<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, 2000.
or
___ 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.
(Exact name of registrant as specified in its charter)
Delaware 94-1620407
--------------------------------------- ------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6040 N. Cutter Circle, Suite 317, Portland, Oregon 97217
-----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(503) 283-3911
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(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 ___
---
At June 30, 2000, the issuer had outstanding the indicated number of shares of
common stock: 9,370,677
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
Consolidated Statements of Operations (Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
------------------------- -------------------------
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Revenues $ 779,000 $ 2,701,000 $ 1,722,000 $ 4,157,000
Costs and expenses:
Cost of product sales 833,000 1,406,000 1,685,000 2,413,000
Cost of technology sold -- 1,279,000 -- 1,279,000
Research and development 447,000 952,000 785,000 1,722,000
Selling, general and administrative 642,000 830,000 1,364,000 1,688,000
----------- ----------- ----------- -----------
Total costs and expenses 1,922,000 4,467,000 3,834,000 7,102,000
----------- ----------- ----------- -----------
Operating loss (1,143,000) (1,766,000) (2,112,000) (2,945,000)
Interest income 65,000 7,000 87,000 25,000
Interest expense (23,000) (23,000) (44,000) (53,000)
----------- ----------- ----------- -----------
Net loss (1,101,000) (1,782,000) (2,069,000) (2,973,000)
Other comprehensive income
(loss) - foreign currency
translation adjustments 6,000 (43,000) (20,000) (31,000)
----------- ----------- ----------- -----------
Comprehensive loss $(1,095,000) $(1,825,000) $(2,089,000) $(3,004,000)
=========== =========== =========== ===========
Net loss per share - basic and diluted $ (.12) $ (.23) $ (.24) $ (.38)
=========== =========== =========== ===========
Weighted average number of
shares used in computation -
basic and diluted 9,324,735 7,871,196 8,794,943 7,858,631
=========== =========== =========== ===========
</TABLE>
2
<PAGE>
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
2000 1999
ASSETS
Current assets:
Cash and cash equivalents $4,564,000 $ 789,000
Accounts receivable 665,000 1,072,000
Inventories 1,245,000 1,327,000
Prepaid and other 81,000 37,000
---------- ----------
Total current assets 6,555,000 3,225,000
Furniture and equipment, net 689,000 808,000
Technology for developed products 773,000 864,000
Other assets 321,000 287,000
---------- ----------
Total assets $8,338,000 $5,184,000
========== ==========
3
<PAGE>
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 446,000 $ 681,000
Accounts payable 479,000 1,131,000
Accrued payroll, payroll taxes and other 482,000 395,000
Current portion of long-term debt 95,000 94,000
------------ ------------
Total current liabilities 1,502,000 2,301,000
Long-term debt due after one year 168,000 194,000
Shareholders' equity:
Preferred stock - $.01 par value; 15,000,000 shares
authorized:
Series B - 428,389 shares issued and outstanding
at June 30, 2000 (liquidation preference of
$1,000,000) 4,000 4,000
Series C - 608,536 shares issued and outstanding
at June 30, 2000 6,000 6,000
Common stock - $.001 par value; 95,000,000 shares
authorized; 9,370,677 shares issued and outstanding
at June 30, 2000 (7,928,784 at December 31, 1999) 9,000 8,000
Additional paid in capital 58,823,000 52,756,000
Accumulated deficit (51,819,000) (49,750,000)
Accumulated other comprehensive loss -
foreign currency translation adjustment (355,000) (335,000)
------------ ------------
Total shareholders' equity 6,668,000 2,689,000
------------ ------------
Total liabilities and shareholders' equity $ 8,338,000 $ 5,184,000
============ ============
</TABLE>
4
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------
2000 1999
<S> <C> <C>
Cash flows from operating activities:
Net loss $(2,069,000) $(2,973,000)
Adjustments to reconcile net loss to cash
used for operating activities:
Depreciation and amortization 276,000 550,000
Gain on sale of land and building -- (16,000)
Loss on sale of technology -- 368,000
Cash proceeds from sale of technology -- 342,000
Changes in assets and liabilities:
Accounts receivable 405,000 80,000
Inventories 82,000 124,000
Other current assets (45,000) 163,000
Accounts payable (651,000) (111,000)
Customer deposits -- (120,000)
Accrued payroll, payroll taxes and other 119,000 (127,000)
----------- -----------
Net cash used for operating activities (1,883,000) (1,720,000)
Cash flows from investing activities:
Proceeds from sale of land and building -- 1,959,000
Purchases of equipment (55,000) (142,000)
Additions to other assets (65,000) (59,000)
Other, net 5,000 (4,000)
----------- -----------
Net cash provided by (used for) investing activities (115,000) 1,754,000
Cash flows from financing activities:
Proceeds from issuance of stock, net of related costs 5,868,000 --
Repayment of short-term borrowings (75,000) --
Repayment of long-term debt (26,000) (1,517,000)
----------- -----------
Net cash provided by (used for) financing activities 5,767,000 (1,517,000)
Effect of exchange rate changes on cash 6,000 17,000
----------- -----------
Net increase (decrease) in cash and cash equivalents 3,775,000 (1,466,000)
Cash and cash equivalents - beginning of period 789,000 2,575,000
----------- -----------
Cash and cash equivalents - end of period $ 4,564,000 $ 1,109,000
=========== ===========
Non-cash transactions:
Issuance of common stock in exchange
for cancellation of notes and accrued interest $ 202,000 $ --
Note received as part of proceeds from sale
of technology -- 569,000
</TABLE>
5
<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 accounting principles generally accepted in
the United States of America 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, 1999. 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.
2. INVENTORIES
Inventories are stated at the lower of cost or market. Cost has been
determined by using the first-in, first-out method. Inventories at June 30,
2000 and December 31, 1999, consisted of the following:
June 30, December 31,
2000 1999
Raw materials $ 682,000 $ 492,000
Work in process 364,000 438,000
Finished goods 199,000 397,000
---------- ----------
Total $1,245,000 $1,327,000
========== ==========
3. SHAREHOLDERS' EQUITY
In April 2000 the Company completed a private placement of units, consisting
of one share of the Company's common stock plus warrants to purchase two
shares of the Company's common stock (the "Units"), primarily to a series of
institutional investors. The Units were priced at the Nasdaq closing price
for the Company's common stock the day prior to the signing of the
subscription agreements relating to the purchase of such Units. The price per
Unit ranged from $3.94 to $4.75. A total of 1,376,950 common shares and
warrants to purchase 2,753,000 common shares were issued in exchange for
gross proceeds of $6,050,000 in cash and conversion of $202,000 of short-term
notes and accrued interest payable. The exercise price of one-half of the
warrants issued in the private placement is
6
<PAGE>
equal to 125% of the price paid per Unit. The exercise price of the other
half of the warrants is equal to 150% of the price paid per Unit.
The Company has agreed to issue additional warrants to its placement agents
giving the agents the right to acquire 155,000 common shares at an exercise
price of $5.94 per share.
The Company has filed a preliminary registration statement with the
Commission registering the common shares, and the common shares issuable upon
exercise of the warrants, issued in the private placement.
4. STOCK OPTIONS
The Company has a stock incentive plan under which 1,365,000 shares of the
Company's common stock are reserved for issuance (the "Plan"). The Plan
permits the Company to grant stock options to acquire shares of the Company's
common stock, award stock bonuses of the Company's common stock, and grant
stock appreciation rights. During the six months ended June 30, 2000, options
to purchase 225,000 shares at an exercise price of $1.9125 have been issued
under the Plan. Options to purchase an additional 400,000 common shares at an
exercise price of $1.9125 have also been issued, subject to shareholder
approval of an amendment to the Plan.
The Company's board of directors has also approved an additional option grant
to purchase 400,000 common shares at an exercise price of $1.5625. This
option grant is not issued pursuant to the Plan.
5. OPERATING SEGMENTS
The following table presents information about the Company's two operating
segments:
Health Therapeutic
Products Development Total
----------- ------------ ------------
Quarter ended June 30, 2000:
Revenues from external
customers $ 779,000 $ -- $ 779,000
Intersegment revenues -- -- --
Net loss (736,000) (365,000) (1,101,000)
As of June 30, 2000 -
Total assets 2,970,000 5,368,000 8,338,000
7
<PAGE>
Health Therapeutic
Products Development Total
------------ ------------ ------------
Quarter ended June 30, 1999:
Revenues from external
customers $ 2,655,000 $ 46,000 $ 2,701,000
Intersegment revenues -- 279,000 279,000
Net loss (834,000) (948,000) (1,782,000)
As of June 30, 1999 -
Total assets 5,067,000 1,220,000 6,287,000
Six months ended June 30, 2000:
Revenues from external
customers $ 1,722,000 $ -- $ 1,722,000
Intersegment revenues -- -- --
Net loss (1,365,000) (704,000) (2,069,000)
Six months ended June 30, 1999:
Revenues from external
customers $ 4,083,000 $ 74,000 $ 4,157,000
Intersegment revenues -- 303,000 303,000
Net loss (1,243,000) (1,730,000) (2,973,000)
6. SUBSEQUENT EVENT
At a meeting held August 1, 2000, the Company's board of directors decided to
develop additional information as to the value of the Company's Health
Products segment, for the purpose of reaching a final decision on whether to
continue operations or develop a formal plan for disposal of this business
segment. To this end, the board has received a nonexclusive offer from two
employees to purchase the Health Products assets. As a result, a special
committee of the board has been charged with the responsibility of completing
a full due diligence investigation of this offer, as well as other avenues of
sale and reporting back to the full board with its recommendation. At the
present time, the specter of a sale as well as specific terms are not defined
sufficiently to quantify the financial results of any agreed upon disposition
or whether continuing operations is a preferable alternative. The Company
believes that it is reasonable for the special committee to complete its work
and to issue its recommendation during the balance of calendar 2000, at which
time it is expected to be clearer as to whether a sale of this business
segment is appropriate.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
CERTAIN STATEMENTS SET FORTH BELOW CONSTITUTE "FORWARD-LOOKING STATEMENTS"
WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
STATEMENTS THAT EXPRESSLY OR BY IMPLICATION PREDICT FUTURE RESULTS, PERFORMANCE
OR EVENTS ARE FORWARD-LOOKING. THE WORDS "BELIEVES," "PLANS," "EXPECTS,"
"ANTICIPATES," "ESTIMATES," AND SIMILAR EXPRESSIONS ALSO IDENTIFY FORWARD-
LOOKING STATEMENTS. THE FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN
RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE THE ACTUAL RESULTS,
PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY OR INDUSTRY RESULTS TO BE MATERIALLY
DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR
IMPLIED BY THE FORWARD-LOOKING STATEMENTS. WITH RESPECT TO THE COMPANY, THESE
FACTORS INCLUDE UNCERTAINTY OF ADDITIONAL FUNDING; LOSS OR IMPAIRMENT OF SOURCES
OF CAPITAL; DEPENDENCE ON STRATEGIC PARTNERS; UNCERTAINTIES RELATING TO PATENTS
AND PROPRIETARY INFORMATION; DEPENDENCE ON KEY PERSONNEL; TECHNOLOGICAL CHANGE
AND COMPETITION AND CHANGES IN LAWS OR REGULATIONS. GIVEN THESE UNCERTAINTIES
READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THE FORWARD-LOOKING
STATEMENTS. THE COMPANY DOES NOT INTEND TO UPDATE ANY FORWARD-LOOKING
STATEMENTS.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital increased during the first half of 2000 by
$4,129,000, from $924,000 at December 31, 1999 to $5,053,000 at June 30,
2000. The increase in working capital resulted primarily from the net
proceeds from issuance of common stock of $5,868,000, offset in part by the
effect of the net loss for the period ($2,069,000 less non-cash charges of
$276,000).
Cash and cash equivalents increased from $789,000 at December 31, 1999 to
$4,564,000 at June 30, 2000.
While the Company believes that its new therapeutic 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.
The Company expects to continue to report losses in 2000 as the level of
expenses is expected to continue to exceed revenues. The Company can give no
assurances as to when and if its revenues will exceed its expenses.
9
<PAGE>
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 2000
COMPARED WITH THREE MONTHS ENDED JUNE 30, 1999
Possible Divestiture of Assets
At a meeting held August 1, 2000, the Company's board of directors decided to
develop additional information as to the value of the Company's Health
Products segment, for the purpose of reaching a final decision on whether to
continue operations or develop a formal plan for disposal of this business
segment. To this end, the board has received a nonexclusive offer from two
employees to purchase the Health Products assets. As a result, a special
committee of the board has been charged with the responsibility of completing
a full due diligence investigation of this offer, as well as other avenues of
sale and reporting back to the full board with its recommendation. At the
present time, the specter of a sale as well as specific terms are not defined
sufficiently to quantify the financial results of any agreed upon disposition
or whether continuing operations is a preferable alternative. The Company
believes that it is reasonable for the special committee to complete its work
and to issue its recommendation during the balance of calendar 2000, at which
time it is expected to be clearer as to whether a sale of this business
segment is appropriate. Although a formal plan for this possible divestiture
has not been put in place, it is anticipated that all of the assets that are
currently generating revenues for the Company may either be sold to a third
party or spun off to the Company's shareholders. Upon completion of such a
restructuring, the Company would no longer have a source of current revenues
and the Company's continued operations would be wholly dependent upon
additional capital financing until such time as revenues can be generated
from its therapeutic development programs.
Revenues
The Company's revenues for the quarters ended June 30, 2000 and 1999 were as
follows:
2000 1999
Research assays and fine chemicals $ 293,000 $ 330,000
Therapeutic drug monitoring assays 174,000 599,000
Instruments 292,000 308,000
Bovine superoxide dismutase (bSOD)
for research and human use -- 456,000
Sale of rights to therapeutic drug
monitoring assays -- 911,000
Other 20,000 97,000
---------- ----------
$ 779,000 $2,701,000
========== ==========
Sales of research assays and fine chemicals declined by $37,000 from $330,000
in the second quarter of 1999 to $293,000 in the second quarter of 2000 due
to a decline in sales volumes.
10
<PAGE>
Revenues from sales of therapeutic drug monitoring assays declined in the
second quarter of 2000 as compared to the second quarter of 1999 resulting in
a decrease in sales of $425,000. Effective June 28, 1999, the Company sold
the intellectual property, contract rights and finished goods inventory
relating to its therapeutic drug monitoring assays. Sales of therapeutic drug
monitoring assays for the second quarter of 1999 include $158,000 for the
sale of the therapeutic drug monitoring finished goods inventory. Therapeutic
drug monitoring assay revenues in the second quarter of 2000 represent
contract sales of assays and services to the purchaser of the rights to this
technology. Such revenues are expected to continue to be less than the level
prior to July 1999. Revenues from therapeutic drug monitoring assay sales and
related services may terminate at the end of the third quarter of 2000, when
the contract to manufacture product for the purchaser of the technology
expires.
Revenue from instrument sales and development declined by $16,000, from
$308,000 in the second quarter of 1999 to $292,000 in the second quarter of
2000. This decrease resulted from reduced orders from customers. Since early
1999, the Company has not invested in any significant marketing efforts to
replace lost instrument customers.
Sales of bSOD in the second quarter of 1999 were primarily the result of one
shipment of bulk bSOD which has not been repeated in 2000.
Costs and Expenses
Cost of sales was 99% of revenues for the second quarter 1999 and increased
to 107% of revenues for the second quarter of 2000. Revenues for the second
quarter of 1999 include $911,000 for the sale of rights to the Company's
therapeutic drug monitoring assays, and expenses include $1,279,000 for the
cost of that technology. Excluding the sale of the therapeutic drug
monitoring technology and related cost, cost of sales for the second quarter
of 1999 was approximately 79% of revenues. The increase in the cost of sales
as a percentage of sales in the second quarter of 2000 is due primarily to
the effect of the fixed manufacturing costs for the Company's products being
spread over a lower manufacturing and sales volume. Cost of product sales
declined from $1,406,000 in the second quarter of 1999 to $833,000 in the
second quarter of 2000, but this decrease was not in proportion to the
decrease in sales volumes.
Research and development expenses decreased from $952,000 in the second
quarter of 1999 to $447,000 in the second quarter of 2000. The decrease in
research and development expenses resulted primarily from the closure of the
Company's French research laboratory in the second quarter of 1999.
Selling, general and administrative expenses decreased from $830,000 in the
second quarter of 1999 to $642,000 in the second quarter of 2000. A reduction
in personnel costs contributed approximately $128,000 to this decrease.
11
<PAGE>
Interest Income
Interest income for the second quarter of 2000 was more than for the second
quarter of 1999 because the Company had more cash available for investment
during 2000.
Net Loss
The Company continued to experience losses in the second quarter of 2000. The
second quarter 2000 net loss of $1,101,000 ($.12 per share-basic and diluted)
was $681,000 less than the $1,782,000 ($.23 per share-basic and diluted) net
loss for the second quarter of 1999. The decrease in the net loss is
primarily due to the decreases in research and development and selling,
general and administrative costs.
The Company expects to incur a substantial net loss for 2000. If the Company
develops substantial new revenue sources or if substantial additional capital
is raised through further sales of securities, the Company plans to continue
to invest in research and development activities and incur sales, general and
administrative expenses in amounts greater than its anticipated near-term
product margins. If the Company is unable to raise sufficient additional
capital or to develop new revenue sources, it will have to cease, or severely
curtail, its operations. In this event, while expenses will be reduced,
expense levels, and the potential write down of various assets, would still
be in amounts greater than anticipated revenues. The Company expects that
additional capital will be required in 2001.
12
<PAGE>
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 2000
COMPARED WITH SIX MONTHS ENDED JUNE 30, 1999
Revenues
The Company's revenues for the six-month periods ended June 30, 2000 and 1999
were as follows:
2000 1999
Sales
Research assays and fine chemicals $ 609,000 $ 736,000
Therapeutic drug monitoring assays 464,000 1,083,000
Instruments 625,000 795,000
Bovine superoxide dismutase (bSOD)
for research and human use -- 460,000
Sale of rights to therapeutic drug monitoring assays -- 911,000
Other 24,000 172,000
---------- ----------
$1,722,000 $4,157,000
========== ==========
Sales of research assays and fine chemicals declined by $127,000, from
$736,000 in the first half of 1999 to $609,000 in the first half of 2000.
This decrease was due primarily to the sale of certain products that became
surplus when the Company's French laboratory was closed in early 1999.
Effective June 28, 1999, the Company sold the intellectual property, contract
rights and finished goods inventory relating to its therapeutic drug
monitoring assays. The Company recognized $911,000 as compensation for the
intellectual property and contract rights. Sales of the Company's therapeutic
drug monitoring assays decreased by $619,000, from $1,083,000 in the first
six months of 1999 to $464,000 in the first six months of 2000. Sales of
therapeutic drug monitoring assays for the six months ended June 30, 1999
include $158,000 for the sale of the therapeutic drug monitoring finished
goods inventory. Therapeutic drug monitoring assay revenues in the first six
months of 2000 represent contract sales of assays and services to the
purchaser of the rights to this technology. Such revenues are expected to
continue to be less than the level prior to July 1999. Revenues from
therapeutic drug monitoring assay sales and related services may terminate at
the end of the third quarter of 2000, when the contract to manufacture
product for the purchaser of the technology expires.
13
<PAGE>
Revenue from instrument sales and development declined by $170,000, from
$795,000 in the first half of 1999 to $625,000 in the first half of 2000.
This decrease resulted from reduced orders from customers. Since early 1999,
the Company has not invested in any significant marketing efforts to replace
lost instrument customers.
Sales of bSOD in the first half of 1999 were primarily the result of one
shipment of bulk bSOD to the Company's Spanish licensee. No significant sales
of bulk bSOD were made during 2000.
Other revenues in the first half of 1999 included a $50,000 royalty payment
that did not recur in the first half of 2000.
Costs and Expenses
Cost of sales was 89% of revenues for the first half of 1999 and increased to
98% of product sales for the first half of 2000. Revenues for 1999 include
$911,000 for the sale of rights to the Company's therapeutic drug monitoring
assays, and expenses include $1,279,000 for the cost of that technology.
Excluding the sale of the therapeutic drug monitoring technology and related
cost, cost of sales for the first half of 1999 was approximately 74% of
revenues. The increase in the cost of sales as a percentage of sales in 2000
is due primarily to the effect of the fixed manufacturing costs for the
Company's products being spread over a lower manufacturing and sales volume.
Excluding the technology sale, sales volume for the first half of 2000 was
approximately 47% less than that of the first half of 1999. Cost of product
sales declined from $2,413,000 in the first half of 1999 to $1,685,000 in the
first half of 2000, but this decrease was not in proportion to the decrease
in sales volumes.
Research and development expenses decreased from $1,722,000 in the first half
of 1999 to $785,000 in the first half of 2000. The decrease in research and
development expenses resulted primarily from costs in the first half of 1999
relating to the closure of the Company's French research facility and
termination of its employees.
Selling, general and administrative expenses decreased by $324,000, from
$1,688,000 in the first half of 1999 to $1,364,000 in the first half of 2000.
Personnel reductions accounted for approximately $145,000 of the decrease.
Reduced advertising expense contributed an additional $42,000 to the
reduction.
Interest Income
Interest income for the first half of 2000 was more than for the first half
of 1999 because the Company had more cash available for investment during
2000.
14
<PAGE>
Net Loss
The Company continued to experience losses in the first six months of 2000.
The first half 2000 net loss of $2,069,000 ($.24 per share-basic and diluted)
was $904,000 less than the $2,973,000 ($.38 per share-basic and diluted) net
loss for the first half of 1999. The decrease in the net loss is primarily
due to reductions in research and development and selling, general and
administrative expenses, partially offset by reduced margins on product
sales.
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.
In March 2000 the Company issued 1,010,868 shares of its common stock and
warrants to purchase 2,021,736 shares of its common stock to eight accredited
investors. Gross proceeds from the sale of these securities were $4,802,000,
including $4,600,000 in cash and $202,000 in exchange for a note and accrued
interest. The securities were sold in a private placement pursuant to
Regulation D of the rules of the Securities and Exchange Commission.
In April 2000 the Company completed the second and final closing of its
private placement pursuant to Regulation D by issuing an additional 366,081
shares of its common stock and warrants to purchase 732,162 shares of its
common stock to three accredited investors, two of which also acquired shares
and warrants in the March closing. Gross proceeds from the April closing were
$1,450,000.
In total, warrants to purchase 2,753,898 shares of common stock were issued
to investors in the private placement. The number of shares subject to the
warrants by exercise price is as follows:
Exercise Shares subject
Price to warrants
----- -----------
$7.13 1,021,394
$5.94 1,021,394
$5.91 355,555
$4.92 355,555
The $5.94 and $4.92 warrants expire one year from issuance. The $7.13 and
$5.91 warrants expire two years from issuance.
In connection with this sale of securities the Company has paid or will pay
to its placement agents $219,000 in cash commissions together with warrants
to purchase 155,000 shares of the Company's common stock at an exercise price
of $5.94 per share.
Item 6. Exhibits and Reports on Form 8-K.
15
<PAGE>
(a) Exhibits - See Exhibit Index on page 16.
(b) Reports on Form 8-K
On April 12, 2000, the Company filed a report on Form 8-K demonstrating
compliance with a minimum net tangible asset requirement that had been
required by a Nasdaq Listing Qualifications Panel.
SIGNATURES
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 10, 2000 By /s/ Paul C. Sharpe
------------------------------
Paul C. Sharpe
Chief Executive Officer
August 10, 2000 By /s/ Jon S. Pitcher
------------------------------
Jon S. Pitcher
Chief Financial Officer
16
<PAGE>
EXHIBIT INDEX
Exhibit Page
Number Description of Document Number
10(a) Executive Employment Agreement dated
April 3, 2000, between the Company and
Jon S. Pitcher
10(b) Executive Employment Agreement dated
April 3, 2000, between the Company and
Humberto V. Reyes
27(a) Financial data schedule
