<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>d10q.txt
<DESCRIPTION>FORM 10-Q FOR QUARTER ENDED MARCH 31, 2001
<TEXT>

<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, DC 20549

                                   FORM 10-Q


    X   Quarterly report pursuant to Section 13 or 15(d) of the Securities
   ---  Exchange Act of 1934 for the quarterly period ended March 31, 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 March 31, 2001, the issuer had outstanding the indicated number of shares of
common stock:  9,660,458

<PAGE>

                        PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements.

               CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
                                                        Three Months Ended
                                                             March 31
                                                   -----------------------------
                                                       2001           2000
<S>                                                <C>            <C>
Revenues                                            $   973,000   $  943,000

Costs and expenses:
  Cost of sales                                         889,000      852,000
  Research and development                              318,000      338,000
  Selling, general and administrative                   925,000      722,000
                                                    -----------   ----------
     Total costs and expenses                         2,132,000    1,912,000
                                                    -----------   ----------
Operating loss                                       (1,159,000)    (969,000)
Interest income                                          17,000       22,000
Interest expense                                         (6,000)     (21,000)
                                                    -----------   ----------
Net loss                                             (1,148,000)    (968,000)

Other comprehensive income (loss) -
  Foreign currency translation adjustments               10,000      (26,000)
                                                    -----------   ----------

Comprehensive loss                                  $(1,138,000)  $ (994,000)
                                                    ===========   ==========

Net loss per share - basic and diluted              $      (.12)  $     (.12)
                                                    ===========   ==========

Weighted average number of
  shares used in computation - basic and diluted      9,565,152    8,259,330
                                                    ===========   ==========
</TABLE>

                                       2
<PAGE>

                          CONSOLIDATED BALANCE SHEETS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                      March 31,   December 31,
                                         2001        2000
                                      ---------   ------------
<S>                                  <C>          <C>
ASSETS

Current assets:
  Cash and cash equivalents           $1,041,000    $2,059,000
  Accounts receivable                    379,000       502,000
  Inventories                          1,097,000     1,271,000
  Prepaid and other                      160,000        81,000
                                      ----------    ----------

Total current assets                   2,677,000     3,913,000

Property and equipment, net              588,000       651,000

Technology for developed products        648,000       681,000

Other assets                             382,000       380,000
                                      ----------    ----------

     Total assets                     $4,295,000    $5,625,000
                                      ==========    ==========
</TABLE>

                                       3
<PAGE>

                          CONSOLIDATED BALANCE SHEETS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                            March 31,    December 31,
                                                              2001          2000
                                                           ----------    ------------
<S>                                                      <C>             <C>
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Notes payable                                           $    160,000   $    160,000
  Accounts payable                                             517,000        628,000
  Customer deposits                                                 --        174,000
  Accrued liabilities                                          441,000        341,000
  Current portion of long-term debt                             99,000         99,000
                                                          ------------   ------------
     Total current liabilities                               1,217,000      1,402,000

Long-term debt due after one year                              143,000        150,000

Shareholders' equity:
  Preferred stock - $.01 par value; 15,000,000 shares
   authorized:
     Series B - 428,389 shares issued and outstanding
     at March 31, 2001  (liquidation preference of
     $1,000,000)                                                 4,000          4,000
Series C - 296,230 shares issued and outstanding
     at March 31, 2001                                           3,000          3,000
  Common stock - $.001 par value; 95,000,000 shares
   authorized; 9,660,458 shares issued and outstanding
   at March 31, 2001 (9,560,458 at December 31, 2000)            9,000          9,000
  Warrants                                                   1,991,000      2,870,000
  Additional paid in capital                                56,835,000     55,956,000
  Accumulated deficit                                      (55,534,000)   (54,386,000)
  Accumulated other comprehensive loss -
     foreign currency translation adjustment                  (373,000)      (383,000)
                                                          ------------   ------------

     Total shareholders' equity                              2,935,000      4,073,000
                                                          ------------   ------------

Total liabilities and shareholders' equity                $  4,295,000   $  5,625,000
                                                          ============   ============
</TABLE>

                                       4
<PAGE>

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                 Three Months Ended
                                                                      March 31,
                                                             -------------------------
                                                                 2001         2000
<S>                                                         <C>            <C>
Cash flows from operating activities:
 Net loss                                                    $(1,148,000)  $ (968,000)
 Adjustments to reconcile net loss to cash
  used for operating activities:
  Depreciation and amortization                                  110,000      156,000
  Changes in assets and liabilities:
   Accounts receivable                                           123,000      309,000
   Inventories                                                   174,000       46,000
   Prepaid and other current assets                              (79,000)     (12,000)
   Accounts payable                                             (111,000)    (668,000)
   Customer deposits                                            (174,000)          --
   Accrued liabilities                                           100,000      255,000
                                                             -----------   ----------

     Net cash used for operating activities                   (1,005,000)    (882,000)

Cash flows from investing activities:
 Purchases of equipment                                           (4,000)     (37,000)
 Additions to other assets                                       (12,000)     (36,000)
 Other, net                                                       10,000       (1,000)
                                                             -----------   ----------

     Net cash used for investing activities                       (6,000)     (74,000)

Cash flows from financing activities:
 Proceeds from issuance of common stock                               --    4,466,000
 Repayment of short-term borrowings                                   --      (75,000)
 Repayment of long-term debt                                      (7,000)      (5,000)
                                                             -----------   ----------

     Net cash provided by (used for) financing activities         (7,000)   4,386,000

Effect of exchange rate changes on cash                               --      (14,000)
                                                             -----------   ----------

Net increase (decrease) in cash and cash equivalents          (1,018,000)   3,416,000

Cash and cash equivalents - beginning of period                2,059,000      789,000
                                                             -----------   ----------

Cash and cash equivalents - end of period                    $ 1,041,000   $4,205,000
                                                             ===========   ==========
</TABLE>

                                       5
<PAGE>

             CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   FINANCIAL STATEMENTS AND CONDENSED NOTES

     The unaudited consolidated financial statements, which have been prepared
     in accordance with the instructions to Form 10-Q, do not include all of the
     information and notes required by accounting principles generally accepted
     in the United States of America for complete financial statements. All
     adjustments considered necessary by management for a fair presentation have
     been included. Operating results for interim periods are not necessarily
     indicative of the results that may be expected for the full year.

     An annual report (Form 10-K) has been filed with the Securities and
     Exchange Commission ("Commission") for the year ended December 31, 2000.
     That report contains, among other information, a description of the
     Company's business, audited financial statements, notes to the financial
     statements, the report of the independent auditors and management's
     discussion and analysis of results of operations and financial condition.
     Readers of this report are presumed to be familiar with that annual report.

2.   NASDAQ LISTING

     The Company has been notified by Nasdaq that it is not in compliance with
     certain Nasdaq requirements for continued listing on the Nasdaq National
     Market. Specifically, the Company is not meeting the requirements for
     maintaining (1) a minimum bid price of $1.00 and (2) a market value of
     public float greater than $5,000,000. Nasdaq staff notified the Company
     that it had determined to delist the Company's common stock from the Nasdaq
     National Market. The Company appealed the staff's determination and
     appeared on April 26, 2001 at an oral hearing before a Nasdaq Listing
     Qualifications Panel (the "Panel"). As of the date of this Report, the
     Company had not received a decision by the Panel. Based on its inability to
     date to raise additional capital in 2001, OXIS believes that its appeal
     will be unsuccessful and that its common stock will be delisted from the
     Nasdaq National Market. Failure of the Company's common stock to continue
     to be listed on the Nasdaq National Market could have a material adverse
     effect on the transferability and value of the common stock.

                                       6
<PAGE>

3.   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 March
     31, 2001 and December 31, 2000, consisted of the following:


                               March 31,   December 31,
                                 2001          2000
                             -----------   ------------

          Raw materials      $  695,000    $  682,000
          Work in process       193,000       398,000
          Finished goods        209,000       191,000
                             ----------    ----------

          Total              $1,097,000    $1,271,000
                             ==========    ==========


4.   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 three months ended March
     31, 2001, options to purchase 50,600 shares at an exercise price of $.6875
     per share were issued under the Plan and options to purchase 3,400 shares
     were forfeited.

     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
     quarter of 2001. Warrants to purchase 1,021,394 shares of common stock at
     an exercise price of $5.94 per share expired in the first quarter of 2001.

     At March 31, 2001, options issued pursuant to the Plan to acquire 1,850,686
     shares of common stock at exercise prices ranging from $.4375 to $17.50
     remained outstanding. Options issued outside the Plan to acquire 32,000
     shares of common stock at exercise prices of $1.38 to $8.44 and warrants to
     acquire 4,173,485 shares of common stock at exercise prices of $3.05 to
     $16.25 also remained outstanding at March 31, 2001.

5.   OPERATING SEGMENTS

     The following table presents information about the Company's two operating
     segments:

                                       7
<PAGE>

                                     Health     Therapeutic
                                    Products    Development      Total
                                    --------    -----------      -----
  Quarter ended March 31, 2001:
     Revenues from external
       customers                   $  973,000    $       --   $   973,000
     Intersegment revenues                 --            --            --
     Segment loss                    (756,000)     (392,000)   (1,148,000)
     As of March 31, 2001 -
        Segment assets              2,602,000     1,693,000     4,295,000

  Quarter ended March 31, 2000:

     Revenues from external
       customers                   $  943,000    $       --   $   943,000
     Intersegment revenues                 --            --            --
     Segment loss                    (629,000)     (339,000)     (968,000)
     As of March 31, 2000 -
        Segment assets              3,658,000     4,500,000     8,158,000


6.   SUBSEQUENT EVENT

     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 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 a loss of their entire
     investment in the Company.

                                       8
<PAGE>

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; DELISTING OF THE COMPANY'S
  COMMON STOCK FROM THE NASDAQ NATIONAL MARKET; 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.

              FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

  The Company's working capital decreased during the first quarter of 2001 by
  $1,051,000, from $2,511,000 at December 31, 2000 to $1,460,000 at March 31,
  2001. The decrease in working capital resulted primarily from the effect of
  the net loss for the quarter ($1,148,000 less non-cash charges of $110,000).

  Cash and cash equivalents decreased from $2,059,000 at December 31, 2000 to
  $1,041,000 at March 31, 2001.

                                       9
<PAGE>

  While the Company believes that its new therapeutic products and technologies
  show considerable promise, its ability to realize revenues therefrom is
  dependent upon the Company's success in developing business alliances with
  biotechnology and/or pharmaceutical companies that have the required resources
  to develop and market certain of these products.  There is no assurance that
  the Company's effort to develop such business alliances will be successful.

  The Company expects to continue to report losses in 2001 as the level of
  expenses is expected to continue to exceed revenues.  The Company can give no
  assurances as to when and if its revenues will exceed its expenses.

  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 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
  a loss of their entire investment in the Company.

                                       10
<PAGE>

 RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2001 COMPARED WITH THREE
                          MONTHS ENDED MARCH 31, 2000


Revenues

  The Company's revenues for the quarters ended March 31, 2001 and 2000 were as
  follows:

                                                  2001      2000
                                                 ------    ------

          Therapeutic drug monitoring assays    $378,000  $290,000
          Research assays and fine chemicals     325,000   294,000
          Medical instruments                    254,000   333,000
          Other                                   16,000    26,000
                                                --------  --------
                                                $973,000  $943,000
                                                ========  ========

  Revenues from sales of therapeutic drug monitoring assays increased in the
  first quarter of 2001 as compared to the first quarter of 2000. Therapeutic
  drug monitoring sales in the first quarter of 2001 include $232,000 for the
  sale of the Company's work-in-process and raw materials inventories to the
  company that purchased the rights to the therapeutic drug monitoring assays in
  1999. The Company's agreement to manufacture these products has terminated,
  and the Company does not expect to manufacture or sell any therapeutic drug
  monitoring products after the first quarter of 2001.

  Sales of research assays and fine chemicals increased by $31,000 from $294,000
  in the first quarter of 2000 to $325,000 in the first quarter of 2001 due to
  an increase in sales volumes.

  Revenue from instrument sales of product and development declined by $79,000,
  from $333,000 in the first quarter of 2000 to $254,000 in the first quarter of
  2001. This decrease resulted from reduced orders from customers.

Costs and Expenses

  Cost of sales was 90% of revenues for the first quarter of 2000 and increased
  to 91% of revenues for the first quarter of 2001. This increase in the cost of
  sales as a percentage of sales is due primarily to the effect of the fixed
  manufacturing costs for the Company's instrument manufacturing business being
  spread over a lower manufacturing and sales volume. Instrument sales declined
  by $79,000 in the first quarter of 2001 as compared to the first quarter of
  2000. The related cost of sales declined by only $27,000. The reduction in
  gross margin was partially offset by an increase in gross margins on sales of
  research assays and fine chemicals.

  Research and development expenses decreased from $338,000 in the first quarter
  of 2000 to $318,000 in the first quarter of 2001. The decrease in research and
  development expenses resulted primarily from a reduction in the Company's
  therapeutic development efforts.

                                       11
<PAGE>

  Selling, general and administrative expenses increased from $722,000 in the
  first quarter of 2000 to $925,000 in the first quarter of 2001. The increase
  is primarily the result of the accrual in the first quarter of 2001 of
  $160,000 for severance payments to two executives whose employment agreements
  expired March 31, 2001. See "Item 5. Other Information - Employment
  Contracts."

Net Loss

  The Company continued to experience net losses in the first quarter of 2001.
  The first quarter 2001 net loss of $1,148,000 ($.12 per share-basic and
  diluted) was $180,000 more than the $968,000 ($.12 per share-basic and
  diluted) net loss for the first quarter of 2000. The increase in the net loss
  is primarily due to the increase in selling, general and administrative costs.

                                       12
<PAGE>

                          PART II.  OTHER INFORMATION

Item 5.   Other Information - Employment Contracts.

  The Company's employment agreements with Humberto V. Reyes, President of OXIS
  Health Products, and Jon S. Pitcher, Chief Financial Officer, expired March
  31, 2001 and neither agreement was renewed.  Upon expiration of their
  employment agreements, Messrs. Reyes and Pitcher became entitled to severance
  payments.  The Company and Mr. Reyes have entered into a new agreement
  pursuant to which Mr. Reyes is continuing to serve as President of OXIS Health
  Products on a month-to-month basis and payment of his severance has been
  deferred.  Although Mr. Pitcher is providing certain services to the Company
  on a contract basis, the Company has not hired a Chief Financial Officer to
  replace him.



                                   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.


May 14, 2001                        By  /s/ Joseph F. Bozman, Jr.
                                        -------------------------
                                        Joseph F. Bozman, Jr.
                                        Chairman, President and
                                        Chief Executive Officer
                                        (Principal Financial Officer)

                                       13
</TEXT>
</DOCUMENT>
