|SECURITIES AND
EXCHANGE COMMISSION                                                        Washington,
D.C. 20549


FORM 10-Q





QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly
period ended June 30, 2004


Commission file
number: 000-25571



AXONYX INC.
                                       (Exact name of registrant as specified in its
charter)
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Nevada
(State or Other Jurisdiction of Incorporation) | 86-0883978
(IRS Employer Identification No.)
|----------------------------------------------------- | --------------------------------------------

|500 Seventh Avenue,
10th Floor, New York, New York 10018
(Address of Principal Executive Offices)       (Zip Code)


Registrants telephone
number, including area code (212) 645-7704



Indicate by a 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 |_|


Indicate by a check mark whether the
registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  Yes
|_| No |X|


As of August 10, 2004, there were
51,706,222 shares of the registrants common stock outstanding.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|AXONYX INC.


INDEX
|-------------------

|           |  |                                                                          
|---------- |  | -------------------------------------------------------------------------
|PART I.    |  | FINANCIAL INFORMATION                                                    
|           | 
|Item 1.    |  | Condensed Consolidated Financial Statements                              
|           | 
|           |  | Condensed Consolidated Balance Sheets as of June 30, 2004 (unaudited)    
|           |  | and December 31, 2003                                                    
|           | 
|           |  | Condensed Consolidated Statements of Operations (unaudited) for the three
|           |  | and six months ended June 30, 2004 and 2003                              
|           | 
|           |  | Condensed Consolidated Statements of Changes in Stockholders Equity     
|           |  | (unaudited) for the six months ended June 30, 2004                       
|           | 
|           |  | Condensed Consolidated Statements of Cash Flows (unaudited) for the six  
|           |  | months ended June 30, 2004 and 2003                                      
|           | 
|           |  | Notes to Condensed Consolidated Financial Statements                     
|           | 
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and          
|           |  | Results of Operations                                                    
|           | 
|Item 3.    |  | Quantitative and Qualitative Disclosures About Market Risk               
|           | 
|Item 4.    |  | Controls and Procedures                                                  
|           | 
|PART II.   |  | OTHER INFORMATION                                                        
|           | 
|Item 2.    |  | Changes in Securities and Use of Proceeds                                
|           | 
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                      
|           | 
|Item 6.    |  | Exhibits and Reports on Form 8-K                                         
|           | 
|Signatures |  |                                                                          

|
|

|PART I.     FINANCIAL
INFORMATION




Item 1.     Condensed
Consolidated Financial Statements




AXONYX INC.


Condensed Consolidated
Balance Sheets
|-----------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                    | June 30,
2004 |  | December 31,
2003 |            
|----------------------------------------------------------------------------------- | ------------- |  | ----------------- | -----------
|                                                                                    |               | 
|
|ASSETS                                                                              |               |  |                   |            
|Current Assets:                                                                     |               | 
|Cash and cash equivalents                                                           |               |  | $                 | 93,341,000 
|Accounts receivable                                                                 |               |  |                   | 198,000    
|Inventories                                                                         |               |  |                   | 318,000    
|Other current assets                                                                |               |  |                   | 305,000    
|                                                                                    |               | 
|Total current assets                                                                |               |  |                   | 94,162,000 
|                                                                                    |               | 
|Equipment, net                                                                      |               |  |                   | 73,000     
|                                                                                    |               | 
|Technology for developed products, net                                              |               |  |                   | 7,208,000  
|Patents and patents pending, net                                                    |               |  |                   | 878,000    
|Security deposit                                                                    |               |  |                   | 18,000     
|                                                                                    |               | 
|                                                                                    |               |  | $                 | 102,339,000
|                                                                                    |               | 
|                                                                                    |               | 
|LIABILITIES                                                                         |               | 
|Current liabilities:                                                                |               | 
|Accounts payable                                                                    |               |  | $                 | 3,380,000  
|Accrued expenses                                                                    |               |  |                   | 1,614,000  
|Note payable                                                                        |               |  |                   | 160,000    
|Convertible bridge loans                                                            |               |  |                   | 261,000    
|                                                                                    |               | 
|Total liabilities                                                                   |               |  |                   | 5,415,000  
|                                                                                    |               | 
|STOCKHOLDERS
      EQUITY                                                          |               | 
|Preferred
      stock - $.001 par value, 15,000,000 shares authorized; none issued  |               | 
|Common
      Stock - $.001 par value, 150,000,000 and 75,000,000 shares authorized; |               | 
|as
      of 2004 and 2003 respectively; 51,271,555 and 33,919,948 shares            |               | 
|issued
      and outstanding in 2004 and 2003 respectively                          |               |  |                   | 51,000     
|Additional
      paid-in capital                                                    |               |  |                   | 143,968,000
|Unearned
      compensation - stock options                                         |               |  |                   | (210,000   
|Accumulated
      comprehensive loss                                                |               |  |                   | (34,000    
|Accumulated
      deficit                                                           |               |  |                   | (46,851,000
|                                                                                    |               | 
|Total stockholders equity                                                          |               |  |                   | 96,924,000 
|                                                                                    |               | 
|Total liabilities and stockholders equity                                          |               |  | $                 | 102,339,000
|                                                                                    |               | 

|See notes to condensed
consolidated financial statements.


1
|-------------------------------------------------------------

|AXONYX INC.



Condensed Consolidated
Statements of Operations(unaudited)
|-------------------------------------------------------------------------

|                                                | Three months ended June 30, |  | Six months ended June 30, |           
|----------------------------------------------- | --------------------------- |  | ------------------------- | ----------
|
|Revenue                                         |                             |  | $                         | 433,000   
|Cost of revenue                                 |                             |  |                           | 238,000   
|                                                |                             |  |                           |           
|Gross profit                                    |                             |  |                           | 195,000   
|                                                |                             | 
|Costs and expenses:                             |                             | 
|Research and development                        |                             |  |                           | 5,782,000 
|Sales, general and administrative               |                             |  |                           | 2,127,000 
|                                                |                             |  |                           |           
|                                                |                             |  |                           | 7,909,000 
|                                                |                             |  |                           |           
|Loss from operations                            |                             |  |                           | (7,714,000
|                                                |                             | 
|Other income (expense)                          |                             | 
|Interest income                                 |                             |  |                           | 241,000   
|Foreign exchange                                |                             |  |                           | 34,000    
|Gain on issuance of subsidiary stock            |                             |  |                           | 55,000    
|Financing fees                                  |                             |  |                           | (164,000  
|Interest expense                                |                             |  |                           | (13,000   
|                                                |                             |  |                           |           
|Net loss before minority interest in subsidiary |                             |  |                           | (7,561,000
|                                                |                             | 
|Minority interest in loss of subsidiary         |                             |  |                           | 429,000   
|                                                |                             |  |                           |           
|Net loss                                        |                             |  |                           | (7,132,000
|                                                |                             | 
|Comprehensive loss                              |                             | 
|Foreign currency translation adjustment         |                             |  |                           | (34,000   
|                                                |                             |  |                           |           
|Comprehensive loss                              |                             |  | $                         | (7,166,000
|                                                |                             |  |                           |           
|                                                |                             | 
|Net loss per common share                       |                             |  | $                         | (0.14     
|                                                |                             |  |                           |           
|Weighted average shares-basic and diluted       |                             |  |                           | 50,056,812

|See notes to condensed
consolidated financial statements.


2
|-------------------------------------------------------------

|AXONYX INC.



Condensed Consolidated
Statements of Changes in Stockholders Equity(unaudited)
|----------------------------------------------------------------------------------------------

|                                                              | Common Stock |  |  | Unearned   |  |   | Accumulated |  |   |            
|------------------------------------------------------------- | ------------ |  |  | ---------- |  | - | ----------- |  | - | -----------
|
|Balance
      - December 31, 2003                             |              |  |  | 33,919,948 |  | $ | 34,000      |  | $ | 60,345,000 
|                                                              |              | 
|Issuance
      of common stock and warrants - net of expenses |              |  |  | 12,727,106 |  |   | 13,000      |  |   | 64,745,000 
|                                                              |              | 
|Issuance
      of common stock for the acquisition of 53% of  |              | 
|Oxis
      International Inc.                                 |              |  |  | 1,618,061  |  |   | 1,000       |  |   | 8,193,000  
|                                                              |              | 
|Issuance
      of common stock options and warrants           |              | 
|for
      consulting services                                 |              |  |  |            |  |   |             |  |   | 1,234,000  
|                                                              |              | 
|Issuance
      of common stock options                        |              |  |  |            |  |   |             |  |   | 387,000    
|                                                              |              | 
|Exercise
      of common stock warrants and options           |              |  |  | 3,001,441  |  |   | 3,000       |  |   | 9,064,000  
|                                                              |              | 
|Amortization                                                  |              |  |  |            |  |   |             |  |   |            
|                                                              |              | 
|Foreign currency
      translation adjustment                 |              |  |  |            |  |   |             |  |   |            
|                                                              |              | 
|Net loss                                                      |              |  |  |           |  |   |            |  |   |           
|                                                              |              |  |  |            |  |   |             |  |   |            
|Balance
      - June 30, 2004                                 |              |  |  | 51,266,556 |  | $ | 51,000      |  | $ | 143,968,000
|                                                              |              |  |  |            |  |   |             |  |   |            

|See notes to condensed
consolidated financial statements.


3
|-------------------------------------------------------------

|AXONYX INC.


Condensed Consolidated
Statements of Cash Flows(unaudited)
|------------------------------------------------------------------------

|                                                                           | Six months
      ended June 30, | 
|-------------------------------------------------------------------------- | ------------------------------- | 
|
|Cash
      flows from operating activities:                                |                                 | 
|Net
      Loss                                                             |                                 | 
|Adjustments
      to reconcile net loss to cash used in                    |                                 | 
|operating
      activities:                                                |                                 | 
|Depreciation
      and amortization                                        |                                 | 
|Amortization
      of deferred financing costs                             |                                 | 
|Minority
      interest in net loss of subsidiary                          |                                 | 
|Compensation
      related to common stock issued for services             |                                 | 
|Compensation
      related to options and warrants issued for services     |                                 | 
|Gain
      on issuance of subsidiary stock                                 |                                 | 
|Changes
      in:                                                          |                                 | 
|Accounts
      receivable                                                  |                                 | 
|Inventory                                                                  |                                 | 
|Other
      current assets                                                 |                                 | 
|Other
      assets                                                         |                                 | 
|Accounts
      payable                                                     |                                 | 
|Accrued
      expenses and other                                           |                                 | 
|Accrued
      stock based compensation                                     |                                 | 
|                                                                           |                                 | 
|Net
      cash used in operating activities                                |                                 | 
|                                                                           |                                 | 
|Cash
      flows from investing activities:                                |                                 | 
|Cash
      acquired in connection with Oxis acquistion                     |                                 | 
|Costs
      related to Oxis acquistion                                     |                                 | 
|Additions
      to patents                                                 |                                 | 
|Purchase
      of equipment                                                |                                 | 
|                                                                           |                                 | 
|Net
      cash provided from investing activities                          |                                 | 
|                                                                           |                                 | 
|Cash
      flows from financing activities                                 |                                 | 
|Net
      proceeds from issuance of common stock and warrants              |                                 | 
|Net
      proceeds from exercise of common stock options and warrants      |                                 | 
|Net
      proceeds from exercise of common stock options in Oxis           |                                 | 
|Collection
      of stock subscriptions receivable and cash held in escrow |                                 | 
|                                                                           |                                 | 
|Net
      cash provided from financing activities                          |                                 | 
|                                                                           |                                 | 
|Net
      increase in cash and cash equivalents                            |                                 | 
|Cash and
      cash equivalents at beginning of period                     |                                 | 
|                                                                           |                                 | 
|                                                                           |                                 | 
|Cash
      and cash equivalents at end of period                           |                                 | 
|                                                                           |                                 | 
|Supplemental
      disclosures of non-cash financing activity              |                                 | 
|Common
      stock issued in connection with acquisition                   |                                 | 
|Unearned
      compensation recorded for common stock options issued       |                                 | 

|See notes to condensed
consolidated financial statements.


4
|-------------------------------------------------------------

|Notes to Condensed
Consolidated Financial Statements


(1) Financial Statement
Presentation


The
 unaudited  condensed  consolidated  financial  statements  of Axonyx Inc.  (the
 Company)  herein have been prepared pursuant to the rules and regulations of the
Securities and Exchange  Commission (SEC) and, in the opinion of management,  reflect
all adjustments  (consisting only of normal recurring  accruals) necessary to present
fairly the financial position at June 30, 2004, and the results of operations  for the
 quarterly  and six month periods  presented.  Certain  information  and footnote
 disclosure normally included in the financial  statements,  prepared in accordance with
accounting  principles generally accepted in the United States of America,  have been
condensed or omitted pursuant to such rules and  regulations.  However,  management
 believes that the disclosures are adequate to make the information  presented not
misleading.  These financial  statements and notes thereto should be read in  conjunction
 with the  financial  statements  and the notes  thereto for the year ended  December 31,
2003,  included in the Companys Form 10-K filing.  The results for the interim periods
are not  necessarily  indicative of the results for the full fiscal year.


The
condensed  consolidated  financial  statements of Axonyx include the accounts of OXIS
 International Inc. (OXIS) from the acquisition date of January 15, 2004. The minority
interest in the condensed  consolidated  financial statements  represents the minority
 stockholders  proportionate  share of equity in OXIS. All significant  inter-company
 accounts and transactions  have been eliminated in consolidation.


(2) Acquisition of OXIS
International, Inc.


On
January 15, 2004, the Company entered into  agreements to acquire  approximately  53% of
the outstanding  voting stock of OXIS. OXIS is a  biopharmaceutical  company engaged in
the development of research  diagnostics,  nutraceuticals and therapeutics in the field
of oxidative stress.  Under the terms of separate  agreements  entered into with several
holders of OXIS common stock, the Company acquired an aggregate of  approximately  14
million shares of OXIS stock, in consideration  for the issuance of an aggregate of
 approximately  1.6 million  shares of our  unregistered  common stock,  which the
Company  registered in May 2004. The Companys Chairman and Chief  Executive  Officer
owns  1,161,532  shares of OXIS common  stock,  representing  approximately  4% of the
OXISs voting stock.  Those shares of OXISs common stock were not acquired.


The
 aggregate  purchase  price was  $8,246,000,  which  includes the fair value of the
 Companys  common shares that were issued as consideration and transaction costs.


The allocation of the cost of the
acquisition is a follows:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 

|5
|-

|(1) | Represents the
tax effect of the excess of the financial statement basis over the tax basis for
acquired technology for developed products.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Represents the
tax benefit of OXIS net operating loss carryfoward and deductible temporary
differences recognized as an offset against the deferred tax liability
attributable to the acquired technology for developed products.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|The following pro forma information
gives effect to the acquisition as if it had occurred on the first day of each of the
quarters and six months ended June 30, 2004 and 2003.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                   | Three months ended June 30, |  | Six months ended June 30, |           
|-------------------------------------------------- | --------------------------- |  | ------------------------- | ----------
|
|Total revenues                                     |                             |  | $                         | 433,000   
|Net loss including minority interest in subsidiary |                             |  |                           | (7,561,000
|Net loss                                           |                             |  |                           | (7,132,000
|Basic and diluted net loss per common share        |                             |  |                           | (0.14     

|(3)  Stock-based
Compensation


The
Company follows the intrinsic value based method in accounting for stock-based  employee
 compensation under Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees,  and related  interpretations.  The Company has adopted the
 disclosure-only  provisions  of Statement of Financial  Accounting  Standard  (SFAS)
 No. 123,  Accounting  for  Stock-Based Compensation and SFAS No. 148,  Accounting for
Stock-Based  CompensationTransition  and Disclosure. The Company follows the fair
value based method for awards to non-employees.


The
following  table  illustrates the effect on net loss and loss per share if the fair value
based method had been applied to all awards:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                             | Three months ended June 30, |  | Six months ended June 30, |           
|-------------------------------------------- | --------------------------- |  | ------------------------- | ----------
|
|Reported net loss attributable to            |                             |  |                           |           
|common stockholders                          |                             |  | $                         | (7,132,000
|                                             |                             | 
|Stock-based employee compensation included   |                             | 
|in net loss                                  |                             |  |                           | 32,000    
|                                             |                             | 
|Stock-based employee compensation determined |                             | 
|under the fair value based method            |                             |  |                           | (452,000  
|                                             |                             | 
|Minority interest in stock-based employee    |                             | 
|compensation determined under the fair value |                             | 
|based method                                 |                             |  |                           | 52,000    
|                                             |                             | 
|Pro forma net loss                           |                             |  | $                         | (7,500,000
|                                             |                             | 
|                                             |                             | 
|Loss per common share attributable to common |                             | 
|stockholders (basic and diluted):            |                             | 
|As reported                                  |                             |  | $                         | (0.14     
|                                             |                             | 
|Pro forma                                    |                             |  | $                         | (0.15     
|                                             |                             | 

|6
|-

|(4)  Private Placement


In
January 2004, we completed a private  placement  for $50 million of securities  through
the sale of 9,650,183  shares of common stock at $5.15 per share with new and existing
 institutional  investors.  This  placement  also involved the  acquisition by the
investor group of five-year  warrants to purchase an additional  2,412,546 shares of the
Companys stock at an exercise price of $7.25 per share.


In
May 2004,  we  completed a private  placement  for $20 million of  securities  through
the sale of  3,076,923  shares of common stock at $6.50 per share with new  institutional
 investors.  This  placement  also involved the  acquisition by the investor group of
five-year  warrants to purchase an  additional  923,077  shares of the  Companys  stock
at an exercise  price of $8.50 per share.



(5)  Operating Segments


The
Company is organized into two reportable  segments:  Axonyx and OXIS. While OXIS has
 historically  been organized into two reportable  segments  (health  products and
therapeutic  development),  OXIS currently  manages its operations in one segment in
order to better monitor and manage its basic  business:  the  development of research
 diagnostics,  nutraceutical  and  therapeutic products.


The
following table presents information about the Companys two operating segments:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                    | Axonyx Inc. |  | Oxis
Intl Inc. |             | Total |  
|----------------------------------- | ----------- |  | --------------- | ----------- | ----- | -
|Quarter ended June 30, 2004         |             |  |                 |             |       |  
|Revenue including minority interest |             |  |                 |             |       | $
|Segment loss                        |             |  | $               | (6,402,000  | )     | $
|                                    |             | 
|Quarter ended June 30, 2003         |             | 
|Revenue including minority interest |             |  | $               | 1,000,000   |       |  
|Segment loss                        |             |  | $               | (1,247,000  | )     |  
|                                    |             | 
|Six months ended June 30, 2004      |             | 
|Revenue including minority interest |             |  |                 |             |       | $
|Segment loss                        |             |  | $               | (12,105,000 | )     | $
|Segment assets including minority   |             | 
|interest at June 30, 2004           |             |  | $               | 99,581,000  |       | $
|                                    |             | 
|Six months ended June 30, 2003      |             | 
|Revenue including minority interest |             |  | $               | 1,000,000   |       |  
|Segment loss                        |             |  | $               | (2,822,000  | )     |  
|Segment assets at June 30, 2003     |             |  | $               | 8,398,000   |       |  

|7
|-

|(6) Related Party
Transaction


In
June 2004, Axonyx Inc., which holds a controlling interest in OXIS International, Inc.,
loaned OXIS $1.2 million, which will be due and payable in one year or until a qualified
financing occurs (whichever is earlier). Interest on this loan accrues at 7% per annum
and is payable quarterly. This loan is partially secured by certain assets of OXIS. The
loan, in the form of a one-year secured note, will be used to continue the advancement of
OXIS oxidative stress programs and other working capital purposes.



(7) Subsequent Event


In
July 2004, Axonyx and Serono International,  S.A. (NYSE: SRA) signed a non-binding
 Memorandum of Understanding (MOU) for the research and joint  development  of
 therapeutic  compounds  (including the Amyloid  Inhibitory  and Prion  Inhibitory
 Peptides described  in more  detail in Item 2 below) and  diagnostic  technologies  in
the field of  protein  mis-folding  disorders  such as Parkinsons Disease,  Downs
Syndrome,  Diabetic disorders,  Lou Gehrigs Disease,  Alzheimers Disease,
 Transmissible  Spongioform Encephalopathies (TSEs) i.e. Mad Cow Disease (BSE) and
Creutzfeldt Jakob Disease new variant (CJDnv).


The
MOU proposes that Serono and Axonyx each will transfer certain  technologies and
proprietary  rights to a public entity they will  jointly  acquire,  including
 technologies  previously  licensed  by  Axonyx to  Serono,  as well as  additional
 related intellectual  property  and  expertise  subsequently  developed  by Serono.  In
addition  to  contributing  specifically  enumerated technologies to the new venture,
 Axonyx will invest $5 million. The parties anticipate that some time after its
formation,  the new venture will then separately raise  additional  capital in the public
markets to fund its research and development  activities.  The ultimate  objective is to
form a company that will  specialize in the  development  of  therapeutic  compounds for
the diagnosis and treatment of protein mis-folding disorders.


Under
the terms of the MOU, the Chief Operating Officer of the new venture will be Dr. Silvano
Fumero, formerly the head of research and development at Serono, and the parties
anticipate that the new venture will enter into a collaborative research agreement with
Creabilis Therapeutics srl, a private company controlled by Dr. Fumero.  The Chief
Scientific Officer will be Dr. Claudio Soto, who was responsible for the initial
discovery and development of the key technology that will be contributed to the joint
venture.  Axonyx will have a majority of the voting stock of the new venture and
initially will designate all of its directors.


Serono
will have the  exclusive  option to license key  technologies  that have  successfully
 completed  Phase II clinical trials,  in which case  milestone  payments and royalties
 would be payable to the new venture by Serono based on the  attainment of certain
milestones and  commercialization.  If Serono does not exercise such option for a
particular drug compound,  upon successful commercialization of the drug compound, the
new venture would pay royalties to Serono.


The
execution of the MOU by the parties is a result of previously  disclosed  discussions
about alternative  structures and collaborations to current licensing arrangements
covering the amyloid and prion inhibitory peptide technologies.



Following
the signing of the MOU, the parties have been  negotiating  the terms of definitive
 agreements.  Although  there is no assurance that a closing will occur,  the parties
hope to be able to finalize  documents and consummate  the  transactions  in the near
future.


8
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Item 2.
          Managements Discussion and Analysis of Financial Condition and Results of
Operations


THIS QUARTERLY REPORT ON
FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION
27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED. ALL STATEMENTS, OTHER THAN STATEMENTS OF
HISTORICAL FACTS, INCLUDED IN OR INCORPORATED BY REFERENCE INTO THIS FORM 10-Q
ARE FORWARD-LOOKING STATEMENTS. IN ADDITION, WHEN USED IN THIS DOCUMENT, THE
WORDS ANTICIPATE, ESTIMATE, PROJECT, AND SIMILAR EXPRESSIONS ARE INTENDED
TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING STATEMENTS ARE
SUBJECT TO CERTAIN RISKS, UNCERTAINTIES AND ASSUMPTIONS INCLUDING AMONG OTHERS,
THE RISK THAT OUR CLINICAL TRIALS WILL NOT PROVE SUCCESSFUL, THAT WE WILL NOT BE
ABLE TO OBTAIN FINANCING TO COMPLETE ANY FUTURE TRIALS, THAT THE FDA WILL NOT
GRANT MARKETING APPROVAL FOR PHENSERINE OR THAT, IF APPROVED, PHENSERINE WILL
NOT PROVE COMPETITVE IN THE MARKETS. THESE RISKS AND OTHERS ARE MORE FULLY
DESCRIBED IN OUR REPORT ON THIS FORM 10-Q AND IN OUR OTHER PUBLIC FILINGS,
INCLUDING OUR FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2003. SHOULD ONE OR MORE
OF THESE RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD UNDERLYING ASSUMPTIONS
PROVE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE ANTICIPATED,
ESTIMATED OR PROJECTED. ALTHOUGH WE BELIEVE THAT THE EXPECTATIONS INCLUDED IN
SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, WE CANNOT GIVE ANY ASSURANCES
THAT THESE EXPECTATIONS WILL PROVE TO BE CORRECT. WE UNDERTAKE NO OBLIGATION TO
PUBLICLY RELEASE THE RESULT OF ANY REVISIONS TO SUCH FORWARD-LOOKING STATEMENTS
THAT MAY BE MADE TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO
REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.



We
are engaged in the business of acquiring and developing  novel  post-discovery  central
nervous system drug  candidates, primarily  in areas of memory and  cognition.  We
acquire  patent  rights to central  nervous  system  pharmaceutical  compounds  we
believe  may have  significant  potential  market  impact  and work to advance  the
 compounds  through  pre-clinical  and  clinical development  towards regulatory
 approval.  We have acquired worldwide  exclusive patent rights to three main classes of
therapeutic compounds  designed for the  treatment of  Alzheimers  disease (AD),  Mild
 Cognitive  Impairment,  and related  diseases.  We have acquired patent rights to a
class of potential  therapeutic  compounds  designed for the treatment of prion related
diseases,  which are  degenerative  diseases of the brain that are thought to be caused
by an infectious  form of a protein  called a prion.  Prions, unlike viruses,  bacteria
and fungi, have no DNA and consist only of protein.  Such diseases include Creutzfeldt
Jakob Disease,  new variant in humans,  Bovine  Spongiform  Encephalopathy  (BSE or Mad
Cow  Disease) in cows,  and Scrapies  disease in sheep.  We have licensed these patent
rights separately from New York University and from the National  Institutes of
 Health/National  Institute on Aging (via a  sublicense).  We also have  co-inventorship
 rights to a patent  application  regarding a therapeutic  compound  named Posiphen
designed for the treatment of Alzheimers disease.


9
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|We
out-source all of our pre-clinical and clinical research and development,  utilizing
 contract  research  organizations, or CROs, and sponsored  research  arrangements.  We
have  contracted  with several CROs to undertake the  pre-clinical  and clinical
development  of  Phenserine.  We have entered into a License  Agreement  with Applied
 Research  Systems ARS Holding N.V.  (ARS),  a subsidiary of Serono  International,  S.A.
(Serono), a Swiss  biopharmaceutical  company,  under which ARS has the rights to conduct
research and  development  on certain of our licensed  technologies.  We received an
up-front fee and a milestone  payment,  and may receive future milestone payments and
royalties,  under the License Agreement.  We are currently  renegotiating our arrangement
with Serono  as  discussed  in note  (7) to the  condensed  consolidated  financial
 statements  contained  elsewhere  herein.  We do not currently maintain any laboratory
or research premises.


Our
current  business  strategy is to  concentrate  our financial  resources  primarily on
the further  development  of our licensed compounds, and in particular,  Phenserine,  an
inhibitor of  acetylcholinesterase,  that is our lead drug candidate for the treatment of
AD.  Acetylcholinesterase  is an enzyme in the synapse that degrades the
 neurotransmitter  acetylcholine  in the brain and  other  tissues  of  the  body.
 Acetylcholine  is  a  chemical  substance  that  sends  signals  between  nerve  cells,
 called neurotransmission,  and is therefore called a  neurotransmitter.
 Neurotransmitters  are secreted by neurons,  or nerve cells,  into the space between
 neurons called the synapse.  Acetylcholine  is a primary  neurotransmitter  in the
brain,  and is associated with memory and cognition.


In
early June 2003,  we initiated a Phase IIb clinical  trial  designed to evaluate the
effects of Phenserine on the levels of beta-amyloid  precursor protein and beta amyloid
in the plasma and cerebrospinal  fluid of AD patients.  The beta amyloid protein is one
of more than a dozen types of amyloid  proteins found in the body.  Beta amyloid is
derived from the  beta-amyloid  precursor protein  normally  present in the brain of
healthy  individuals in small  quantities.  Beta-amyloid,  derived from the  beta-amyloid
precursor protein, is over-produced in AD and Downs Syndrome.  In AD, the beta-amyloid
 protein undergoes a conformational  change, aggregates and is deposited as insoluble
 fibrils in amyloid plaques in the brain.  The  beta-amyloid  precursor  protein is
present in the cell wall of numerous cells within the body  including  nerve cells of the
brain.  Beta-amyloid  protein is derived from this larger  protein.  In late June 2003 we
also initiated a Phase III potentially  pivotal  clinical trial to further examine the
safety and efficacy of  Phenserine  on AD patients.  In June 2004 we completed
 enrollment  in the 1st Phase III trial and  initiated a 2nd Phase III trial with 450
patients.


In
addition to the Phenserine  clinical program,  we are sponsoring  pre-clinical  research
relating to an assay method for screening drug  candidates for  Alzheimers  disease.
 Pursuant to a sublicense  agreement with ARS, ARS has the rights to undertake research
and  development  concerning  the  development of (1) compounds  called Amyloid
 Inhibitory  Peptides  (AIPs),  which may prevent and reverse the  formation of amyloid
 plaques in AD, and (2) a  pharmaceutical  compound  for  prion-related  diseases.  In
Alzheimers  disease the conversion of  beta-amyloid  protein into insoluble  beta-sheets
 that aggregate to form insoluble  fibrous masses  (fibrils)  is a key event that leads
 eventually  to neuronal  cell death in the brains of AD  patients.  These  fibrils are
deposited as part of the amyloid  plaques that appear to be a cause of the death of
neurons in the brain.  The AIPs,  also  referred to as beta-sheet  breaker peptides,
 have been designed to block the aggregation of beta-amyloid in a competitive  manner by
binding to the  beta-sheet  form of the amyloid  protein,  thus  preventing  the
formation of amyloid  plaques in the brain.  The beta-sheet breaker peptide is a molecule
 composed of naturally  occurring amino acids,  the building blocks of proteins,  which
is designed to bind to and prevent the conversion of the normal form of protein to the
misshapen form that is found in amyloid plaques.


10
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|We
have  initiated  the  preclinical  development  of Posiphen,  a compound  that appears to
decrease the  formation of the beta-amyloid  precursor protein with potential
 applications in the treatment of AD, and given sufficient  financial  resources,  we
may, in the future, sponsor further pre-clinical  development of Tolserine,  another
 acetylcholinesterase  inhibitor and one of our butyrylcholinesterase    inhibitors.
   Acetylcholinesterase    inhibitors    are   drugs    designed   to    selectively
   inhibit acetylcholinesterase.  Butyrylcholinesterase  is an enzyme that is normally
 found  widely in the body.  Its function in the central nervous system remains to be
fully understood.  Amongst other roles, it degrades  acetylcholine,  a primary
 neurotransmitter in the brain.  Butyrylcholinesterase  is found in high  concentration
 in the plaques  taken from  individuals  who have died from AD. This enzyme also
functions to degrade a number of drugs and natural products and is involved in their
elimination from the body.



The AD targeted approaches include:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 1) | Phenserine,
 an inhibitor of  acetylcholinesterase  and the beta-amyloid  precursor protein,  our
lead drug candidate,  and          Tolserine, another follow-on acetylcholinesterase
inhibitor;
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2) | a
butyrylcholinesterase inhibitor which will be chosen from a series of selectively acting
compounds;
| | -- | -----------------------------------------------------------------------------------------------------

| | 3) | Posiphen,
a compound that decreases the formation of beta-amyloid precursor protein;
| | -- | ------------------------------------------------------------------------------------

| | 4) | through
our  sublicense  with ARS, a subsidiary of Serono,  which is described in greater  detail
below,  compounds  called          Amyloid Inhibitory Peptides (AIPs) which may prevent
and reverse the formation of amyloid plaques in AD.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|On
May 2, 2000,  ARS, a  subsidiary  of Serono,  exercised  its right to  license  certain
of our patent  rights  under the Development  Agreement  and  Right  to  License  signed
 with us in May of  1999.  Under  that  agreement,  ARS  paid us a  $250,000
non-refundable fee for the right to license.  Pursuant to the resulting License
 Agreement,  which became effective on September 15, 2000, ARS acquired  exclusive
 worldwide patent rights to our AIP and Prion  Inhibitory  Peptide  technologies,  called
the Licensed Products.  In  conjunction  with the signing of the License  Agreement with
ARS, we generated $1.5 million of revenue in the form of an up-front  license fee. We
received a milestone  payment of $1 million in April 2003 from ARS in relation to the
 initiation  of a Phase I  clinical  trial  with a  licensed  AIP  compound.  We may
 generate  additional  revenues  from ARS if they  reach  certain development  milestones
concerning the licensed compounds or other products and related intellectual  property,
 although additional milestone  payments  did not occur in fiscal year 2003.  The Company
 could  receive  milestone  payments  from ARS in an  aggregate amount of $13  million if
the  Licensed  Product  involved  is a patented  product  covered by the  sub-licensed
 patents and patent applications and it achieves  certain  developmental  milestones up
through health  registration  approval.  The amount of aggregate milestone  payments
 through  health  registration  approval would be $7 million if the Licensed  Product
 involved was developed by Serono  during the one year term of the  Development
 Agreement  we  entered  into with ARS in May 1999.  We cannot  assure you that licensed
 compounds  or products  will reach any  particular  stage of  development  requiring a
milestone  payment,  that  licensed compounds  or  products  will ever reach the market
and give rise to royalty  payments,  or that  additional  revenues  from  patent
licensing will be generated or that Serono will continue with any research and
 development  activities.  However,  we are currently renegotiating  the terms of the
Serono  agreement  as  described  in note (7) to the  condensed  consolidated  financial
 statements contained elsewhere herein.


Through
our sublicense with ARS, Serono has the right to conduct  research and development  work
on compounds called Prion Inhibitory  Peptides  designed for the diagnosis and treatment
of prion  diseases  such as Bovine  Spongiform  Encephalopathy  (also known as Mad Cow
Disease) and the human form of the disease, Creutzfeldt Jakob Disease, new variant.


11
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|We
are also funding  research at Monash  University  in Australia  relating to the
 development  of an assay method for the rapid  screening of potential drug  candidates
for the treatment of Alzheimers  disease.  We have signed a Research  Agreement with the
 principal  researcher,  David Henry Small,  Ph.D.,  to fund this  research  over a
three-year  period ending in May 2005. It is anticipated  that the Axonyx rights to the
assay may be transferred to the  Serono-Axonyx  public entity as described in note (7) to
the condensed consolidated financial statements contained elsewhere herein.


In
 December  2000, The  Company  incorporated  Axonyx  Europe BV, a wholly  owned
 subsidiary,  in the  Netherlands.  Gosse Bruinsma,  M.D.,  currently the President and
Chief  Operating  Officer of Axonyx Inc., was appointed the President of Axonyx Europe
BV. The majority of our clinical  development  activities and a significant  amount of
our  preclinical  development  activities are carried out in Europe. The Axonyx Europe BV
office manages,  directs,  and controls these activities.  Axonyx Europe BV explores and
pursues  in-licensing  and  out-licensing  opportunities  for The  Companys  licensed
 technologies  in Europe and  elsewhere,  and facilitates communication with The
Companys European shareholders and Serono.


We
have incurred  negative cash flows from  operations  since the inception of the Company
in 1997.  Our net losses for the three fiscal years ended 2001,  2002, and 2003 were
 $8,144,000,  $6,256,000 and  $8,106,000  respectively.  As of June 30, 2004, we had an
accumulated  deficit of $46,851,000 and our operating losses are continuing.  Except for
OXIS, we have no products  available for sale and we do not expect to have any products
commercially available for several years, if at all.


On
January 15, 2004, we entered into agreements to acquire  approximately 53% of the
outstanding  voting stock of OXIS is a biopharmaceutical/diagnostic  company engaged in
the development of research  diagnostics,  nutraceuticals  and  therapeutics in the field
of  oxidative  stress.  Under the terms of separate  agreements  entered into with
several  holders of OXIS common  stock,  we acquired an  aggregate  of  approximately  14
million  shares of OXIS stock,  in  consideration  for our issuance of an aggregate of
approximately  1.6 million shares of our  unregistered  common stock. We filed a
registration  statement on Form S-3 to register the shares of Axonyx  common  stock that
were  issued in the  exchange.  Marvin S.  Hausman,  M.D.,  our  Chairman  and Chief
 Executive Officer,  owns 1,161,532 shares of OXIS common stock,  representing
 approximately 4% of OXIS voting stock. Dr. Hausmans shares of OXIS common stock were
not subject to this exchange for our common stock.


Axonyx
Inc. was  incorporated in Nevada on July 29, 1997. Our principal  executive  offices are
located at 500 Seventh Avenue,  10th Floor, New York, New York 10018, and our telephone
number is (212) 645-7704.


RESULTS OF OPERATIONS


Revenues


The
 Company had revenue of  $433,000  and  $1,000,000  for the three  months  ended June 30,
2004 and 2003, respectively.  The Company had revenue of $911,000 and  $1,000,000  for
the six months ended June 30, 2004 and 2003,  respectively.  Revenue in 2004 was derived
 from the sale of research  assays and fine  chemicals  at Oxis.  In April  2003,  Axonyx
 received a  milestone  payment of $1,000,000 from Serono  International  S.A. (Serono)
under the terms of a license agreement for beta-sheet  breaker  technology that was
signed in  September  2000.  The  milestone  payment  was  triggered  when  Serono
 initiated  a Phase I  clinical  trial with a beta-sheet breaker peptide for the
potential treatment of Alzheimers disease.


12
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Costs of Sales


The
Companys  costs of sales were entirely  related to its majority  owned  subsidiary,
 OXIS.  The  percentage of cost of sales for both the quarter and six months ended June
30, 2004, was 55%.


Research and Development


Research
 and  development  expenses  were  $5,782,000  and  $1,249,000  for the  quarters  ended
 June 30,  2004 and 2003, respectively.  Research and  development  expenses were
 $9,834,000  and $2,276,000 for the six months ended June 30, 2004 and 2003,
respectively.  The increase is primarily  attributable  to the ongoing  Phase IIB and
Phase III pivotal  trials  underway in Europe. These trials  commenced in June 2003.  In
June 2004, we have  initiated a 2nd Phase III trial and incurred  start up costs
 including the initial investigators meeting. Addditionally,  preclinical studies in
carcinogenicity and Absorption,  Distribution,  Metabolism and Excretion (ADME) increased
by $727,000 from the same six month period in 2003.



Sales, General and
Administrative


Sales,
 general and  administrative  expenses were $2,127,000 and $1,017,000 for the quarters
ended June 30, 2004 and 2003, respectively.  Sales,  general and  administrative
 expenses were  $4,498,000  and $1,590,000 for the six months ended June 30, 2004 and
2003,  respectively.  Non-cash  charges  relating to stock option grants to consultants
 was $1,248,000  compared to $154,000 in the six months ended June 30, 2004 and 2003,
 respectively.  $1,743,000  of sales,  general and  administrative  expenses  relate to
OXIS.  The OXIS expenses include $525,000 in severance and legal costs attributed to the
change of control to Axonyx.


Other Income (Expense)


Interest
income was $241,000 and $15,000 for the quarters ending June 30, 2004 and 2003,
respectively.  Interest income was $426,000 and $37,000 for the six months ended June 30,
2004 and 2003.  The increase reflects the higher cash and cash equivalent balances held
in 2004 resulting from the cash collected from several private placements occurring in
late 2003 and 2004.


Foreign
exchange for the six months ended June 30, 2004, was a loss of $37,000 compared to a
foreign exchange gain of $7,000 for the six months ended June 30, 2003.  The loss
reflects the increased transactions in Euro denominated currency and the valuation
changes between the Euro and the U.S. dollar.


Gain
on issuance of subsidiary stock was $55,000 for the quarter and six months ended June 30,
2004.  This gain results from common stock issued in OXIS.


Financing
fees and interest expense reflect the cost of borrowing incurred by OXIS in obtaining
temporary short term financing.


Net Loss


The
 Company  experienced  net  losses of  $7,132,000  ($0.14  per  share-basic  and
 diluted)  and  $1,247,000  ($0.05 per share-basic  and  diluted)  for the  quarters
 ended June 30, 2004 and 2003,  respectively.  The Company  experienced  net losses of
$13,123,000  ($0.28 per  share-basic  and diluted) and $2,822,000  ($0.12 per share-basic
and diluted) for the six months ended June 30, 2004 and 2003,  respectively.  The
increase in the net loss is primarily  due to the expense of the ongoing  Phase IIB and
Phase III clinical  trials for  Phenserine,  initiation of the 2nd Phase III clinical
 trial, an increase in the non-cash stock and option charges and our share of the net
loss of OXIS.


13
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Comprehensive Loss


The
Company reported for the quarter and six months ended June 30, 2004, a $34,000 foreign
currency  translation  adjustment occurring in the OXIS subsidiary.



LIQUIDITY AND CAPITAL
RESOURCES


As
of June 30, 2004, we had $93,341,000 in cash and cash  equivalents,  and $88,747,000 in
working capital.  We do not have any available lines of credit.  Since inception we have
financed our operations from private  placements of equity  securities,  the exercise of
common stock purchase warrants, license fees, interest income and loans from a
shareholder.


Net
cash used in operating  activities for the six months ended June 30, 2004, was  $9,795,000
 resulting from a net loss of $13,123,000,  offset in part by an increase in accounts
 payable and  accrued  expenses of  $2,002,000,  and stock and option  based compensation
 of $1,458,000 and  depreciation  expense of $443,000.  Net cash used in operating
 activities for the six months ended June 30, 2003, was  $2,868,000  resulting  from a net
loss of  $2,822,000,  a decrease in  accounts  payable and accrued  expenses of $374,000
and stock and option based compensation of $294,000.


Net
cash  provided from  investing  activities  was $481,000 for the six months ended June
30, 2004.  $714,000 was acquired in  connection  with the Oxis  acquisition  offset in
part by costs  related to additions to patents,  the  acquisition  of OXIS and office
equipment purchases.


Net
cash from  financing  activities  for the six months  ended June 30, 2004, was
 $73,875,000.  In January we received net proceeds of $46,394,000 from a private
 placement of $50,000,000 of securities  through the sale of 9,650,183 shares of common
stock and warrants.  In May we received net proceeds of $18,364,000  from the private
 placement of $20,000,000 of securities  through the sale of 3,076,923  shares of common
stock and warrants.  Additionally,  we received  $9,067,000  during the period from the
exercise of stock options and warrants and $50,000 from the exercise of common stock
options in OXIS.


Net
cash from financing for the six months ended June 30, 2003, was  $8,111,000 of which
 $4,868,000 was from the collection of stock  subscriptions  receivable  held in escrow
from a private  placement of shares of common stock and warrants  that closed on December
31, 2002.  Net cash from  financing in June 2003, was  $3,243,000.  In June 2003, we
received  aggregate  gross  proceeds of approximately  $2.3  million and issued  919,130
 shares of common  stock upon the  exercise  of warrants by fifteen  holders of AXC
warrants  pursuant to a special  offer.  In June 2003, we raised  aggregate  gross
 proceeds of $575,000  through the sale of 230,000 shares of common stock at $2.50 per
share in a private  placement  with four  European  accredited  investors.  Also in June
2003, we received gross proceeds of approximately  $345,000 and issued approximately
 775,000 shares to holders of AXD warrants who exercised their warrants.


We
currently  have  contracts  with JSW Research of Austria,  to undertake the ongoing
 Phenserine  Phase IIb and Phase III clinical  trials.  We also have  contracts  with
other CROs to provide  services  relating to  Phenserine  research and  development
activities  including  completing  pre-clinical  tests on the final drug  formulation  of
 Phenserine,  undertaking  carcinogenicity studies,  bio-assays of blood plasma samples,
 and finalizing drug stability studies. We are currently  finalizing a contract with a
large CRO to conduct a second pivotal  cognition Phase III trial for Phenserine.  This
multi-year  contract is expected to be in the range of $20 million,  depending upon the
number of patients to be included in the trial. The studies  commenced in 3rd quarter
2004 and are expected to run 24 to 30 months.  Finally,  under our Research  Agreement we
are funding a two year research  program at the laboratory  of Dr. David Small at Monash
 University in Australia  concerning  an assay method that is designed to screen
 potential drug  compounds  for  Alzheimers  disease  that have an effect on
 beta-amyloid.  This  research  project  is  anticipated  to cost approximately $75,000
in 2003, and an additional $75,000 in the 2004 year.


14
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Under
our Research and License Agreement with New York University, we must pay minimum annual
royalty payments of $150,000 per year beginning in 2004 through the expiration or
termination of that agreement. Our current real estate leases are all on a short-term
basis.


We
plan to finance our needs principally from the following:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | our
existing capital resources and interest earned on that capital;
|- | -------------------------------------------------------------------

| | future
private placement financing or other equity financings..
|- | ---------------------------------------------------------------

|We
believe that we have  sufficient  capital  resources to finance our plan of operation for
at least the next  twenty-four months.  However,  as this is a  forward-looking
 statement,  and  there may be  changes  that  could  consume  available  resources
significantly  before such time.  Our long term capital  requirements  and the adequacy
of our  available  funds will depend on many factors,  including the eventual contract
costs of undertaking the Phenserine Phase III clinical trials,  regulatory delays,
 patent costs for filing, prosecuting, maintaining and defending our patent rights, among
others.


We
are regularly seeking potential equity financing,  sub-licensing and other collaborative
 arrangements that may generate additional  capital for us if the FDA  requires  us to
enroll more  patients or to conduct  additional  pivotal  Phase III  clinical trials.  We
cannot  assure you that we will  generate  sufficient  additional  capital or revenues,
 if any, to fund our  operations beyond the 24 month period ending June 30, 2006,  that
any future equity  financings  will be  successful,  or that other  potential financings
through bank borrowings, debt or equity offerings, or otherwise, will be available on
acceptable terms or at all.


The
Companys  liquidity and capital resources  position is currently  adequate to support
its own development plans for at least the next 24 months.  However,  the liquidity and
capital resource position of the Companys  majority owned subsidiary,  OXIS, standing
 alone,  is not adequate to support its ongoing  operations  without  additional
 capital.  OXIS working  capital  deficit increased during the first six months of 2004
to $1,224,000, from a deficit of $36,000 at December 31, 2003.


OXIS
expects to incur operating  losses for the foreseeable  future.  There can be no
assurance that OXIS will ever achieve profitable  operations.  The report of the OXIS
 independent  auditors on the companys  financial  statements for the period ended
December 31, 2003, includes an explanatory paragraph referring to OXIS ability to
continue as a going concern.


OXIS
needs to raise  additional  capital for  continuing  operations  of the health  products
 segment and to complete  its contemplated  drug  development  programs and no
 assurances  can be given that OXIS will be able to raise such capital on favorable
terms.  As the majority  stockholder  and an interested  person under Delaware law, the
Company is limited in the ways in which it can provide  financial  assistance  to OXIS.
 The  unavailability  of  additional  capital  could cause OXIS to cease or curtail its
operations and/or delay or prevent the development and marketing of the Companys
existing and potential products.


Executive Stock
Trading Program


In
June  2004,  the  Chairman  of the Board and  Chief  Executive  Officer  of the  Company,
 Marvin  S.  Hausman,  M.D.,  adopted a pre-arranged stock trading plan in accordance
with guidelines specified by Rule 10b5-1 under the Securities Exchange Act of 1934.


15
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Rule
10b5-1  permits  officers and directors of public  companies to adopt  pre-determined
 plans for selling  specified  amounts of stock.  The plans may be entered into only when
the director or officer is not in  possession  of material,  non-public  information and
may be used to gradually diversify investment portfolios over a period of time.



Dr.
 Hausman will only sell shares of stock if the Companys  stock price  exceeds $6.00
per share.  His plan provides for the first possible sale to be made in the month of July
2004.  Since the Companys  stock price did not exceed the $6.00 price,  no sales
were made in July 2004.


Under
the terms of Dr.  Hausmans  one-year  plan,  he may,  prior to July 10, 2005, sell,
 on a pro rated  monthly  basis,  up to an aggregate of 200,000 shares,  which represents
 approximately 6.4% of the total number of shares and currently  exercisable warrants and
options he currently  holds.  Dr.  Hausman has adopted his stock selling plan for
financial  planning  purposes and to diversify his personal portfolio.



Critical Accounting
Policies and Estimates.


This
 discussion and analysis of our financial  condition and results of operations  are based
on our financial  statements that have been  prepared  under  accounting  principles
 generally  accepted in the United  States of America.  The  preparation  of financial
 statements in conformity  with  accounting  principles  generally  accepted in the
United States of America  requires our management to make  estimates and  assumptions
 that affect the reported  amounts of assets and  liabilities  and the  disclosure of
contingent  assets and liabilities at the date of the financial  statements and the
reported  amounts of revenue and expenses during the reporting  period.  Actual results
could materially  differ from those estimates.  We have disclosed all significant
 accounting policies in note B to the  financial  statements  included  in our Form 10-K
for the year ended  December  31,  2003.  Our  critical accounting policies are:


Inventories:Inventories are stated at the lower of cost or market. Cost has been determined by
using the first-in, first-out method.


Revenue
recognition:We defer recognition of revenue from fees received in advance unless they
represent the culmination of a separate earnings process. Such deferred fees are
recognized as revenue over the term of the arrangement as they are earned, in accordance
with the agreement. License fees represent the culmination of a separate
earnings process if they are sold separately without obligating us to perform
research and development activities or other services. Rights to license fees are
recognized over the term of the arrangement. Nonrefundable, non-creditable license
fees that represent the culmination of a separate earnings process are recognized
upon execution of the license agreement. Revenue from the achievement of milestone
events stipulated in the agreements will be recognized when the milestone is
achieved. Royalties will be recognized as revenue when the amounts earned become fixed
and determinable.


OXIS
manufactures,  or has manufactured on a contract basis,  products that are sold to
customers.  OXIS recognizes product sales upon shipment of the product to the customer.
 OXIS also develops and acquires  technology  that is used in its  operations or sold,
licensed or assigned to third parties.  OXIS recognizes revenue upon the sale or
assignment of technology to third parties.


Research,
development costs:Research and development costs are expensed as incurred.


16
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Item 3.
          Quantitative and Qualitative Disclosures About Market Risk.


We
have foreign currency  accounts that are exposed to currency  exchange risk.  These
foreign currency  accounts have been utilized to fund the  operations of our wholly owned
 subsidiary,  Axonyx  Europe,  based in the  Netherlands.  We had a net foreign exchange
 loss of $37,000 for the six months  ended June 30, 2004, and a gain of $7,000 for the six
months  ended June 30,  2003.  If the foreign  currency  rates were to fluctuate by 10%
from rates at June 30, 2004 and 2003,  the effect on our financial  statements would not
be  material.  However,  there can be no assurance  there will not be a material  impact
in the future.  During  2003,  we adopted a policy to limit the purchase of foreign
 currencies  to the amounts  necessary to cover firm  contractual  commitments  in
foreign currencies for the forward six months.  However, as long as we continue to fund
our foreign  operations,  we will be exposed to some currency exchange risks. The
majority of our ongoing clinical trials are being conducted in Europe.


We
consider our  investments  in money market  accounts,  short term  commercial  paper and
time  deposits as cash and cash equivalents.  The carrying  values of these  investments
 approximate  fair value because of the short  maturities  (three months or less) of
these  instruments  and  accounts.  Therefore,  changes  in the  markets  interest
 rates do not  affect  the value of the investments as recorded by us.


We
do not enter into or trade derivatives or other financial instruments or conduct any
hedging activities.





Item 4.
          Controls and Procedures.


Evaluation of Disclosure
Controls and Procedures


Our
management,  with the  participation  of our principal  executive  officer and principal
 financial  officer,  has evaluated the effectiveness  of the design and operation of our
disclosure  controls and  procedures (as defined in Rules  13a-14(c) and 15d-14(c) under
the Securities  Exchange Act of 1934, as amended) as of the end of the period  covered by
this quarterly  report on Form 10-Q. Based on this evaluation,  our principal  executive
officer and principal financial officer concluded that these disclosure controls and
 procedures  are  effective  and  designed  to ensure that the  information  required to
be  disclosed  in our reports  filed or submitted  under the  Securities  Exchange Act of
1934 is recorded,  processed,  summarized  and reported  within the requisite time
periods.


Our
management,  including our Chief Executive  Officer and Chief Financial  Officer,  does
not expect that our disclosure  controls and procedures or internal  control over
financial  reporting  will prevent all errors and all fraud.  A control  system,  no
matter how well  conceived and operated,  can provide only  reasonable,  not absolute,
 assurance that the objectives of the system are met and cannot  detect all  deviations.
 Because of the inherent  limitations  in all control  systems,  no  evaluation  of
controls can provide  absolute  assurance  that all control  issues and  instances  of
fraud or  deviations,  if any within the company have been detected.  While we believe
that our disclosure  controls and procedures have been effective,  in light of the
foregoing,  we intend to continue to examine and refine our disclosure control and
procedures to monitor ongoing developments in this area.


Changes in Internal
Controls


There
was no change in our internal  control  over  financial  reporting  (as defined in Rules
 13a-15(f)  and  15d-15(f)  under the Securities  Exchange Act of 1934, as amended)
 identified in connection with the evaluation of our internal control performed during
our last fiscal  quarter  that has  materially  affected,  or is  reasonably  likely to
 materially  affect,  our  internal  control over  financial reporting.


17
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|PART II  OTHER INFORMATION




Item 2.
          Changes in Securities and Use of Proceeds


In
May 2004,  we  completed a private  placement  for $20 million of  securities  through
the sale of  3,076,923  shares of common stock at $6.50 per share with new  institutional
 investors.  This  placement  also involved the  acquisition by the investor group of
five-year  warrants to purchase an  additional  923,077  shares of the  Companys  stock
at an exercise  price of $8.50 per share.





Item 4.
          Submission of Matters to a Vote of Security Holders



At
the Companys 2004 Annual Meeting of  Shareholders  held on June 22, 2004,  the
Companys          shareholders voted on the following matters:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | a.)
Election of the following Directors
| | ---------------------------------------

| | Director |  | For                     |  | Withheld | 
| | -------- |  | ----------------------- |  | -------- | 
| |          |  | Marvin S. Hausman, M.D. |  |          | 
| |          |  | Gosse B. Bruinsma, M.D. |  |          | 
| |          |  | Louis G. Cornacchia     |  |          | 
| |          |  | Steven H. Ferris, PhD.  |  |          | 
| |          |  | Gerard J. Vlak, PhD.    |  |          | 
| |          |  | Ralph Snyderman, M.D.   |  |          | 

| | b.)
Resolution  authorizing the amendment of the Companys  restated  Articles of
 Incorporation to increase the authorized          number of shares of the Companys
common stock to 150,000,000.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | For |  | Against |            | Abstain |          
| | --- |  | ------- | ---------- | ------- | ---------
| |     |  |         | 36,059,654 |         | 1,459,767

| | c.)
Resolution approving the Companys second amended and restated 2000 stock option plan.
| | ------------------------------------------------------------------------------------------

| | For |  | Against |            | Abstain |          
| | --- |  | ------- | ---------- | ------- | ---------
| |     |  |         | 14,172,558 |         | 2,544,619

| | d.)
Ratification of the selection of independent auditors.
| | ----------------------------------------------------------

| | For |  | Against |            | Abstain |        
| | --- |  | ------- | ---------- | ------- | -------
| |     |  |         | 37,258,966 |         | 267,388

|18
|--

|Item 6.
          Exhibits and Reports on Form 8-K
|--------------------------------------------------

| | (a) | Exhibits
| | --- | --------

| | 3(a) | Certificate of
Amendment of Restated Articles of Incorporation dated June 28, 2004;
| | ---- | -----------------------------------------------------------------------------------

| | 10(a)  * | Securities
Purchase Agreement dated as of May 3, 2004, between Axonyx Inc. and certain
investors (incorporated by reference to Exhibit 4.1 in the current report on
Form 8-K previously filed by Axonyx Inc. on May 5, 2004);
| | -------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10(b)  * | Registration
Rights Agreement dated as of May 3, 2004, between Axonyx Inc. and certain
investors (incorporated by reference to Exhibit 4.2 in the current report on
Form 8-K previously filed by Axonyx Inc. on May 5, 2004);
| | -------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 31(a) | Rule 13a-14(a)
Certification by Chief Executive Officer;
| | ----- | --------------------------------------------------------

| | 31(b) | Rule 13a-14(a)
Certification by Chief Financial Officer;
| | ----- | --------------------------------------------------------

| | 32(a) | Section 1350
Certification by Chief Executive Officer;
| | ----- | ------------------------------------------------------

| | 32(b) | Section 1350
Certification by Chief Financial Officer.
| | ----- | ------------------------------------------------------

|* | Previously
filed
|- | ----------------

| | (b) | Reports
on Form 8-K
| | --- | -------------------

| | 1. | We
filed a Current Report on Form 8-K (item 5) with the  Securities  and Exchange
 Commission on          January 12, 2004,  reporting our press release,  Axonyx
Announces $50 Million Private Placement          of Common Stock and Warrants.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2. | We
 filed a  Current  Report  on Form  8-K  (items 2 and 7) with  the  Securities  and
 Exchange          Commission on January 20, 2004,  reporting our press release,  Axonyx
Inc. today announced that          it has entered into agreements to acquire
 approximately 53% of the outstanding  voting stock of          OXIS.  We filed a Form
 8-K/A  amending  such  form on March 30,  2004,  to  include  Item 7(a)
         Financial Statements of Business Acquired and Item 7(b) Pro Forma Financial
Information.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3. | We
filed a Current Report on Form 8-K (item 5) with the Securities  and Exchange  Commission
on May 5, 2004,  reporting our                                     press release, Axonyx
Announces $20 million Private Placement of Common Stock and Warrants.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4. | We
filed a Current Report on Form 8-K (item 5) with the  Securities  and Exchange
 Commission on          June 4, 2004,  reporting our loan of $1.2 million to Oxis
International,  Inc., in which we hold          a controlling interest.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 5. | We
filed a Current Report on Form 8-K (item 5) with the  Securities  and Exchange
 Commission on          June 4, 2004,  reporting the adoption of a pre-arranged stock
trading plan by Marvin S. Hausman,          M.D., our Chairman of the Board and Chief
Executive Officer.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 6. | We
filed a Current Report on Form 8-K (item 5) with the  Securities  and Exchange
 Commission on          June  10,  2004,  reporting  that  our  Board  of  directors
 resolved  to deny  itself  and its          Compensation  Committee the  flexibility  to
reprice any stock options  granted  pursuant to our          2000 Stock Option Plan.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|19
|--

|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.


Dated August 11, 2004.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | AXONYX INC.
| | -----------

| | By: /s/ Marvin S. Hausman, M.D.

Marvin S. Hausman, M.D.
Chairman and Chief Executive Officer
| | -----------------------------------------------------------------------------------------------------------

| | By: /s/ S. Colin Neill

S. Colin Neill
Chief Financial Officer,
Secretary and Treasurer
(Principal Financial and Accounting Officer)
| | ---------------------------------------------------------------------------------------------------------------------------------------------

|20
|--