-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
 MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
 TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
 T6prl310c1CV0xklCZ2uvvOjIfzGNuLag3Q5PZks4jP9ykt1ANVNTvryoOyLI8P+
 12fakEifCHA7nguZOUc09A==

<SEC-DOCUMENT>0001032210-01-501367.txt : 20020410
<SEC-HEADER>0001032210-01-501367.hdr.sgml : 20020410
ACCESSION NUMBER:		0001032210-01-501367
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		2
CONFORMED PERIOD OF REPORT:	20010930
FILED AS OF DATE:		20011114

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			OXIS INTERNATIONAL INC
		CENTRAL INDEX KEY:			0000109657
		STANDARD INDUSTRIAL CLASSIFICATION:	PHARMACEUTICAL PREPARATIONS [2834]
		IRS NUMBER:				941620407
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-08092
		FILM NUMBER:		1786903

	BUSINESS ADDRESS:	
		STREET 1:		6040 N CUTTER CIRCLE STE 317
		CITY:			PORTLAND
		STATE:			OR
		ZIP:			97217
		BUSINESS PHONE:		5032833911

	MAIL ADDRESS:	
		STREET 1:		6040 N CUTTER CIRCLE STE 317
		CITY:			PORTLAND
		STATE:			OR
		ZIP:			97217

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	DDI PHARMACEUTICALS INC
		DATE OF NAME CHANGE:	19920703

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	DIAGNOSTIC DATA INC /DE/
		DATE OF NAME CHANGE:	19850312
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>d10q.txt
<DESCRIPTION>FORM 10-Q FOR THE QUARTERLY PERIOD ENDED 09/30/01
<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 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

<PAGE>

                          PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                      Three Months Ended                    Nine Months Ended
                                                          September 30                         September 30
                                                  ---------------------------         ----------------------------
                                                     2001             2000                2001            2000

<S>                                               <C>             <C>                 <C>              <C>
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
                                                  ===========     ===========         ===========      ===========
</TABLE>

            See condensed notes to consolidated financial statements

                                        2


<PAGE>

                           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

<PAGE>

                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                    September 30,    December 31,
                                                                                        2001             2000
<S>                                                                                 <C>              <C>
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
                                                                                    ============     ============
</TABLE>

            See condensed notes to consolidated financial statements

                                       4

<PAGE>

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                        Nine Months Ended
                                                                                          September 30,
                                                                                -----------------------------------
                                                                                   2001                   2000
<S>                                                                           <C>                     <C>
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                      --
</TABLE>

            See condensed notes to consolidated financial statements

                                       5

<PAGE>

              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

<PAGE>

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

<PAGE>

     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:

<TABLE>
<CAPTION>
                                                        Health        Therapeutic
                                                       Products       Development       Total
                                                       --------       -----------       -----
     <S>                                             <C>            <C>             <C>
     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)
</TABLE>

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

<PAGE>

     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

<PAGE>

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

<PAGE>

  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

<PAGE>

     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

<PAGE>

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

<PAGE>

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

<PAGE>

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

<PAGE>

                           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

<PAGE>

                                   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

<PAGE>

                                  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

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<FILENAME>dex101.txt
<DESCRIPTION>ADDENDUM TO EXECUTIVE SEPARATION/EMPLOYMENT AGREE.
<TEXT>
<PAGE>

                                  Exhibit 10.1

                                   ADDENDUM TO
                  EXECUTIVE SEPARATION AND EMPLOYMENT AGREEMENT

     This Addendum (the "Addendum") to Executive Separation and Employment
Agreement (the "Agreement") is entered into as of the 1st day of August, 2001 by
and between OXIS International, Inc., its affiliated, related, parent or
subsidiary corporations (the "Company") and Ray R. Rogers ("Rogers"),
(collectively the "Parties").

                                    RECITALS

     A. The effective date of this Addendum is June 30, 2001, and the above date
of this Addendum is the date, for reference purposes, when all of the provisions
of this Addendum were first reduced to writing.

     B. Rogers has or will execute the form of Release I which was required to
be executed as of June 30, 2000, in accordance with the terms of the Agreement.

     C. The Parties agree that Rogers' employment under section 2 of the
Agreement has been continuous to the date hereof, without interruption and
therefore without the necessity of entering into the General Release of Claims
II which is the subject of section 2(c) of the Agreement.

     D. Based on the report of the Compensation Committee to the Board, the
Board of Directors of the Company has appointed Rogers as interim President,
Chief Executive Officer and Chairman of the Board of the Company, effective
August 1, 2001, and Rogers has agreed to accept this appointment for a period of
one year ending June 30, 2002 subject to extension in accordance with section
2(b) of the Agreement and subject to earlier termination should the permanent
chief executive position for the Company be engaged in accordance with the
Company's "Business Plan" prior to June 30, 2002 (for purposes of this Addendum
the Business Plan is that particular plan developed as part of the negotiations
for a loan transaction to be entered into with _______________________________).

1.   Modification of Agreement.

     The Parties agree that this Addendum is entered into for good and valuable
consideration and is a modification of the Executive Separation and Employment
Agreement between Rogers and the Company and is entered into pursuant to section
12 of the Agreement. The Parties agree that all terms of the Agreement remain in
full force and effect except as expressly modified by this Addendum. Under
section 2 of the Agreement, Rogers' employment is now as the Chief Executive
Officer, not as Special Advisor. Section 3 of the Agreement changes in that
Rogers'

                                       1

<PAGE>

position, duties and responsibilities now shift to those associated with
employment service as the Chief Executive Officer of the Company. Under section
4 of the Agreement, the specified compensation for Services is presently an
annual base salary of $200,000, not $240,000 (subject to other terms of this
Addendum hereinbelow set forth). Under section 8 of the Agreement, if Rogers'
employment with the Company terminates as the result of the hire of a permanent
CEO as contemplated under the Business Plan (and only as a result of such
permanent CEO hire), then Rogers' termination of employment will be for Good
Reason under section 8(d); however, if Rogers' employment continues after the
effective date of hire of the permanent CEO, then the Agreement shall be deemed
to have been further amended to reflect Rogers' new employment status. In
addition, under section 8(d) of the Agreement, it shall not be termination for
Good Reason under clause (iv) if as a result of the closing of the loan
transaction with __________________, the Company's principal offices are
relocated to or near the lender's principal offices (currently in southern
California) and Rogers is required to relocate along with such office
relocation.

2.   Extension of Period of Employment.

     The Initial Term of the Period of Employment under the Agreement is
extended to June 30, 2002 and the Agreement may be renewed in accordance with
section 2 of the Agreement for an additional one (1) year period following June
30, 2002. If either party declines to renew the Period of Employment, Rogers
shall receive those Non-Renewal Benefits identified in paragraph 2. c. of the
Agreement, except that he shall receive a continuation of his then-current
salary for a period of twelve (12) months after the Period of Employment. The
Company agrees that it shall defend and indemnify Rogers to the fullest extent
allowed by law for any acts within the course or scope of employment during the
Period of Employment or any renewal.

3.   Waiver of Termination by Executive for Good Reason.

     But for the terms of this Addendum, the Parties acknowledge that the
reduction of Rogers' base salary from $240,000 to $200,000 would have permitted
Rogers to terminate the Period of Employment "for Good Reason" as defined in
paragraph 8.d. of the Agreement and thereby become entitled to severance under
the Agreement. In consideration of this Addendum, Rogers has waived his right to
terminate the Agreement as a result of that reduction.

4.   Rate of Salary and New Stock Option.

     The Parties agree that effective May 1, 2001, Rogers shall be compensated
as follows: $200,000 annually in accordance with the Company's regular payroll
practices. In addition, Rogers shall receive stock options granted this date by
the Board of Directors which provide for an aggregate grant of 470,588 shares,
each with an exercise price of $.085 per share (determined to be the market
value of a share of common stock on this date). Of the total option grant
392,150 shares shall be qualified stock options, and the balance of 78,438
shares shall be non-qualified stock options. For vesting purposes this option
grant shall be deemed to have been made effective May 1, 2001, and vesting shall
be proportional on a monthly basis through the twelve-month period ending April
30, 2002. This means that as to the qualified option a total of

                                       2

<PAGE>

39,215 shares shall vest monthly during the ten months ending February 28, 2002.
As to the non-qualified stock option shares, vesting on these shares shall occur
as to one-half of the option shares commencing March 1, 2002, with the remaining
one-half of the option shares vesting commencing April 2, 2002. In the event
Rogers' employment is terminated during this twelve-month period ending April
30, 2002, the qualified stock option shares then vested and eligible for
purchase may be purchased at any time on or prior to the expiration of 90 days
following such date of employment termination. The non-qualified stock option
portion may be purchased at any time on or before the lapse of the one-year
period following the date of such employment termination (as to shares, if any,
then vested). In all other respects these options shall be set forth on the
Company's form of stock option agreement as currently in use.

5.   Continuation of Base Salary Rate; Adjustment Thereof.

Rogers shall continue to be paid annually a base salary of $200,000. This annual
rate shall continue until the earliest of (a) the closing by the Company of any
transaction which secures new or additional financing of at least $1,000,000
(the "Financing Date") or (b) the occurrence of a "Change in Control". Upon the
first to occur of either of the foregoing events, Rogers shall receive an
immediate cash lump sum payment in amount equal to $3,333 multiplied by the
number of months (whole months and fractions of months) that have lapsed since
May 1, 2001, to and including the date of the occurrence of the first of either
of such two events. In addition to this lump sum cash payment Rogers' annual
base salary rate shall be increased to $240,000, payable in accordance with the
Company's then applicable payroll practices. In addition, the aggregate number
of shares subject to option as specified above in paragraph 4 shall be reduced
on the basis of 39,215 shares for each of the months of the twelve-month period
ending April 30, 2002 that remain after the effective date of either of said
events (i.e., the Financing Date or Change in Control date).

6.   Change in Control of Company.

     The following new clause (ix) shall be added in section 8(d) to the
definition of "Good Reason" for which Rogers may terminate his Period of
Employment:

"(ix) There occurs a change in control of the Company. For purposes of this
Agreement, a "change in control" of the Company shall be the occurrence of any
of the following: (i) the dissolution, liquidation, winding up the affairs, or
the sale or transfer of all or substantially all of the assets of Company or the
adoption of a plan or proposal for the same; (ii) the sale, lease, exchange or
other transfer of all, or substantially all, the assets of Company; (iii) the
acquisition of 30% or more of the outstanding shares of Company's stock by an
entity, person or group other than Company or the issuance by the Company of
shares of voting securities representing at least 30% or more of the ownership
of the Company giving effect to such securities issue; or (iv) the holders of
the voting securities of the Company approve any other transaction of any kind
whereby a third party acquires actual control of the Company either through
ownership of the Company's assets or ownership of more than 50% of the Company's
then issued and outstanding voting securities (and if new shares are issued in
any such transaction, then the 50% amount is computed giving effect to the
issuance of new shares in that transaction). Notwithstanding the

                                       3

<PAGE>

foregoing, it is not deemed to be a Change in Control for the Company to carry
out, pursuant to said Business Plan, the disposition (by sale, closure, write
off or otherwise) of the Company's assets and business unrelated to its
therapeutics development business. Further notwithstanding the foregoing, if
Rogers continues his employment with the Company, as an employee or independent
contractor, for any period of service after the effective date of any of the
aforementioned "Change in Control" transactions that occurs at any time within
twelve months of such effective date of Change in Control, then such transaction
is not a Change in Control event. The purpose of the immediately preceding
sentence is to prohibit Rogers from triggering his severance payments and then
resuming employment with the Company while retaining the right to continue
receipt of such severance payments.

7.   Additional Bonus.

     The parties agree that in the event of a sale of Oxis technology (including
but not limited to Palosein and/or rhSOD technology), Rogers shall be entitled
to a bonus payment equal to 10% of the gross sale price. Payment to Rogers of
his additional bonus shall be made as follows: the first 5% of the gross sale
price paid in cash shall be retained by the Company and all of the bonus to
which Rogers is entitled shall next be paid to Rogers from cash proceeds next
received in that transaction. While Rogers is employed by the Company, he has
full authority to negotiate and effect any such transaction.

8.   Life Insurance.

     The Parties agree that the life insurance policy on the life of Rogers,
which is currently owned by Rogers and for which premiums have previously been
paid by the Company, shall become the sole property of Rogers, and Rogers agrees
from this time forward to pay all premiums for this coverage should Rogers wish
to continue this policy in force. The Company relinquishes all ownership
interest and claims, as a creditor or otherwise, in respect of this policy. If
necessary, the Company will cooperate in relinquishing any secured interest in
the policy in favor of Rogers.

     IN WITNESS WHEREOF, the Parties have executed this Addendum as of the date
first above written; and this Addendum is executed by the Company by its
signator thereunto duly authorized, to-wit the Chair of the Compensation
Committee.

OXIS International, Inc.                             /s/ Ray R. Rogers
                                                     ---------------------------
                                                     Ray R. Rogers


By: /s/ Stuart G. Lang
    -----------------------------------
The Compensation Committee of the
Board of Directors, acting by and
through its Chair, Stuart Lang

                                       4

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
