SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
- -----
Exchange Act of 1934 for the quarterly period ended September 30, 2001.
or
_____ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _______ to ________
Commission File Number O-8092
OXIS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-1620407
- -------------------------------------- ----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6040 N. Cutter Circle, Suite 317, Portland, Oregon 97217
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(503) 283-3911
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO _____
-----
At September 30, 2001, the issuer had outstanding the indicated number of shares
of common stock: 9,660,458
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
--------------------------- ----------------------------
2001 2000 2001 2000
Revenues $ 640,000 $ 1,039,000 $ 2,455,000 $ 2,761,000
Costs and expenses:
Cost of product sales 519,000 690,000 3,031,000 2,375,000
Research and development 93,000 436,000 602,000 1,221,000
Selling, general and administrative 394,000 1,072,000 2,108,000 2,436,000
----------- ----------- ----------- -----------
Total costs and expenses 1,006,000 2,198,000 5,741,000 6,032,000
----------- ----------- ----------- -----------
Operating loss (366,000) (1,159,000) (3,286,000) (3,271,000)
Interest income 6,000 57,000 28,000 144,000
Interest expense (7,000) (17,000) (11,000) (61,000)
----------- ----------- ----------- -----------
Net loss (367,000) (1,119,000) (3,269,000) (3,188,000)
Other comprehensive income (loss) -
foreign currency
translation adjustments 8,000 (20,000) (21,000) (40,000)
----------- ----------- ----------- ------------
Comprehensive loss $ (359,000) $(1,139,000) $(3,290,000) $(3,228,000)
=========== =========== =========== ===========
Net loss per share - basic and diluted $ (.04) $ (.12) $ (.34) $ (.35)
=========== =========== =========== ===========
Weighted average number of
shares used in computation -
basic and diluted 9,660,458 9,370,667 9,629,038 8,987,552
=========== =========== =========== ===========
See condensed notes to consolidated financial statements
2
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
2001 2000
ASSETS
Current assets:
Cash and cash equivalents $ 258,000 $2,059,000
Accounts receivable 158,000 502,000
Inventories 402,000 1,271,000
Prepaid and other 90,000 81,000
---------- ----------
Total current assets 908,000 3,913,000
Furniture and equipment, net 114,000 651,000
Technology for developed products 509,000 681,000
Other assets 357,000 380,000
---------- ----------
Total assets $1,888,000 $5,625,000
========== ==========
See condensed notes to consolidated financial statements
3
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
2001 2000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 160,000 $ 160,000
Accounts payable 622,000 628,000
Customer deposits 37,000 174,000
Accrued payroll, payroll taxes and other 160,000 341,000
Current portion of long-term debt 124,000 99,000
------------ ------------
Total current liabilities 1,103,000 1,402,000
Long-term debt due after one year -- 150,000
Shareholders' equity:
Preferred stock - $.01 par value; 15,000,000 shares authorized:
Series B - 428,389 shares issued and outstanding at September 30, 2001
and December 31, 2000
(liquidation preference of $1,000,000) 4,000 4,000
Series C - 296,230 shares issued and outstanding at September 30, 2001
and December 31, 2000 3,000 3,000
Common stock - $.001 par value; 95,000,000 shares authorized; 9,660,458
shares issued and outstanding at September 30, 2001 (9,560,458 at December
31, 2000) 9,000 9,000
Warrants 1,670,000 2,870,000
Additional paid in capital 57,156,000 55,956,000
Accumulated deficit (57,655,000) (54,386,000)
Accumulated other comprehensive loss -
foreign currency translation adjustment (402,000) (383,000)
------------ ------------
Total shareholders' equity 785,000 4,073,000
------------ ------------
Total liabilities and shareholders' equity $ 1,888,000 $ 5,625,000
============ ============
See condensed notes to consolidated financial statements
4
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
-----------------------------------
2001 2000
Cash flows from operating activities:
Net loss $ (3,269,000) $ (3,188,000)
Adjustments to reconcile net loss to cash
used for operating activities:
Depreciation and amortization 290,000 386,000
Litigation settlement 57,000 --
Write-down of inventory and equipment 1,004,000 --
Changes in assets and liabilities:
Accounts receivable 344,000 333,000
Inventories 353,000 40,000
Other current assets (9,000) (87,000)
Accounts payable (6,000) (566,000)
Customer deposits (137,000) --
Accrued payroll, payroll taxes and other (181,000) (43,000)
------------ ------------
Net cash used for operating activities (1,554,000) (3,125,000)
Cash flows from investing activities:
Purchases of equipment (10,000) (123,000)
Additions to other assets (36,000) (93,000)
Other, net (19,000) 11,000
------------ ------------
Net cash used for investing activities (65,000) (205,000)
Cash flows from financing activities:
Proceeds from issuance of stock, net of related costs -- 5,868,000
Repayment of short-term borrowings (182,000) (75,000)
Repayment of long-term debt -- (34,000)
------------ ------------
Net cash provided by (used for) financing activities (182,000) 5,759,000
Effect of exchange rate changes on cash -- (15,000)
------------ ------------
Net increase (decrease) in cash and cash equivalents (1,801,000) 2,414,000
Cash and cash equivalents - beginning of period 2,059,000 789,000
------------ ------------
Cash and cash equivalents - end of period $ 258,000 $ 3,203,000
============ ============
Non-cash transactions:
Issuance of common stock in exchange
for cancellation of notes and accrued interest $ -- $ 202,000
Cancellation of note payable as a result of litigation settlement 63,000 --
See condensed notes to consolidated financial statements
5
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. FINANCIAL STATEMENTS AND CONDENSED NOTES
The unaudited consolidated financial statements, which have been prepared
in accordance with the instructions to Form 10-Q, do not include all of the
information and notes required by accounting principles generally accepted
in the United States of America for complete financial statements. All
adjustments considered necessary by management for a fair presentation have
been included. Operating results for interim periods are not necessarily
indicative of the results that may be expected for the full year.
An annual report (Form 10-K) has been filed with the Securities and
Exchange Commission ("Commission") for the year ended December 31, 2000.
That report contains, among other information, a description of the
Company's business, audited financial statements, the report of the
independent auditors and management's discussion and analysis of results of
operations and financial condition. Readers of this report are presumed to
be familiar with that annual report.
2. NEW ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and
Other Intangible Assets", which is effective January 1, 2002. SFAS 142
requires, among other things, the discontinuance of goodwill amortization.
In addition, the standard includes provisions for the reclassification of
certain existing recognized intangibles, reclassification of certain
intangibles out of previously reported goodwill and the identification of
reporting units for purposes of assessing potential future impairments of
goodwill. SFAS 142 also requires the Company to complete a transitional
goodwill impairment test within six months from the date of adoption. The
Company is currently assessing but has not yet determined the impact of
SFAS 142 on its financial position and results of operations.
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations," which is effective January 1, 2003. SFAS 143
requires, among other things, the accounting and reporting of legal
obligations associated with the retirement of long-lived assets that result
from the acquisition, construction, development or normal operation of a
long-lived asset. The Company is currently assessing but has not yet
determined the impact of SFAS 143 on its financial position, results of
operations and cash flows.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," which is effective January 1,
2002. SFAS 144 addresses accounting and reporting of all long-lived assets,
except goodwill, that are either held and used or disposed of through sale
or other means. The Company is currently assessing but has not yet
determined the impact of SFAS 144 on its financial position, results of
operations and cash flows.
6
3. NASDAQ DELISTING
On May 17, 2001, the Company's common stock was delisted from the Nasdaq
National Market. However, the Company continues to be publicly traded
over-the-counter and continues to be listed in Europe on Nouveau Marche.
4. INVENTORIES
Inventories are stated at the lower of cost or market. Cost has been
determined by using the first-in, first-out method. Inventories at
September 30, 2001 and December 31, 2000, consisted of the following:
September 30, December 31,
2001 2000
------------ -----------
Raw materials $138,000 $ 682,000
Work in process 151,000 398,000
Finished goods 113,000 191,000
--------- ----------
Total $402,000 $1,271,000
======== ==========
5. CLOSURE OF CERTAIN OPERATIONS
In the second quarter of 2001, the Company's health products segment
decided to cease operating its instrument manufacturing facility and its
wellness services program. All remaining employees of the instruments
manufacturing facility and wellness services program were terminated during
the second quarter of 2001. Accordingly, the inventory and equipment for
manufacturing instruments and for the wellness services program had been
written down to their estimated sales values by approximately $885,000
during the second quarter of 2001. The Company negotiated the sale of
certain of the remaining inventory and equipment relating to these
operations during the third quarter.
6. STOCK OPTIONS AND WARRANTS
The Company has a stock incentive plan under which 2,250,000 shares of the
Company's common stock are reserved for issuance (the "Plan"). The Plan
permits the Company to grant stock options to acquire shares of the
Company's common stock, award stock bonuses of the Company's common stock,
and grant stock appreciation rights. During the nine months ended September
30, 2001, options to purchase 442,750 shares at an exercise price of $.085
to $.6875 per share were issued under the Plan and options to purchase
505,145 shares were forfeited.
During the first nine months of 2001, options to purchase 78,438 shares
were issued outside the Plan at an exercise price of $.085. An option that
was issued outside the plan to acquire 400,000 shares of common stock at an
exercise of $1.56 per share was forfeited in the first
7
nine months of 2001. Warrants to purchase 1,673,598 shares of common stock
at exercise prices ranging from $4.92 to $16.25 per share expired in the
first nine months of 2001.
At September 30, 2001, options issued pursuant to the Plan to acquire
1,740,091 shares of common stock at exercise prices ranging from $.085 to
$17.50 remained outstanding. At September 30, 2001, options issued outside
the Plan to acquire 110,438 shares of common stock at exercise prices of
$.085 to $8.44 and warrants to acquire 3,521,279 shares of common stock at
exercise prices of $3.05 to $9.38 also remained outstanding at September
30, 2001.
7. OPERATING SEGMENTS
The following table presents information about the Company's two operating
segments:
Health Therapeutic
Products Development Total
-------- ----------- -----
Quarter ended September 30, 2001:
Revenues from external
customers $ 640,000 $ -- $ 640,000
Net loss (245,000) (122,000) (367,000)
As of September 30, 2001 -
Total assets 966,000 922,000 1,888,000
Quarter ended September 30, 2000:
Revenues from external
customers $ 1,039,000 $ -- $ 1,039,000
Net loss (443,000) (676,000) (1,119,000)
As of September 30, 2000 -
Total assets 3,074,000 4,033,000 7,107,000
Nine months ended September 30, 2001:
Revenues from external
customers $ 2,455,000 $ -- $ 2,455,000
Net loss (2,514,000) (755,000) (3,269,000)
Nine months ended September 30, 2000:
Revenues from external
customers $ 2,761,000 $ -- $ 2,761,000
Net loss (1,808,000) (1,380,000) (3,188,000)
8. LACK OF CAPITAL
The Company believes that its capital is insufficient for ongoing
operations, with current cash reserves almost completely exhausted.
Although the Company is attempting to secure additional funds through asset
sales and additional investments in or loans to the Company,
8
there can be no assurance that the Company will be able to raise any
additional funds or that such funds will be available on acceptable terms.
Any funds raised through equity financing will likely be significantly
dilutive to current shareholders. The failure by the Company to secure
additional funds within the next several months will materially affect the
Company and its business, and may cause the Company to cease operations or
to seek protection of the courts through reorganization, bankruptcy or
insolvency proceedings. Consequently, shareholders could incur losses of
their entire investment in the Company.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
CERTAIN STATEMENTS SET FORTH BELOW MAY CONSTITUTE "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995. THE FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN
RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE THE ACTUAL RESULTS,
PERFORMANCE OR ACHIEVEMENTS TO DIFFER FROM THOSE EXPRESSED OR IMPLIED BY
THE FORWARD-LOOKING STATEMENTS. WITH RESPECT TO THE COMPANY, THE FOLLOWING
FACTORS, AMONG OTHERS, COULD CAUSE ACTUAL RESULTS OR OUTCOMES TO DIFFER
MATERIALLY FROM CURRENT EXPECTATIONS: THE INABILITY TO OBTAIN FINANCING;
UNCERTAINTIES RELATING TO PATENTS AND PROPRIETARY INFORMATION; THE
POTENTIAL FOR PATENT-RELATED LITIGATION EXPENSES AND OTHER COSTS RESULTING
FROM CLAIMS ASSERTED AGAINST THE COMPANY OR ITS CUSTOMERS BY THIRD PARTIES;
ACHIEVEMENT OF PRODUCT PERFORMANCE SPECIFICATIONS; THE ABILITY OF NEW
PRODUCTS TO COMPETE SUCCESSFULLY IN EITHER EXISTING OR NEW MARKETS; THE
POTENTIAL FOR ADVERSE FLUCTUATIONS IN FOREIGN CURRENCY EXCHANGE RATES; THE
EFFECT OF PRODUCT OR MARKET DEVELOPMENT ACTIVITIES; AVAILABILITY AND FUTURE
COSTS OF MATERIALS AND OTHER OPERATING EXPENSES; COMPETITIVE FACTORS; THE
RISKS INVOLVED IN INTERNATIONAL OPERATIONS AND SALES; THE PERFORMANCE AND
NEEDS OF INDUSTRIES SERVED BY THE COMPANY AND THE FINANCIAL CAPACITY OF
CUSTOMERS IN THESE INDUSTRIES TO PURCHASE THE COMPANY'S PRODUCTS; AS WELL
AS OTHER FACTORS DISCUSSED UNDER THE HEADING "RISK FACTORS" IN ITEM 1 OF
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER
31, 2000 WHICH IS INCORPORATED HEREIN BY REFERENCE. GIVEN THESE
UNCERTAINTIES STOCKHOLDERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THE
FORWARD-LOOKING STATEMENTS. THE COMPANY DISCLAIMS ANY OBLIGATION
SUBSEQUENTLY TO REVISE OR UPDATE FORWARD-LOOKING STATEMENTS TO REFLECT
EVENTS OR CIRCUMSTANCES AFTER THE DATE OF SUCH STATEMENTS OR TO REFLECT THE
OCCURRENCE OF ANTICIPATED OR UNANTICIPATED EVENTS.
9
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased from $2,059,000 at December 31, 2000 to
$258,000 at September 30, 2001.
The Company's working capital decreased during the first nine months of
2001 by $2,706,000, from $2,511,000 at December 31, 2000 to a negative
working capital of $195,000 at September 30, 2001. The decrease in working
capital resulted primarily from the effect of the net loss for the period
($3,269,000 less depreciation, amortization and equipment write-offs
totaling $778,000).
The Company believes that its capital is insufficient for ongoing
operations, with current cash reserves almost completely exhausted.
Although the Company is attempting to secure additional funds through asset
sales and additional investments in or loans to the Company, there can be
no assurance that the Company will be able to raise any additional funds,
or that such funds will be available on acceptable terms. Any funds raised
through equity financing will likely be significantly dilutive to current
shareholders. The failure by the Company to secure additional funds within
the next few months will materially affect the Company and its business,
and may cause the Company to cease operations or to seek protection of the
courts through reorganization, bankruptcy or insolvency proceedings.
Consequently, shareholders could incur losses of their entire investment in
the Company.
While the Company believes that its new therapeutic products and
technologies show considerable promise, its ability to realize revenues
therefrom is dependent first upon obtaining sufficient capital to continue
operations, and then upon successful development of business alliances with
biotechnology and/or pharmaceutical companies that have the resources
required to develop and market certain of these products. There is no
assurance that the Company's efforts to obtain sufficient capital or to
develop such business alliances will be successful.
The Company expects to continue to report losses in 2001 as expenses are
expected to continue to exceed revenues. The Company can give no assurance
of continued operations.
10
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED WITH
THREE MONTHS ENDED SEPTEMBER 30, 2000
Revenues
The Company's revenues for the quarters ended September 30, 2001 and 2000
were as follows:
2001 2000
Research assays and fine chemicals $577,000 $ 437,000
Therapeutic drug monitoring assays -- 262,000
Instruments 63,000 333,000
Other -- 7,000
-------- ----------
$640,000 $1,039,000
======== ==========
Sales of research assays and fine chemicals increased by $140,000 from
$437,000 in the third quarter of 2000 to $577,000 in the third quarter of
2001 due primarily to a single significant compound sale.
The Company's contract to manufacture therapeutic drug monitoring assays
has terminated, and the Company ceased manufacturing and selling these
products in the first quarter of 2001.
Revenue from instrument development sales decreased by $270,000, from
$333,000 in the third quarter of 2000 to $63,000 in the third quarter of
2001. The Company decided to cease operating its instrument manufacturing
facility in the second quarter of 2001, in the effort to lower the
Company's losses. The instrument sales in the third quarter of 2001 are a
result of July shipments of orders in house at June 30, 2001.
Costs and Expenses
Cost of sales was 66% of revenues for the third quarter of 2000 and
increased to 81% of revenues for the third quarter of 2001 due to the loss
taken on the Instruments division. Though cost of sales as a percentage of
revenues for the third quarter of 2001 is up from the third quarter of
2000, we have continued to bring our cost of sales as a percentage down
from the second quarter of 2001 (88%) to 81% in the third quarter of 2001.
Research and development expenses decreased from $436,000 in the third
quarter of 2000 to $93,000 in the third quarter of 2001. The 2000 expenses
included a settlement with two former French research employees resulting
in an expense of $59,000. Additionally, $52,000 of research and development
expenses by the Company's Health Products segment relating to development
of new research assays and new uses for the Company's fine chemicals did
not reoccur during the third quarter of 2001. The remaining decrease is due
to the closure of the
11
United Kingdom facility along with the cut back of activity and personnel
in research and development in the United States in 2001.
Selling, general and administrative expenses decreased from $1,072,000 in
the third quarter of 2000 to $394,000 in the third quarter of 2001. This
reduction is due primarily to the reduction of the marketing costs related
to the Health Products segment, closure of the Company's United Kingdom
subsidiary, and the reduction of additional management and staff personnel.
Net Loss
The Company continued to experience losses in the third quarter of 2001.
The third quarter 2001 net loss of $367,000 ($.04 per share-basic and
diluted) was $752,000 less than the $1,119,000 ($.12 per share-basic and
diluted) net loss for the third quarter of 2000. The decrease in the net
loss is primarily due to the decreases in research and development and
selling, general and administrative costs, offset by decreased profit
margins.
The Company expects to incur a substantial net loss for 2001. If the
Company develops substantial new revenue sources or if substantial
additional capital is raised through further sales of securities, the
Company plans to continue to invest in research and development activities
and incur sales, general and administrative expenses in amounts greater
than its anticipated near-term product margins. If the Company is unable to
raise sufficient additional capital or develop new revenue sources, it will
have to cease, or severely curtail, its operations. In this event, while
expenses will be reduced, expense levels, and the potential write down of
various assets, would still be in amounts greater than anticipated
revenues. The Company expects that additional capital will be required in
2001.
12
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED WITH NINE
MONTHS ENDED SEPTEMBER 30, 2000
Revenues
The Company's revenues for the nine-month periods ended September 30, 2001
and 2000 were as follows:
2001 2000
Research assays and fine chemicals $1,291,000 $1,015,000
Therapeutic drug monitoring assays 378,000 726,000
Instruments 617,000 958,000
Bovine superoxide dismutase (bSOD)
for research and human use 117,000 --
Other 52,000 62,000
---------- ----------
$2,455,000 $2,761,000
========== ==========
Sales of research assays and fine chemicals increased by $276,000, from
$1,015,000 in the first nine months of 2000 to $1,291,000 in the first nine
months of 2001. This increase was due primarily to a single significant
compound sale.
The Company's contract to manufacture therapeutic drug monitoring assays
has terminated, and the Company ceased manufacturing and selling these
products in the first quarter of 2001.
Revenue from instrument sales declined by $326,000, from $958,000 in the
first nine months of 2000 to $632,000 in the first nine months of 2001. The
Company decided to cease operating its instrument manufacturing facility in
the second quarter of 2001, in the effort to lower the Company's losses.
Therefore, instrument sales subsequent to the second quarter of 2001 are
expected to be substantially reduced from previous levels, consisting only
of certain inventory in process at the end of the second quarter and the
Company's OxyScan instruments which are expected to be manufactured on a
contract basis, as necessary, to meet orders. Instrument sales in the third
quarter of 2001 of $78,000 are a result of July shipment of orders in house
at June 30, 2001.
Sales of bSOD in the first nine months of 2001 consisted of one shipment of
bulk bSOD to the Company's Spanish licensee. No significant sales of bulk
bSOD were made during 2000. Future sales of bulk bSOD beyond 2001 are
largely dependent on the needs of the Company's Spanish licensee. Because
such needs are uncertain and difficult to predict, no assurance can be
given that the Company will continue to sell bulk bSOD to its Spanish
licensee.
13
Costs and Expenses
Cost of product sales for the first nine months of 2001 includes a charge
of $516,000 to write down inventory relating to the closure of the
Company's instrument manufacturing facility and wellness services program.
Excluding this $516,000 charge, cost of product sales for the first nine
months of 2001 was $2,515,000, or 102% of revenues, compared to $2,375,000,
or 86% of revenues for the first nine months of 2000.
Research and development expenses decreased from $1,221,000 in the first
nine months of 2000 to $602,000 in the first nine months of 2001. The
decrease in research and development expenses resulted primarily from a
reduction in research and development activity by the Company's therapeutic
development segment necessitated by the Company's lack of capital.
Selling, general and administrative expenses decreased by $328,000, from
$2,436,000 in the first nine months of 2000 to $2,108,000 in the first nine
months of 2001. This decrease was primarily the result of the closure of
the United Kingdom, wellness and instrument businesses along the associated
expenses of these businesses; partially offset by increased legal fees and
other costs incurred in conducting and settling of the litigation described
below in the section titled Legal Proceedings.
14
Net Loss
The Company continued to experience losses in the first nine months of
2001. The first nine month 2001 net loss of $3,269,000 ($.34 per
share-basic and diluted) was $81,000 more than the $3,188,000 ($.35 per
share-basic and diluted) net loss for the first nine months of 2000. The
increase in the net loss is primarily due to the $1,004,000 charge to write
down inventory and equipment relating to operations that were closed during
the second quarter, offset by reduced research and development expenses and
reduction in costs associated with the instruments and wellness businesses.
After adjusting the 2001 net loss down by the $1,004,000 write down of
inventory and equipment the resulting net loss due to operations is
$2,265,000 compared to the $3,188,000 net loss of the first nine months of
2000.
15
PART II. OTHER INFORMATION
Item 5. Other Information
Interim Executive Appointment
As previously reported, Ray R. Rogers has been appointed as the interim
Chairman of the Board, President and Chief Executive Officer of the
Company, effective August 1, 2001. Accordingly, Mr. Rogers' Executive
Separation and Employment Agreement (dated April 2000) was amended to shift
his consultancy to employment status and to establish an employment term
ending June 30, 2002. Mr. Rogers' annual salary has been reduced to
$200,000, and in connection with this appointment Mr. Rogers was granted
stock options which become vested monthly (during the period May 1, 2001 to
April 30, 2002) and ratably for each month (through April 30, 2002) during
which his salary reduction continues in effect or until at least $1.0
million in working capital has been raised, whichever comes first. The
option exercise price per share is $.0850, and the aggregate shares grant
is 470,588 shares, 392,150 shares of which represent a qualified stock
option grant with the balance being a non-qualified stock option grant. It
is the intention of the Company to secure additional working capital in an
amount sufficient to begin implementation of its business plan. The first
stage of such implementation includes provision for a permanent chief
executive. To date the Company has been unsuccessful in obtaining
additional working capital. The amendment (Addendum) to Mr. Rogers'
Executive Separation and Employment Agreement, which contains the full text
of the foregoing summary, is filed as Exhibit 10.1 with this Report (see
Exhibit Index to this Report).
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - See Exhibit Index on page 18.
(b) 8-K Reports - None filed for this period.
16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OXIS International, Inc.
November 14, 2001 By /s/Ray R. Rogers
------------------------------------------------
Ray R. Rogers
Interim Chairman of the Board,
President, and Interim Principal Accounting Officer
17
EXHIBIT INDEX
Exhibit
Number Description of Document
10.1 Addendum to Executive Separation and Employment Agreement between
OXIS International, Inc. and Ray R. Rogers
18