubtful accounts
is maintained at approximately 3% of the accounts receivable balance, an amount
management deems appropriate.
See accompanying notes to financial statements.
12
<PAGE>
INNOVATIVE MEDICAL SYSTEMS CORP
- -------------------------------------------------------------------------------
Notes to financial statements
October 31, 1997 and 1996
FIXED ASSETS AND ACCUMULATED DEPRECIATION
Fixed assets are recorded at their cost and include expenditures for major
improvements that substantially increase their useful life. Repairs and
maintenance are expensed as incurred.
For financial reporting purposes, depreciation is provided generally on a
straight-line basis over the estimated useful lives of the related assets. For
income tax purposes, depreciation is computed by using various accelerated
methods and, in some cases, different useful lives than those used for financial
reporting purposes.
The following net fixed assets remain at October 31, 1997:
<TABLE>
<S> <C>
Building and improvements $1,463,309
Machinery and equipment 161,513
Tooling 99,589
</TABLE>
DEFERRED INCOME TAXES
The company has adopted Statement of Financial Accounting Standard (SFAS) No
109, "Accounting for Income Taxes". SFAS No 109 requires under the liability
method, that deferred tax liabilities are recognized for the estimated future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
in effect for the year in which temporary differences are expected to be
recovered or settled. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized.
Deferred income taxes have been provided for timing differences, resulting from
depreciation expense which is recognized differently for income tax and
financial reporting purposes.
2. LOANS
-----
The following loans are outstanding at October 31, 1997:
<TABLE>
<CAPTION>
Long
Current Term Total
-------------------- -------------------------- ---------------------
<S> <C> <C> <C>
Mellon Bank $389,345 $ 0 $ 389,345
AT&T Small Business Lending 53,167 1,486,204 1,539,371
Shareholders 162,840 0 162,840
-------------------- -------------------------- ---------------------
Total $605,352 $1,486,204 $2,091,556
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
INNOVATIVE MEDICAL SYSTEMS CORP
- --------------------------------------------------------------------------------
Notes to financial statements
October 31, 1997 and 1996
The $1,539,371 loan due to AT&T Small Business Lending Corp is a mortgage on the
building. This is a 15-year mortgage. The interest rate is 10.25%. The
Building, equipment and machinery and all contract rights and general
intangibles are held as collateral for this mortgage.
The $389,345 due to Mellon Bank is owed pursuant to a line of credit. The
inventory and accounts receivable are collateral for this loan. The formula
used to determine the borrowing base is 80% of eligible accounts receivable and
20% of eligible inventory. At October 31, 1997 Innovative Medical Systems Corp
was in default of this loan.
On September 30, 1994 the company bought back a large portion of stock from a
major shareholder. At that time the company entered into an agreement to pay
$225,000 over three years for a covenant not-to-compete. At October 31, 1997
the balance owed was $45,156.
There are additional shareholders loans due of $117,684 at October 31, 1997.
They are all due within one year. Interest is due at 10%.
The aggregate annual maturates of long-term debt during the years ending October
31, 1999 to 2002 are as follows: 1999 - $57,752; 2000 - $63,958; 2001 -
$70,830; 2002 - $78,441.
3. PENSION
-------
The company sponsors a 401(k)-pension plan. An employee can contribute up to
6% of their annual pay. The company will match 10% of an employees
contribution. For 1997 the amount of pension expense included in administrative
expenses was $2,195.
4. DEFERRED INCOME
---------------
Revenues received in advance from engineering projects are recognized on
engineering hours. This method is used because management considers hours
incurred to be the best available measure of progress on these projects.
Contract costs include all direct material and labor costs and those indirect
costs related to contract performance, such as indirect labor, supplies, tools,
repairs and depreciation costs. Selling, general, and administrative costs are
charged to expense as incurred. Provisions for estimated losses on uncompleted
contracts are made in the period in which such losses are determined. Changes
in job performance, job conditions, and estimated profitability, including those
arising from contract penalty provisions, and final contract settlements may
result in revisions to costs and income and are recognized in the period in
which the revisions are determined.
The $175,000 in Deferred Income was a payment in advance for units not completed
or shipped at October 31, 1997. These units were included in the Work in
Process inventory.
See accompanying notes to financial statements.
14
<PAGE>
INNOVATIVE MEDICAL SYSTEMS CORP
- -------------------------------------------------------------------------------
Notes to financial statements
October 31, 1997 and 1996
5. INCOME
------
The Net Sales includes both the sale of equipment and development income in the
following amounts:
<TABLE>
<CAPTION>
October 31, 1997 October 31, 1996
---------------------- ---------------------
<S> <C> <C>
Manufacturing Sales $1,913,025 $2,845,875
Engineering fees 299,698 599,756
---------------------- ---------------------
Net Sales $2,212,723 $3,445,631
====================== =====================
</TABLE>
The "Net Sales" is the total sales net of discounts, returns and allowances and
royalty payments.
6. OTHER ASSETS
------------
Covenant not-to-compete
- -----------------------
A covenant-not-to-compete was entered into with the previous shareholder of
INNOVATIVE MEDICAL SYSTEMS CORP. This amount, valued at $225,000, has been
capitalized and is being amortized over the three-year term of the agreement.
The refinance costs were incurred on the refinancing of the mortgage to AT&T and
the refinance of the line of credit with Mellon Bank. These costs are being
amortized over fifteen years.
7. INCOME TAXES (BENEFIT)
----------------------
The provision for income taxes (benefit) is as follows:
<TABLE>
<CAPTION>
October 31, 1997 October 31, 1996
------------------------- --------------------------
<S> <C> <C>
Currently payable $ 0 $ 0
Deferred (30,628) (161,466)
------------------------ -------------------------
$ (30,628) $(161,466)
======================== =========================
</TABLE>
The losses of Innovative Medical Systems Corp for income tax purposes resulted
in the recognition of deferred income tax for October 31, 1996 and a refund of
income taxes for October 31. 1997. There is a loss carryforward for tax
purposes of $727,334. The entire carryfoward expires October 31, 2012.
See accompanying notes to financial statements.
15
<PAGE>
INNOVATIVE MEDICAL SYSTEMS CORP
- --------------------------------------------------------------------------------
Notes to financial statements
October 31, 1997 and 1996
Deferred Taxes Deferred taxes reflect the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes, and (b)
operating losses and tax credit carryforwards.
The tax effects of significant items comprising Innovative Medical Systems
Corp`s deferred taxes as of October 31, 1997 were as follows:
<TABLE>
<CAPTION>
October 31, 1997 October 31, 1996
-------------------------- --------------------------
Deferred tax assets:
<S> <C> <C>
Federal net operating loss carryforward $ 247,284 $ 0
Impact of temporary differences 96,968 117,586
-------------------------- --------------------------
Total 344,252 117,586
Valuation allowance (344,252) (117,586)
-------------------------- --------------------------
Net deferred taxes $ 0 $ 0
========================== ==========================
</TABLE>
Temporary differences result from depreciation of fixed assets.
Statement of Financial Accounting Standards No 109 requires that the tax benefit
of net operating losses and temporary differences be recorded as an asset to the
extent that management assesses that realization is "more likely than not".
Realization of the future tax benefits is dependent on Innovative Medical
Systems Corp's ability to generate sufficient taxable income within the
carryforward. Because of Innovative Medical Systems Corp's recent history of
operating losses, management has provided a valuation allowance for its net
deferred tax assets.
8. SUBSEQUENT STOCK EXCHANGE
-------------------------
On December 31, 1997 100% of the outstanding stock of Innovative Medical Systems
Corp was exchanged for stock of OXIS International Inc. At that date Oxis
International Inc became the 100% shareholder of Innovative Medical Systems
Corp.
See accompanying notes to financial statements.
16
<PAGE>
Exhibit 99(b)
OXIS International, Inc. and Innovative Medical Systems Corp.
Unaudited Pro Forma Financial Information
On December 31, 1997, OXIS International, Inc. ("OXIS") consummated the
acquisition of Innovative Medical Systems Corp. ("IMS") pursuant to a
transaction whereby OXIS acquired all of the outstanding stock of IMS. The
unaudited pro forma financial information presented below combines the balance
sheets of OXIS as of September 30, 1997, with the balance sheet of IMS as of
July 31, 1997, and the statements of operations of OXIS for the year ended
December 31, 1996, and nine months ended September 30, 1997 with the statements
of operations of IMS for the year ended October 31, 1996 and the nine months
ended July 31, 1997, respectively. This pro forma combination gives effect to
the following assumptions.
* That the acquisition of IMS by OXIS occurred at the beginning of each of the
periods presented.
* That the acquisition of IMS would be accounted for as a purchase.
* That the purchase price paid by OXIS to acquire IMS would be $1,559,000,
consisting of: (1) 1,000,000 shares of OXIS common stock issued and (2) the
present value of expected minimum future payments aggregating $1,250,000. The
shares of common stock issued have been valued at the average per share
closing price of OXIS' common stock for the three trading days before and
after November 1, 1997, the date on which the two companies reached agreement
on the purchase price.
It should be noted that the unaudited pro forma financial information:
* does not give effect to any costs of combining the companies or to any
efficiencies in operations that could be achieved by combining the companies,
* does not purport to be indicative either of the results of operations that
would have occurred had the acquisition been consummated at the date
indicated, or of future combined results of operations of the companies.
The unaudited pro forma financial information presented below should be read in
conjunction with the notes hereto and the separate financial statements of the
two companies. Unaudited financial statements of the Company as of September
30, 1997 are included in the Company's third quarter Form 10-Q report filed with
the Securities and Exchange Commission. Financial statements of IMS as of and
for the years ended October 31, 1996 and 1997 are included in this report on
Form 8-K/A.
17
<PAGE>
Unaudited Pro Forma Balance Sheet of
OXIS International, Inc.
(OXIS International, Inc. and Innovative Medical Systems Corp.)
Combined as of September 30, 1997
<TABLE>
<CAPTION>
Pro forma Pro forma
ASSETS OXIS IMS adjustments combined
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $2,752,000 $ 0 $ 2,752,000
Accounts receivable 882,000 459,000 1,341,000
Inventories 733,000 1,050,000 1,783,000
Prepaid and other 373,000 38,000 411,000
---------- ---------- -----------
Total current assets 4,740,000 1,547,000 6,287,000
Property and equipment, net 1,214,000 1,857,000 $770,000 (1) 3,841,000
Technology for developed products
and custom assays, net 3,244,000 0 3,244,000
Other assets 255,000 72,000 327,000
---------- ---------- -------- -----------
Total assets $9,453,000 $3,476,000 $770,000 $13,699,000
========== ========== ======== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $1,148,000 $ 407,000 $ 1,555,000
Accounts payable 1,348,000 399,000 1,747,000
Customer deposits 116,000 0 116,000
Accrued liabilities 579,000 207,000 786,000
Current portion of
long-term debt 9,000 219,000 228,000
---------- ----------- -----------
Total current liabilities 3,200,000 1,232,000 0 4,432,000
Long-term debt after one year 1,455,000 1,455,000
Shareholders' equity:
Preferred stock 16,000 0 16,000
Common stock
OXIS 13,287,000 500,000 (1) 13,787,000
IMS 21,000 (21 ,000)(1) 0
Additional paid in capital
OXIS 30,321,000 1,059,000 (1) 31,380,000
IMS 718,000 (718,000)(1) 0
Retained Earnings
OXIS (37,132,000) (37,132,000)
IMS 1,550,000 (1,550,000)(1)
Treasury stock (1,500,000) 1,500,000 (1)
Accumulated translation adjustments (239,000) 0 (239,000)
---------- ---------- ---------- -----------
Total shareholders' equity 6,253,000 789,000 770,000 7,812,000
---------- ---------- -------- -----------
Total liabilities and shareholders' equity $9,453,000 $3,476,000 $770,000 $13,699,000
========== ========== ======== ===========
</TABLE>
18
<PAGE>
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1997
1. To reflect the pro forma purchase price, $1,559,000, paid to acquire IMS,
consisting of: (1) 1,000,000 shares of OXIS common stock issued and (2) the
present value of expected minimum future payments (to be paid in shares of
OXIS common stock) aggregating $1,250,000. The shares of common stock issued
have been valued at the average per share closing price of OXIS' common stock
for the three trading days before and after November 1, 997, the date on
which the two companies reached agreement on the purchase price. The excess
of the pro forma purchase price over the shareholders' equity of IMS has been
allocated to property and equipment.
Stock issued in connection with the acquisition has been recorded in
shareholders' equity as follows:
Common stock, 1,000,000 shares at
$.50 par value $ 500,000
Additional paid-in capital 1,059,000
-----------
$ 1,559,000
===========
2. In addition to the minimum payments of $1,250,000, the stockholders of IMS
may receive additional payments (in OXIS common stock) of up to $2,250,000
depending on future revenues of IMS through 2002. No effect has been given
in the pro forma balance sheet to the potential additional payments.
19
<PAGE>
Unaudited Pro Forma Statement of Operations
OXIS International, Inc.
(OXIS International, Inc. and Innovative Medical Systems Corp.)
Combined for the year ended December 31, 1996
<TABLE>
<CAPTION>
Pro forma Pro forma
OXIS IMS adjustments combined
<S> <C> <C> <C> <C>
Revenues:
Sales $ 4,802,000 $3,446,000 $ 8,248,000
Royalties 65,000 65,000
----------- ---------- -----------
Total revenues 4,867,000 3,446,000 8,313,000
Costs and expenses:
Cost of sales 3,009,000 2,904,000 $ 124,000 (1) 6,037,000
Research and development 4,908,000 4,908,000
Sales, general and administrative 2,841,000 748,000 31,000 (1) 3,620,000
----------- ---------- --------- -----------
Total costs and expenses 10,758,000 3,652,000 155,000 14,565,000
----------- ---------- --------- -----------
Operating loss (5,891,000) (206,000) (155,000) (6,252,000)
Interest income and finance charges 37,000 74,000 111,000
Interest expense (138,000) (232,000) (370,000)
----------- ---------- --------- -----------
Net loss before income tax credits (5,992,000) (364,000) (155,000) (6,511,000)
Credit for income taxes 0 161,000 161,000
----------- ---------- --------- -----------
Net Loss $(5,992,000) $ (203,000) $(155,000) $(6,350,000)
=========== ========== ========= ===========
Net loss per OXIS share $ (.21) $ (.22)
=========== ===========
</TABLE>
20
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
1. To reflect amortization, on a straight-line basis over 7 years, of the pro
forma purchase price adjustment of $1,084,000 which was allocated to
property, plant and equipment.
The pro forma amortization has been allocated 80% to cost of sales and 20% to
sales, general and administrative expense.
2. The net loss per OXIS share in the unaudited pro forma statement of
operations has been computed based on 28,596,320 common shares outstanding
upon consummation of the acquisition.
3. The unaudited pro forma statement of operations includes the revenues and
expenses of OXIS International, Inc. for the year ended December 31, 1996,
and the revenues and expenses of IMS for the year ended October 31, 1996.
21
<PAGE>
Unaudited Pro Forma Statement of Operations
OXIS International, Inc.
(OXIS International, Inc. and Innovative Medical Systems Corp.)
Combined for the nine months ended September 30, 1997
<TABLE>
<CAPTION>
Pro forma Pro forma
OXIS IMS adjustments combined
Revenues:
<S> <C> <C> <C> <C>
Sales $ 3,137,000 $1,522,000 $ 4,659,000
Royalties 209,000 209,000
----------- ---------- -----------
Total revenues 3,346,000 1,522,000 4,868,000
Costs and expenses:
Cost of sales 2,148,000 1,399,000 $ 93,000 (1) 3,640,000
Research and development 3,199,000 3,199,000
Sales, general and administrative 2,049,000 614,000 23,000 (1) 2,686,000
----------- ---------- ---------- -----------
Total costs and expenses 7,396,000 2,013,000 116,000 9,525,000
----------- ---------- ---------- -----------
Operating loss (4,050,000) (491,000) (116,000) (4,657,000)
Interest income and finance charges 53,000 53,000
Interest expense (112,000) (149,000) (261,000)
----------- --------- -----------
Net loss before income tax credits (4,109,000) (640,000) (116,000) (4,865,000)
Credit for income taxes 0 0 0 0
----------- --------- --------- -----------
Net Loss $(4,109,000) $(640,000) $(116,000) $(4,865,000)
=========== ========= ========= ===========
Net loss per OXIS share $ (.14) $ (.17)
=========== ===========
</TABLE>
22
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
1. To reflect amortization, on a straight-line basis over 7 years, of the pro
forma purchase price adjustment of $1,084,000 which was allocated to
property, plant and equipment.
The pro forma amortization has been allocated 80% to cost of sales and 20% to
sales, general and administrative expense.
2. The net loss per OXIS share in the unaudited pro forma statement of
operations has been computed based on 28,596,320 common shares outstanding
upon consummation of the acquisition.
3. The unaudited pro forma statement of operations includes the revenues and
expenses of OXIS International, Inc. for the nine months ended September 30,
1997, and the revenues and expenses of IMS for the nine months ended July 31,
1997.
23
