UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K/A
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year
ended December 31, 2015
Commission File
Number: 000-08092
OXIS
INTERNATIONAL, INC.
(Exact name of
Registrant as specified in its charter)
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Delaware
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94-1620407
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(State of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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100 South Ashley
Drive, Suite 600
Tampa, FL 33602
(Address of
principal executive offices) (Zip code)
(800) 304-9888
(Registrant’s
telephone number including area code)
Securities
registered pursuant to Section 12(b) of the Act: None.
Securities
registered pursuant to section 12(g) of the Act:
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Title of
Securities
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Exchanges on which
Registered
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Common Stock, $.001
Par Value
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None
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Indicate by check
mark if the registrant is a well-known seasoned issuer, as defined
in Rule 405 of the Securities Act. Yes ◻ No
⌧
Indicate by check
mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes ◻ No
⌧
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
⌧ No ◻
Indicate by check
mark whether the registrant has submitted electronically and posted
on its corporate website, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of
Regulation S-T during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such
files). Yes ◻ No ⌧
Indicate by check
mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405) is not contained herein, and will
not be contained, to the best of registrant’s knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ◻
Indicate by check
mark whether the registrant is a large accelerated filer,
accelerated filer or non-accelerated filer (See the definitions of
“large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule
12b-2 of the Exchange Act) (Check one).
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Large accelerated
filer◻
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Accelerated filer
◻
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Non-accelerated
filer ◻ (Do not check if a smaller reporting
company)
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Smaller reporting
company ☑
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Indicate by check
mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ◻ No ⌧
The aggregate
market value of the registrant’s common stock, $0.001 par
value per share, of the registrant on June 30, 2015, the last
business day of the registrant’s most recently completed
fiscal year, was approximately $13.1 million. As of March 27, 2016,
there were 21,517,221 shares of the registrant’s common
stock, $0.001 par value, issued and outstanding.
EXPLANATORY NOTE
GT Biopharma, Inc., formerly known as Oxis
International, Inc, (the “Company”)
is filing this Amendment No. 1 to its Annual Report on Form 10-K
for its fiscal year ended December 31, 2015, as filed with the
Securities and Exchange Commission on March 30, 2016 (the
“Original December 2015 Form
10-K”), primarily to
correct an error related to the non-cash calculation of warranty
liabilities.
Actual Changes in the Original
December 2015 Form 10-K. The actual changes in the Original December Form
10-K included in this Amendment No. 1 are amendments that
include: (a) amended and restated Consolidated Balance
Sheet as of December 31, 2015, (b) amended and restated Consolidated Statement
of Operations for the year ended December 31,
2015, (c) amended and restated Consolidated Statement
of Stockholders’ deficit for the year ended December 31,
2015, (d) amended and restated Consolidated Statement
of Cash Flows for the year ended December 31, 2015, and
(e) an amended Note 1 with the addition of Note
7.
Notwithstanding
that there are no changes in most of the Notes to the Consolidated
Financial Statements included in this Amendment No. 1, a complete
Form 10-K document including a complete set of the Consolidated
Financial Statements (together with all of the Notes from the
Original December 2015 10-K) has been included in this Amendment
No. 1, for convenient reference.
In
addition, see additional amended filings of the Company for
relevant subsequent events.
Table of
Contents
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PART I
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Item
1.
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Business
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2
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Item
1A.
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Risk
Factors
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8
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Item
1B.
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Unresolved Staff
Comments
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8
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Item
2.
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Properties
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8
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Item
3.
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Legal
Proceedings
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8
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Item
4.
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Mine Safety
Disclosures
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8
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PART
II
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Item
5.
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Market for
Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
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8
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Item
6.
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Selected Financial
Data
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10
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Item
7.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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10
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Item
7A.
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Quantitative and
Qualitative Disclosures About Market Risk
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14
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Item
8.
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Financial
Statements and Supplementary Data
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14
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Item
9.
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Changes in and
Disagreements With Accountants on Accounting and Financial
Disclosure
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14
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Item
9A.
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Controls and
Procedures
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15
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Item
9B.
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Other
Information
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16
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PART
III
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Item
10.
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Directors,
Executive Officers and Corporate Governance
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16
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Item
11.
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Executive
Compensation
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18
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Item
12.
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Security Ownership
of Certain Beneficial Owners and Management and Related Stockholder
Matters
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19
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Item
13.
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Certain
Relationships and Related Transactions, and Director
Independence
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21
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Item
14.
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Principal
Accounting Fees and Services
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21
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PART
IV
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Item
15.
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Exhibits, Financial
Statement Schedules
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23
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PART
I
CAUTIONARY
NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This Report,
including any documents which may be incorporated by reference into
this Report, contains “Forward-Looking Statements”
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. All statements other than statements of
historical fact are “Forward-Looking Statements” for
purposes of these provisions, including our plans of operation, any
projections of revenues or other financial items, any statements of
the plans and objectives of management for future operations, any
statements concerning proposed new products or services, any
statements regarding future economic conditions or performance, and
any statements of assumptions underlying any of the
foregoing. All Forward-Looking Statements included in
this document are made as of the date hereof and are based on
information available to us as of such date. We assume
no obligation to update any Forward-Looking
Statement. In some cases, Forward-Looking Statements can
be identified by the use of terminology such as “may,”
“will,” “expects,” “plans,”
“anticipates,” “intends,”
“believes,” “estimates,”
“potential,” or “continue,” or the negative
thereof or other comparable terminology. Although we
believe that the expectations reflected in the Forward-Looking
Statements contained herein are reasonable, there can be no
assurance that such expectations or any of the Forward-Looking
Statements will prove to be correct, and actual results could
differ materially from those projected or assumed in the
Forward-Looking Statements. Future financial condition
and results of operations, as well as any Forward-Looking
Statements are subject to inherent risks and uncertainties,
including any other factors referred to in our press releases and
reports filed with the Securities and Exchange
Commission. All subsequent Forward-Looking Statements
attributable to the company or persons acting on its behalf are
expressly qualified in their entirety by these cautionary
statements. Additional factors that may have a direct
bearing on our operating results are described under “Risk
Factors” and elsewhere in this report.
Introductory
Comment
Throughout this
Annual Report on Form 10-K, the terms
“OXIS,” “we,”
“us,” “our,” “the
company” and “our company” refer to OXIS
International, Inc., a Delaware corporation formerly known as DDI
Pharmaceuticals, Inc. and Diagnostic Data, Inc, together with our
subsidiaries.
ITEM
1. BUSINESS
Overview
OXIS International, Inc., through its
wholly owned subsidiary Oxis Biotech, Inc, is an
immuno-oncology company with a robust technology platform
consisting of bispecific and trispecific scFv constructs,
full-length antibodies, proprietary drug payloads, proprietary
antibody-drug linkers, dual-drug payload antibody-drug conjugates
(ADCs), bispecific targeted ADCs, and NK cell and T-cell antibody
directed cell-mediated cytotoxic (ADDCs) agents.
OXS-1550
OXS-1550 is a
bispecific scFv recombinant fusion protein-drug conjugate composed
of the variable regions of the heavy and light chains of anti-CD19
and anti-CD22 antibodies and a modified form of diphtheria toxin as
its cytotoxic drug payload. CD19 is a membrane glycoprotein
present on the surface of all stages of B-lymphocyte development,
and is also expressed on most B-cell mature lymphoma cells and
leukemia cells. CD22 is a glycoprotein expressed on B-lineage
lymphoid precursors, including precursor acute lymphoblastic
leukemia, and often is co-expressed with CD19 on mature B-cell
malignancies such as lymphoma.
OXS-1550 targets
cancer cells expressing the CD19 receptor or CD22 receptor or both
receptors. When OXS-1550 binds to cancer cells, the cancer
cells internalize OXS-1550, and are killed due to the action of
drug's cytotoxic diphtheria toxin payload. OXS-1550 has
demonstrated success in a Phase 1 human clinical trial in patients
with relapsed/refractory B-cell lymphoma or leukemia.
p62/SQSTM1
(Sequestosome-1) Inhibitor Drug Development Program
In humans, the
p62/SQSTM1 protein is encoded by the SQSTM1 gene. The
p62/SQSTM1 protein is a multifunctional protein involved in
autophagy, cell signaling, tumorigenesis, and plays an important
role at the crossroad between autophagy and
cancer. Cell-cell interactions between multiple myeloma
cells and bone marrow stromal cells activate signaling pathways
that result in enhanced multiple myeloma cell growth, osteoclast
formation, and inhibition of osteoblast
differentiation.
Multiple myeloma
remains an incurable malignancy with systematic morbidity and a
median survival of 3-5 years. Multiple myeloma is
characterized by aberrant proliferation of terminally
differentiated plasma cells and impairment in apoptosis
capacity. Due to the interactions between myeloma cells
and cells of the bone marrow microenvironment, the osteolytic bone
disease associated with myeloma is inextricably linked with tumor
progression. High incidence of bone metastasis in
multiple myeloma patients is frequently associated with severe bone
pain and pathological bone fracture. Activated
osteoclast levels and suppressed osteoblast levels are thought to
play a role in multiple myeloma associated osteolytic bone
disease.
While a diverse
spectrum of novel agents has shown therapeutic potential for the
treatment of multiple myeloma including bortezomib, lenalidomide
and arsenic trioxide, high relapse rates and drug resistance
continue to plague these therapies. Thus, novel targets
and new therapeutics for the treatment of multiple myeloma are of
critical importance for improved patient outcomes.
It has been
demonstrated that the ZZ domain of the p62/SQSTM1 protein is
responsible for increased multiple myeloma cell growth and
associated osteoclast mediated bone disease. Dr.
Xiang-Qun Xie and colleagues at ID4 Pharma LLC have developed novel
chemical compounds (e.g., OXS-4235) which inhibit osteoclastic bone
destruction in multiple myeloma. Oxis Biotech has
exclusively licensed rights to OXS-4135 and other compounds for the
treatment of multiple myeloma and associated osteolytic bone
disease.
Triple-Negative
Breast Cancer Drug Development Program OXS-2175
OXS-2175 is a small
molecule therapeutic candidate which has shown promise in
early-stage preclinical in
vitro and in vivo
models of triple-negative breast cancer. Oxis Biotech is
investigating OXS-2175 formulated as an infusible therapy, and as
part of an ADC infusible therapy for the treatment of
triple-negative breast cancer.
Therapeutic
Antibody-Drug Conjugates Drug Development Program
Antibody-drug
conjugates (ADCs) are a new class of highly potent
biopharmaceutical drugs designed as a targeted therapy for the
treatment of cancer. By combining the unique targeting
capabilities of monoclonal antibodies with the cancer-killing
ability of cytotoxic drugs, antibody-drug conjugates allow
sensitive discrimination between healthy and diseased
tissue.
Markets
Triple-Negative Breast Cancer
(TNBC)
According to the
American Cancer Society there were approximately 231,840 new cases
of invasive breast cancer last year in the USA and 40,290 deaths
from breast cancer during the same period. Women
represent 99% of all breast cancer patients. Breast
cancer is treated by various combinations of surgery, radiation
therapy, chemotherapy, and hormone therapy. TNBC is a
type of breast cancer characterized by breast cancer cells that do
not express estrogen receptors, progesterone receptors, or large
amounts of HER2/neu protein. Approximately 10% - 20%
percent of invasive breast cancers are diagnosed as triple-negative
breast cancers. TNBC is more likely to affect younger
people, African Americans or Hispanics, and those with a BRCA1 gene
mutation.2 TNBC
is insensitive to many of the most effective therapies available
for the treatment of breast cancer including the HER2-directed
therapy Herceptin® (trastuzumab), and endocrine therapies such
as tamoxifen or the aromatase inhibitors. The relapse
and survival rates of TNBC patients are shorter than for patients
with other types of breast cancer.
Multiple Myeloma
Multiple myeloma is
a type of cancer that forms in white blood cells, and affects about
26,850 people annually in the USA causing about 11,240 deaths per
year. Multiple myeloma causes cancer cells to
accumulate in the bone marrow, where they crowd out healthy blood
cells. Multiple myeloma is also characterized by
destructive lytic bone lesions (rounded, punched-out areas of
bone), diffuse osteoporosis, bone pain, and the production of
abnormal proteins which accumulate in the urine. Anemia
is also present in most multiple myeloma patients at the time of
diagnosis and during follow-up. Anemia in multiple
myeloma is multifactorial, and is secondary to bone marrow
replacement by malignant plasma cells, chronic inflammation,
relative erythropoietin deficiency, and vitamin
deficiency. Plasma cell leukemia, a condition in which
plasma cells comprise greater than 20% of peripheral leukocytes, is
typically a terminal stage of multiple myeloma and is associated
with short survival.
Manufacturing
We do not currently
own or operate manufacturing facilities for the production of
clinical or commercial quantities of any of our product candidates.
We rely on a small number of third-party manufacturers to produce
our compounds, and expect to continue to do so to meet the
preclinical and clinical requirements of our potential product
candidates as well as for all of our commercial needs. We do not
have long-term agreements with any of these third parties. We
require in our manufacturing and processing agreements that all
third-party contract manufacturers and processors produce active
pharmaceutical ingredients, or API, and finished products in
accordance with the FDA's current Good Manufacturing Practices, or
cGMP, and all other applicable laws and regulations. We maintain
confidentiality agreements with potential and existing
manufacturers in order to protect our proprietary rights related to
our drug candidates.
Patents
and Trademarks
ID4 Pharma, LLC
License Agreement. Pursuant
to a patent license agreement with ID4 Pharma LLC, dated January 2,
2015 (the “ID4 License Agreement”), we received an
exclusive, worldwide license to certain intellectual property,
including intellectual property related to treating a p62-mediated disease (e.g.,
multiple myeloma). The terms of this license require us to
pay ID4 Pharma royalties equal to three percent (3%) of net sales
of products and twenty-five percent royalty of net sublicensing
revenues. The license will expire upon expiration of the
last patent contained in the licensed patent rights, unless
terminated earlier. We may terminate the licensing agreement with
ID4 Pharma by providing ID4 Pharma with a 30 day written
notice.
Oxis shall pay the
following cash amounts to ID4 upon the attainment of the following
milestones:
(i)
filing of an
investigational new drug application with a competent regulatory
authority anywhere in the world -- $50,000;
(ii) Initiation
of Phase I Human Clinical Trial -- $50,000;
(iii) Initiation
of Phase II Human Clinical Trial
-- $100,000;
(iv) Initiation
of pivotal Phase III Human Clinical Trial -- $250,000;
and
(v) Receipt
of the first marketing approval -- $250,000
The following is a
list of the pending patent applications that we licensed from ID4
Pharma under our License Agreement:
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Pat./Pub.
No.
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Title
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Country
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Status
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U.S. Patent
Application USSN 14/237,494
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P62-zz chemical
inhibitor
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US
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Pending
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China Patent
Application
CN201280048718
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P62-zz chemical
inhibitor
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China
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Pending
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MultiCell Immunotherapeutics, Inc. (MCIT)
License Agreement. Oxis licensed exclusive rights to three
antibody-drug conjugates
(ADCs) that MCIT will prepare for further evaluation by Oxis
as prospective therapeutics for the treatment of triple-negative
breast cancer, and multiple myeloma and associated osteolytic bone
disease. Under the terms of
the agreement, MCIT will develop three ADC product candidates which
contain Oxis’ lead drug candidates OXS-2175 and
OXS-4235. Oxis paid MCIT a license fee of $500,000 and
will reimburse MCIT up to $1.125 million for its development costs
to make the three ADCs exclusively licensed to
Oxis. Assuming all clinical development milestones are
achieved and manufacturing rights to the three ADCs purchased, Oxis
will pay MCIT an additional sum of $22.75 million and pay a royalty
of 3% of net yearly worldwide sales upon marketing approval of the
ADCs.
MCIT’s ADC
platform technology is based on unique multivalent, cleavable
linkers that allow drugs tethered to the antibody to be released
intracellularly or extracellularly upon binding of the antibody to
the target cell. Additionally, the MCIT’s ADC
technology platform allows multiple drugs to be attached per
targeting antibody, and to release the drugs in their original form
without modification of the drug.
Daniel A. Vallera,
Ph.D. License Agreement. Oxis executed an exclusive worldwide
license agreement with Daniel A. Vallera, Ph.D. and his associate
(jointly "Dr. Vallera"), to further develop and commercialize
DT2219ARL (OXS-1550), a novel therapy for the treatment of various
human cancers. Under the terms of the agreement, OXIS receives
exclusive rights to conduct research and to develop, make, use,
sell, and import DT2219ARL worldwide for the treatment of any
disease, state or condition in humans. OXIS shall own all permits,
licenses, authorizations, registrations and regulatory approvals
required or granted by any governmental authority anywhere in the
world that is responsible for the regulation of products such as
DT2219ARL, including without limitation the Food and Drug
Administration in the United States and the European Agency for the
Evaluation of Medicinal Products in the European Union. Under the
agreement, Dr. Vallera will receive an upfront license fee, royalty
fees, and certain milestone payments.
The following is a
list of the pending patent applications that we licensed from D
under our License Agreement:
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Pat./Pub.
No.
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Title
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Country
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Status
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U.S. Patent
Application USSN 13/256,812
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Methods and
compositions for bi-specific targeting of cd19/cd22
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US
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Pending
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Competition
The biotechnology
and pharmaceutical industries are subject to rapid technological
change. Competition from domestic and foreign biotechnology
companies, large pharmaceutical companies and other institutions is
intense and expected to increase. A number of companies are
pursuing the development of pharmaceuticals in our targeted areas.
According to the Pharmaceutical Manufacturers Research Association,
at the end of 2015 there were 168 drugs in development for the
treatment of breast cancer, and there were 135 drugs in development
for the treatment of lymphomas (blood cell cancers including
multiple myeloma).
Government
Regulation
United States
Our research and
development activities and the future manufacturing and marketing
of any products we develop are subject to significant regulation by
numerous government authorities in the United States and other
countries. In the United States, the Federal Food, Drug and
Cosmetic Act and the Public Health Service Act govern the testing,
manufacture, safety, efficacy, labeling, storage, record keeping,
approval, advertising and promotion, and distribution of our drug
candidates and any products we may develop. In addition, this
regulatory framework is subject to changes that may adversely
affect approval, delay an application or require additional
expenditures.
The steps required
before a pharmaceutical compound may be marketed in the United
States include: preclinical laboratory and animal testing;
submission of an IND to the FDA, which must become effective before
clinical trials may commence; conducting adequate and
well-controlled clinical trials to establish the safety and
efficacy of the drug; submission of a New Drug Application, or NDA,
or Biologics License Application, or BLA, to the FDA; satisfactory
completion of an FDA pre-approval inspection of the manufacturing
facilities to assess compliance with cGMP; and FDA approval of the
NDA or BLA prior to any commercial sale or shipment of the drug. In
addition to obtaining FDA approval for each product, each
drug-manufacturing establishment used must be registered with the
FDA and be operated in conformity with cGMP. Drug product
manufacturing facilities may also be subject to state and local
regulatory requirements.
Preclinical testing
includes laboratory evaluation of product chemistry and animal
studies to assess the safety and efficacy of the product and its
formulation. The results of preclinical testing are submitted to
the FDA as part of an IND, and, unless the FDA objects, the IND
becomes effective 30 days following its receipt by the
FDA.
Clinical trials
involve administration of the study drug to healthy volunteers and
to patients diagnosed with the condition for which the study drug
is being tested under the supervision of qualified clinical
investigators. Clinical trials are conducted in accordance with
protocols that detail the objectives of the study, the parameters
to be used to monitor safety and the efficacy criteria to be
evaluated. Each protocol is submitted to the FDA as part of the
IND. Each clinical trial is conducted under the auspices of an
independent Institutional Review Board, or IRB, in the United
States, or Ethics Committee, or EC, outside the United States, for
each trial site. The IRB or EC considers, among other matters,
ethical factors and the safety of human clinical trial
subjects.
Clinical trials are
typically conducted in three sequential phases, but the phases may
overlap or be repeated. In Phase 1 clinical trials, the drug is
initially introduced into healthy human subjects or patients and is
tested for adverse effects, dosage tolerance, pharmacokinetics, and
clinical pharmacology. Phase 2 clinical trials involve the testing
of a limited patient population in order to characterize the
actions of the drug in targeted indications, in order to determine
drug tolerance and optimal dosage and to identify possible adverse
side effects and safety risks. When a compound appears to be
effective at a specific dosage and have an acceptable safety
profile in Phase 2 clinical trials, Phase 3 clinical trials are
undertaken to further evaluate and confirm clinical efficacy and
safety within an expanded patient population at multiple clinical
trial sites. The FDA reviews the clinical plans and monitors the
results of the trials and may discontinue the trials at any time if
significant safety issues arise. Similarly, an IRB or EC may
suspend or terminate a trial at a study site that is not being
conducted in accordance with the IRB or EC’s requirements or
that has been associated with unexpected serious harm to
subjects.
The results of
preclinical testing and clinical trials are submitted to the FDA
for marketing approval in the form of an NDA or BLA. The submission
of an NDA or BLA also requires the payment of user fees, but a
waiver of the fees may be obtained under specified circumstances.
The testing and approval process is likely to require substantial
time, effort and resources and there can be no assurance that any
approval will be granted on a timely basis, if at all, or that
conditions of any approval, such as warnings, contraindications, or
scope of indications will not materially impact the potential
market acceptance and profitability of the drug product. Data
obtained from clinical trials are not always conclusive, and the
FDA may interpret data differently than we interpret the same data.
The FDA may refer the application to an advisory committee for
review, evaluation and recommendation as to whether the application
should be approved and under what conditions. The FDA is not bound
by the recommendations of an advisory committee, but it generally
follows such recommendations. The approval process is affected by a
number of factors, including the severity of the disease, the
availability of alternative treatments and the risks and benefits
of the product demonstrated in clinical trials.
Additional
preclinical testing or clinical trials may be requested during the
FDA review period and may delay any marketing approval. After FDA
approval for the initial indications, further clinical trials may
be necessary to gain approval for the use of the product for
additional indications. In addition, after approval, certain types
of changes to the approved product, such as manufacturing changes,
are subject to further FDA review and approval. The FDA mandates
that adverse effects be reported to the FDA, and the regulatory
agency may also require post-marketing testing to continue
monitoring for expected and unexpected adverse effects, which can
involve significant expense. Adverse effects observed during the
commercial use of a drug product or which arise in the course of
post-marketing studies can result in the need for labeling
revisions, including additional warnings and contraindications; and
if the findings significantly alter the risk/benefit assessment,
the potential withdrawal of the drug from the market.
Among the
conditions for FDA approval is the requirement that the prospective
manufacturer’s quality control and manufacturing procedures
conform to the FDA’s cGMP requirements. Domestic
manufacturing facilities are subject to biannual FDA inspections
and foreign manufacturing facilities are subject to periodic
inspections by the FDA or foreign regulatory authorities. If the
FDA finds that a company is not operating in compliance with cGMPs,
the continued availability of the product can be interrupted until
compliance is achieved; and if the deficiencies are not corrected
within a reasonable time frame, the drug could be withdrawn from
the market. In addition, the FDA strictly regulates labeling,
advertising and promotion of drugs. Failure to conform to
requirements relating to licensing, manufacturing and promoting
drug products can result in informal or formal sanctions, including
warning letters, injunctions, seizures, civil and criminal
penalties, adverse publicity and withdrawal of
approval.
Foreign
We are also subject
to numerous and varying foreign regulatory requirements governing
the design and conduct of clinical trials and marketing approval
for pharmaceutical products to be marketed outside of the United
States. The approval process varies among countries and regions and
can involve additional testing; and the time required to obtain
approval may differ from that required to obtain FDA
approval.
The steps to obtain
approval to market a pharmaceutical compound in the European Union
include: preclinical laboratory and animal testing; conducting
adequate and well-controlled clinical trials to establish safety
and efficacy; submission of a Marketing Authorization Application,
or MAA; and the issuance of a product marketing license by the
European Commission prior to any commercial sale or shipment of
drug. In addition to obtaining a product marketing license for each
product, each drug manufacturing establishment must be registered
with the European Medicines Agency, or EMA, must operate in
conformity with European good manufacturing practice and must pass
inspections by the European health authorities.
Upon receiving the
MAA, the Committee for Human Medicinal Products, or CHMP, a
division of the EMA, will review the MAA and may respond with a
list of questions or objections. Answers to questions posed by the
CHMP may require additional tests to be conducted. Responses to the
list of questions or objections must be provided to and deemed
sufficient by the CHMP within a defined time frame. Ultimately, a
representative from each of the European Member States will vote
whether to approve the MAA.
Foreign regulatory
approval processes include all of the risks associated with
obtaining FDA approval, and approval by the FDA does not ensure
approval by the health authorities of any other
country.
Employees
As of December 31,
2015, we had two employees, the chief executive officer and chief
financial officer of the company. Many of our activities
are out-sourced to consultants who provide services to us on a
project basis. As business activities require and
capital resources permit, we will hire additional employees to
fulfill our company’s needs.
ITEM
1A. RISK
FACTORS
This company
qualifies as a “smaller reporting company” as defined
in 17 C.F.R. §229.10(f)(1), and is not required to provide
information by this Item.
ITEM
1B. UNRESOLVED
STAFF COMMENTS
Not
applicable.
ITEM
2. PROPERTIES
Our principal
executive office is located at 100 South Ashley Drive, Suite 600,
Tampa, FL 33602. It is leased on an annual basis at the
rate of $1,209 per month. In the event this lease should
be terminated, we believe the Company could locate equally
favorable office space at a comparable price.
ITEM
3. LEGAL
PROCEEDINGS
In March, 2014,
Nexdius PTY LTD, a purported licensee of rights from ESLLC, filed a
declaratory action against the Company in the United States
District Court Central District of California, Case
No: CV14-1770SH. The lawsuit disputed the
Company’s worldwide licensing rights to a vitamin D producing
line of sun care and skin care products under a license from
ESLLC. In May 2014, the Company filed a counterclaim
against Nexdius PTY LTD. The Company also filed a claim
against ESLLC for violating a non-circumvent agreement with the
Company in relation to the Nexdius action. On October
24, 2014, the Company reached a satisfactory resolution with
Nexdius PTY LTD and Exposure Scientific, LLC. For
consideration of releasing Nexdius and Exposure Scientific from any
further claims, the Company will receive a cash payment and
perpetual royalty against all future product sales.
In May, 2015, Aaion Partners Inc, a
consulting firm, filed a breach of contract action against the
Company in the Superior Court of California County of Los Angeles,
Case No: BC581098. The lawsuit seeks payment
under a consulting agreement. In July, 2015, the Company
filed a cross-claim against Aaion Partners Inc. for breach
of contract and tort claims. In December 2015, we settle
this claim for $150,000 in cash and 11,429 shares of restricted
common stock.
ITEM
4. MINE
SAFETY DISCLOSURES
None.
PART
II
ITEM
5. MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES.
Until May 2009, our
common stock was traded on the OTC Bulletin Board
(“OTCBB”) under the symbol
“OXIS.” From May 20, 2009 until March 11,
2010, our common stock was traded on Pink OTC Markets Inc. trading
platform under the symbol “OXIS.” Since
January 2015, our common stock is quoted on the OTCQB under the
“OXIS” trading symbol.
Trading in our
common stock has fluctuated greatly during the past
year. Accordingly, the prices for our common stock
quoted on the OTCQB or Pink OTC Markets Inc. may not necessarily be
reliable indicators of the value of our common
stock. The following table sets forth the high and low
bid prices for shares of our common stock for the quarters noted,
as reported on the OTCQB and the Pink OTC Markets
Inc. The following price information reflects
inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions.
Our common stock is
also quoted on several European based exchanges including Berlin
(OXI.BE), Frankfurt (OXI.DE), the Euronext (OXI.NX) and Paris,
(OXI.PA). The foregoing trading prices exclude trading
on these foreign stock markets.
Stockholders
As of December 31,
2015, there were 1,330 stockholders of record, which total does not
include stockholders who hold their shares in “street
name.” The transfer agent for our common stock is
ComputerShare, whose address is 350 Indiana Street, Golden, CO
80401.
Dividends
We have not paid
any dividends on our common stock to date and do not anticipate that we will pay
dividends in the foreseeable future. Any payment of cash
dividends on our common stock in the future will be dependent upon
the amount of funds legally available, our earnings, if any, our
financial condition, our anticipated capital requirements and other
factors that the Board of Directors may think are
relevant. However, we currently intend for the
foreseeable future to follow a policy of retaining all of our
earnings, if any, to finance the development and expansion of our
business and, therefore, do not expect to pay any dividends on our
common stock in the foreseeable future.
Equity
Compensation Plan Information
The information
included under the heading “Equity Compensation Plan
Information” in Item 12 of Part III of this report,
“Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters.” is hereby
incorporated by reference into this Item 5 of this
report.
Recent
Issuances of Unregistered Securities
We did not issue
any unregistered securities during the fourth quarter of the fiscal
year covered by this report.
Repurchase
of Shares
We did not
repurchase any shares during the fourth quarter of the fiscal year
covered by this report.
ITEM
6. SELECTED
FINANCIAL DATA
This company
qualifies as a “smaller reporting company” as defined
in 17 C.F.R. §229.10(f)(1), and is not required to provide
information by this Item.
ITEM
7. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
Until the end of
2008, we were engaged in the business of developing and selling
clinical and research assay products and out-licensing certain
therapeutic compounds addressing conditions and diseases associated
with oxidative stress. During 2008, we lost our
majority-owned subsidiary, BioCheck, Inc., which was engaged in the
production of enzyme immunoassay diagnostic kits for clinical
laboratories, and in December 2008 we sold substantially all of the
assets of our research assay product line to Percipio Biosciences,
Inc. Commencing in 2009, our focus shifted from the
clinical and research assay business to developing and marketing
nutraceutical products in the field of oxidative stress reduction,
with a focus on products that include EGT™ as a
component. We conducted limited operations,
and had limited revenues from these products in 2013 and in 2014.
In July 2014, we began pursuing the acquisition of novel therapeutics from various
educational and research institutions.
As shown in the
accompanying consolidated financial statements, the Company has
incurred an accumulated deficit of $145,636,000 through December
31, 2015. On a consolidated basis, the Company had cash
and cash equivalents of $47,000 at December 31, 2015. Because our
lack of funds, we will have to raise additional capital in order to
fund our selling, general and administrative, and research and
development expenses. There are no assurances that we
will be able to raise the funds necessary to maintain our
operations or to implement our business plan. The
consolidated financial statements included in this Annual Report do
not include any adjustments relating to the recoverability and
classification of recorded assets, or the amounts and
classification of liabilities that might be necessary in the event
we cannot continue our operations.
Recent
Developments
License Agreements
Pursuant to a
patent license agreement with the ID4, dated December 31, 2015, we
received a non-exclusive, worldwide license to certain intellectual
property, including intellectual property related to treating a p62-mediated disease (e.g.,
multiple myeloma).
On March 10, 2015,
Oxis licensed exclusive rights to three antibody-drug conjugates (ADCs)
that MCIT will prepare for further evaluation by Oxis as
prospective therapeutics for the treatment of triple-negative
breast cancer, and multiple myeloma and associated osteolytic bone
disease. Under the terms of
the agreement, MCIT will develop three ADC product candidates which
contain Oxis’ lead drug candidates OXS-2175 and
OXS-4235.
Oxis executed an exclusive worldwide
license agreement with Daniel A. Vallera, Ph.D. and his associate
(jointly "Dr. Vallera"), to further develop and commercialize
DT2219ARL (OXS-1550), a novel therapy for the treatment of various
human cancers. Under the terms of the agreement, OXIS receives
exclusive rights to conduct research and to develop, make, use,
sell, and import DT2219ARL worldwide for the treatment of any
disease, state or condition in humans. OXIS shall own all permits,
licenses, authorizations, registrations and regulatory approvals
required or granted by any governmental authority anywhere in the
world that is responsible for the regulation of products such as
DT2219ARL, including without limitation the Food and Drug
Administration in the United States and the European Agency for the
Evaluation of Medicinal Products in the European Union. Under the
agreement, Dr. Vallera will receive an upfront license fee, royalty
fees, and certain milestone payments.
Financing
On July 24, 2014,
the Company entered into a securities purchase agreement with ten
accredited investors to sell 10% convertible debentures, with an
exercise price of $1.75, with an initial principal balance of
$1,250,000 and warrants to acquire up to 714,286 shares of the
Company’s common stock at an exercise price of $2.50 per
share.
On October 15,
2014, the Company entered into a securities purchase agreement with
three accredited investors to sell 10% convertible debentures, with
an exercise price of $2.50, with an initial principal balance of
$1,250,000 and warrants to acquire up to 400,000 shares of the
Company’s common stock at an exercise price of $5.00 per
share.
On February 23, 2015, the Company
entered into a securities purchase agreement with ten accredited
investors to sell 10% convertible debentures, with and an exercise
price of $6.25, with an initial principal balance of $2,350,000 and
warrants to acquire up to 376,000 shares of the Company’s
common stock at an exercise price of $7.50 per
share.
Effective July 2015, the Company
entered into a securities purchase agreement with three accredited
investors to sell 10% convertible debentures, with and an exercise
price of $5.00, with an initial principal balance of $550,000 and
warrants to acquire up to 111,765 shares of the Company’s
common stock at an exercise price of $6.25 per
share.
Effective October 2015, the Company
entered into a securities purchase agreement with three accredited
investors to sell 10% convertible debentures, with and an exercise
price of $2.50, with an initial principal balance of $500,000 and
warrants to acquire up to 200,000 shares of the Company’s
common stock at an exercise price of $2.50 per
share.
Effective November 2015, the Company
entered into a securities purchase agreement with two accredited
investors to sell 10% convertible debentures, with and an exercise
price of $2.50, with an initial principal balance of $100,000 and
warrants to acquire up to 80,000 shares of the Company’s
common stock at an exercise price of $2.50 per
share.
Effective December 2015, the Company
entered into a securities purchase agreement with two accredited
investors to sell 10% convertible debentures, with and an exercise
price of $1.25, with an initial principal balance of $350,000 and
warrants to acquire up to 280,000 shares of the Company’s
common stock at an exercise price of $1.25 per
share.
In December 2015,
the Company agreed to an adjustment as negotiated to enable
inducement of further financing of the Company. Pursuant
to the anti-dilution provisions in all the convertible instruments,
the conversion price of certain convertible instruments is now
$1.25 (with the exception of the conversion price of the October
2006 Debenture which is already priced at the lesser of $1.25 and
60% of the average of the lowest three trading prices occurring at
any time during the 20 trading days preceding
conversion).
Results
of Operations
Revenues
The following table
presents the changes in revenues from fiscal 2014 to fiscal
2015:
|
|
|
|
|
|
Decrease
from 2014
|
|
|
|
|
2015
|
|
|
2014
|
|
|
Amount
|
|
|
Product
revenues
|
|
$
|
-0-
|
|
|
$
|
28,000
|
|
|
$
|
28,000
|
|
We did not actively
market any products in 2015 as we began the development of biotech
products.
Cost of product revenues
The following table
presents the changes in cost of product revenues from fiscal 2014
to fiscal 2015:
|
|
|
|
|
|
Decrease
from 2014
|
|
|
|
|
2015
|
|
|
2014
|
|
|
Amount
|
|
|
Cost of product
revenues
|
|
$
|
-0-
|
|
|
$
|
57,000
|
|
|
$
|
57,000
|
|
We did not actively
market any products in 2015 as we began the development of biotech
products.
Selling, general and administrative expenses
Our selling,
general and administrative expenses increased in fiscal 2015 by
$6,554,000 to $8,954,000 compared to $2,400,000 in fiscal
2014. The increase is primarily the result of an
increase in stock based compensation, professional fees and
consulting, professional and license fees, related to the
development of our biotech products.
Change in value of warrant and derivative liabilities
During the year
ended December 31, 2015, we recorded income as a
result of a decrease in the fair market value of
outstanding warrants and beneficial conversion features of
$4,505,000, compared to an expense
of $15,963,000 during the year ended December 31, 2014. We
recorded income as a result of a decrease
in the fair market value of outstanding debt and equity securities
accounted for as derivative liabilities.
Interest Expense
Interest expense
was $17,039,000 compared to $5,146,000 for the year ended December
31, 2015 and 2014, respectively. The increase of
$11,893,000 is due to additional notes payable and allonge
agreements incurred in 2015.
Liquidity
and Capital Resources
As of December 31,
2015, we had cash and cash equivalents of $47,000. This cash and
cash equivalents is in part the result of the proceeds from
borrowings in 2015. On the same day we had total current
assets of $54,000, and a working capital deficit of
$49,860,000. Based upon the cash position, it is
necessary to raise additional capital by the end of the next
quarter in order to continue to fund current operations. The
Company is pursuing several alternatives to address this situation,
including the raising of additional funding through equity or debt
financings. In order to finance existing operations and pay current
liabilities over the next twelve months, the Company will need to
raise approximately $4-5 million of capital.
Critical
Accounting Policies
We consider the
following accounting policies to be critical given they involve
estimates and judgments made by management and are important for
our investors’ understanding of our operating results and
financial condition.
Basis of
Consolidation
The consolidated
financial statements contained in this report include the accounts
of OXIS International, Inc. and its subsidiaries. All
intercompany balances and transactions have been
eliminated.
Revenue
Recognition
Product Revenue
The Company
manufactures, or has manufactured on a contract basis, fine
chemicals and nutraceutical products, which are its primary
products to be sold to customers. Revenue from the sale of its
products, including shipping fees, will be recognized when title to
the products is transferred to the customer which usually occurs
upon shipment or delivery, depending upon the terms of the sales
order and when collectability is reasonably assured. Revenue from
sales to distributors of its products will be recognized, net of
allowances, upon delivery of product to the distributors. According
to the terms of individual distributor contracts, a distributor may
return product up to a maximum amount and under certain conditions
contained in its contract. Allowances are calculated based upon
historical data, current economic conditions and the underlying
contractual terms.
Long-Lived
Assets
Our long-lived
assets include property, plant and equipment, capitalized costs of
filing patent applications and goodwill and other
assets. We evaluate our long-lived assets for impairment
in accordance with SFAS No. 144, “Accounting for
the Impairment or Disposal of Long-Lived Assets” whenever
events or changes in circumstances indicate that the carrying
amount of such assets may not be recoverable. Estimates
of future cash flows and timing of events for evaluating long-lived
assets for impairment are based upon management’s
judgment. If any of our intangible or long-lived assets
are considered to be impaired, the amount of impairment to be
recognized is the excess of the carrying amount of the assets over
its fair value.
Applicable
long-lived assets are amortized or depreciated over the shorter of
their estimated useful lives, the estimated period that the assets
will generate revenue, or the statutory or contractual term in the
case of patents. Estimates of useful lives and periods
of expected revenue generation are reviewed periodically for
appropriateness and are based upon management’s
judgment. Goodwill and other assets are not
amortized.
Certain Expenses and
Liabilities
On an ongoing
basis, management evaluates its estimates related to certain
expenses and accrued liabilities. We base our estimates
on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying values
of liabilities that are not readily apparent from other
sources. Actual results may differ materially from these
estimates under different assumptions or conditions.
Derivative Financial
Instruments
During the normal
course of business, from time to time, we issue warrants as part of
a debt or equity financing. We do not enter into any derivative
contracts for speculative purposes. We recognize all derivatives as
assets or liabilities measured at fair value with changes in fair
value of derivatives reflected as current period income or loss
unless the derivatives qualify for hedge accounting and are
accounted for as such. During fiscal 2014 and 2013, we issued
warrants to purchase 9,874,833 and 1,325,155 shares of common
stock, respectively, in connection with equity transactions. In
accordance with ASC Topic 815-40, “Derivatives and Hedging
— Contracts in Entity’s Own Stock” (“ASC
815-40”), the value of these warrants is required to be
recorded as a liability, as the holders have an option to put the
warrants back to us in certain events, as defined.
Inflation
We believe that
inflation has not had a material adverse impact on our business or
operating results during the periods presented.
Off-balance
Sheet Arrangements
We have no
off-balance sheet arrangements as of December 31,
2015.
ITEM
7A QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
This company
qualifies as a smaller reporting company, as defined in 17
C.F.R. §229.10(f) (1) and is not required to
provide information by this Item.
ITEM
8.
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
Please see the
financial statements beginning on page F-1 located elsewhere in
this annual report and incorporated herein by
reference.
ITEM
9.
CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None.
ITEM
9A. CONTROLS
AND PROCEDURES
Evaluation
of Disclosure Controls and Procedures
Our principal
executive officer and principal financial officer evaluated the
effectiveness of our “disclosure controls and
procedures” (as such term is defined in Rules 13a-15(e) and
15d-15(e) of the United States Securities Exchange Act of 1934, as
amended), as of December 31, 2015. Based on that
evaluation we have concluded that our disclosure controls and
procedures were not effective as of December 31, 2015.
Management’s
Report on Internal Control over Financial Reporting
Management is
responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over
financial reporting is defined in Rule 13a-15(f) or 15d-15(f)
promulgated under the Securities Exchange Act of 1934, as amended,
as a process designed by, or under the supervision of, a
company’s principal executive and principal financial
officers and effected by a company’s board of directors,
management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles and
includes those policies and procedures that:
·
Pertain to the
maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of the assets of
the company;
·
Provide reasonable
assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures
of the company are being made only in accordance with
authorizations of management and directors of the company;
and
·
Provide reasonable
assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the company’s assets that
could have a material effect on the financial
statements.
All internal
control systems, no matter how well designed, have inherent
limitations and can provide only reasonable, not absolute,
assurance that the objectives of the control system are
met. Further, the design of a control system must
reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any,
within our company have been detected. Therefore, even
those systems determined to be effective can provide only
reasonable assurance with respect to financial statement
preparation and presentation.
As of December 31,
2015, management of the company conducted an assessment of the
effectiveness of the company’s internal control over
financial reporting. In making this assessment, it used
the criteria set forth by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO) in Internal
Control—Integrated Framework. In the course of the
assessment, material weaknesses were identified in the
company’s internal control over financial
reporting.
A material weakness
is a deficiency, or a combination of deficiencies, in internal
control over financial reporting, such that there is a reasonable
possibility that a material misstatement of our annual or interim
financial statements will not be prevented or detected on a timely
basis.
Management
determined that fundamental elements of an effective control
environment were missing or inadequate as of December 31,
2015. The most significant issues identified were: 1)
lack of segregation of duties due to very small staff and
significant reliance on outside consultants, and 2) risks of
executive override also due to lack of established policies, and
small employee staff. Based on the material weaknesses
identified above, management has concluded that internal control
over financial reporting was not effective as of December 31,
2015.
As the
company’s operations increase, the company intends to hire
additional employees in its accounting department. This
annual report does not include an attestation report of our
independent registered public accounting firm regarding internal
control over financial reporting.
Changes
in Internal Control over Financial Reporting
Other than as
described above, no changes in our internal control over financial
reporting were made during our most recent fiscal quarter that has
materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.
ITEM
9B. OTHER
INFORMATION
None.
PART
III
ITEM
10. DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table
sets forth the name, age and position held by each of our executive
officers and directors as of March 15, 2015. Directors
are elected for a period of one year and thereafter serve until the
next annual meeting at which their successors are duly elected by
the stockholders.
|
Name
|
|
Age
|
|
Position
|
|
Anthony J.
Cataldo
|
|
|
64
|
|
Chief Executive
Officer and Chairman of the Board
|
|
Steven
Weldon
|
|
|
40
|
|
Chief Financial
Officer and Director
|
Anthony J. Cataldo was appointed to the
Board of Directors on July 31, 2014 and he was appointed Chief
Executive Officer on November 19, 2014. Most recently,
From February 2011 to June 2013 Mr. Cataldo served as Chairman and
CEO/ Founder of Genesis Biopharma, Inc. (Now known as Lion
Biotechnologies, Inc. Trading symbol, LBIO) Mr. Cataldo created
Lion/Genesis with the inclusion of assets purchase from the
National Cancer Institute (NIH) for their
novel treatment of Stage Four Cancer treatment for
melanoma.
Mr. Cataldo also
served as Chairman of the board of directors of Brand Partners
Group, Inc., a provider of integrated products and services
dedicated to providing financial services and traditional retail
clients with turn-key environmental solutions, from October 2003
through August 2006.
Mr. Cataldo also
served as non-executive co-chairman of the board of MultiCell
Technologies, Inc., a supplier of functional, non-tumorigenic
immortalized human hepatocytes from February 2005 through July
2006. Mr. Cataldo has also served as Executive Chairman
of Calypte Biomedical Corporation, a publicly traded biotechnology
company, involved in the development and sale of urine based HIV-1
screening tests from May 2001 through November 2004. Mr.
Cataldo served as the Chief Executive Officer and Chairman of the
Board of Directors of Miracle Entertainment, Inc., a Canadian film
production company, from May 1999 through May 2002 where he was the
executive producer or producer of several motion pictures. From
August 1995 to December 1998, Mr. Cataldo served as President and
Chairman of the Board of Senetek, PLC, a publicly traded
biotechnology company involved in age-related
therapies.
Steven Weldon was appointed to our Board
of Directors in September, 2014 and as our President and Chief
Financial Officer in November, 2014. Mr. Weldon has over
15 years of financial and accounting experience. The
majority of his career has been focused on tax planning,
preparation, and CFO consulting. Mr. Weldon’s
financial background includes experience in managerial, private
accounting and planning. He has served on the board of
several publicly traded companies as both, Chief Executive Officer
and Chief Financial Officer. For several years, he
taught accounting and tax courses to undergrad students at Florida
Southern College. He received his Bachelor of Science
degree and his Masters in Business Administration from Florida
Southern College. Mr. Weldon was appointed as
Chief Financial Officer and as a member of the board of directors
of Growblox Sciences, Inc., a Delaware corporation in September
2005 and served in both positions until November
2014. Mr. Weldon also served as chief executive officer
of Growblox Sciences from December 29, 2009, through May 2, 2011,
and from April 18, 2012, through March 13, 2014.
Committees
of the Board of Directors
Due to the small
number of directors, at the present time the duties of an Audit
Committee, Nominating and Governance Committee, and Compensation
Committee are performed by the board of directors as a
whole. At such time as we have more directors on our
board of directors, these committees will be
reconstituted.
Code
of Ethics
A copy of the
company’s code of ethics is attached to this annual report as
exhibit 99.
Section
16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of
the Securities Exchange Act of 1934 requires our executive officers
and directors, and persons who own more than 10% of a registered
class of the company’s equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange
Commission (“SEC”). Executive officers,
directors and greater than 10% stockholders are required by SEC
regulations to furnish the company with copies of all Section 16(a)
forms they file.
Based solely on its
review of the copies of reporting forms received by the company,
the company believes that all of our executive officers and
directors filed the required reports on a timely basis under
Section 16(a).
ITEM
11. EXECUTIVE
COMPENSATION SUMMARY COMPENSATION TABLE
The following table
set forth certain information concerning the annual and long-term
compensation for services rendered to us in all capacities for the
fiscal years ended December 31, 2015 and 2014 of all persons who
served as our principal executive officers and as our principal
financial officer during the fiscal year ended December 31,
2015. No other executive officers received total annual
compensation during the fiscal year ended December 31, 2015 in
excess of $100,000. The principal executive officer and
the other named officers are collectively referred to as the
“Named Executive Officers.”
|
Name
and Principal Position
|
Year
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
|
|
|
Option Awards(1)
($)
|
|
|
Non-Equity
Incentive Plan Compensation Earnings
($)
|
|
|
Nonqualified
Deferred Compensation Earnings
($)
|
|
|
All
Other Compensation
($)
|
|
|
Total
|
|
|
Anthony J.
Cataldo,
|
2015
|
|
$
|
216,000
|
|
|
$
|
134,000
|
|
|
$
|
----
|
|
|
$
|
102,535
|
|
|
$
|
–––
|
|
|
$
|
–––
|
|
|
$
|
–––
|
|
|
$
|
452,535
|
|
|
Chairman(2)
|
2014
|
|
$
|
154,000
|
|
|
$
|
–––
|
|
|
$
|
402,291
|
|
|
$
|
139,079
|
|
|
$
|
–––
|
|
|
$
|
–––
|
|
|
$
|
–––
|
|
|
$
|
695,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth
Eaton,
|
2015
|
|
$
|
–––
|
|
|
$
|
–––
|
|
|
$
|
–––
|
|
|
$
|
–––
|
|
|
$
|
–––
|
|
|
$
|
–––
|
|
|
$
|
–––
|
|
|
$
|
–––
|
|
|
Chief Executive
Officer (Principal Executive Officer) (3)
|
2014
|
|
$
|
224,560
|
|
|
$
|
–––
|
|
|
$
|
–––
|
|
|
$
|
–––
|
|
|
$
|
–––
|
|
|
$
|
–––
|
|
|
$
|
–––
|
|
|
$
|
224,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven
Weldon,
|
2015
|
|
$
|
168,000
|
|
|
$
|
–––
|
|
|
$
|
197,845
|
|
|
$
|
–––
|
|
|
$
|
–––
|
|
|
$
|
–––
|
|
|
$
|
–––
|
|
|
$
|
365,845
|
|
|
Chief Financial
Officer (Principal Financial Officer) (4)
|
2014
|
|
$
|
25,500
|
|
|
$
|
–––
|
|
|
$
|
57,945
|
|
|
$
|
–––
|
|
|
$
|
–––
|
|
|
$
|
–––
|
|
|
$
|
–––
|
|
|
$
|
83,445
|
|
(1)
This column
represents option awards computed in accordance with FASB ASC Topic
718, excluding the effect of estimated forfeitures related to
service-based vesting conditions. For additional
information on the valuation assumptions with respect to the option
grants, refer to Note 1 of our financial statements in this Annual
Report. These amounts do not correspond to the actual
value that will be recognized by the named executives from these
awards.
(2)
Mr. Cataldo
served as our Chief Executive Officer from March 2009 to August
2011 and again in November 2014, and was appointed Chairman of the
Board of Directors on July 25, 2014.
(3)
Mr. Eaton was
appointed Chief Executive Officer in November 2013 and resigned in
November 2014.
(4)
Mr. Weldon was
appointed Chief Financial Officer on November 3,
2014.
Employment
Agreements
The Company has
entered into employment agreements with Anthony J. Cataldo and
Steven Weldon. Pursuant to the agreements, Mr. Cataldo and
Mr. Weldon receive annual salaries of $216,000 and $168,000
respectively, as well as bonuses under certain circumstances and as
awarded by the Board of Directors. The term of employment
under Mr. Cataldo’s agreement is for three years with a year
to year renewal option thereafter. The term of employment
under Mr. Weldon’s agreement is for two years with a year to
year renewal option thereafter.
Stock
Option Grants
The following table
sets forth information as of December 31, 2015, concerning
unexercised options, unvested stock and equity incentive plan
awards for the executive officers named in the Summary Compensation
Table.
OUTSTANDING
EQUITY AWARDS AT YEAR ENDED DECEMBER 31, 2015
|
|
|
Option
Awards
|
Stock
Awards
|
|
Name
|
|
Number
of Securities Underlying Unexercised Options
(#)
Exercisable
|
|
|
Number
of Securities Underlying Unexercised Options
(#)
Unexercisable
|
|
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options
(#)
|
|
|
Option
Exercise Price
($)
|
|
Option
Expiration Date
|
Number
of Shares or Units of Stock That Have Not Vested
(#)
|
Market
Value of Shares or Units of Stock That Have Not Vested
($)
|
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other
Rights That Have Not Vested
(#)
|
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares,
Units or Other Rights That Have Not Vested
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anthony
Cataldo
|
|
|
321,833
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
2.50
|
|
07/01/19
|
|
|
|
|
|
Anthony
Cataldo
|
|
|
321,833
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
5.00
|
|
07/01/19
|
|
|
|
|
|
Anthony
Cataldo
|
|
|
321,833
|
|
|
|
321,833
|
|
|
|
-
|
|
|
$
|
7.50
|
|
07/01/19
|
|
|
|
|
Director
Compensation
Beginning in
January 2012, members of the Board of Directors are to receive
$3,000 per quarter either in cash or registered shares, plus an
option to purchase 25,000 shares at the market price at the end of
each quarter. The options will vest equally over a one
year period. There was not compensation paid to
non-employee directors during fiscal 2015.
ITEM
12.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The following table
sets forth certain information regarding beneficial ownership of
our common stock as of March 23, 2016 (a) by each person known by
us to own beneficially 5% or more of any class of our common stock,
(b) by each of our Named Executive Officers, (c) by each of our
directors and (d) by all of our current executive officers and
directors as a group. As of March 23, 2016 there were
21,517,221 shares of our common stock issued and
outstanding. Shares of common stock subject to stock
options and warrants that are currently exercisable or exercisable
within 60 days of March 23, 2016 are deemed to be outstanding for
the purpose of computing the percentage ownership of that person
but are not treated as outstanding for the purpose of computing the
percentage ownership of any other person. Unless
indicated below, the persons and entities named in the table have
sole voting and sole investment power with respect to all shares
beneficially owned, subject to community property laws where
applicable. Except as otherwise indicated, the address
of each stockholder is c/o OXIS International, Inc. at 100 South
Ashley Street, Suite 600, Tampa, FL 33602.
|
Name
and Address of Beneficial Owner
|
|
Number
of Shares of Common Stock Beneficially Owned
|
|
|
Percent
of Shares of Outstanding Common Stock
|
|
|
Security
Ownership of Certain Beneficial Owners:
|
|
|
|
|
|
|
|
Bristol Investment
Fund, Ltd.
|
|
|
2,080,347
|
(1)
|
|
|
9.67
|
%
|
|
Theorem Group, LLC
(2)
|
|
|
2,096,480
|
(2)
|
|
|
9.74
|
%
|
|
Alpha Capital
Anstalt
|
|
|
2,034,830
|
(3)
|
|
|
9.46
|
%
|
|
James W.
Heavener
|
|
|
1,684,100
|
(4)
|
|
|
7.83
|
%
|
|
Adam
Kasower
|
|
|
1,392,857
|
(5)
|
|
|
6.47
|
%
|
|
Red Mango
Enterprises Ltd
|
|
|
1,120,000
|
|
|
|
5.21
|
%
|
|
Security
Ownership of Management:
|
|
|
|
|
|
|
|
|
|
Anthony J.
Cataldo
|
|
|
4,030,731
|
|
|
|
18.73
|
%
|
|
Steven
Weldon
|
|
|
601,610
|
|
|
|
2.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Executive officers
and directors as a group — 2 persons
|
|
|
4,632,341
|
|
|
|
21.53
|
%
|
_______________________________________
(1)
As reported on SC
13G/A filed with the SEC on January 25,
2016. Paul
Kessler, manager of Bristol Capital Advisors, LLC, the investment
advisor to Bristol Investment Fund, Ltd., has voting and investment
control over the securities held by Bristol Investment Fund,
Ltd. Mr. Kessler disclaims beneficial ownership of
these securities.
(2)
As reported on SC
13D/A filed with the SEC on January 26,
2016. Anshuman
Dube, manager of Theorem Group, LLC, has voting and investment
control over the securities. Mr. Dube disclaims
beneficial ownership of these
securities.
(3)
As reported on SC
13G filed with the SEC on January 26, 2016 Konrad
Ackermann, director
of Alpha Capital Anstalt, has voting and investment
control over the securities.
(4)
As reported on SC
13G filed with the SEC on February 9, 2016 James W. Heavener
has voting and investment
control over the securities.
(5)
As reported on SC
13G filed with the SEC on February 17, 2016 Adam Kasower
has voting and investment
control over the securities.
Equity
Compensation Plan Information
The following is a
summary of our equity compensation plans at December 31,
2015:
|
Plan
Category
|
|
Number
of Securities to be Issued Upon Exercise of Outstanding Options,
Warrants and Rights
(a)
|
|
|
Weighted-Average
Exercise Price of Outstanding Options, Warrants and
Rights
(b)
|
|
|
Number
of Securities Remaining Available for Future Issuance Under Equity
Compensation Plans (Excluding Securities Reflected in Column
(a))
(c)
|
|
|
Equity compensation
plans approved by security holders (1)
|
|
|
374,801
|
|
|
$
|
4.78
|
|
|
|
133,445
|
|
|
Equity compensation
plans not approved by security holders
|
|
|
-
|
|
|
|
-
|
|
|
|
–––
|
|
|
Total
|
|
|
374,801
|
|
|
$
|
4.78
|
|
|
|
133,445
|
|
(1)
As of December 31,
2015, we had options issued and outstanding to purchase 967 shares
of common stock under our 2003 Stock Incentive Plan, -0- shares of
our common stock under the 2010 Plan and 373,833 shares of common
stock under our 2014 Stock Incentive Plan.
ITEM
13.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
Director
Independence
None of our two
directors qualify as “independent directors” as defined
by Item 407 of Regulation S-K.
We have elected to
use the definition for “director independence” under
the Nasdaq Stock Market’s listing standards, which defines an
“independent director” as “a person other than an
officer or employee of us or its subsidiaries or any other
individual having a relationship, which in the opinion of our Board
of Directors, would interfere with the exercise of independent
judgment in carrying out the responsibilities of a director.”
The definition further provides that, among others, employment of a
director by us (or any parent or subsidiary of ours) at any time
during the past three years is considered a bar to independence
regardless of the determination of our Board of
Directors.
ITEM
14. PRINCIPAL
ACCOUNTANT FEES AND SERVICES
Seligson &
Giannattasio, LLP was our independent registered public accounting
firm for the fiscal years ending December 31, 2014 and
2015. The Audit Committee appointed Seligson &
Giannattasio, LLP as our independent registered public accounting
firm for the fiscal year ending December 31, 2015. The
following table shows the fees that were paid or accrued by us for
audit and other services provided by Seligson & Giannattasio,
LLP for the 2014 and 2015 fiscal years.
|
|
|
2015
|
|
|
2014
|
|
|
Audit Fees
(1)
|
|
$
|
50,500
|
|
|
$
|
50,500
|
|
|
Audit-Related Fees
(2)
|
|
|
-
|
|
|
|
-
|
|
|
Tax Fees
(3)
|
|
|
-
|
|
|
|
-
|
|
|
All Other
Fees
|
|
|
-
|
|
|
|
-
|
|
|
Total
|
|
$
|
50,500
|
|
|
$
|
50,500
|
|
_____________
(1)
Audit fees
represent fees for professional services provided in connection
with the audit of our annual financial statements and the review of
our financial statements included in our Form 10-Q quarterly
reports and services that are normally provided in connection with
statutory or regulatory filings for the 2015 and 2014 fiscal
years.
(2)
Audit-related fees
represent fees for assurance and related services that are
reasonably related to the performance of the audit or review of our
financial statements and not reported above under “Audit
Fees.”
(3)
Tax fees represent
fees for professional services related to tax compliance, tax
advice and tax planning.
All audit related
services, tax services and other services rendered by Seligson
& Giannattasio, LLP were pre-approved by our Board of Directors
or Audit Committee. The Audit Committee has adopted a
pre-approval policy that provides for the pre-approval of all
services performed for us by Seligson & Giannattasio,
LLP. The policy authorizes the Audit Committee to
delegate to one or more of its members pre-approval authority with
respect to permitted services. Pursuant to this policy,
the Board delegated such authority to the Chairman of the Audit
Committee. All pre-approval decisions must be reported
to the Audit Committee at its next meeting. The Audit
Committee has concluded that the provision of the non-audit
services listed above is compatible with maintaining the
independence Seligson & Giannattasio, LLP.
ITEM
15. EXHIBITS,
FINANCIAL STATEMENT SCHEDULES
The Company’s
financial statements and related notes thereto are listed and
included in this Annual Report beginning on page
F-1. The following documents are furnished as exhibits
to this Annual Report on Form 10-K.
EXHIBIT
INDEX
|
|
|
|
|
Incorporated
by Reference
|
|
ExhibitNumber
|
|
Exhibit
Description
|
|
Form
|
|
Date
|
|
Number
|
|
Filed
Herewith
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restated
Certificate of Incorporation as filed in Delaware September 10,
1996 and as thereafter amended through March 1, 2002
|
|
10-KSB
|
|
04/01/02
|
|
3.A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificate of
Amendment to Amended and Restated Certificate of Incorporation of
Oxis International, Inc.
|
|
10-K
|
|
03/31/11
|
|
3.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificate of
Designation of Preferences, Rights and Limitations of Series H
Convertible Preferred Stock of Oxis International, Inc., dated
February 5, 2010
|
|
8-K
|
|
2/16/10
|
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificate of
Designation of Preferences, Rights and Limitations of Series I
Convertible Preferred Stock of Oxis International, Inc., dated
March 18, 2011.
|
|
10-K
|
|
03/31/11
|
|
3.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bylaws, as restated
effective September 7, 1994 and as amended through April 29,
2003
|
|
10-QSB
|
|
08/13/03
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employment
Agreement of Steven Weldon
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employment
Agreement of Anthony Cataldo
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Code of
Ethics
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidiaries of
OXIS International, Inc.
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certification of
the Principal Executive Officer pursuant to Rule
13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certification of
the Principal Financial Officer pursuant to Rule
13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certification of
the Principal Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certification of
the Principal Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101
|
|
Interactive Data
File
|
|
|
|
|
|
|
|
X
|
SIGNATURES
Pursuant to the
requirements of Section 13 or 15(d) 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.
|
|
GT Biopharma,
Inc.
|
|
|
|
|
|
|
|
Dated: February 28,
2018
|
By:
|
/s/ Shawn
Cross
|
|
|
|
|
Shawn Cross
|
|
|
|
|
Chief Executive
Officer and Chairman of the Board
|
|
Pursuant to the
requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates
indicated.
|
Name
|
|
Position
|
|
Date
|
|
|
|
|
|
|
|
/s/ Shawn
Cross
Shawn
Cross
|
|
Chief Executive
Officer and Chairman of the Board
|
|
February 28,
2018
|
|
/s/ Steven
Weldon
Steven
Weldon
|
|
Chief Financial
Officer (Principal Financial Officer), and
Director
|
|
February 28,
2018
|
|
/s/ Dr. Kathleen
Clarence-Smith
Dr. Kathleen
Clarence-Smith
|
|
Vice Chairwoman and
Director
|
|
February 28,
2018
|
|
/s/Anthony J.
Cataldo
Anthony J.
Cataldo
|
|
Director
|
|
February 28,
2018
|
|
/s/ Geoffrey
Davis
Geoffrey
Davis
|
|
Director
|
|
February 28,
2018
|
OXIS
INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2015 AND 2014
Contents
|
|
Page
|
|
Report of
Independent Registered Public Accounting Firm
|
|
|
Seligson &
Giannattasio, LLP
|
F-1
|
|
Consolidated
Financial Statements
|
|
|
Balance Sheets as
of December 31, 2015 and 2014
|
F-2
|
|
Statements of
Operations For Years Ended December 31, 2015 and 2014
|
F-3
|
|
Statement of
Stockholders’ Equity (Deficit) For Years Ended December 31,
2015 and 2014
|
F-4
|
|
Statements of Cash
Flows For Years Ended December 31, 2015 and 2014
|
F-5
|
|
Notes To
Consolidated Financial Statements
|
F-6
|
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To The Board of
Directors and Stockholders of
Oxis International,
Inc.
We have audited the
accompanying consolidated balance sheets of Oxis International,
Inc. (the "Company") and subsidiaries as of December 31, 2015
and 2014 and the related consolidated statements of
operations, stockholders’ deficit and cash flows
for each of the two years in the period ended December 31,
2015. Oxis International, Inc. and subsidiaries’
management is responsible for the consolidated financial
statements. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our
audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audits to obtain reasonable assurance
about whether the consolidated financial statements are free of
material misstatement. The Company is not required to have, nor
were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, 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
consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of
Oxis International, Inc. and subsidiaries as of December 31, 2015
and 2014 and the consolidated results of their operations and
their consolidated cash flows for each of the two years in the
period ended December 31, 2015 in conformity with accounting
principles generally accepted in the United States of
America.
The accompanying consolidated financial
statements have been prepared assuming the Company will continue as
a going concern. As discussed in Note 1 to the financial
statements, the Company has incurred significant recurring losses.
The realization of a major portion of its assets is dependent upon
its ability to meet its future financing needs and the success of
its future operations. These factors raise substantial doubt about
the Company’s ability to continue as a going concern. The
consolidated financial statements do not include any adjustments
that might result from this uncertainty.
/s/ Seligson &
Giannattasio, LLP
Seligson &
Giannattasio, LLP
White Plains, New
York
March 30,
2016, except for Note
7
as
to which the date is February 28, 2018
OXIS
International, Inc. and Subsidiaries
|
December
31, 2015 and 2014
|
Consolidated
Balance Sheets
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
Current
Assets:
|
|
|
|
Cash and cash
equivalents
|
$47,000
|
$855,000
|
|
Prepaid
expenses
|
2,000
|
27,000
|
|
Total Current
Assets
|
49,000
|
882,000
|
|
Fixed assets,
net
|
5,000
|
6,000
|
|
Total Other
Assets
|
5,000
|
6,000
|
|
TOTAL
ASSETS
|
$54,000
|
$888,000
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|
|
|
Current
Liabilities:
|
|
|
|
Accounts
payable
|
$893,000
|
$412,000
|
|
Accrued
interest
|
2,391,000
|
2,025,000
|
|
Accrued
expenses
|
4,326,000
|
3,085,000
|
|
Line of
credit
|
31,000
|
28,000
|
|
Warrant
liability
|
33,266,000
|
21,581,000
|
|
Settlement note
payable
|
691,000
|
691,000
|
|
Demand notes
payable, net of discount of $-0- and $-0-
|
452,000
|
252,000
|
|
Convertible
debentures, net of discount of $900,000 and $-0-, current
portion
|
6,820,000
|
1,207,000
|
|
Convertible
debentures
|
1,039,000
|
547,000
|
|
Total Current
Liabilities
|
49,909,000
|
29,828,000
|
|
|
|
|
|
Long term
liabilities:
|
|
|
|
Convertible
debentures, net of discount of $2,536,000 and
$2,302,000
|
714,000
|
634,000
|
|
Total long term
liabilities
|
714,000
|
634,000
|
|
Total
liabilities
|
50,623,000
|
30,462,000
|
|
|
|
|
|
Stockholders’
Deficit:
|
|
|
|
Convertible
preferred stock - $0.001 par value; 15,000,000 shares
authorized:
|
|
|
|
Series C - 96,230
and 96,230 shares issued and outstanding at December 31, 2015 and
December 31, 2014, respectively
|
1,000
|
1,000
|
|
Series H –
25,000 and 25,000 shares issued and outstanding at December 31,
2015 and December 31, 2014, respectively
|
—
|
—
|
|
Series I –
1,666,667 shares issued and outstanding at December 31, 2015 and
December 31, 2014, respectively
|
2,000
|
2,000
|
|
Common stock -
$0.001 par value; 2,400,000 shares authorized; and 2,400,000 and
2,366,588 shares issued and outstanding at December 31, 2015 and
December 31, 2014, respectively
|
2,000
|
2,000
|
|
Additional paid-in
capital
|
84,012,000
|
83,546,000
|
|
Accumulated
deficit
|
(134,417,000)
|
(112,956,000)
|
|
Noncontrolling
interest
|
(169,000)
|
(169,000)
|
|
Total
Stockholders’ Deficit
|
(50,569,000)
|
(29,574,000)
|
|
TOTAL LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
$54,000
|
$888,000
|
The accompanying
notes are an integral part of these consolidated financial
statements.
OXIS
International, Inc. and Subsidiaries
|
December
31, 2015 and 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
Product
revenues
|
$-
|
$28,000
|
|
License
revenues
|
27,000
|
33,000
|
|
TOTAL
REVENUE
|
27,000
|
61,000
|
|
Cost of Product
Revenue
|
-
|
57,000
|
|
Gross
profit
|
27,000
|
4,000
|
|
Operating
Expenses:
|
|
|
|
Research and
development
|
1,000,000
|
-
|
|
Selling, general
and administrative
|
7,954,000
|
2,400,000
|
|
Total operating
expenses
|
8,954,000
|
2,400,000
|
|
Loss from
Operations
|
(8,927,000)
|
(2,396,000)
|
|
Other income
(expense)
|
|
|
|
Change in value of
warrant and derivative liabilities
|
4,505,000
|
(15,963,000)
|
|
Interest
expense/income
|
(17,039,000)
|
(5,146,000)
|
|
Total Other Income
(Expense)
|
(12,534,000)
|
(21,109,000)
|
|
Loss before
minority interest and provision for income taxes
|
(21,461,000)
|
(23,505,000)
|
|
Less: Net loss
attributable to the noncontrolling interests
|
0
|
16,000
|
|
Loss before
provision for income taxes
|
(21,461,000)
|
(23,489,000)
|
|
Provision for
income taxes
|
-
|
-
|
|
Net
loss
|
(21,461,000)
|
(23,489,000)
|
|
Loss Per Share
– basic and diluted
|
$ (8.96)
|
$(10.09)
|
|
|
|
|
|
Weighted Average
Shares Outstanding – basic and diluted
|
2,394,540
|
2,327,873
|
The accompanying
notes are an integral part of these consolidated financial
statements.
|
OXIS
INTERNATIONAL, INC. AND SUBSIDIARIES
|
|
Consolidated
Statement of Stockholders’ Deficit
|
|
For
the Years Ended December 31, 2015 and 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
Paid-in
Capital
|
|
|
Balance
at December 31, 2013
|
1,787,897
|
$3,000
|
2,291,936
|
$2,000
|
$83,281,000
|
$(89,467,000)
|
|
Issuance of stock
options
|
|
|
|
|
162,000
|
|
|
Issuance of common
stock for accrued expenses
|
|
|
74,652
|
-
|
103,000
|
|
|
Net
loss
|
|
|
|
|
|
(23,489,000)
|
|
Balance
at December 31, 2014
|
1,787,897
|
$3,000
|
2,366,588
|
$2,000
|
$83,546,000
|
$(112,956,000)
|
|
Issuance of stock
options
|
|
|
|
|
220,000
|
|
|
Issuance of common
stock for accrued expenses
|
|
|
33,412
|
|
246,000
|
|
|
Net loss (as
restated)
|
|
|
|
|
|
(21,461,000)
|
|
Balance
at December 31, 2015 (as
restated)
|
1,787,897
|
$3,000
|
2,400,000
|
$2,000
|
$84,012,000
|
$ (134,417,000)
|
The accompanying
notes are an integral part of these consolidated financial
statements.
OXIS
INTERNATIONAL, INC. AND SUBSIDIARIES
|
Consolidated
Statements of Cash Flows
|
For
the Years Ended December 31, 2015 and 2014
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
Net
loss
|
$ (21,461,000)
|
$(23,489,000)
|
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
|
Depreciation
|
2,000
|
-
|
|
Amortization of
intangible assets
|
-
|
22,000
|
|
Stock compensation
expense for options and warrants issued to employees and
non-employees
|
3,761,000
|
2,630,000
|
|
Note
Allonges
|
3,667,000
|
-
|
|
Amortization of
debt discounts
|
2,494,000
|
2,759,000
|
|
Non-cash interest
expense
|
9,840,000
|
2,764,000
|
|
Change in value of
warrant and derivative liabilities
|
(3,865,000)
|
13,962,000
|
|
Note
settlement
|
-
|
(176,000)
|
|
Changes in
operating assets and liabilities:
|
|
|
|
Inventory
|
-
|
42,000
|
|
Other
assets
|
25,000
|
13,000
|
|
Accounts payable
and accrued liabilities
|
880,000
|
(276,000)
|
|
Net cash used in
operating activities
|
(4,657,000)
|
(1,749,000)
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
Acquisition of
fixed assets
|
(1,000)
|
(6,000)
|
|
Net cash used by
investing activities
|
(1,000)
|
(6,000)
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
Proceeds from notes
payable
|
3,850,000
|
2,589,000
|
|
Repayment of note
payable
|
-
|
(6,000)
|
|
Net cash provided
by financing activities
|
3,850,000
|
2,583,000
|
|
Minority
interest
|
-
|
(16,000)
|
|
NET INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS
|
(808,000)
|
812,000
|
|
CASH AND CASH
EQUIVALENTS - Beginning of period
|
855,000
|
43,000
|
|
CASH AND CASH
EQUIVALENTS - End of period
|
$47,000
|
$855,000
|
The accompanying
notes are an integral part of these consolidated financial
statements.
OXIS
International, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2015
1. The
Company and Summary of Significant Accounting Policies
OXIS International, Inc. (collectively,
“OXIS” or the “Company”) is engaged in discovering, developing
and commercializing novel therapeutics from our proprietary product
platform in a broad range of disease areas. Currently, OXIS develops innovative drugs focused
on the treatment of cancer. OXIS' lead drug candidate,
OXS-2175, is a small molecule therapeutic candidate targeting the
treatment of triple-negative breast cancer.
In in
vitro and in
vivo models of TNBC, OXS-2175 demonstrated
the ability to inhibit metastasis. OXIS' lead drug candidate,
OXS-4235, also a small molecule therapeutic candidate, targets the
treatment of multiple myeloma and associated osteolytic
lesions. In in
vitro and in
vivo models of multiple myeloma, OXS-4235
demonstrated the ability to kill multiple myeloma cells, and
decrease osteolytic lesions in bone. OXIS' lead drug candidate,
OXS-1550, is a bispecific scFv recombinant fusion protein-drug
conjugate composed of the variable regions of the heavy and light
chains of anti-CD19 and anti-CD22 antibodies and a modified form of
diphtheria toxin as its cytotoxic drug payload. OXS-1550 has
demonstrated success in early human clinical trials in patients
with relapsed/refractory B-cell lymphoma or
leukemia.
In 1965, the
corporate predecessor of OXIS, Diagnostic Data, Inc. was
incorporated in the State of California. Diagnostic Data changed
its incorporation to the State of Delaware in 1972; and changed its
name to DDI Pharmaceuticals, Inc. in 1985. In 1994, DDI
Pharmaceuticals merged with International BioClinical, Inc. and
Bioxytech S.A. and changed its name to OXIS International,
Inc.
Going Concern
As shown in the
accompanying consolidated financial statements, the Company has
incurred an accumulated deficit of $134,417,000
through December 31, 2015. On a consolidated basis, the
Company had cash and cash equivalents of $47,000 at December 31,
2015. The Company's plan is to raise additional capital until such
time that the Company generates sufficient revenues to cover its
cash flow needs and/or it achieves profitability. However, the
Company cannot assure that it will accomplish this task and there
are many factors that may prevent the Company from reaching its
goal of profitability.
The current rate of
cash usage raises substantial doubt about the Company’s
ability to continue as a going concern, absent any sources of
significant cash flows. In an effort to mitigate this
near-term concern the Company intends to seek additional equity or
debt financing to obtain sufficient funds to sustain
operations. The Company plans to increase revenues by
introducing new nutraceutical products primarily based on its
ergothioneine assets. However, the Company cannot
provide assurance that it will successfully obtain equity or debt
or other financing, if any, sufficient to finance its goals or that
the Company will generate future product related
revenues. The Company’s financial statements do
not include any adjustments relating to the recoverability and
classification of recorded assets, or the amounts and
classification of liabilities that might be necessary in the event
that the Company cannot continue in existence.
Accounts receivable
The Company carries
its accounts receivable at cost less an allowance for doubtful
accounts. On a periodic basis, the Company evaluates its accounts
receivable and establishes an allowance for doubtful accounts,
based on a history of past write-offs and collections and current
credit conditions.
OXIS
International, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2015
Advertising and promotional fees
Advertising
expenses consist primarily of costs incurred in the design,
development, and printing of Company literature and marketing
materials. The Company expenses all advertising expenditures as
incurred. There were no advertising expenses for the years ended
December 31, 2015 and 2014, respectively.
Basis of Consolidation and Comprehensive Income
The accompanying
consolidated financial statements include the accounts of OXIS
International, Inc. and its subsidiaries. All intercompany balances
and transactions have been eliminated. The Company's financial
statements are prepared using the accrual method of
accounting.
Cash and Cash Equivalents
The Company
considers all highly liquid investments with original maturities of
three months or less to be cash equivalents.
Concentrations of Credit Risk
The Company's cash
and cash equivalents, marketable securities and accounts receivable
are monitored for exposure to concentrations of credit risk. The
Company maintains substantially all of its cash balances in a
limited number of financial institutions. The balances
are each insured by the Federal Deposit Insurance Corporation up to
$250,000. The Company does not have balances in excess
of this limit at December 31, 2015.
Fair Value of Financial Instruments
The carrying
amounts of cash and cash equivalents, restricted cash, accounts
receivable, inventory, accounts payable and accrued expenses
approximate fair value because of the short-term nature of these
instruments. The fair value of debt is based upon current interest
rates for debt instruments with comparable maturities and
characteristics and approximates the carrying amount.
Stock Based Compensation to Employees
The Company
accounts for its stock-based compensation for employees in
accordance with Accounting Standards Codification
(“ASC”) 718. The Company recognizes in the
statement of operations the grant-date fair value of stock options
and other equity-based compensation issued to employees and
non-employees over the related vesting period.
The Company granted
stock options to purchase 52,000 and 321,833 shares of the
Company’s common stock to employees and directors during the
year ended December 31, 2015 and 2014, respectively. The
fair values of employee stock options are estimated for the
calculation of the pro forma adjustments at the date of grant using
the Black-Scholes option-pricing model with the following
weighted-average assumptions during 2015: expected volatility of
90%; average risk-free interest rate of 1.50% initial expected life
of 5 years; no expected dividend yield; and amortized over the
vesting period of typically one to four years. The
Company reported an expense for share-based compensation for its
employees and directors of $221,000 and $162,000 for the year ended
December 31, 2015 and 2014, respectively.
OXIS
International, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2015
Impairment of Long Lived Assets
The Company's
long-lived assets currently consist of capitalized
patents The Company evaluates its long-lived assets for
impairment whenever events or changes in circumstances indicate
that the carrying amount of such assets may not be recoverable. If
any of the Company's long-lived assets are considered to be
impaired, the amount of impairment to be recognized is equal to the
excess of the carrying amount of the assets over the fair value of
the assets.
Income Taxes
The Company
accounts for income taxes using the asset and liability approach,
whereby deferred income tax assets and liabilities are recognized
for the estimated future tax effects, based on current enacted tax
laws, of temporary differences between financial and tax reporting
for current and prior periods. Deferred tax assets are reduced, if
necessary, by a valuation allowance if the corresponding future tax
benefits may not be realized.
Net Income (Loss) per Share
Basic net income
(loss) per share is computed by dividing the net loss for the
period by the weighted average number of common shares outstanding
during the period. Diluted net income (loss) per share is computed
by dividing the net loss for the period by the weighted average
number of common shares outstanding during the period, plus the
potential dilutive effect of common shares issuable upon exercise
or conversion of outstanding stock options and warrants during the
period. The weighted average number of potentially dilutive common
shares excluded from the calculation of net income (loss) per share
totaled in 12,525,721 in 2015 and 3,092,737 in 2014.
Patents
Acquired patents
are capitalized at their acquisition cost or fair value. The legal
costs, patent registration fees and models and drawings required
for filing patent applications are capitalized if they relate to
commercially viable technologies. Commercially viable technologies
are those technologies that are projected to generate future
positive cash flows in the near term. Legal costs associated with
patent applications that are not determined to be commercially
viable are expensed as incurred. All research and development costs
incurred in developing the patentable idea are expensed as
incurred. Legal fees from the costs incurred in successful defense
to the extent of an evident increase in the value of the patents
are capitalized.
Capitalized cost
for pending patents are amortized on a straight-line basis over the
remaining twenty year legal life of each patent after the costs
have been incurred. Once each patent is issued, capitalized costs
are amortized on a straight-line basis over the shorter of the
patent's remaining statutory life, estimated economic life or ten
years.
Fixed Assets
Fixed assets is
stated at cost. Depreciation is computed on a straight-line basis
over the estimated useful lives of the assets, which are 3 to
10 years for machinery and equipment and the shorter of the
lease term or estimated economic life for leasehold
improvements.
Fair Value
The carrying
amounts reported in the balance sheets for receivables and current
liabilities each qualify as financial instruments and are a
reasonable estimate of fair value because of the short period of
time between the origination of such instruments and their expected
realization and their current market rate of interest. The
three levels are defined as follows:
·
Level 1 inputs to
the valuation methodology are quoted prices (unadjusted) for
identical assets or liabilities in active markets. The
Company’s Level 1 assets include cash equivalents, primarily
institutional money market funds, whose carrying value represents
fair value because of their short-term maturities of the
investments held by these funds.
OXIS
International, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2015
·
Level 2 inputs to
the valuation methodology include quoted prices for similar assets
and liabilities in active markets, and inputs that are observable
for the asset or liability, either directly or indirectly, for
substantially the full term of the financial instrument. The
Company’s Level 2 liabilities consist of liabilities arising
from the issuance of convertible securities and in accordance with
ASC 815-40: a warrant liability for detachable warrants, as well as
an accrued derivative liability for the beneficial conversion
feature. These liabilities are remeasured each reporting period.
Fair value is determined using the Black-Scholes valuation model
based on observable market inputs, such as share price data and a
discount rate consistent with that of a government-issued security
of a similar maturity.
·
Level 3 inputs to
the valuation methodology are unobservable and significant to the
fair value measurement.
The following table
represents the Company’s assets and liabilities by level
measured at fair value on a recurring basis at December 31,
2015.
|
Description
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
|
|
|
|
|
(As
restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,266,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and Development
Research and
development costs are expensed as incurred and reported as research
and development expense. Research and development costs totaling
$1,000,000 and $-0- for the years ended December 31, 2015 and 2014,
respectively.
Revenue Recognition
Product Revenue
The Company
manufactures, or has manufactured on a contract basis, fine
chemicals and nutraceutical products, which are its primary
products to be sold to customers. Revenue from the sale of its
products, including shipping fees, will be recognized when title to
the products is transferred to the customer which usually occurs
upon shipment or delivery, depending upon the terms of the sales
order and when collectability is reasonably assured. Revenue from
sales to distributors of its products will be recognized, net of
allowances, upon delivery of product to the distributors. According
to the terms of individual distributor contracts, a distributor may
return product up to a maximum amount and under certain conditions
contained in its contract. Allowances are calculated based upon
historical data, current economic conditions and the underlying
contractual terms.
License Revenue
License
arrangements may consist of non-refundable upfront license fees,
exclusive licensed rights to patented or patent pending technology,
and various performance or sales milestones and future product
royalty payments. Some of these arrangements are multiple element
arrangements.
Non-refundable,
up-front fees that are not contingent on any future performance by
us, and require no consequential continuing involvement on our
part, are recognized as revenue when the license term commences and
the licensed data, technology and/or compound is
delivered. We defer recognition of non-refundable
upfront fees if we have continuing performance obligations without
which the technology, right, product or service conveyed in
conjunction with the non-refundable fee has no utility to the
licensee that is separate and independent of our performance under
the other elements of the arrangement. In addition, if we have
continuing involvement through research and development services
that are required because our know-how and expertise related to the
technology is proprietary to us, or can only be performed by us,
then such up-front fees are deferred and recognized over the period
of continuing involvement.
OXIS
International, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2015
Payments related to
substantive, performance-based milestones in a research and
development arrangement are recognized as revenue upon the
achievement of the milestones as specified in the underlying
agreements when they represent the culmination of the earnings
process.
Use of Estimates
The financial
statements and notes are representations of the Company's
management, which is responsible for their integrity and
objectivity. These accounting policies conform to accounting
principles generally accepted in the United States of America, and
have been consistently applied in the preparation of the financial
statements. The preparation of financial statements requires
management to make estimates and assumptions that affect the
reported amounts of assets, liabilities revenues and expenses and
disclosures of contingent assets and liabilities at the date of the
financial statements. Actual results could differ from those
estimates.
2. Patents
|
|
|
December
30,
2015
|
|
|
December
31,
2014
|
|
|
Capitalized patent
costs
|
|
$
|
642,000
|
|
|
$
|
642,000
|
|
|
Accumulated
amortization
|
|
|
(642,000
|
)
|
|
|
(642,000
|
)
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Periodically, the
Company reviews its patent portfolio and has determined that
certain patent applications no longer possessed commercial
viability or were abandoned since they were inconsistent with the
Company's business development strategy.
3. Debt
Convertible debentures
On October 25,
2006, the Company entered into a securities purchase agreement
(“2006 Purchase Agreement”) with four accredited
investors (the “2006 Purchasers”). In conjunction with
the signing of the 2006 Purchase Agreement, the Company issued
secured convertible debentures (“2006 Debentures”) and
Series A, B, C, D, and E common stock warrants (“2006
Warrants”) to the 2006 Purchasers, and the parties also
entered into a security agreement (the “2006 Security
Agreement”) pursuant to which the Company agreed to grant the
2006 Purchasers, pari passu, a security interest in substantially
all of the Company’s assets.
Pursuant to the
terms of the 2006 Purchase Agreement, the Company issued the 2006
Debentures in an aggregate principal amount of $1,694,250 to the
2006 Purchasers. The 2006 Debentures are subject to an original
issue discount of 20.318% resulting in proceeds to the Company of
$1,350,000 from the transaction. The 2006 Debentures were due on
October 25, 2008. The 2006 Debentures are convertible, at the
option of the 2006 Purchasers, at any time prior to payment in
full, into shares of common stock of the Company. As a result of
the full ratchet anti-dilution provision the current conversion
price is $2.50 per share (the “2006 Conversion Price”).
Beginning on the first of the month beginning February 1, 2007, the
Company was required to amortize the 2006 Debentures in equal
installments on a monthly basis resulting in a complete repayment
by the maturity date (the “Monthly Redemption
Amounts”). The Monthly Redemption Amounts could have been
paid in cash or in shares, subject to certain restrictions. If the
Company chose to make any Monthly Redemption Amount payment in
shares of common stock, the price per share would have been the
lesser of the Conversion Price then in effect and 85% of the
weighted average price for the 10-trading days prior to the due
date of the Monthly Redemption Amount. The Company did not make any
of the required monthly redemption payments.
OXIS
International, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2015
Pursuant to the
provisions of the 2006 Debentures, such non-payment was an event of
default and penalty interest has accrued on the unpaid redemption
balance at an interest rate equal to the lower of 18% per annum and
the maximum rate permitted by applicable law. In addition, each of
the 2006 Purchasers has the right to accelerate the cash repayment
of at least 130% of the outstanding principal amount of the 2006
Debenture (plus accrued but unpaid liquidated damages and interest)
and to sell substantially all of the Company’s assets
pursuant to the provisions of the 2006 Security Agreement to
satisfy any such unpaid balance. On June 6, 2008, the Company
received notification from Bristol Investment Fund, Ltd
(“Bristol”), that the collateral held under the 2006
Security Agreement would be sold to the highest qualified bidder on
Thursday, June 19, 2008. On June 19, 2008, the Company received a
Notice of Disposition of Collateral from Bristol in which Bristol
notified the Company that Bristol, acting as the agent for itself
and the three other 2006 Purchasers, purchased certain assets held
as collateral under the 2006 Security Agreement. Bristol purchased
111,025 shares of common stock of BioCheck, Inc., the
Company’s majority owned subsidiary, on a credit bid of
$50,000, and Bristol also purchased 1,000 shares of the capital
stock of OXIS Therapeutics, Inc., a wholly owned subsidiary of
OXIS, for a credit bid of $10,000. In December 2005, OXIS purchased
the 111,025 shares of common stock of BioCheck, Inc. for
$3,060,000. After crediting the aggregate amount of $60,000 to the
aggregate amount due under the 2006 Debentures, plus fees and
charges due through June 19, 2008, Bristol notified the Company
that the Company remains obligated to the 2006 Purchasers in a
deficiency in an aggregate amount of $2,688,000 as of June 19,
2008. As a result of the disposition of the collateral, the Company
recorded a net loss aggregating $2,978,000.
Under the 2006
Purchase Agreement, the 2006 Purchasers also have a right of first
refusal to participate in up to 100% of any future financing
undertaken by the Company until the 2006 Debentures are no longer
outstanding. In addition, the Company is also prohibited from
effecting any subsequent financing involving a variable rate
transaction until such time as no 2006 Purchaser holds any of the
2006 Debentures. Furthermore, so long as any 2006 Purchaser holds
any of the securities issued under the 2006 Purchase Agreement, if
the Company issues or sells any common stock or instruments
convertible into common stock which a 2006 Purchaser reasonably
believes is on terms more favorable to such investors than the
terms pursuant to the 2006 Debentures or 2006 Warrants, the Company
is obligated to permit such 2006 Purchaser the benefits of such
better terms.
Of the 2006
Warrants issued by the Company to the 2006 Purchasers, only the
Series A Warrants remain outstanding. The Series A Warrants, which
now expire in July 2019, permit the holders to purchase 9,681
shares of common stock at an original exercise price of $87.50 per
share. Such exercise price is adjustable pursuant to a full ratchet
anti-dilution provision and upon the occurrence of a stock split or
a related event.
During 2009,
Bristol converted $177,900 of the principal amount of 2006
Debentures for 71,160 shares of the Company’s common stock.
During 2010, Bristol converted an additional $401,000 of the
principal amount of 2006 Debentures for 160,400 shares of the
Company’s common stock. During 2011, an additional $605,000
of the principal amount of 2006 Debentures was converted into
242,000 shares of the Company’s common stock. During 2012, an
additional $369,625 of the principal amount of 2006 Debentures was
converted into 350,619 shares of the Company’s common
stock.
OXIS
International, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2015
The 2006 Debentures
do not meet the definition of a “conventional convertible
debt instrument” since they are not convertible into a fixed
number of shares. The Monthly Redemption Amounts can be paid with
common stock at a conversion price that is a percentage of the
market price; therefore the number of shares that could be required
to be delivered upon “net-share settlement” is
essentially indeterminate. Therefore, the 2006 Debentures are
considered “non-conventional,” which means that the
conversion feature must be bifurcated from the debt and shown as a
separate derivative liability. This beneficial conversion liability
has been calculated to be $690,000 on October 25, 2006. In
addition, since the 2006 Debentures are convertible into an
indeterminate number of shares of common stock, it is assumed that
the Company could never have enough authorized and unissued shares
to settle the conversion of the 2006 Warrants issues in this
transaction into common stock. Therefore, the 2006 Warrants have a
fair value of $2,334,000 at October 25, 2006. The value of the 2006
Warrant was calculated using the Black-Scholes model using the
following assumptions: Discount rate of 4.5%, volatility of 158%
and expected term of 1 to 6 years. The fair value of the beneficial
conversion feature and the 2006 Warrant liability will be adjusted
to fair value on each balance sheet date with the change being
shown as a component of net loss. The fair value of the beneficial
conversion feature and the 2006 Warrants at the inception of the
2006 Debentures were $690,000 and $2,334,000, respectively. The
first $1,350,000 of these discounts was amortized over the term of
the 2006 Debenture and the excess of $1,674,000 was shown as
financing costs in statement of operations.
The Company and
Bristol entered into a Forbearance Agreement on December 3, 2015,
pursuant to which Bristol agreed to refrain and forbear from
exercising certain rights and remedies with respect the 2006
Debentures for three months. In exchange for the
Forbearance Agreement, the Company issued an allonge in the amount
of $250,000 increasing the principal amount if the 2006
Debentures.
On October 1, 2009,
the Company entered into a financing arrangement with several
accredited investors (the “2009 Investors”), pursuant
to which it sold various securities in consideration of a maximum
aggregate purchase price of $2,000,000 (the “2009
Financing”). In connection with the 2009 Financing, the
Company issued the following securities to the 2009
Investors:
·
0% Convertible
Debentures in the principal amount of $2,000,000 due 24 months from
the date of issuance (the “ 2009 Debentures”),
convertible into shares of the Company’s common stock at a
per share conversion price equal to $12.50 per
share;
·
Series A warrant to
purchase such number of shares of the Company’s common stock
equal to 50% of the principal amount invested by each 2009 Investor
(the “2009 Class A Warrants” ) resulting in the
issuance of Class A Warrants to purchase 80,000 shares of common
stock of the Company.
·
Series B warrant to
purchase such number of shares of the Company’s common stock
equal to 50% of the principal amount invested by each 2009 Investor
(the “2009 Class B Warrants”) resulting in the issuance
of Class B Warrants to purchase 80,000 shares of common stock of
the Company.
The Class A
Warrants and Class B Warrants (collectively, the “ 2009
Warrants”) are exercisable for up to five years from the date
of issue at a per share exercise price equal to $15.625 and $18.75
for the Class A Warrants and the Class B Warrants, respectively, on
a cash or cashless basis. The 2009 Debentures and the 2009 Warrants
are collectively referred to herein as the “2009
Securities”.
In connection with
the sale of the 2009 Securities by the Company, the Company and
Bristol entered a Standstill and Forbearance Agreement, pursuant to
which Bristol agreed to refrain and forbear from exercising certain
rights and remedies with respect to (i) the 2006 Debentures and
(ii) certain demand notes (the “Bridge Notes”) issued
by the Company on October 8, 2008, March 19, 2009, April 7, 2009,
April 28, 2009, May 21, 2009 and June 25, 2009 and discussed under
the caption “Demand Notes” below. In connection with
the sale of the 2009 Securities by the Company, the Company and
Bristol have also entered into a waiver agreement (the
“Waiver Agreement”) pursuant to which Bristol waived
certain rights with respect to the 2006 Debentures and Bridge
Notes.
OXIS
International, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2015
The conversion
price of the 2009 Debentures and the exercise price of the 2009
Warrants are subject to full ratchet anti-dilution adjustment in
the event that the Company thereafter issues common stock or common
stock equivalents at a price per share less than the conversion
price or the exercise price, respectively, and to other normal and
customary anti-dilution adjustment upon certain other events. So
long as the 2009 Debentures are outstanding, if the Company effects
a subsequent financing, the October 2009 Investors may elect, in
their sole discretion, to exchange all or some of the October 2009
Debentures (but not the 2009 Warrants) for any securities or units
issued in a subsequent financing on a $1.00 for $1.00 basis or to
have any particular provisions of the subsequent financing legal
documents apply to the documents utilized for the October 2009
Financing.
The Company also
agreed that if it determines to prepare and file with the
Commission a registration statement relating to an offering for its
own account or the account of others, then it shall include the
shares of common stock underlying the 2009 Securities on such
registration statement. The 2009 Investors have contractually
agreed to restrict their ability to convert the 2009 Debentures and
exercise the 2009 Warrants and receive shares of our common stock
such that the number of shares of the Company common stock held by
a 2009 Investor and its affiliates after such conversion or
exercise does not exceed 4.9% of the Company’s then issued
and outstanding shares of common stock.
During 2010, 2009
Investors converted $1,335,000 of the principal amount of 2009
Debentures for 106,800 shares of the Company’s common stock.
During 2011, 2009 Investors converted $610,000 of the principal
amount of 2009 Debentures for 48,800 shares of the Company’s
common stock. Accordingly, at December 31, 2015, $55,000 in
aggregate principal amount of 2009 Debentures remained
outstanding.
The Company entered
into a Forbearance Agreement on December 3, 2015, pursuant to which
the remaining 2009 Debenture holder agreed to refrain and forbear
from exercising certain rights and remedies with respect the 2009
Debentures for three months. In exchange for the
Forbearance Agreement, the Company issued an allonge in the amount
of $250,000 increasing the principal amount of the 2009
Debentures.
On June 1, 2011,
the Company entered into a financing arrangement with several
accredited investors (the “June 2011 Investors”),
pursuant to which it sold various securities in consideration of a
maximum aggregate purchase price of $500,000 (the “June 2011
Financing”). In connection with the June 2011 Financing, the
Company issued the following securities to the June 2011
Investors:
·
12% Convertible
Debentures in the principal amount of $500,000 due April 15, 2012,
convertible into shares of the Company’s common stock at a
per share conversion price equal to $25.00 per share;
and
·
Warrants to
purchase 20,000 of shares of the Company’s common stock. The
warrants are exercisable, on a cash or cashless basis, for up to
two years from the date of issue at a per share exercise price
equal to $37.50. During 2015, the exercise price was adjusted to
$1.25 and the exercise date was extended to June
2019.
In November, 2011,
the Company entered into a financing arrangement with several
accredited investors (the “November 2011 Investors”),
pursuant to which it sold various securities in consideration of a
maximum aggregate purchase price of $275,000 (the “November
2011 Financing”). In connection with the November 2011
Financing, the Company issued the following securities to the
November 2011 Investors:
·
8% Convertible
Debentures in the principal amount of $275,000 due in two years,
convertible into shares of the Company’s common stock at a
per share conversion price equal to $12.50 per share;
and
·
Warrants to
purchase 22,000 of shares of the Company’s common stock. The
Class A Warrants and Class B Warrants (collectively, the
“Warrants”) are exercisable for up to five years from
the date of issue at a per share exercise price equal to $15.625
and $18.75 for the Class A Warrants and the Class B Warrants,
respectively, on a cash or cashless basis.
OXIS
International, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2015
In March, 2012, the
Company entered into a financing arrangement with several
accredited investors pursuant to which it sold various securities
in consideration of a maximum aggregate purchase price of $617,500
(the “March 2012 Financing”). In connection with the
March 2012 Financing, the Company issued the following securities
to the investors:
·
8% Convertible
Debentures in the principal amount of $617,500 due in two years,
convertible into shares of the Company’s common stock at a
per share conversion price equal to $12.50 per share;
and
·
Warrants to
purchase 49,400 of shares of the Company’s common stock. The
Class A Warrants and Class B Warrants (collectively, the “
March 2012 Warrants”) are exercisable for up to five years
from the date of issue at a per share exercise price equal $15.625
and $18.75 for the Class A Warrants and the Class B Warrants,
respectively, on a cash or cashless basis.
In April 2012, the
Company agreed to an adjustment as negotiated to enable inducement
of further financing of the Company. Pursuant to the
anti-dilution provisions in the convertible instruments, the
conversion price of certain
convertible
instruments is now $2.50 (with the exception of the conversion
price of the October 2006 Debenture which is already priced at the
lesser of $2.50 and 60% of the average of the lowest three trading
prices occurring at any time during the 20 trading days preceding
conversion).
In May, 2012, the
Company entered into a financing arrangement with several
accredited investors pursuant to which it sold various securities
in consideration of a maximum aggregate purchase price of $275,000
(the “May 2012 Financing”). In connection with the May
2012 Financing, the Company issued the following securities to the
investors:
·
8% Convertible
Debentures in the principal amount of $275,000 due May 2014,
convertible into shares of the Company’s common stock at a
per share conversion price equal to $12.50 per share;
and
·
Warrants to
purchase 22,000 of shares of the Company’s common stock. The
Class A Warrants and Class B Warrants (collectively, the “
May 2012 Warrants”) are exercisable for up to five
years from the date of issue at a per share exercise price equal to
$15.625 and $18.75 for the Class A Warrants and the Class B
Warrants, respectively, on a cash or cashless
basis.
On August 8, 2012,
a Settlement Agreement and Mutual General Release ("Agreement") was
made by and between OXIS and Bristol Investment Fund, Ltd., in
order to settle certain claims regarding certain convertible
debentures held by Bristol.
Pursuant to the
Agreement, OXIS shall pay Bristol (half of which payment would
redound to Theorem Capital LLC (“Theorem”)) a total of
$1,119,778 as payment in full for the losses suffered and all costs
incurred by Bristol in connection with the Transaction. Payment of
such $1,119,778 shall be made as follows: OXIS shall issue
restricted common stock to each of Bristol and Merit, in an amount
such that each Bristol and Theorem shall hold no more than 9.99% of
the outstanding shares of OXIS (including any shares that each may
hold as of the date of issuance). The shares so issued represent
$417,475.65 of the $1,119,778 payment (111,327 shares at $3.75 per
share, of which 36,675 will be retained by Bristol and 74,652 will
be issued to Theorem). The remaining balance of the payment shall
be made in the form of two convertible promissory notes in the
respective amounts of $422,357.75 for Bristol and $279,944.60 for
Theorem (collectively, the “Notes”) with a maturity of
December 1, 2017 having an 8% annual interest rate, with interest
only accruing until January 1, 2013, and then level payments of
$3,750 each beginning January 1, 2013 until paid in full on
December 1, 2017. In the event a default in the monthly payments on
the Notes has occurred and is continuing each holder of the Notes
shall be permitted to convert the unpaid principal and interest of
the Notes into shares of OXIS at $2.50 cents per
share. In the absence of such continuing default no
conversion of the Notes will be permitted. OXIS will have the right
to repay the Notes in full at any time without
penalty.
Effective April,
2013 the Company entered into a securities purchase agreement with
one accredited investor to sell 10% convertible debentures with an
initial principal balance of $75,000.
OXIS
International, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2015
In October and
November, 2013, the Company entered into a securities purchase
agreement with four accredited investors to sell 10% convertible
debentures with an initial principal balance of $172,000 and
warrants to acquire up to 98,286 shares of the Company’s
common stock at an exercise price of $2.50 per share.
In December, 2013,
the Company entered into a convertible demand promissory note with
an initial principal balance of $189,662 convertible at $1.75 per
share and warrants to acquire up to 108,378 shares of the
Company’s common stock at an exercise price of $2.50 per
share.
In January, 2014,
the Company entered into a securities purchase agreement with one
accredited investor to sell 10% convertible debentures with an
initial principal balance of $50,000 and warrants to acquire up to
28,571 shares of the Company’s common stock at an exercise
price of $2.50 per share.
In April, 2014, the
Company entered into a securities purchase agreement with three
accredited investors to sell 10% convertible debentures with an
initial principal balance of $49,000 and warrants to acquire up to
22,286 shares of the Company’s common stock at an exercise
price of $2.50 per share.
In July 2014, the
Company agreed to an adjustment as negotiated to enable inducement
of further financing of the Company. Pursuant to the
anti-dilution provisions in the convertible instruments, the
conversion price of certain
convertible
instruments is now $1.75 (with the exception of the conversion
price of the October 2006 Debenture which is already priced at the
lesser of $1.75 and 60% of the average of the lowest three trading
prices occurring at any time during the 20 trading days preceding
conversion).
On July 24, 2014,
the Company entered into a securities purchase agreement with ten
accredited investors to sell 10% convertible debentures, with an
exercise price of $1.75, with an initial principal balance of
$1,250,000 and warrants to acquire up to 714,286 shares of the
Company’s common stock at an exercise price of $2.50 per
share.
Also on July 24,
2014, the Company sold to Kenneth Eaton, the Company’s Chief
Executive Officer, a $175,000 debenture, with an exercise price of
$1.75, as payment in full for all accrued and unpaid salary and
fees owed to Mr. Eaton.
On October 15,
2014, the Company entered into a securities purchase agreement with
three accredited investors to sell 10% convertible debentures, with
an exercise price of $2.50, with an initial principal balance of
$1,250,000 and warrants to acquire up to 400,000 shares of the
Company’s common stock at an exercise price of $5.00 per
share.
On February 23, 2015, the Company
entered into a securities purchase agreement with ten accredited
investors to sell 10% convertible debentures, with an exercise
price of $6.25, with an initial principal balance of $2,350,000 and
warrants to acquire up to 376,000 shares of the Company’s
common stock at an exercise price of $7.50 per
share.
Effective July 2015, the Company
entered into a securities purchase agreement with three accredited
investors to sell 10% convertible debentures, with an exercise
price of $5.00, with an initial principal balance of $550,000 and
warrants to acquire up to 111,765 shares of the Company’s
common stock at an exercise price of $6.25 per
share.
Effective October 2015, the Company
entered into a securities purchase agreement with three accredited
investors to sell 10% convertible debentures, with an exercise
price of $2.50, with an initial principal balance of $500,000 and
warrants to acquire up to 200,000 shares of the Company’s
common stock at an exercise price of $2.50 per
share.
Effective November 2015, the Company
entered into a securities purchase agreement with two accredited
investors to sell 10% convertible debentures, with an exercise
price of $2.50, with an initial principal balance of $100,000 and
warrants to acquire up to 80,000 shares of the Company’s
common stock at an exercise price of $2.50 per
share.
Effective December 2015, the Company
entered into a securities purchase agreement with two accredited
investors to sell 10% convertible debentures, with and an exercise
price of $1.25, with an initial principal balance of $350,000 and
warrants to acquire up to 280,000 shares of the Company’s
common stock at an exercise price of $1.25 per
share.
OXIS
International, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2015
In December 2015,
the Company agreed to an adjustment as negotiated to enable
inducement of further financing of the Company. Pursuant
to the anti-dilution provisions in all the convertible instruments,
the conversion price of certain convertible instruments is now
$1.25 (with the exception of the conversion price of the October
2006 Debenture which is already priced at the lesser of $1.25 and
60% of the average of the lowest three trading prices occurring at
any time during the 20 trading days preceding
conversion).
Allonges
On August 18, 2015,
the Company entered into a settlement agreement with three
noteholders. In accordance with the July 24, 2014
Security Purchase Agreements, The Company was required to establish
and maintain a reserve of shares of its common stock from its duly
authorized shares of Common Stock for issuance in an amount equal
to 150% of a required minimum by December 21, 2014 which did not
occur. As compensation for the default, the Company
issued allonges to the noteholders for a total of $812,500,
increasing the principal amount of the convertible
notes.
On October 7, 2015,
the Company entered into a settlement agreement with two
noteholders. In accordance with the July 24, 2014
Security Purchase Agreements, The Company was required to establish
and maintain a reserve of shares of its common stock from its duly
authorized shares of Common Stock for issuance in an amount equal
to 150% of a required minimum by December 21, 2014 which did not
occur. As compensation for the default, the Company
issued allonges to the noteholders for a total of $537,500,
increasing the principal amount of the convertible
notes.
On November 5,
2015, the Company entered into a Second Settlement Agreement with
three noteholders. On August 18, 2015 the Company entered into a
Settlement Agreement that required the Company to increase its
authorized shares to not less 8,000,000 shares and reserve 150% of
the number of shares of its Common Stock no later than the earlier
of (1) two days after Oxis obtaining all corporate and regulatory
approvals necessary to increase it authorized shares; or (2)
September 30, 2015 which did not occur. As compensation
for the default, the Company issued additional allonges to the
noteholders for a total of $837,500, increasing the principal
amount of the convertible notes.
On Dec 5, 2015, the
Company entered into a Second Settlement Agreement with three
noteholders. On October 7, 2015 the Company entered into a
Settlement Agreement that required the Company to increase its
authorized shares to not less than 8,000,000 shares and reserve
150% of the number of shares of its Common Stock no later than the
earlier of (1) two days after Oxis obtaining all corporate and
regulatory approvals necessary to increase it authorized shares; or
(2) September 30, 2015 which did not occur. As
compensation for the default, the Company issued additional
allonges to the noteholders for a total of $537,500, increasing the
principal amount of the convertible notes.
Demand Notes
On May 15, 2009,
the Company entered into a convertible demand promissory note with
Bristol Capital, LLC for certain consulting services totaling
$100,000. The note does not provide for any interest and is due
upon demand by the holder. The note has been converted into common
stock of the Company.
On June 22, 2009,
the Company entered into a convertible demand promissory note with
Theorem Group (“Theorem”) pursuant to which Theorem
purchased an aggregate principal amount of $31,375 of convertible
demand promissory notes for an aggregate purchase price of $25,000
(the “ 2009 Theorem Note”). The 2009 Theorem Note was
subsequently sold as described below.
OXIS
International, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2015
Simultaneously with
the issuance of the 2009 Theorem Note, the Company issued Theorem a
seven-year warrant (the “2009 Theorem Warrant”) to
purchase 12,550 shares of common stock of the Company at a price
equal to the lower of (i) $2.50 and (ii) 60% of the average of the
three (3) lowest trading prices occurring at any time during the 20
trading days preceding the issue date of the Theorem Note (the
“Exercise Price”). The 2009 Theorem Warrant may be
exercised on a cashless basis if the shares of common stock
underlying the 2009 Theorem Warrant are not then registered
pursuant to an effective registration statement. In the event the
2009 Theorem Warrant is exercised on a cashless basis, we will not
receive any proceeds.
On December 1,
2009, Theorem sold the 2009 Theorem Note to Net Capital Partners,
Inc. (“Net Capital”). In December 2009, Net Capital
converted $24,000 of the principal for 9,600 shares of the
Company’s common stock. In January 2010, Net Capital
converted the remaining $7,375 of principal amount for an
additional 2,950 shares of the Company’s common
stock.
On February 7, 2011
the Company entered into a convertible demand promissory note with
Bristol pursuant to which Bristol purchased an aggregate principal
amount of $31,375 of convertible demand promissory notes for an
aggregate purchase price of $25,000 (the “February 2011
Bristol Note”). The February 2011 Bristol Note is convertible
into shares of common stock of the Company at a price equal to
$12.50 per share.
Simultaneously with
the issuance of the February 2011 Bristol Note, the Company issued
Bristol a Series A Warrant (the “February 2011 Bristol Series
A Warrants”) to purchase 1,255 shares of the Company’s
common stock at a per share exercise price of $15.625, and a Series
B Warrant (the “February 2011 Bristol Series B
Warrants” and, together with the February 2011 Bristol Series
A Warrants, the “February 2011 Bristol Warrants”) to
purchase 1,255 shares of the Company’s common stock at a per
share exercise price of $18.75. The February 2011 Warrants are
exercisable for up to seven years from the date of issue. The
February 2011 Warrants may be exercised on a cashless basis if the
shares of common stock underlying the February 2011 Warrants are
not then registered pursuant to an effective registration
statement. In the event the February 2011 Bristol Warrants are
exercised on a cashless basis, the Company will not receive any
proceeds.
On February 7, 2011
the Company entered into a convertible demand promissory note with
Net Capital pursuant to which Net Capital purchased an aggregate
principal amount of $31,375 of convertible demand promissory notes
for an aggregate purchase price of $25,000 (the “February
2011 Net Capital Note”). The February 2011 Net Capital Note
is convertible into shares of common stock of the Company at a
price equal to $12.50 per share. As of September, 2012, the
February 2011 Net Capital Note had been converted into shares of
the Company’s common stock.
Simultaneously with
the issuance of the February 2011 Net Capital Note, the Company
issued Net Capital a Series A Warrant (the “February 2011 Net
Capital Series A Warrants”) to purchase 1,255 shares of the
Company’s common stock at a per share exercise price of
$15.625, and a Series B Warrant (the “February 2011 Net
Capital Series B Warrants” and, together with the February
2011 Net Capital Series A Warrants, the “February 2011 Net
Capital Warrants”) to purchase 1,255 shares of the
Company’s common stock at a per share exercise price of
$18.75. The February 2011 Net Capital Warrants are exercisable for
up to seven years from the date of issue. The February 2011 Net
Capital Warrants may be exercised on a cashless basis if the shares
of common stock underlying the February 2011 Net Capital Warrants
are not then registered pursuant to an effective registration
statement. In the event the February 2011 Net Capital Warrants are
exercised on a cashless basis, the Company will not receive any
proceeds.
OXIS
International, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2015
On March 4, 2011 the Company entered
into a convertible demand promissory note with Bristol pursuant to
which Bristol purchased an aggregate principal amount of $31,375 of
convertible demand promissory notes for an aggregate purchase price
of $25,000 (the “March 2011 Bristol Note”). The March
2011 Bristol Note is convertible at the option of the holder at any
time into shares of common stock, at a price equal to
$12.50.
Simultaneously with
the issuance of the March 2011 Bristol Note, the Company issued
Bristol a Series A Warrant (the “March 2011 Bristol Series A
Warrants”) to purchase 1,255 shares of the Company’s
common stock at a per share exercise price of $15.625, and a Series
B Warrant (the “March 2011 Bristol Series B Warrants”
and, together with the March 2011 Bristol Series A Warrants, (the
“March 2011 Bristol Warrants”) to purchase 1,255 shares
of the Company’s common stock at a per share exercise price
of $18.75. The March 2011 Warrants are exercisable for up to seven
years from the date of issue. The March 2011 Warrants may be
exercised on a cashless basis if the shares of common stock
underlying the March 2011 Warrants are not then registered pursuant
to an effective registration statement. In the event the March 2011
Warrants are exercised on a cashless basis, the Company will not
receive any proceeds.
On April 4, 2011
the Company entered into a convertible demand promissory note with
Net Capital pursuant to which Net Capital purchased an aggregate
principal amount of $31,375 of convertible demand promissory notes
for an aggregate purchase price of $25,000 (the “April 2011
Net Capital Note”). The April 2011 Net Capital Note is
convertible into shares of common stock of the Company, at a price
equal to $12.50 per share. As of September, 2012, the
April 2011 Net Capital Note had been converted into shares of the
Company’s common stock.
Simultaneously with
the issuance of the Net Capital Note, the Company issued Net
Capital a Series A Warrant (the “April 2011 Net Capital
Series A Warrants”) to purchase 1,255 shares of common stock
of the Company at a per share exercise price of $15.625, and a
Series B Warrant (the “April 2011 Net Capital Series B
Warrants” and, together with the April 2011 Net Capital
Series A Warrants, the “April 2011 Net Capital
Warrants”) to purchase 1,255 shares of common stock of the
Company at a per share exercise price of $18.75. The April 2011 Net
Capital Warrants are exercisable for up to seven years from the
date of issue. The April 2011 Net Capital Warrants may be exercised
on a cashless basis if the shares of common stock underlying the
April 2011 Net Capital Warrants are not then registered pursuant to
an effective registration statement. In the event the April 2011
Net Capital Warrants are exercised on a cashless basis, we will not
receive any proceeds.
On October 26, 2011
the Company entered into a convertible demand promissory note with
Theorem pursuant to which Theorem purchased an aggregate principal
amount of $200,000 of convertible demand promissory notes for an
aggregate purchase price of $157,217 (the “October 2011
Theorem Note”). The October 2011 Theorem Note is convertible
into shares of common stock of the Company, at a price equal to
$12.50 per share.
Simultaneously with
the issuance of the October 2011 Theorem Note, the Company issued
Theorem a Series A Warrant (the “October 2011 Series A
Warrant”) to purchase 40,000 shares of common stock of the
Company at a per share exercise price of $15.625, and a Series B
Warrant (the “October 2011 Series B Warrants” and,
together with the October 2011 Series A Warrants, the
“October 2011 Warrants”) to purchase 40,000 shares of
common stock of the Company at a per share exercise price of
$18.75. The October 2011 Warrants are exercisable for up to
seven
years from the date of issue. The October 2011 Warrants may be
exercised on a cashless basis if the shares of common stock
underlying the October 2011 Warrants are not then registered
pursuant to an effective registration statement. In the event the
October 2011 Warrants are exercised on a cashless basis, we will
not receive any proceeds.
All of the
foregoing securities were issued in reliance upon an exemption from
the registration requirements pursuant to Section 4(2) of the
Securities Act of 1933, as amended.
OXIS
International, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2015
On December 7,
2012, the Company entered into, and made its initial $315,000
borrowing under, a short-term loan agreement with two lenders
pursuant to which it is permitted to borrow up to an aggregate of
$350,000. The loans made under the loan agreement are evidence by
the Company’s notes and secured
pursuant to a Security Agreement, that is junior to the
Company’s existing security arrangements under the
Company’s October 26, 2006 Debentures but cover
the same assets of the Company.
Interest on the
Notes is at the rate of 18% per annum, payable on the first day of
each month until maturity on May 1, 2013. On April 1, 2013, the
Company was required to pay 25.7143% of the Loan, with the
remaining balance due on May 1, 2013.
The full principal
amount of the Loans may be due upon default under the terms of the
Loan Agreement, the Notes or the Security Agreement.
Under the Loan
Agreement, the Company is required to issue 266.67 shares of its
common stock for each $1,000 of Loans made. Accordingly, on
December 7, 2012, the Company issued 84,000 shares of its common
stock. Assuming the entire amounts of Loans permitted under the
Loan Agreement are borrowed, the Company will issue 93,334 shares
in connection with the Loan Agreement.
In March 2013, the
Company entered into, and made an additional $35,000 borrowing
under, a short-term loan agreement with two lenders the Company
entered into in December 2012, pursuant to which it is permitted to
borrow up to an aggregate of $350,000. The loans made under the
loan agreement are evidence by the
Company’s notes and secured pursuant to
a Security Agreement, that is junior to the Company’s
existing security arrangements under the Company’s October
26, 2006 Debentures but cover the same assets of the
Company.
Financing Agreement
On November 8,
2010, the Company entered into a financing arrangement with Gemini
Pharmaceuticals, Inc., a product development and manufacturing
partner of the Company, pursuant to which Gemini Pharmaceuticals
made a $250,000 strategic equity investment in the Company and
agreed to make a $750,000 purchase order line of credit facility
available to the Company.
The aggregate
amount of outstanding Advances available to the Company under the
Line of Credit may not exceed $750,000.00 at any time. The credit
amounts available to the Company will be tiered, starting at
$250,000 and will ramp up to $500,000 and then $750,000 upon
achievement of determined milestones. The Advances requested under
the Line of Credit may only be used for purchases of products and
inventory from Gemini Pharmaceuticals.
The outstanding
principal of all Advances under the Line of Credit will bear
interest at the rate of interest of prime plus 2 percent per
annum.
In partial
consideration of the commitment made by Gemini Pharmaceuticals
under the Line of Credit, the Company has issued to Gemini,
non-callable 5-year warrants to purchase 1,200 additional shares of
Common Stock at a share price of $30.00. The warrants contain a
cashless exercise provision. The warrants vest as follows: 50%
immediately, 25% when the credit line is increased to $500,000, and
the remaining 25% when the credit line is increased to
$750,000. These warrants expired in October 2015. There
is $31,000 due on this credit line at December 31,
2015.
OXIS
International, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2015
Joint Ventures
In March 2011, the
Company agreed to form a joint venture with engage:BDR, Inc., an
on-line marketing company that offers both premium and
placement-specific display marketing solutions and the ability to
distribute campaigns through its own display platforms and
channels. engage:BDR partners with most of comScore's
top 1000 websites (globally) for the most advanced display
marketing capabilities. Under the joint venture
agreement, engage:BDR will provide a full range of online marketing
services to the joint venture, including developing brand strategy,
the design of all digital media and interfaces, online media
planning and buying, leveraging and integrating social media, and
customer analysis.
In March 2012 the
Company signed a term sheet with engage:BDR that further evidences
its arrangement and that permits both parties to commence
operations under the arrangement. The parties
contemplate that the existing binding arrangement will be evidenced
by a formal limited liability company agreement that the parties
are preparing. The following is a summary of the principal
provisions of our joint venture arrangement (the “Joint
Venture”) with engage:BDR, Inc.:
A. The
Company has agreed to grant the Joint Venture an exclusive license
for the on-line marketing of products containing
EGT™. The first product to be marketed and sold
through the Joint Venture shall be OXIS’ ErgoFlex™
product, which product was successfully test marketed in mail
offering in late 2010 and early 2011. Additional OXIS
products designated by the Company will be offered by the Joint
Venture. If both parties agree, third party products may
also be offered through the Joint Venture. However,
nothing in the Joint Venture is intended to prohibit the Company
from marketing, distributing and selling ErgoFlex™ or any of
its other current or future products by means other than through
online sales.
B. OXIS
and engage:BDR have agreed to make the
following contributions to the Joint
Venture:
(a) OXIS
will contribute up to $240,000 during the first year following the
formation of the Joint Venture. These funds will be
provided if, when and as needed by the Joint
Venture. OXIS’ cash capital contribution will be
used (i) to purchase ErgoFlex and other products from OXIS, at
OXIS’ cost, without any markup, (ii) to purchase website
media inventory from engage:BDR, at engage:BDR’s cost, plus a
15% administrative mark-up, and (iii) to fund the Joint
Venture’s other operating costs. engage:BDR has
agreed to waive the 15% administrative mark-up through December 31,
2012.
(b) In
addition to the cash, OXIS’ contribution to the Joint Venture
includes the exclusive license for the on-line marketing of any
products created by OXIS which utilize its proprietary
EGT™.
(c) engage:BDR
, at its own cost and expense, is designing, developing and
providing to the Joint Venture, on a turnkey basis, all online
product offering systems and technologies, including website
layouts, landing pages, graphic designs, display advertising, rich
media, in-banner and in-stream video development. During
the initial start-up phase of the Joint Venture, engage:BDR will,
at its own cost and expense, also manage all day-to-day online
activities of the Joint Venture. Cash from operations in excess of
the amounts needed for its operations and for reasonable reserves,
shall be distributed by the Joint Venture in the following
order:
(a) First,
to OXIS on a cumulative basis, an amount equal to the cash that
OXIS contributed to the Joint Venture, and
(b) Thereafter,
all excess net operating cash will be distributed 50.1% to OXIS and
49.9% to engage:BDR.
C. The
administrative affairs of the Joint Venture shall be managed by a
committee consisting of one representative of each Joint Venture
member.
OXIS
International, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2015
As additional
consideration for engage:BDR entering into the Joint Venture and
for contributing its services in designing, developing and
implementing the advertising platform, at the time that the Joint
Venture operating agreement is signed, OXIS will grant engage:BDR a
two-year option to purchase OXIS securities. The option
shall entitle engage:BDR to purchase the type of securities sold by
us in a future $6,000,000 or more financing, on the same terms and
conditions, and at the same price, as such securities are sold to
third party investors in such financing. The number of
such securities that engage:BDR may purchase upon the exercise of
the option (determined by assuming all convertible securities are
converted and all exercisable securities are exercised) shall be
equal to 4.99% of the Company’s common stock issued and
outstanding on the date the Joint Venture agreement is
signed. If the Company has not raised $6,000,000 by
December 31, 2012, commencing on that date, engage:BDR will have a
two-year right to purchase OXIS’ common stock at a price
equal to $7.50. OXIS has also agreed to issue to
engage:BDR a warrant to purchase up to 20,000 shares of its common
stock if the Joint Venture, through engage:BDR efforts, attains
certain revenue and profits targets. The warrant will
have an exercise price of $7.50 per share. This joint venture
ceased operations in 2014.
4. Stockholders'
Equity
Common Stock
On May 8, 2015, the Company obtained
stockholder consent for the approval of an amendment to our
certificate of incorporation to effect a reverse stock split of the
Company’s common stock at a ratio to be determined by the
Board prior to the effective time of the amendment (the
“Effective Time”) of not less than one-for-fifty and
not more than one-for-two hundred fifty and the approval of an
amendment to our certificate of incorporation to set the number of
authorized shares of common stock the Company shall authority to
issue following the reverse stock split in an amount to be
determined by the Board prior to the Effective
Time.
The Company filed the amended
certificate of incorporation with the State of Delaware on December
16, 2015. The Company effected a reverse stock split of
the Company’s common stock at a ratio of one-for-two hundred
fifty and set the number of authorized shares of common stock the
Company shall have authority to issue following the reverse stock
split in an amount of 150,000,000. The effect of the
reverse stock split has been reflected retroactively for all
disclosures.
Stock
Issuances
In January 2015, the Company agreed to
issue 39,657 shares of common stock as a price protection to a note
holder that originally converted notes at a price of $2.50 and
continues to hold these shares. These additional shares would have
been issued if the conversion shares price was $1.75. As of
December 31, 2015, 33,142 shares of common stock have been issued
and $247,000 of interest expense was recorded for this
issuance.
Preferred Stock
The 96,230 shares
of Series C preferred stock are convertible into 111 shares of the
Company's common stock at the option of the holders at any time.
The conversion ratio is based on the average closing bid price of
the common stock for the fifteen consecutive trading days ending on
the date immediately preceding the date notice of conversion is
given, but cannot be less than .20 or more than .2889 common shares
for each Series C preferred share. The conversion ratio may be
adjusted under certain circumstances such as stock splits or stock
dividends. The Company has the right to automatically convert the
Series C preferred stock into common stock if the Company lists its
shares of common stock on the Nasdaq National Market and the
average closing bid price of the Company's common stock on the
Nasdaq National Market for 15 consecutive trading days exceeds
$3,000.00. Each share of Series C preferred stock is entitled to
the number of votes equal to .26 divided by the average closing bid
price of the Company's common stock during the fifteen consecutive
trading days immediately prior to the date such shares of Series C
preferred stock were purchased. In the event of liquidation, the
holders of the Series C preferred stock shall participate on an
equal basis with the holders of the common stock (as if the Series
C preferred stock had converted into common stock) in any
distribution of any of the assets or surplus funds of the Company.
The holders of Series C preferred stock are entitled to
noncumulative dividends if and when declared by the Company's board
of directors. No dividends to Series C preferred stockholders were
issued or unpaid through December 31, 2015.
OXIS
International, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2015
On December 4,
2008, the Company entered into and closed an Agreement (the
“Bristol Agreement”) with Bristol Investment Fund, Ltd.
pursuant to which Bristol agreed to cancel the debt payable by the
Company to Bristol in the amount of approximately $20,000 in
consideration of the Company issuing Bristol 25,000 shares of
Series G Convertible Preferred Stock, which such shares carry
a stated value equal to $1.00 per share (the “Series G
Stock”).
The Series G
Stock is convertible, at any time at the option of the holder, into
common shares of the Company based on a conversion price equal to
the lesser of $2.50 or 60% of the average of the three lowest
trading prices occurring
at any time during
the 20 trading days preceding the conversion. The
Series G Stock, as amended, shall have voting rights on
an as converted basis multiplied by 100.
In the event of any
liquidation or winding up of the Company, the holders of
Series G Stock will be entitled to receive, in preference to
holders of common stock, an amount equal to the stated value plus
interest of 15% per year.
The Series G Stock
restricts the ability of the holder to convert the Series G
Stock and receive shares of the Company’s common stock such
that the number of shares of the Company common stock held by
Bristol and its affiliates after such conversion does not exceed
4.9% of the Company’s then issued and outstanding shares of
common stock.
The Series G Stock
was previously referred to in an 8-K filed by the Company on
December 10, 2008 in error as the “Series E Stock”.
Further, the Series G Stock initially incorrectly provided that it
voted on an as converted basis multiplied by 10. This
incorrectly reflected the intent of the Company and the
holder.
On October 13, 2009
the Company was informed by Theorem Group, LLC that it had
purchased all of the outstanding Series G Preferred Stock and
Theorem gave notice to the Company that it intended to exercise its
ability to vote on all shareholder matters utilizing the super
voting privileges provided by the Series G Stock.
Effective February
10, 2010, the Company issued 25,000 shares of its new Series H
Convertible Preferred Stock (the “Series H Preferred”)
to Theorem Group, LLC, a California limited liability company (the
“Stockholder”), in exchange for the 25,000 shares of
Series G Stock then owned by the Stockholder. The
foregoing exchange was effected pursuant to that certain Exchange
Agreement, dated February 10, 2010, between the Company and the
Stockholder (the “Exchange Agreement”).
The Certificate of
Designation of the Series H Preferred is based on, and
substantially similar to the form and substance of the Certificate
of Designation of the Series G Preferred. Some of the
corrections, changes and differences between the Certificate of
Designation of the Series G Preferred and the Certificate of
Designation of the Series H Preferred include the
following:
·
As previously
disclosed, the holder of the Series H Preferred is entitled to vote
with the common stock, and is entitled to a number of votes equal
to (i) the number of shares of common stock it can convert into
(without any restrictions or limitations on such conversion), (ii)
multiplied by 100.
·
The holder of the
Series H Preferred cannot convert such preferred stock into shares
of common stock if the holder and its affiliates after such
conversion would own more than 9.9% of the Company’s
then issued and outstanding shares of common
stock.
·
The Series G
Preferred contained a limitation that the holder of the Series G
Preferred could not convert such preferred shares into more than
19.999% of the issued and outstanding shares of common stock
without the approval of the stockholders if the rules of the
principal market on which the common stock is traded would prohibit
such a conversion. Since the rules of the
Company’s principal market did not require such a limitation,
that provision has been deleted.
On November 8,
2010, Gemini Pharmaceuticals purchased 1,666,667 shares of the
Company’s Series I Preferred Stock, $.001 par value, at a
price of $0.15 per share ($250,000).
OXIS
International, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2015
As the holder of
the Series I Preferred Stock, Gemini Pharmaceuticals will be
entitled to receive, out of funds legally available, dividends in
cash at the annual rate of 8.0% of the Preference Amount ($0.15),
when, as, and if declared by the Board. No dividends or
other distributions shall be made with respect to any shares of
junior stock until dividends in the same amount per share on the
Series I Preferred Stock shall have been declared and paid or set
apart during that fiscal year. Dividends on the Series I Preferred
Stock shall not be cumulative and no right shall accrue to the
Series I Preferred Stock by reason of the fact that the Company may
fail to declare or pay dividends on the Series I Preferred Stock in
the amount of the Dividend Rate per share or in any amount in any
previous fiscal year of the Company, whether or not the earnings of
the Company in that previous fiscal year were sufficient to pay
such dividends in whole or in part.
Each share of
Series I Preferred Stock shall entitle the holder thereof to such
number of votes per share as shall equal the number of shares of
Common Stock (rounded to the nearest whole number) into which such
share of Series I Preferred Stock is then convertible.
Upon any
liquidation of the Company, subject to the rights of any series of
Preferred Stock that may from time to time come into existence,
before any distribution or payment shall be made to the holders of
any Junior Stock, the holders of the shares of Series I Preferred
Stock then outstanding shall be entitled to receive and be paid out
of the assets of the Company legally available for distribution to
its stockholders liquidating distributions in cash or property at
its fair market value as determined by the Board in the amount of
$0.15 per share (as adjusted for any stock dividends, combinations
or splits with respect to such shares).
Shares of Series I
Preferred Stock may, at the option of the holder thereof, be
converted at any time or from time to time into fully paid and
non-assessable shares of Common Stock. The number of
shares of Common Stock which a holder of shares of Series I
Preferred Stock shall be entitled to receive upon conversion of
such shares shall be the product obtained by multiplying the
Conversion Rate by the number of shares of Series I Preferred Stock
being converted. Initially, the Series I Preferred Stock
is convertible into 6,667 shares of common stock.
In the event that
the per-share Market Price of the Common Stock over a period of 20
consecutive trading days is equal to at least 130% of the initial
conversion price (130% of $0.15), all outstanding shares of Series
I Preferred Stock shall be converted automatically into
the number of shares of Common Stock into which such shares of
Series I Preferred Stock are then convertible without any further
action by the holders of such shares and whether or not the
certificates representing such shares of Series I Preferred Stock
are surrendered to the Company or its transfer agent.
Common Stock Warrants
Warrant
transactions for the years ended December 31, 2015 and 2014 are as
follows:
|
|
|
Number
of Warrants
|
|
|
Weighted
Average Exercise Price
|
|
|
Outstanding,
December 31, 2013:
|
|
|
2,364,183
|
|
|
$
|
5.00
|
|
|
Granted
|
|
|
1,325,155
|
|
|
|
3.25
|
|
|
Forfeited
|
|
|
(1,037,240
|
)
|
|
|
2.50
|
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
Outstanding at
December 31, 2014:
|
|
|
2,652,098
|
|
|
$
|
2.50
|
|
|
Granted
|
|
|
9,874,823
|
|
|
|
1.25
|
|
|
Forfeited
|
|
|
(1,200
|
)
|
|
|
30.00
|
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
Outstanding at
December 31, 2015
|
|
|
12,525,721
|
|
|
$
|
1.25
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
warrants:
|
|
|
|
|
|
|
|
|
|
December 31,
2014
|
|
|
2,652,098
|
|
|
$
|
2.50
|
|
|
December 31,
2015
|
|
|
12,525,721
|
|
|
$
|
1.25
|
|
OXIS
International, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2015
Consulting Agreements
On December 29,
2014, the Company issued 120,000 warrants to a consultant for
services rendered. The warrants were valued at $601,000
and were recorded as an expense in the Statement of Operations for
the year ended December 31, 2014.
On October 1, 2015,
the Company issued 120,000 warrants to a consultant for services
rendered. The warrants were valued at $448,000 and were
recorded as an expense in the Statement of Operations for the year
ended December 31, 2015.
Stock Options
The Company
reserved 400,000 shares of its common stock at December 31, 2014
for issuance under the 2014 Stock Incentive Plan (the “2014
Plan”). The 2014 Plan, approval by stockholders in May 2015,
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. At December 31,
2015, 133,445 shares of common stock were available for grant and
options to purchase 266,555 shares of common stock are outstanding
under the 2014 Plan.
The Company has no
shares of its common stock at December 31, 2015 to issue under the
2010 Stock Incentive Plan (the “2010 Plan”). The 2010
Plan, approved by stockholders at the 2011 annual meeting, 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. At December 31,
2015, options to purchase 600 shares of common stock are
outstanding under the 2010 Plan.
The Company has no
shares of its common stock reserved at December 31, 2014 for
issuance under the 2003 Stock Incentive Plan (the “2003
Plan”). The 2003 Plan, approved by stockholders at the 2003
annual meeting, 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.
At December 31, 2015, options to purchase 967 shares of common
stock are outstanding under the 2003 Plan.
In addition, the
Company has reserved 2,000 shares of its common stock for issuance
outside of its stock incentive plans. At December 31, 2015,
options to purchase 2,000 shares of common stock are outstanding
outside of its stock incentive plans.
The following table
summarizes stock option transactions for the years ended December
31, 2015 and 2014:
|
|
|
Number
of Options
|
|
|
Weighted
Average Exercise Price
|
|
|
Outstanding,
December 31, 2013
|
|
|
117,110
|
|
|
$
|
15.00
|
|
|
Granted
|
|
|
321,833
|
|
|
|
5.00
|
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
Expired
|
|
|
(112,903
|
)
|
|
|
22.50
|
|
|
Outstanding,
December 31, 2014
|
|
|
326,040
|
|
|
$
|
15.00
|
|
|
Granted
|
|
|
52,000
|
|
|
|
3.29
|
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
Expired
|
|
|
(3,240
|
)
|
|
|
61.00
|
|
|
Outstanding,
December 31, 2015
|
|
|
374,800
|
|
|
$
|
4.88
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
Options:
|
|
|
|
|
|
|
|
|
|
December 31,
2014
|
|
|
111,485
|
|
|
$
|
15.00
|
|
|
December 31,
2015
|
|
|
270,762
|
|
|
$
|
4.88
|
|
OXIS
International, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2015
The
weighted-average fair value of options granted was $1,829,000 and
$1,609,000 in 2015 and 2014, respectively.
The following table
summarizes information about all outstanding and exercisable stock
options at December 31, 2015:
|
|
|
|
Outstanding
Options
|
|
|
Exercisable
Options
|
|
|
Range
of
Exercise
Prices
|
|
|
Number
of
Options
|
|
|
Weighted-Average
Remaining Contractual Life
|
|
|
Weighted-Average
Exercise
Price
|
|
|
Number
of
Options
|
|
|
Weighted-Average
Exercise
Price
|
|
|
$
|
2.50 to
$7.50
|
|
|
|
373,833
|
|
|
|
3.34
|
|
|
$
|
4.76
|
|
|
|
266,555
|
|
|
$
|
3.66
|
|
|
$
|
7.51 to
$50.00
|
|
|
|
908
|
|
|
|
.85
|
|
|
|
50.00
|
|
|
|
908
|
|
|
|
50.00
|
|
|
$
|
50.01 to
$67.50
|
|
|
|
59
|
|
|
|
.71
|
|
|
|
65.54
|
|
|
|
59
|
|
|
|
62.54
|
|
|
|
|
|
|
|
374,800
|
|
|
|
|
|
|
|
|
|
|
|
267,522
|
|
|
|
|
|
5. Income
Taxes
Deferred Taxes
Deferred taxes
reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes, and
operating losses and tax credit carryforwards. The significant
components of net deferred income tax assets for the Company
are:
|
|
|
December
31,
|
|
|
|
|
2015
|
|
|
2014
|
|
|
Deferred tax
assets:
|
|
|
|
|
|
|
|
Federal net
operating loss carryforward
|
|
$
|
15,400,000
|
|
|
$
|
14,481,000
|
|
|
Other
|
|
|
1,028,000
|
|
|
|
871,000
|
|
|
Patent
amortization
|
|
|
(13,000
|
)
|
|
|
(15,000
|
)
|
|
Deferred tax assets
before valuation
|
|
|
16,415,000
|
|
|
|
15,337,000
|
|
|
Valuation
allowance
|
|
|
(16,415,000
|
)
|
|
|
(15,337,000
|
))
|
|
Net deferred income
tax assets
|
|
$
|
—
|
|
|
$
|
—
|
|
Generally accepted
accounting principles requires that the tax benefit of net
operating losses, temporary differences and credit carryforwards 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 the Company's ability to
generate sufficient taxable income within the carryforward period.
Because of the Company's history of operating losses, management
has provided a valuation allowance equal to its net deferred tax
assets. The valuation allowance increased by $1,078,000 during the
year ended December 31, 2015.
Tax Carryforward
At December 31,
2015, the Company had net operating loss carryforwards of
approximately $35,800,000 to reduce United States federal taxable
income in future years. These carryforwards expire through
2035.
OXIS
International, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2015
The Company is no
longer subject to U.S. and state tax examinations for years ending
before the fiscal year ended December 31, 2011. Management does not
believe there will be any material changes in our unrecognized tax
positions over the next twelve months.
The Company's
policy is to recognize interest and penalties accrued on any
unrecognized tax benefits as a component of income tax expense.
There was no accrued interest or penalties associated with any
unrecognized tax benefits, nor was any interest expense recognized
during the years ended December 31, 2015 and 2014.
6. Subsequent
Events
In January 2016, the Company entered
into a securities purchase agreement with one accredited investor
to sell 10% convertible debentures, with and an exercise price of
$1.25, with an initial principal balance of $100,000 and warrants
to acquire up to 80,000 shares of the Company’s common stock
at an exercise price of $1.25 per share.
Restructuring
Agreements
Effective January
8, 2016, Company entered into agreements to effect the
restructuring (the “Restructuring”) of certain
unregistered debt and equity securities of the Company that will
result in an issuance of up to 28,389,193 shares of common stock of
the Company (the “Common Stock”). In
connection with the Restructuring, the Company entered into a note
conversion agreement (the “Conversion Agreement”), a
warrant exercise agreement (the “Exercise Agreement”)
and a preferred stock exchange agreement (the “Exchange
Agreement” and, collectively with the Conversion Agreement
and the Exercise Agreement, the “Restructuring
Agreements”), pursuant to which the Company and certain of
the Company’s creditors and investors have agreed that (i)
certain outstanding debt of the Company (collectively, the
“Debt”) will be converted into shares of Common Stock;
(ii) certain outstanding warrants to purchase shares of capital
stock of the Company (collectively, the “Warrants”)
will be exercised on a cashless basis for shares of Common
Stock; and (iii) certain outstanding shares of Series H
Convertible Preferred Stock of the Company (the “Series H
Preferred Stock”) and Series I Convertible Preferred Stock of
the Company (the “Series I Preferred Stock” and
together with the Series H Preferred Stock, the “Preferred
Stock”) will be exchanged for shares of Common
Stock. The Conversion Agreement, Exercise Agreement and
Exchange Agreement and the transactions contemplated thereby are
described in further detail below.
Under the
Conversion Agreement, certain creditors of the Company holding an
aggregate of approximately $15,056,000 (including accrued interest
and penalties) of outstanding Debt have agreed to convert all such
outstanding Debt into shares of Common Stock at a conversion price
of $1.25 per share upon successful completion by the Company of a
$6 million financing.
In addition, under
the Exercise Agreement, certain investors together holding warrants
to purchase 12,269,240 shares of capital stock of the Company
exchanged such warrants and received one share of Common Stock in
exchange for each share of capital stock of the Company underlying
the warrants.
Finally, under the
Exchange Agreement, certain investors together holding 25,000
shares of Series H Preferred Stock and 1,666,667 shares of Series I
Preferred Stock have agreed to convert all such shares of Preferred
Stock into an aggregate of 4,075,000 shares of Common Stock upon
successful completion by the Company of a $6 million
financing.
The Restructuring
Agreements terminated the notes, the warrants, and any
anti-dilution protection thereunder. In addition, all
creditor and investor parties to the Restructuring Agreements
provided a waiver of any and all past defaults and breaches under
the Notes, Warrants and Preferred Stock, in consideration of the
shares issued pursuant to the Restructuring
Agreements.
OXIS
International, Inc. and Subsidiaries
Notes
to Consolidated Financial Statements
December
31, 2015
Common Stock
The Company has
issued an aggregate of 12,397,040 shares of common stock to a total
of 29 persons or entities in exchange of the cancellation of
warrants on a cashless basis. The shares issued were
exempt from the registration requirements of Section 5 of the
Securities Act of 1933 (the “Act”) pursuant to Section
4(2) of the Act since the shares were issued to persons or entities
closely associated with the Company and there was no public
offering of the shares.
The Company also
issued an aggregate of 2,283,840 shares of common stock to a
total of 15 persons as payment
for consulting services provided to the Company. The
average valuation of these shares was $2.50 per share. These shares
were also exempt from the registration requirements of
Section 5 of the Act pursuant to Section 4(2) of the Act since the
shares were also issued to persons closely associated with the
Company and there was no public offering of the
shares.
The Company also issued an aggregate of
4,612,341 shares of common stock to two executive officers of the
Company in fulfilment of contractual rights held by the officers
pursuant to their employment agreements. These shares
were also exempt from the registration requirements of Section 5 of
the Act pursuant to Section 4(2) of the Act since the shares were
also issued to persons closely associated with the Company and
there was no public offering of the shares.
7.
Restatement
The Company’s
management determined that the Company needs to make adjustments to
correct errors identified in the previously issued financial
statements related to the
non-cash calculation of warranty liabilities. The error affects
the periods ending December 31,
2015, March 31, 2016, June 30, 2016, September 30, 2016 and
December 31, 2016 financial
statements.
As
a result of the error, the Company will recognize a gain in the
amount of $11,265,000, which will increase the change in warrant
liability and decrease the Warrant Liability by $11,265,000 through
December 31, 2015 and decrease the Change in Warrant Liability by
$11,265,000 through December 31, 2016.
This change had no net effect on cash flows from operations,
investing or financing.
The following table presents the impact of the restatement
adjustment on the Company’s Consolidated Balance Sheets as of
December 31, 2015.
|
Liabilities and Stockholders:
|
|
Effects of
restatement/
reclassification
|
|
|
|
|
|
|
|
Warrant
liability
|
$ 44,531,000
|
$ 33,266,000
|
$ (11,265,000)
|
|
Accumulated
deficit
|
$ (145,682,000)
|
$ (134,417,000)
|
$ 11,265,000
|
The following table presents the impact of the restatement
adjustment on the Company’s Consolidated Statement of
Operations for the year ended December 31,
2015.
|
Liabilities and Stockholders:
|
|
Effects of
restatement/
reclassification
|
|
|
|
|
|
|
|
Change in value of
warrants and derivative liabilities
|
$ (6,760,000)
|
$ 4,505,000
|
$ 11,265,000
|
|
Net
loss
|
$ (32,726,000)
|
$ (21,461,000)
|
$ 11,265,000
|
|
Loss per share
– basic and diluted
|
$ (13.67)
|
$ (8.96)
|
$ 4.71
|
F-27