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Exhibit Index is on page 19
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 September 30, 1995.
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 October 31, 1995, the issuer had outstanding the indicated number of shares
of common stock: 12,124,423
1
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three months ended Nine months ended
September 30 September 30
--------------------------- ----------------------------
1995 1994 1995 1994
Revenues:
Product sales $ 1,024,000 $ 424,000 $ 4,164,000 $ 1,633,000
Royalties and license fees 74,000 23,000 146,000 108,000
----------- ----------- ----------- -----------
Total revenues 1,098,000 447,000 4,310,000 1,741,000
Cost and expenses:
Cost of sales 735,000 303,000 2,593,000 1,086,000
Research and development 1,025,000 393,000 3,044,000 813,000
Selling, general and administrative 827,000 490,000 2,318,000 1,011,000
Purchased in-process
technology (Note 5) 3,329,000 3,675,000 3,329,000 3,675,000
----------- ----------- ----------- -----------
Total costs and expenses 5,916,000 4,861,000 11,284,000 6,585,000
----------- ----------- ----------- -----------
Operating loss (4,818,000) (4,414,000) (6,974,000) (4,844,000)
Interest income 16,000 26,000 36,000 66,000
Interest expense (29,000) (11,000) (112,000) (11,000)
----------- ----------- ----------- -----------
Net loss $(4,831,000) $(4,399,000) $(7,050,000) $(4,789,000)
----------- ----------- ----------- -----------
Net loss per share $(.41) $(.72) $(.68) $(.90)
----------- ----------- ----------- -----------
Weighted average number of
shares used in computation 11,858,200 6,067,693 10,426,071 5,348,319
============ =========== =========== ===========
2
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1995 1994
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 1,008,000 $ 936,000
Certificates of deposit -- 496,000
Accounts receivable 1,133,000 740,000
Inventories 844,000 673,000
Prepaid and other 146,000 228,000
----------- -----------
Total current assets 3,131,000 3,073,000
Property and equipment, net 1,136,000 1,298,000
Assets under capital leases, net 1,259,000 1,340,000
Technology for developed products
and custom assays, net 4,678,000 5,215,000
Other assets 117,000 268,000
----------- -----------
Total assets $10,321,000 $11,194,000
=========== ===========
3
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1995 1994
(unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to bank $ -- $ 340,000
Other notes payable 1,366,000 --
Accounts payable 1,157,000 1,562,000
Customer deposits 250,000 1,116,000
Accrued liabilities 693,000 628,000
Current portion of long-term
debt and capital lease obligations 321,000 473,000
------------ ------------
Total current liabilities 3,787,000 4,119,000
Long-term debt and
capital lease obligations 420,000 356,000
Other liabilities 20,000 20,000
Shareholders' equity:
Preferred stock - $.01 par value; 5,000,000 shares
authorized; 642,583 outstanding (liquidation
preference - $1,500,000) 6,000 --
Common stock - $.50 par value; 25,000,000 shares
authorized; 12,124,423 outstanding 6,062,000 4,661,000
Additional paid in capital 25,158,000 20,230,000
Accumulated deficit (25,189,000) (18,139,000)
Accumulated translation adjustments 57,000 (53,000)
------------ ------------
Total shareholders' equity 6,094,000 6,699,000
------------ ------------
Total liabilities and shareholders' equity $ 10,321,000 $ 11,194,000
============ ============
4
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30,
---------------------------
1995 1994
Cash flows from operating activities:
Net loss $(7,050,000) $(4,789,000)
Adjustments to reconcile net loss to cash provided
by (used for) operating activities:
Depreciation and amortization 1,024,000 130,000
Purchased in-process technology 3,329,000 3,675,000
Changes in assets and liabilities:
Accounts receivable (393,000) 385,000
Inventories 79,000 96,000
Other current assets 246,000 (213,000)
Accounts payable (476,000) 326,000
Customer deposits (866,000) 1,078,000
Accrued liabilities 48,000 41,000
----------- -----------
Net cash provided by (used for) operating activities (4,059,000) 729,000
Cash flows from investing activities:
Redemption of certificates of deposit 496,000 289,000
Purchases of equipment (45,000) (8,000)
Acquisition and stock issuance costs (Note 5) (506,000) (1,211,000)
Cash of businesses acquired (Note 5) 73,000 273,000
Other, net (113,000) 14,000
----------- -----------
Net cash provided by (used for) investing activities (95,000) (643,000)
Cash flows from financing activities:
Proceeds from issuance of short-term notes 1,366,000 60,000
Proceeds from issuance of stock 3,538,000 --
Repayment of short-term bank borrowings (340,000) --
Repayment of long-term debt and capital lease obligations (338,000) (123,000)
----------- -----------
Net cash provided by (used for) financing activities 4,226,000 (63,000)
----------- -----------
Net increase in cash and cash equivalents 72,000 23,000
Cash and cash equivalents - beginning of period 936,000 758,000
----------- -----------
Cash and cash equivalents - end of period $ 1,008,000 $ 781,000
=========== ===========
5
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 by OXIS International, Inc
("OXIS" or the "Company") with the Securities and Exchange Commission
("Commission") for the year ended December 31, 1994. That report contains,
among other information, a description of OXIS' business, audited financial
statements, notes to the financial statements, the report of the independent
auditors and management's discussion and analysis of financial condition and
results of operations. Readers of this report are presumed to be familiar
with that annual report.
The functional currency of OXIS International S.A. ("OXIS S.A."), formerly
Bioxytech S.A., the Company's foreign subsidiary, is the French franc. OXIS
S.A.'s assets and liabilities are translated using the exchange rate at the
end of the period. Its statement of operations is translated at the average
exchange rate during the period that OXIS S.A.'s revenues and expenses are
included in the consolidated statement of operations. Gains or losses
resulting from foreign currency translation are accumulated as a separate
component of shareholders' equity.
2. BASIS OF PRESENTATION
These financial statements have been prepared on a going concern basis which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. The Company has incurred losses in each of the
last three years, and for the nine months ended September 30, 1995. As of
September 30, 1995, the Company's current liabilities exceeded its current
assets by $656,000. The Company's continuation as a going concern is
contingent upon its ability to obtain additional financing, and to generate
revenue and cash flow to meet its obligations on a timely basis. These
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts
and classification of liabilities that may be necessary should the Company be
unable to continue as a going concern.
Since December 31, 1994, the Company has improved its financial position
through issuance of both debt and equity securities. In May 1995 the Company
issued 1,227,625 shares of its common stock to private investors for gross
proceeds of $2,038,000. In connection with this sale of stock, the Company
also issued a warrant to purchase 122,763
6
shares of its common stock at a price of $2.82 per share. In February and May
a total of $1,366,000 was advanced to the Company pursuant to notes described
in Note 4. In addition, in June, the Company purchased inventory in the
amount of $250,000 in exchange for a note payable in two years.
As further described in Note 5, the Company raised an additional $1,500,000
through a further private placement of equity securities in July.
The Company is currently seeking additional capital through a private
placement of securities. If the Company is unable to raise additional capital
during the remainder of 1995, it intends to curtail its operations through
the reduction of personnel and facility costs and by reducing its research
and development efforts. If the Company were to be unable to sufficiently
curtail its costs in such a situation, it might be forced to seek protection
of the courts through reorganization, bankruptcy or insolvency proceedings.
3. 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 September 30, 1995 and December 31, 1994, consisted
of the following:
September 30, December 31,
1995 1994
Raw materials $205,000 $179,000
Work in process 405,000 357,000
Finished goods 234,000 137,000
-------- --------
Total $844,000 $673,000
======== ========
4. NOTES PAYABLE
In February 1995 certain of the Company's shareholders, who were former OXIS
S.A. shareholders, advanced $766,000 to the Company pursuant to promissory
notes. The notes are due in February 1996 and bear interest at 8% per year.
The notes are secured by certain of the Company's products and related assets
and are subordinated to the major customer advance discussed below.
As additional consideration for the loans, the Company has issued 93,300
shares of its common stock to the lenders, the value of which has been
recorded as a cost of debt issuance and is being amortized over one year, the
life of the notes. Further, the Company has agreed to issue warrants
entitling the lenders to purchase equity securities. The terms
7
and number of warrants to be issued will be determined based on the terms of
another placement of equity securities by the Company.
In May 1995 a major customer advanced the Company $600,000 under a promissory
note that is secured by the Company's assets and is due in May 1996. The note
bears no interest for the first six months and, thereafter, bears interest at
prime plus 2%.
5. ACQUISITIONS
On July 19, 1995, the Company consummated the acquisition of Therox
Pharmaceuticals, Inc. ("Therox") pursuant to a transaction wherein Therox was
merged with and into a wholly-owned subsidiary of OXIS. Therox was a
Philadelphia-based start-up company focused on the development of
therapeutics to treat diseases associated with damage from free radicals. The
Company issued 1,440,736 shares of its common stock to Therox stockholders in
exchange for all of the Therox capital stock. In addition, the acquisition
agreement provides for payment of up to $2,000,000 in cash or OXIS common
stock by OXIS to the Therox stockholders based on the successful
commercialization of the Therox technologies.
The acquisition of Therox has been recorded as a purchase and, accordingly,
the acquired assets and liabilities were recorded at their estimated fair
values as of the date of acquisition. The aggregate purchase price of
$3,353,000 (1,440,736 shares issued times the average per share closing price
of OXIS common stock for the five days ended July 20, 1995, discounted 30%
for certain trading restrictions) has been allocated to the assets and
liabilities acquired.
The cost of the acquisition of Therox has been allocated to the assets
acquired and liabilities assumed as follows:
Cash $ 73,000
Equipment 16,000
Technology for in-process products 3,329,000
Other assets 23,000
Less liabilities assumed (88,000)
----------
Acquisition cost $3,353,000
----------
The Company's consolidated results of operations include the operating
results of the acquired company since the acquisition.
Approximately $3,329,000 of the purchase price represented technology related
to research and development projects that are in process and that has no
alternative future use other than the completion of these projects.
Accordingly, these costs have been charged to operations immediately upon
completion of the acquisition.
8
The following table presents the unaudited pro forma combined results of
operations for the nine-month periods ended September 30, 1995 and 1994 as if
the acquisition had occurred at the beginning of the periods presented:
Nine months ended September 30
--------------------------------
1995 1994
--------------- --------------
Total revenues $ 4,310,000 $ 1,741,000
Net loss $(4,148,000) $(5,180,000)
Net loss per share (based
on 12,124,423 shares outstanding) $ (.34) $ (.43)
The above table includes, on an unaudited pro forma basis, the Company's
financial information for the nine months ended September 30, 1995 and 1994,
combined with the financial information of Therox for the same nine-month
periods. The above table excludes the one-time $3,329,000 charge for
purchased in-process technology arising from the 1995 acquisition, but
includes non-recurring costs of $3,675,000 for purchased in-process technology
from the Company's September 1994 business acquisitions.
The unaudited pro forma combined results of operations are presented for
illustrative purposes only and are not necessarily indicative of the operating
results that would have occurred had the acquisitions been consummated at the
beginning of the periods presented, nor are they necessarily indicative of
future operating results.
Simultaneously with the Therox acquisition, a Series B Preferred Stock
Purchase Agreement was entered into between OXIS and two venture capital firms
(S.R. One, Limited and Brantley Venture Partners II, L.P.) which were major
stockholders of Therox. Pursuant to this agreement, OXIS sold 642,583 shares
of its Series B Preferred Stock for an aggregate price of $1,500,000. The
Series B Preferred Stock is initially convertible into common stock on a one-
for-one basis. It has the same voting rights as the common stock and, in
addition, the holders of the Series B Preferred Stock also have the right to
elect one director. The Series B Preferred Stock has certain preferential
rights with respect to liquidation and dividends.
Costs of approximately $150,000 directly attributable to the issuance of the
Series B Preferred Stock and the common stock issued in the Therox acquisition
have been recorded as a reduction in the proceeds from the issuance of the
shares.
9
6. STOCK OPTIONS
The Company has a stock incentive plan under which 1,200,000 shares of the
Company's common stock are reserved for issuance. The plan permits granting
stock options to acquire shares of the Company's common stock, awarding stock
bonuses of the Company's common stock, and granting stock appreciation
rights. As of September 30, 1995, the Company had granted options to purchase
407,900 shares of the Company's common stock under this plan. As of September
30, 1995, options to purchase 150,127 shares of the Company's common stock at
exercise prices of $2.25 - $3.50 per share were exercisable.
In addition, options to purchase 214,700 shares of the Company's common stock
at an exercise price of $3.55 per share were awarded in connection with
acquisitions in September 1994. All of these options remained outstanding and
were exercisable as of September 30, 1995.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
ACQUISITIONS
In September 1994, the Company significantly increased its scientific and
technical staff, patent application portfolio, current product offerings,
research and development programs, research and manufacturing facilities and
its customer base by acquiring OXIS S.A. and International BioClinical, Inc.
("IBC") (the "1994 acquired businesses"). Both acquisitions were completed
through the exchange of stock, and were accounted for as purchases;
accordingly, the acquired assets and liabilities were recorded at their
estimated fair values as of the date of acquisition. IBC was merged into the
Company. OXIS S.A. operates as a subsidiary of the Company.
In July 1995, in a transaction which was also accounted for as a purchase, the
Company acquired Therox Pharmaceuticals, Inc. ("Therox"). The acquisition of
Therox provided the Company with a technology portfolio complementary to its
novel therapeutics for treatment of free radical associated diseases together
with university partnerships and seven patents.
Because the acquisitions have been accounted for as purchases, the Company's
consolidated results of operations include the operating results of the
acquired businesses from the dates of acquisition only. Therefore, the
results of operations of the 1994 acquired businesses are included in the
consolidated statements of operations from September 7, 1994, and the results
of Therox's operations are included in the consolidated statements of
operations from July 19, 1995.
The increased research and development investments have placed significant
demand on the Company's limited financial resources. See "Financial
Condition, Liquidity and Capital Resources" below.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of 1995, the Company's working capital deficit
was reduced from $1,046,000 at December 31, 1994, to $656,000 at September 30,
1995. This reduction resulted primarily from the sale of stock for cash
(gross proceeds of $3,538,000) and issuance of long-term debt ($250,000),
offset by the effect of the net loss for the period ($7,050,000 less non-cash
charges of $4,353,000) and repayment of long-term debt and capital lease
obligations ($338,000).
11
Cash and certificates of deposit declined from $1,432,000 at December 31,
1994, to $1,008,000 at September 30, 1995.
The Company expects to continue to report losses in the near term as the level
of expenses is expected to continue to exceed revenues. The Company must
raise additional capital during the remainder of 1995. Failure to raise such
additional capital would cause the Company to severely curtail or cease
operations. For more information concerning the Company's ability to continue
as a going concern, see Note 2 to the consolidated financial statements.
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.
Further, bovine superoxide dismutase sales of recent years to Sanofi Winthrop
Inc. (35% of 1994 revenues) are not expected to continue. Sanofi Winthrop
announced in October 1995 that a second Phase III trial on its drug,
DISMUTEC(TM) (a coupled form of OXIS' bovine superoxide dismutase) to treat
head trauma failed to show statistically significant improvement between the
treatment and control groups. European sales and royalties would decline
further if bovine superoxide dismutase is withdrawn in Spain (see "Results of
Operations" below). Although the Company is currently seeking additional funds
through a private placement, it cannot predict the source, terms, amount,
form, and/or availability of additional capital to fund its operations to the
end of the current year.
An investment banking firm has been engaged by the Company to assist on a
best-efforts basis to raise up to $3,000,000. However, no assurances can be
given that the Company will successfully raise the needed capital. If the
Company is unable to raise additional capital during the remainder of 1995, it
would endeavor to extend its ability to continue in business through the
reduction of personnel and facility costs, by slowing its research and
development efforts, and by reducing other operating costs.
12
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED WITH
THREE MONTHS ENDED SEPTEMBER 30, 1994
REVENUES
The Company's product sales for the quarters ended September 30, 1995 and 1994
were as follows:
1995 1994
Bovine superoxide dismutase (bSOD)
for research and human use $ 270,000 $129,000
Diagnostic and research assays 551,000 114,000
Palosein(R) (bSOD for veterinary use) 135,000 139,000
Other 68,000 42,000
---------- --------
$1,024,000 $424,000
---------- --------
Sales of bulk bSOD for research and human use increased by $141,000 in the
third quarter of 1995 as compared to the third quarter of 1994, almost
entirely due to increases in sales to the Company's Spanish licensee.
Substantially all of the Company's $129,000 bulk bSOD sales in the third
quarter of 1994 were to the Spanish distributor. Bulk bSOD sales to this
distributor increased to $241,000 in the third quarter of 1995. Due to
regulatory actions in four European countries in 1994, the Company's Spanish
licensee has had informal discussions with the Spanish regulatory authorities
regarding the Company's bSOD product. Future sales in Spain could be adversely
affected by either regulatory action in Spain, or safety concerns stemming
from actions in other countries.
Sales of diagnostic and research assays from the 1994 acquired businesses
totaled $551,000 in the third quarter of 1995, compared to $114,000 for the
period from September 7, 1994 through September 30, 1994. Sales of other
products acquired in the 1994 acquisitions further increased sales in the
third quarter of 1995 as compared to the third quarter of 1994.
COSTS AND EXPENSES
Cost of sales as a percentage of product sales increased from 71% in the third
quarter of 1994 to 72% in the third quarter of 1995. Three months'
amortization of acquired technology is included in the cost of sales for the
third quarter of 1995, while the 1994 cost includes one months' amortization.
13
Research and development expenses increased from $393,000 in the third quarter
of 1994 to $1,025,000 in the third quarter of 1995. The 1995 increase
resulted primarily from the cost of the research and development activities
associated with acquired potential pharmaceutical technologies. The lease of
the Company's Mountain View, California facility terminated in October 1995;
and substantially all of the laboratory and office equipment from that
facility has been moved to the Company's Portland, Oregon facility. Certain
of the research and development and quality control programs previously
located in California will be continued. If the Company continues to obtain
sufficient additional capital funding, it expects its investment in research
and development activities to continue at a level substantially higher than
historical amounts.
Selling, general and administrative expenses increased from $490,000 in the
third quarter of 1994 to $827,000 in the third quarter of 1995. This increase
is primarily due to the inclusion of the selling, general and administrative
costs of the 1994 acquired businesses for the entire quarter in 1995.
INTEREST INCOME AND EXPENSE
Interest income decreased in the third quarter of 1995 as compared with the
third quarter of 1994 due to a decline in certificates of deposit. The funds
from redeemed certificates of deposit have been primarily used to support
research and development programs.
Interest expense in 1995 and 1994 relates primarily to the capitalized lease
obligations of the Company's French subsidiary and short-term notes payable.
NET LOSS
The Company continued to experience losses in the third quarter of 1995. The
third quarter 1995 loss of $4,831,000 ($.41 per share) was $432,000 greater
than the $4,399,000 ($.72 per share) loss for the third quarter of 1994.
The third quarter losses for both 1995 and 1994 include charges to operations
for the effect of purchased in-process technology relating to business
acquisitions. The 1995 loss includes a charge of $3,329,000 relating to the
acquisition of Therox. Likewise, the 1994 loss includes a charge of
$3,675,000 relating to the acquisitions of OXIS S.A. and IBC. Excluding the
charges for purchased in-process technology, the net loss for the third
quarter of 1995 would have been $1,502,000 and the net loss for the third
quarter of 1994 would have been $724,000. Increased research and development
expenditures and selling, general and administrative expenses from the
businesses acquired late in the third quarter of 1994 and increased research
and development expenditures relating to the acquisition of Therox early in
the third quarter of 1995 were the principal cause of the increased loss.
14
The Company expects to incur a substantial net loss for 1995. If additional
capital is raised through a private placement of securities (see "Financial
Condition, Liquidity and Capital Resources"), the Company plans to continue to
invest in research and development activities and incur selling, general and
administrative expenses in amounts greater than its anticipated near-term
product margins. If the Company is unable to raise sufficient additional
capital in a timely fashion, it will have to cease, or severely curtail, its
operations. In the event that operations are severely curtailed, so that cash
expenditures for operations are equal to or less than receipts from product
sales and royalties, the Company still expects to continue to report net
losses due to the amortization and potential write down of various assets.
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED WITH NINE
MONTHS ENDED SEPTEMBER 30, 1994
REVENUES
Product sales for the first nine months of 1995 were $4,164,000, compared to
$1,633,000 for the corresponding period in 1994, an increase of $2,531,000.
The increase in product sales is primarily due to (1) the inclusion in 1995 of
$1,650,000 of sales of diagnostic and research assays of the 1994 acquired
businesses compared to $114,000 included in 1994 for the period from September
7, 1994 through September 30, 1995, (2) an increase of $537,000 in sales to
Sanofi Winthrop in 1995 and (3) an increase of $110,000 in Palosein sales in
1995.
COSTS AND EXPENSES
Cost of sales as a percent of product sales decreased from 67% in the first
nine months of 1994 to 62% in the first nine months of 1995. Cost of sales in
the first nine months of 1994 was higher than historical levels due to a
significant sale of bulk bSOD at less than the Company's historic profit
margin. Palosein sales, which increased by 39% in 1995, have a lower cost of
sales than bulk bSOD sales, contributing to the reduction in cost of sales in
1995. These factors were partially offset by higher costs of products of the
1994 acquired businesses, which costs include the amortization of acquired
technology.
The increase of $2,231,000 in research and development costs for the first
nine months of 1995 compared to 1994 is primarily due to the cost of the
research and development activities associated with acquired pharmaceutical
technologies.
Selling, general and administrative expenses increased from $1,011,000 for the
first nine months of 1994 to $2,318,000 for the first nine months of 1995, an
increase of $1,307,000. The largest components of this increase are: (1)
selling, general and administrative expenses relating to the French subsidiary
of $528,000, (2) an increase of $227,000 in selling expenses relating to the
United States operations, primarily costs to market and sell the diagnostic
15
assays and Palosein, (3) an increase of $169,000 in financial and
administrative personnel costs due to the increased requirements for
administrative and accounting functions following the 1994 acquisitions, and
(4) a foreign exchange loss of $42,000 in the first nine months of 1995
compared to a gain of $47,000 in 1994.
INTEREST INCOME AND EXPENSE
Interest income decreased in the first six months of 1995 as compared with the
same period in 1994 due to a decline in certificates of deposit. The funds
from redeemed certificates of deposit have been primarily used to support
research and development programs.
Interest expense in 1995 relates primarily to the capitalized lease
obligations of the Company's French subsidiary and short-term notes payable.
NET LOSS
The Company's loss for the first nine months of 1995 was $7,050,000 ($.68 per
share) compared to a loss of $4,789,000 ($.90 per share) for the first nine
months of 1994. The losses for the first nine months of both 1995 and 1994
include charges to operations for the effect of purchased in-process
technology relating to business acquisitions. The 1995 loss includes a charge
of $3,329,000 relating to the acquisition of Therox. Likewise, the 1994 loss
includes a charge of $3,675,000 relating to the acquisitions of Oxis S.A.
and IBC. Excluding the charges for purchased in-process technology, the net
loss for the first nine months of 1995 would have been $3,721,000 and the net
loss for the first nine months of 1994 would have been $1,114,000. Increased
research and development expenditures and selling, general and administrative
expenses from the businesses acquired late in the third quarter of 1994 and
increased research and development expenditures relating to the acquisition of
Therox early in the third quarter of 1995 were the principal causes of the
increased loss.
16
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's 1995 Annual Meeting of Stockholders held on August 15, 1995
("1995 Stockholders Meeting"), the Company's stockholders elected the following
persons to the Company's Board of Directors:
Name Shares FOR Shares WITHHELD
---- ---------- ---------------
Ray R. Rogers 7,372,181 365,442
Anna D. Barker, Ph.D. 7,372,781 364,842
Timothy Biro 7,379,309 358,314
Lawrance A. Brown, Jr. 7,375,409 362,214
Gerald D. Mayer, Ph.D. 7,379,809 357,814
David A. Needham, Ph.D. 7,379,409 358,214
A.R. Sitaraman 7,375,130 362,493
Peter E. Taussig 7,379,230 358,393
At the 1995 Stockholders Meeting, the stockholders also approved an amendment of
the Company's 1994 Stock Incentive Plan (as described in greater detail in the
Proxy Statement dated July 19, 1995) to increase the number of shares of Common
Stock available for issuance thereunder by 800,000 shares, to an aggregate of
1,200,000 shares (5,754,195 shares voting for, 628,089 shares voting against,
96,241 shares abstaining and 1,259,098 broker non-votes).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits - See Exhibit Index on page 19.
(b) Reports on Form 8-K.
The Company has filed with the Commission a current Report on Form 8-K dated
July 19, 1995 (the "Form 8-K"), and a Current Report on form 8-K/A dated
September 28, 1995 (the "Form 8-K/A"). The Form 8-K reports the acquisition of
Therox Pharmaceuticals, Inc. The Form 8-K/A provides additional financial
information relating to the acquisition.
17
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.
November 10, 1995 By /s/ Anna D. Barker
-------------------------------------
Anna D. Barker
President and Chief Executive Officer
November 10, 1995 By /s/ Jon S. Pitcher
-------------------------------------
Jon S. Pitcher
Chief Financial Officer
18
EXHIBIT INDEX
Exhibit Page
Number Description of Document Number
2(A) Agreement and Plan of Reorganization and Merger
between OXIS International, Inc., OXIS Acquisition
Corporation and Therox Pharmaceuticals,
Inc., dated July 18, 1995. (1)
4(A) Certificate of Designations, Preferences, and
Rights of Series B Preferred Stock. 20
10(A) OXIS International, Inc. Series B Preferred
Stock Purchase Agreement dated July 18, 1995. 28
27(A) Financial data schedule 90
__________
(1) Incorporated by reference to the Company's Form 8-K/A Current Report
dated July 19, 1995.
19