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**UNITED          STATES SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,          D.C. 20549**

| **Delaware**(State                    or other jurisdiction ofincorporation                    or organization)                                                                                                                                                                                  | **94-1620407**(I.R.S.                    employeridentification                    number) |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------|
|  **323                    Vintage Park Drive, Suite B, Foster City, CA 94404**(Address                    of principal executive offices and zip code)**(650)                    212-2568**(Registrant’s                    telephone number, including area                    code) |

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**TABLE        OF CONTENTS**

| PART                  I        | Page                                                                                                                                                                          |
|--------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Item                  1.       | Description                  of Business                                                                                                                                      | 2 |
| Item                  2.       | Description                  of Property                                                                                                                                      | 18 |
| Item                  3.       | Legal                  Proceedings                                                                                                                                            | 19 |
| Item                  4.       | Submission                  of Matters to a Vote of Security Holders                                                                                                          | 19 |
| PART                  II       |
| Item                  5.       | Market                  for Common Equity and Related Stockholder Matters                                                                                                     | 20 |
| Item                  6.       | Management’s                  Discussion and Analysis or Plan of Operation                                                                                              | 23 |
| Item                  6.       | Risk                  Factors                                                                                                                                                 | 40 |
| Item                  7.       | Financial                  Statements                                                                                                                                         | 57 |
| Item                  8.       | Changes                  in and Disagreements With Accountants on Accounting and Financial                  Disclosure                                                        | 57 |
| Item                  8A.      | Controls                  and Procedures                                                                                                                                      | 58 |
| Item                  8B.      | Other                  Information                                                                                                                                            | 58 |
| PART                  III      |
| Item                  9.       | Directors,                  Executive Officers, Promoters and Control Persons; Compliance with                  Section                  16(a) of the Securities Exchange Act | 59 |
| Item                  10.      | Executive                  Compensation                                                                                                                                       | 63 |
| Item                  11.      | Security                  Ownership of Certain Beneficial Owners and Management and Related                  Stockholder Matters                                              | 71 |
| Item                  12.      | Certain                  Relationships and Related Transactions                                                                                                               | 75 |
| Item                  13.      | Exhibits                                                                                                                                                                      | 78 |
| Item                  14.      | Principal                  Accountant Fees and Services                                                                                                                       | 78 |
| SIGNATURES                     | 79                                                                                                                                                                            |
| EXHIBIT                  INDEX | 80                                                                                                                                                                            |

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**PART          I**

**CAUTIONARY          NOTICE REGARDING FORWARD-LOOKING STATEMENTS**

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**ITEM          1.**
**DESCRIPTION          OF BUSINESS**

**Recent          Events**

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*License          Agreement with Alteon*

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**Recent            Convertible Debenture and Warrant Financing**

**BioCheck          Acquisition**

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**BUSINESS**

**Overview**

** **

*in          vitro*

**OXIS          INTERNATIONAL, INC.**

** **

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*Marketed          Products*

*in          vitro*
*in          vitro*
*in          vivo*

*OXIS          Research Diagnostic Assays*

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*Ergothioneine*

** **

** **

**Marketing**

*OXIS*
*OXIS*

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**Foreign          Operations and Export Sales**

|                                       |   | **2006** |          | **2005** |    |
|--------------------------------------------|--------|----------|---------------|----------|---------|
|  Japan                                |   |  $  | 151,000  |     |  $ | 163,000  |   |
| Korea                                      |   |     | 55,000        |     |    | 76,000 |   |
| Poland                                     |   |     | 53,000        |     |    | 54,000 |   |
| France                                     |   |     | 45,000        |     |    | 94,000 |   |
| Canada                                     |   |     | 35,000        |     |    | 47,000 |   |
| Other                    foreign countries |   |     | 296,000       |     |    | 275,000 |   |

**Other          OXIS Therapeutic Compounds**

*BXT          (Organoselenium) Compounds*

*License          Agreement with Alteon*

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*Ergothioneine          as a Veterinary Product*

*Ergothioneine          as a Nutraceutical Supplement*

*Lipid          Soluble Antioxidants Patented Compound Group*

*Superoxide          Dismutase (SOD)*

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*Myeloperoxidase          Assay/Cardiovascular Predictor Product*

** **

*Out-Licensed          Technology*

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**BIOCHECK,          INC.**

*in          vitro*

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**BioCheck          Products and Services**

*in          vitro*

*BioCheck          Clinical Diagnostics*

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*BioCheck          Research Reagents and Assay Kits *

** **

*BioCheck          Cardiovascular Markers*

** **

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*BioCheck          Research Services*

| ·   | *Custom                  Immunoassay Development.*With                  over 30 years of experience and the development over 40 immunoassay                  products, BioCheck’s in-house research and development team provides                  antibodies and antigens, and assists biotechnology and pharmaceutical                  customers with the development of their immunoassay test                  kits. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | *Antibody                  Purification and Conjugation.*Using                  chromatography technology and proprietary antibody conjugation                  methods,                  BioCheck offers antibody purification services and antibody conjugates.                  Stability testing has indicated that BioCheck’s conjugates remain active                  for five years. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | *Immunoassay                  Assembly Services.*                  Having developed over 40 immunoassay products, BioCheck has exceptional                  test kit packaging experience and can provide custom immunoassay                  assembly                  services for our customers. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Further          Information Regarding OXIS and BioCheck**

**Research          and Development**

*Angiogenesis          Tumor Markers *

* *

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*Aggressive          Breast Cancer Marker *

**Patents          and Trademarks**

*OXIS          Patent Portfolio*

** **

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*OXIS          Research Assay Patents*

| · | U.S.                    Patent 5,726,063 issued March 10, 1998 for “Method of Colorimetric                    Analysis of Malonic Dialdehyde and 4-Hydroxy-2-Enaldehydes as                    Indexes of                    Lipid Peroxidation, Kits for Carrying Out Said Method, Substituted                    Indoles                    for Use in Said Method and their Preparation” will expire on May 6,                    2014. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | U.S.                    Patent 5,543,298 issued August 6, 1996 for “Method for Assaying the SOD                    Activity by Using a Self-Oxidizable Compound Necessary for its                    Implementation, Self-Oxidizable Compounds and Preparation Thereof” will                    expire on August 6, 2013.                                                                                                                  |
| · | U.S.                    Patent 6,235,495 issued May 1, 2001 for “Methods for the Quantiation of In                    Vivo Levels of Oxidized Glutathione” will expire on November 12,                    2019.                                                                                                                                                                                                                            |
| · | U.S.                    Patent 5,861,262 issued January 19, 1999 for “Method of the Specific                    Immunoassay of Human Plasma Glutathione Peroxidase, Kit for its                    Implementation, Oligopeptides and Antibodies Specific for the                    Method” will                    expire on January 19, 2016.                                                                                            |
| · | U.S.                    Patent 5,817, 520 issued October 6, 1998 for “Spectrophotometric Methods                    for Assaying Total Mercaptans, Reduced Glutathione (GSH) and                    Mercaptans                    other than GSH in an Aqueous Medium, Reagents and Kits for Implementing                    Same” will expire on December 15,                    2012.                                                    |

*OXIS          Ergothioneine Patents*

| · | U.S.                    Patent 5,438,151 issued August 1, 1995 entitled “Process for the                    Preparation of Ergothioneine” will expire on February 8,                    2014.                 |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | U.S.                    Patent 6,103,746 issued August 8, 2000 entitled “Methods and Compositions                    for the Protection of Mitochondria” will expire on February 19,                    2018. |
| · | Patent                    Application Serial No. 60/367,845 filed March 26, 2002 entitled                    “Neuroprotectant Methods, Compositions and Screening Methods                    Thereof”.        |

*Selected          Licensed BXT-51072 Patents*

| · | U.S.                    Patent 5,968,920 issued October 19, 1999 entitled “Novel Compounds having                    a Benzoisoelen-Azoline and -Azine Structure, Method for Preparing                    Same and                    Therapeutic Uses Thereof” will expire on April 7, 2015. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | U.S.                    Patent 6,093,532 issued July 25, 2000 entitled “Method for Storing a                    Biological Organ Transplant Graft Using a Benzisoelen-Azoline                    or -Azine                    Compound” will expire on April 7, 2015.                         |
| · | U.S.                    Patent 5,973,009 issued October 26, 1999 entitled “Aromatic Diselenides                    and Selenosulfides, their Preparation and their Uses, more Particularly                    their Therapeutic Use” will expire on December 23,                    2017.     |
| · | U.S.                    Patent 6,525,040 issued February 25, 2003 entitled “Cyclic Organoselenium                    Compounds, their Preparation and their Uses” will expire on December 23,                    2017.                                                                        |

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*BioCheck          Patent Applications and Other Rights*

*troponin*

**Competition**

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**Government          Regulation**

**Employees**

**Facilities**

**ITEM          2.**
**DESCRIPTION          OF PROPERTY**

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**.          **

**ITEM          3.**
**LEGAL          PROCEEDINGS**

*Settlement          Agreement with Steve Guillen*

**ITEM          4.**
**SUBMISSION          OF MATTERS TO A VOTE OF SECURITY HOLDERS**

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**PART          II**

**ITEM          5.**
**MARKET          FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS**

| **YEAR**                            |   | **PERIOD** |                                     | **HIGH** |   | **LOW** |   |
|-------------------------------------|--------|------------|------------------------------------------|----------|--------|---------|--------|
| Fiscal                    Year 2004 |   |       | First                    Quarter         |     | $      | 0.90    |   | $ | 0.52 |   |
|                                |   |       | Second                    Quarter   |     | $      | 0.84    |   | $ | 0.45 |   |
|                                |   |       | Third                    Quarter    |     | $      | 0.69    |   | $ | 0.32 |   |
|                                |   |       | Fourth                    Quarter   |     | $      | 0.65    |   | $ | 0.41 |   |
| Fiscal                    Year 2005 |   |       | First                    Quarter         |     | $      | 0.57    |   | $ | 0.28 |   |
|                                |   |       | Second                    Quarter   |     | $      | 0.43    |   | $ | 0.27 |   |
|                                |   |       | Third                    Quarter    |     | $      | 0.48    |   | $ | 0.28 |   |
|                                |   |       | Fourth                    Quarter        |     | $      | 0.39    |   | $ | 0.24 |   |
| Fiscal                    Year 2006 |   |       | First                    Quarter         |     | $      | 0.38    |   | $ | 0.26 |   |
|                                |   |       | Second                    Quarter        |     | $      | 0.44    |   | $ | 0.32 |   |
|                                |   |       | Third                    Quarter         |     | $      | 0.36    |   | $ | 0.21 |   |
|                                |   |       | Fourth                    Quarter        |     | $      | 0.28    |   | $ | 0.18 |   |

**Stockholders**

**DIVIDEND        POLICY**

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**Recent        Sales of Unregistered Securities**

*January        2004 Bridge Financing*

*December        2004 Common Stock and Warrant Financing*

*April        2005 Note Conversion*

*Series        B Preferred Stock Financing*

*October        2006 Convertible Debenture and Warrant Financing*

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*Anti-dilution        Adjustments Under Warrant to Fagan Capital*

*Anticipated        Investment by Alteon*

| **ITEM                  6.** | **MANAGEMENT’S                  DISCUSSION AND ANALYSIS OR PLAN OF                  OPERATION** |
|------------------------------|-------------------------------------------------------------------------------------------------------|

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**Introduction**

The        current rate of cash usage at our parent level raises substantial doubt about        our ability to continue as a going concern, absent any new sources of        significant cash flows. In an effort to mitigate this near-term concern,        we        obtained debt financing in which we received proceeds of $1,350,000 in October        2006 and we are seeking additional equity financing to obtain sufficient        funds        to sustain operations and purchase the remaining 49% of BioCheck for        approximately $3.0 million. From this debt financing, $635,000 was used to        repay        existing debt, accrued interest and related legal fees. We plan to increase        revenues by introducing new research assays and reagents as well as by        out-licensing compounds from our antioxidant library. However, we cannot        provide        assurance that we will successfully obtain equity financing, if any, sufficient        to finance our goals or that we will increase product related revenues. Our        financial statements do not include any adjustments relating to the        recoverability and classification of recorded assets, or the amounts and        classification of liabilities that might be necessary in the event that we        cannot continue in existence.

**Overview**

** **

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*in        vitro*

*Relocation        of Operations*

*Product        Development*

BioCheck        currently has several products under development for cancer,        cardiac/inflammatory and angiogenesis research applications. Among these        products, BioCheck has marketed the following ELISA kits to the research        market        in 2006: 

| ·   | Reagents                  for the detection of HMGA2, a marker for aggressive breast cancer                  (in July                  2006); |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Research                  assays for the detection of HMGA2; |
|--------------------|--------------------------------------------------------------|

| ·   | Myeloperoxidase,                  an inflammatory protein that has utility as a prognostic marker                  for                  cardiac events; and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | A                  new myeloperoxidase research assay. |
|--------------------|--------------------------------------------------------|

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*Loans        and Warrants*

*Debt        Financing*

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Pursuant        to the registration rights agreement, we filed a registration statement covering        the public resale of the shares underlying the Series A, B, C, D and E warrants        and the debentures. This registration statement was declared effective by        the        Securities and Exchange Commission in February 2007.

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*Stockholder        Approval*

*License        Agreement with Alteon*

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*Agreements          with Ambient Advisors LLC*

*Appointment        of New President and Chief Executive Officer*

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*Consulting        Agreement with John E. Repine, M.D.*

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*Preferred        Stock Conversion*

*Note        Conversion*

*Management        Team and Board of Directors*

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*Loan        Repayment*

*Acquisition        of BioCheck*

*Mutual        Services Agreement with BioCheck*

**Results        of Operations**

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*Revenues*

|                                |   |      |     |      | **Increase                    (Decrease) from 2005** |
|-------------------------------------|--------|-----------|----------|-----------|------------------------------------------------------|
|                                |   |      | **2006** |      | **2005**                                             |   | **Amount** |   | **%** |
| Product                    revenues | $      | 5,201,000 | $        | 2,397,000 | $                                                    | 2,804,000 |   | 117% |
| License                    revenues |   | 575,000   |     | 100,000   |                                                 | 475,000 |   | 475% |
| Total                    revenues   | $      | 5,776,000 | $        | 2,497,000 | $                                                    | 3,279,000 |   | 131% |

*Cost        of Product Revenues*

|                                      |   |      |     |      | **Increase                  (Decrease) from 2005** |
|-------------------------------------------|--------|-----------|----------|-----------|----------------------------------------------------|
|                                      |   |      | **2006** |      | **2005**                                           |   | **Amount** |   | **%** |
| Cost                  of product revenues | $      | 3,084,000 | $        | 1,345,000 | $                                                  | 1,739,000 |   | 129% |

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*Research        and Development Expenses*

|                                      |   |    |     |    | **Increase                  (Decrease) from 2005** |
|-------------------------------------------|--------|---------|----------|---------|----------------------------------------------------|
|                                      |   |    | **2006** |    | **2005**                                           |   | **Amount** |   | **%** |
| Research                  and development | $      | 708,000 | $        | 499,000 | $                                                  | 209,000 |   | 42% |

*Selling,        General and Administrative Expenses*

|                                                 |   |      |     |      | **Increase                  (Decrease) from 2005** |
|------------------------------------------------------|--------|-----------|----------|-----------|----------------------------------------------------|
|                                                 |   |      | **2006** |      | **2005**                                           |   | **Amount** |   | **%** |
| Selling,                  general and administrative | $      | 4,654,000 | $        | 2,342,000 | $                                                  | 2,312,000 |   | 99% |

*Purchased        In-process Research and Development*

*Financing        Fees*

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*Interest        Expense*

**Liquidity        and Capital Resources**

*Net        cash provided by financing activities*

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**Commitments        and Contingencies**

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**Critical        Accounting Policies**

*Basis        of Consolidation*

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*Revenue        Recognition*

*Inventories*

*Long-Lived        Assets*

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*Certain        Expenses and Liabilities*

*Share-Based        Compensation*

**Inflation**

**Off-balance        Sheet Arrangements**

**Changes        or Disagreements with Accountants**

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**RISK        FACTORS**

**Risks        Related to Our Business **

**We        will need to raise additional capital to fund our general and administrative        expenses, and if we are unable to raise such capital, we will have to curtail        or        cease operations.**

** **

**Restrictive        provisions of the Securities Purchase Agreement signed with purchasers of        debentures and warrants in our recent convertible debt and warrant financing        may        prohibit us from consummating an equity financing        transaction.**

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**Repayment        of recently issued debentures in shares and the exercise of recently issued        warrants would cause substantial dilution to our stockholders and would likely        to depress our stock price, making it more difficult for us to consummate        future        equity financings.**

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**Restrictions          on our ability to repay the debentures in shares rather than in cash may          deplete          our cash resources and will require future financings to avoid          default.**

**As          we have failed to make payments due to BioCheck under          our Mutual Services Agreement, BioCheck could exercise its rights under          the          default provisions of that agreement to terminate the agreement and cease          production of many of our research test kit assays.**

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**Raising          additional capital may be necessary in order to complete our acquisition          of the          outstanding shares of BioCheck that we do not own, which constitutes 49%          of          BioCheck’s issued and outstanding shares.**

**We        will need additional financing in order to        complete our development and commercialization programs.**

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|         |  · |  continued                  scientific progress in our research and development programs and                  the                  commercialization of additional products;                                                                          |
|--------------|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |  · |  the                  cost of our research and development and commercialization activities                  and                  arrangements, including sales and marketing;                                                                        |
|    |  · |  the                  costs associated with the scale-up of manufacturing;                                                                                                                                                                            |
|    |  · |  the                  success of pre-clinical and clinical trials;                                                                                                                                                                                    |
|    |  · |  the                  establishment of and changes in collaborative                  relationships;                                                                                                                                                   |
|    |  · |  the                  time and costs involved in filing, prosecuting, enforcing and defending                  patent claims;                                                                                                                         |
|    |  · |  the                  time and costs required for regulatory approvals;                                                                                                                                                                               |
|    |  · |  the                  acquisition of additional technologies or businesses;                                                                                                                                                                           |
|    |  · |  technological                  competition and market developments; and                                                                                                                                                                              |
|    |  · |  the                  cost of complying with the requirements of the Autorité des Marchés                  Financiers, or AMF, the French regulatory agency overseeing the                  Nouveau                  Marché in France. |

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**If        we complete our acquisition of BioCheck, our business could be materially        and        adversely affected if we fail to adequately integrate the operations of the        two        companies.**

|        | · | difficulties                  in assimilating the operations, technologies, products and personnel                  of an                  acquired company; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | · | risks                  of entering markets in which we have either no or limited prior                  experience;                                          |
|   | · | diversion                  of management’s attention from other business concerns;                  and                                                |
|   | · | potential                  loss of key employees of an acquired                  company.                                                                    |

**We        may experience disruption or may fail to achieve any benefits in connection        with        the recent changes in executive management and in board        membership.**

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**If        we fail to attract and retain key personnel, our business could        suffer.**

**The        success of our business depends upon our ability to successfully develop        and        commercialize products.**

**Our        future profitability is uncertain.**

**Our        ability to successfully develop and commercialize our nutraceutical or clinical        diagnostic product candidates, and make them available for sale, is uncertain.        **

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|         |  · |  our                  nutraceutical and clinical diagnostic candidates may be ineffective,                  toxic                  or may not receive regulatory clearances,                                        |
|--------------|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |  · |  our                  nutraceutical and clinical diagnostic candidates may be too expensive                  to                  manufacture or market or may not achieve broad market                  acceptance, |
|    |  · |  third                  parties may hold proprietary rights that may preclude us from developing                  or marketing our nutraceutical and clinical diagnostic candidates,                  or            |
|    |  · |  third                  parties may market equivalent or superior                  products.                                                                                                                        |

**Clinical        development is inherently uncertain and expense levels may fluctuate        unexpectedly because we cannot accurately predict the timing and level of        such        expenses.**

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**Competition        in most of our primary current and potential market areas is intense and        expected to increase.**

**TorreyPines        Therapeutics, Inc. holds significant stockholder voting power, and may be        in a        position to influence matters affecting us.**

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**If        we are unable to develop and maintain alliances with collaborative partners,        we        may have difficulty developing and selling our products and        services.**

|         |  · |  our                  partners may develop products or technologies competitive with                  our                  products and technologies;              |
|--------------|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |  · |  our                  partners may not devote sufficient resources to the development                  and sale                  of our products and technologies; |
|    |  · |  our                  collaborations may be unsuccessful; or                                                                                                       |
|    |  · |  we                  may not be able to negotiate future alliances on acceptable                  terms.                                                           |

**Our        revenues and quarterly results have fluctuated historically and may continue        to        fluctuate, which could cause our stock price to decrease.**

|         |  · |  an                  inability to produce products in sufficient quantities and with                  appropriate quality; |
|--------------|--------------|---------------------------------------------------------------------------------------------------------------------------------|
|    |  · |  an                  inability to obtain sufficient raw materials;                                                         |
|    |  · |  the                  loss of or reduction in orders from key customers;                                                   |
|    |  · |  variable                  or decreased demand from our customers;                                                         |
|    |  · |  the                  receipt of relatively large orders with short lead                  times;                           |

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|    |  · |  our                  customers’ expectations as to how long it takes us to fill future                  orders;                                                   |
|--------------|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |  · |  customers’                  budgetary constraints and internal acceptance review                  procedures;                                                     |
|    |  · |  there                  may be only a limited number of customers that are willing to purchase                  our                  research assays and fine chemicals; |
|    |  · |  a                  long sales cycle that involves substantial human and capital resources;                  and                                                         |
|    |  · |  potential                  downturns in general or in industry specific economic                  conditions.                                                           |

**Changes        in accounting standards regarding stock option plans could increase our reported        losses, cause our stock price to decline and limit the desirability of granting        stock options.**

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**Our        income may suffer if we receive relatively large orders with short lead times,        or our manufacturing capacity does not otherwise match our        demand.**

**Our        success will require that we establish a strong intellectual property position        and that we can defend ourselves against intellectual property claims from        others.**

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|         |  · |  enforce                  patents that we own or license;                                                                                 |
|--------------|--------------|------------------------------------------------------------------------------------------------------------------------------------------------|
|    |  · |  protect                  trade secrets or know-how that we own or license; or                                                            |
|    |  · |  determine                  the enforceability, scope and validity of the proprietary rights                  of                  others. |

**We        may be exposed to liability due to product defects.**

**Disclosure        controls are no assurance that the objectives of the control system are        met.**

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**Risks        Related to Our Common Stock**

**Our        common stock is traded on the OTCBB, our stock price is highly volatile,        and you        may not be able to sell your shares of our common stock at a price greater        than        or equal to the price you paid for such shares.**

|         |  · |  our                  financial results;                                                                                                                                                |
|--------------|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |  · |  fluctuations                  in our operating results;                                                                                                                                |
|    |  · |  announcements                  of technological innovations or new commercial health care products                  or                  therapeutic products by us or our competitors; |
|    |  · |  government                  regulation;                                                                                                                                                |
|    |  · |  developments                  in patents or other intellectual property rights;                                                                                                        |
|    |  · |  developments                  in our relationships with customers and potential customers;                  and                                                                        |
|    |  · |  general                  market conditions.                                                                                                                                            |

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**Our        common stock may be subject to “penny stock” rules which may be detrimental to        investors.**

**Sales        of our common stock may require broker-dealers to make special suitability        determinations regarding prospective purchasers.**

**We        will incur expenses in connection with registration of our shares which may        be        significant.**

**A        large number of additional shares may be sold into the public market in the        near        future, which may cause the market price of our common stock to decline        significantly, even if our business is successful.**

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**A        large number of common shares are issuable upon exercise of outstanding common        share options and warrants and upon conversion of our outstanding debentures.        The exercise or conversion of these securities could result in the substantial        dilution of your investment in terms of your percentage ownership in OXIS        as        well as the book value of your common shares. The sale of a large amount        of        common shares received upon exercise of these options and warrants on the        public        market to finance the exercise price or to pay associated income taxes, or        the        perception that such sales could occur, could substantially depress the        prevailing market prices for our shares.**

**If        we fail to maintain the adequacy of our internal controls, our ability to        provide accurate financial statements and comply with the requirements of        the        Sarbanes-Oxley Act of 2002 could be impaired, which could cause our stock        price        to decrease substantially.**

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**Our        common shares are thinly traded and, if you are a holder of debentures, you        may        be unable to sell at or near ask prices or at all if you need to convert        your        debentures into common stock and sell your shares to raise money or otherwise        desire to liquidate such shares.**

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**We        do not anticipate paying any cash dividends.**

**ITEM        7.**
**FINANCIAL        STATEMENTS **

**ITEM        8.**
**CHANGES        IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL        DISCLOSURE.**

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**ITEM        8A.**
**CONTROLS        AND PROCEDURES**

**ITEM        8B. OTHER INFORMATION**

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**PART        III**

**ITEM        9.**
**DIRECTORS,        EXECUTIVE OFFICERS**
**,        PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE        ACT**
** **

|  **Name**                               |   |  **Age** |   |  **Principal                  Occupation**                               |   | **Served                  as****Director                  Since** |
|----------------------------------------------|--------|---------------|--------|-------------------------------------------------------------------------------|--------|-------------------------------------------------------------------|
| Marvin                  S. Hausman, M.D. (2) |   | 65            |   | President,                  Chief Executive Officer and Chairman of the Board |   | 2004                                                              |
| Steven                  T. Guillen (4)       |   | 55            |   | Director                                                                      |   | 2005                                                              |
| S.                  Colin Neill (1) (3)      |   | 60            |   | Secretary,                  Director                                          |   | 2004                                                              |
| John                  E. Repine, M.D. (1)    |   | 62            |   | Director                                                                      |   | 2005                                                              |
| Gary                  M. Post (1)            |   | 58            |   | Director                                                                      |   | 2006                                                              |
| Matthew                  Spolar              |   | 33            |   | Director                                                                      |   | 2007                                                              |

| (1) | Member                  of the Audit Committee.                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Appointed                  President and Chief Executive Officer on September 15, 2006. Member                  of the                  Compensation Committee. In addition, on November 15, 2006, following                  the                  resignation of Michael Centron as our Vice President and Chief                  Financial                  Officer, Dr. Hausman has assumed the role of chief financial and                  accounting officer on an interim basis. |
| (3) | Member                  of the Nominating Committee.                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (4) | Terminated                  as President and Chief Executive Officer on September 15, 2006.                   Resigned                  from the board of directors on April 12, 2007.                                                                                                                                                                                                                                                                                             |

**Marvin        S. Hausman, M.D.,**

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**Steven        T. Guillen,**

**S.        Colin Neill,**

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**  Gary        M.        Post,**

**John        E. Repine, M.D.,**

**Matthew        Spolar**

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**.        **

**Section        16(a) Beneficial Ownership Reporting Compliance**

**Code        of Ethics**

**Audit        Committee and Audit Committee Financial Expert**

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**ITEM        10.**
**EXECUTIVE        COMPENSATION**

**SUMMARY        COMPENSATION TABLE**

| **Name                  and Principal Position**   |   | **Year** |   | **Salary** |   |    |   | **Bonus** |   | **Stock                  Awards** |   |   |   | **Option/****Warrant                  Awards (4)** |    | **Non-Equity****Incentive                  Plan Compen-sation** |   | **All                  Other Compensation** |   |   |   | **Total** |   |
|----------------------------------------------------|--------|----------|--------|------------|--------|---------|--------|-----------|--------|-----------------------------------|--------|--------|--------|----------------------------------------------------|---------|-----------------------------------------------------------------|--------|---------------------------------------------|--------|--------|--------|-----------|--------|
| Steven                  T. Guillen (1)             |   |     | 2006   |       | $      | 190,000 |   |      |        |                              |   |   |   | $                                                  | — |                                                            | $      | —                                     |   |   |        |      | $      | 68,772 |   | $ | — |   | $ | 29,417 |   |   | (2 | ) | $ | 288,189 |   |
| Former                  President, Chief Executive |   |     | 2005   |       | $      | 209,000 |   |      |        |                              |   |   |   | $                                                  | — |                                                            | $      | —                                     |   |   |        |      | $      | 111,510 |   | $ | — |   | $ | 7,000 |   |   | (3 | ) | $ | 327,510 |   |
| Officer                  and Former Director       |   |     |        |       |   |         |   |      |        |                              |   |        |   |                                               |         |                                                            |   |                                             |   |   |        |      |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |
|                                               |   |     |        |       |   |         |   |      |        |                              |   |        |   |                                               |         |                                                            |   |                                             |   |   |        |      |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |
| Dr.                  Marvin S. Hausman (5)         |   |     | 2006   |       | $      | 52,083  |   |      | (6     | )                                 |   |   |   | $                                                  | — |                                                            | $      | 164,977                                     |   |   | (7     | )         | $      | 208,870 |   | $ | — |   | $ | — |   |   |  |   | $ | 425,930 |   |
| Chairman                  of the Board,            |   |     | 2005   |       | $      | — |   |      | (6     | )                                 |   |   |   | $                                                  | — |                                                            | $      | —                                     |   |   |        |      | $      | 10,297 |   | $ | — |   | $ | 15,000 |   |   | (8 | ) | $ | 25,297 |   |
| Chief                  Executive Officer           |   |     |        |       |   |         |   |      |        |                              |   |        |   |                                               |         |                                                            |   |                                             |   |   |        |      |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |
| Acting                  Chief                      |   |     |        |       |   |         |   |      |        |                              |   |        |   |                                               |         |                                                            |   |                                             |   |   |        |      |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |
| Financial                  Officer                 |   |     |        |       |   |         |   |      |        |                              |   |        |   |                                               |         |                                                            |   |                                             |   |   |        |      |   |  |   |   |  |   |   |  |   |   |  |   |   |  |   |
|                                               |   |     |   |       |   |    |   |      |   |                              |   |   |   |                                               |    |                                                            |   |                                        |   |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Michael                  Centron (9)               |   |     | 2006   |       | $      | 133,466 |   |      |   |                              |   |   |   | $                                                  | — |                                                            | $      | —                                     |   |   |   |      | $      | 29,908 |   | $ | — |   | $ | 5,240 |   |   | (10 | ) | $ | 168,614 |   |
| Former                  Chief                      |   |     | 2005   |       | $      | — |   |      |   |                              |   |   |   | $                                                  | — |                                                            | $      | —                                     |   |   |   |      | $      | — |   | $ | — |   | $ | — |   |   |   |   | $ | — |   |
| Financial                  Officer                 |   |     |   |       |   |    |   |      |   |                              |   |   |   |                                               |    |                                                            |   |                                        |   |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                               |   |     |   |       |   |    |   |      |   |                              |   |   |   |                                               |    |                                                            |   |                                        |   |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

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|  (1) |  Mr.                  Guillen served as President, Chief Executive Officer and Director                  from                  February 28, 2005 to September 15, 2006.  Mr.                  Guillen resigned from the board of directors on April 12, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  (2) |  Includes                  $4,250 car allowance, $2,000 for matching contribution under our                  401(k)                  plan, $21,792 in penalties and interest paid by the Company in                  connection                  with back salary, and $1,375 paid by the Company into a medical                  spending                  account.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|  (3) |  Includes                  $5,000 car allowance and $2,000 for matching contribution under                  our 401(k)                  plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|  (4) |  Reflects                  dollar amount expensed by the company during applicable fiscal                  year for                  financial statement reporting purposes pursuant to FAS 123R. FAS                  123R                  requires the company to determine the overall value of the options                  as of                  the date of grant based upon the Black Scholes method of valuation,                  and to                  then expense that value over the service period over which the                  options                  become exercisable (vest). As a general rule, for time in service                  based                  options, the company will immediately expense any option or portion                  thereof which is vested upon grant, while expensing the balance                  on a pro                  rata basis over the remaining vesting term of the                  option. |
|  (5) |  Dr.                  Hausman served as Acting Chief Executive Officer from December                  8, 2004 to                  February 28, 2005 and as Acting Chief Financial Officer from December                  8,                  2004 until January 6, 2006. On September 15, 2006, Dr. Hausman                  was                  appointed as Chairman of the board of directors and our President                  and                  Chief Executive Officer.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

|  (6)  |  Dr.                  Hausman did not receive a cash salary for his services as Chairman                  and                  Acting President, Chief Executive Officer and Chief Financial Officer                  in                  2004 or 2005. See Director Compensation below for Dr. Hausman’s                  compensation as a director. In 2006, under the terms of Dr. Hausman’s                  employment agreement with us, Dr. Hausman may elect to receive                  his salary                  in the form of common stock at a price equal to 85% of the market                  price                  (the average closing price for the five trading days preceding                  the                  measurement date), or in the form of a ten year warrant to purchase                  1.5                  times the number of shares he would have received in the foregoing,                  at an                  exercise price equal to such market price. |
|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  (7)  |  Dr.                  Hausman was issued 330,769 shares of common stock on October 12,                  2006, as                  payment for compensation and expenses owed by us to NW Medical                  Research                  Partners, Inc., of which Dr. Hausman is the sole member and manager.                  The                  amount owed was $67,477, and the shares were valued at approximately                  $0.204 per share, and are not subject to repurchase. Also includes                  dollar                  amount expensed by the company during 2006 for financial statement                  reporting purposes pursuant for FAS 123R in connection with a grant                  to Dr.                  Hausman of 500,000 restricted shares of common stock vesting over                  a 180                  day period, for agreeing to serve as our Chief Executive Officer                  and                  President.                                     |
|  (8)  |  Dr.                  Hausman earned $15,000 pursuant to a consulting agreement with                  NW Medical                  Research Partners, Inc. Dr. Hausman is the sole member and manager                  of NW                  Medical Research Partners.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|  (9)  |  Mr.                  Centron served as our Chief Financial Officer from January 6, 2006                  to                  November 15, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|  (10) |  Includes                  $3,779 paid to Mr. Centron as a consultant following his departure                  as an                  employee, and $1,461 paid by the Company into a medical spending                  account.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

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**Outstanding        Equity Awards at Fiscal Year-End**

| **Outstanding                  Equity Awards at Fiscal Year-End** |   |
|-------------------------------------------------------------------|--------|
| **Options                  Awards**                               |   | **Stock                  Awards** |   |
| **Name**                                                          |   | **Number                  of****Securities                  Underlying Unexercised****Options****Exercisable** |   | **Number                  of Securities Underlying Unexercised****Options                  Unexercisable** |   | **Equity                  Incentive Plan Awards: Number of Securities Underlying Unexercised                  Unearned Options** |   | **Option****Exercise****Price** |   | **Option                  Expiration****Date** |   | **Number                  of****Shares                  or****Units                  of****Stock****That                  Have****Not                  Vested** |   | **Market                  Value****of                  Shares****Or                  Units****That                  Have****Not                  Vested** |   | **Equity****Incentive****Plan                  Awards: Number of****Unearned****Shares,                  Units****or                  Other****Rights                  That****Have                  Not****Vested** |   | **Equity****Incentive                  Plan Awards:****Market                  or****Payout                  Value****of                  Unearned****Shares,                  Units,****or                  Other****Rights                  That****Have                  Not****Vested** |   |
|                                                              |   | (#) |   | (#) |   | (#) |   | (                  $                  ) |   |   |   | (#) |   | ($) |   | (#) |   | ($) |   |
| Steven                  T. Guillen                                |   |   | 250,000 |   |   | 250,000 |   |   | — |   | $ | 0.40 |   |   | 02/28/15 |   |   | — |   |   | — |   |   | — |   | $ | — |   |
|                                                              |   |   |                    50,000 |   |   | 50,000 |   |   | — |   | $ | 0.40 |   |   | 02/28/15 |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |   | 275,000 |   |   | 225,000 |   |   | — |   | $ | 0.29 |   |   | 02/28/15 |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dr.                  Marvin S. Hausman                            |   |   | 30,000 |   |   | — |   |   | — |   | $  | 0.22 |   |   | 06/14/12 |   |   | 416,667 |   | $ | 95,833 |   |   | — |   | $ | — |   |
|                                                              |   |   | 5,000 |   |   |                    — |   |   |                    — |   | $ |                    0.42 |   |   | 06/18/13 |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |   | 11,695 |   |   |                    — |   |   |                    — |   | $ |                    0.57 |   |   | 12/03/13 |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |   | 50,000 |   |   |                    — |   |   |                    — |   | $ |                    0.59 |   |   | 10/11/14 |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |   | 5,000 |   |   | — |   |   | — |   | $ | 0.34 |   |   | 06/22/15 |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |   | 108,000 |   |   | — |   |   | — |   | $ | 0.37 |   |   | 10/05/15 |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |   | — |   |   | 500,000 |   |   | — |   | $ | 0.29 |   |   | 12/28/15 |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |   | 5,000 |   |   | — |   |   | — |   | $ | 0.27 |   |   | 07/31/16 |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |   | — |   |   | 495,000 |   |   | — |   | $ | 0.20 |   |   | 11/05/16 |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |   | 501,667 |   |   | 1,003,333 |   |   | — |   | $ | 0.20 |   |   | 11/05/16 |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Michael                  Centron                                  |   |   | 150,000 |   |   | 37,500 |   |   | — |   | $ | 0.30 |   |   | 01/05/16 |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |   | 100,000 |   |   | 75,000 |   |   | — |   | $ | 0.27 |   |   | 07/31/16 |   |   |   |   |   |   |   |   |   |   |   |   |   |

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**Aggregated        Option Exercises During 2006 and Fiscal Year-End Option        Table**

|                                     |   |  **Shares                of Common Stock Acquired** |   |                                |   | Number                of Securities Underlying Unexercised Options at December 31,                2006 |   |              |   | **Value                of Unexercised In-the-Monoey Options at December 31, 2006                (3)**  |   |
|------------------------------------------|--------|----------------------------------------------------------|--------|-------------------------------------|--------|--------------------------------------------------------------------------------------------------------|--------|-------------------|--------|-------------------------------------------------------------------------------------------------------------|--------|
| **Name**                                 |   | **on                  Exercise**                         |   | **Value                  Realized** |   | **Exercisable**                                                                                        |   | **Unexercisable** |   |                                                                                                        |   | **Exercisable** |   | **Unexercisable** |   |
| Steven                  T. Guillen       |   |                                                     |        |                                |   | —                                                                                                |   |              |        |                                                                                                        |   | — |   |   | 575,000 |   |   | 525,000 |   |   | (1 | ) |   |  |   |   | — |   |   |  |   |   | — |   |
| Marvin                  S. Hausman, M.D. |   |                                                     |        |                                |   | —                                                                                                |   |              |        |                                                                                                        |   | — |   |   | 711,361 |   |   | 2,003,334 |   |   | (2 | ) |   |   |   | $ | 2,508 |   |   |  |   |   | 7,492 |   |

|  (1)       |  Options                  for 150,000 shares of common stock became exercisable on February                  28,                  2006, with an additional 150,000 shares to become exercisable annually                  for                  two years after this date, so long as Mr. Guillen continues to                  serve in                  the capacity of either an employee, outside director or consultant.                  Options for 200,000 shares of common stock became exercisable upon                  grant                  of a non-qualified stock option on December 28, 2005. Options for                  an                  additional 75,000 shares of common stock became exercisable on                  December                  28, 2006, and continue to become exercisable annually for three                  years                  after this date so long as Mr. Guillen continues to serve in the                  capacity                  of either an employee, outside director or consultant. Pursuant                  to a                  Settlement Agreement with Mr. Guillen dated February 12, 2007,                  we agreed                  to accelerate the vesting of Mr. Guillen’s options, which took effect in                  March 2007.                                                                    |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   (2) |  Options                  for 12,500 shares of common stock became exercisable on October                  12, 2006.                  Options for 5,000 shares of common stock became exercisable on                  June 22,                  2006. Options for 9,000 shares of common stock became exercisable                  on                  January 5, 2006 and monthly for 8 months after this date. Options                  for                  300,000 shares of common stock become exercisable on February 27,                  2007.                  Options for 100,000 shares of common stock become exercisable on                  December                  28, 2007 and December 28, 2008. Options for 5,000 shares become                  exercisable on August 1, 2007. Options for 247,500 shares become                  exercisable in quarterly installments starting on February 6, 2007                  for a                  one year period; options for an additional 247,500 shares become                  exercisable in eight quarterly installments over the following                  two years.                  A warrant for the purchase of an aggregate of 1,505,000 shares                  of common                  stock becomes exercisable in six consecutive monthly installments                  beginning on November 14, 2006. |
|   (3) |  In-the-money                  options represents unexercised options having a per share exercise                  price                  below $0.205, the closing price of our common stock at December                  29, 2006.                  The value of unexercised in-the-money options equals the number                  of                  in-the-money options multiplied by the excess of $0.205 over the                  per-share                  exercise prices of the options. The value of unexercised in-the-money                  options at December 31, 2006, may never be realized by the option                  holders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |

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**Director        Compensation**

| **Director                    Compensation** |   |
|----------------------------------------------|--------|
| **Name**                                     |   | **Fees                    Earned****or                    Paid in****Cash                    (1)** |   | **Stock****Awards** |   | **Option****Awards** |   | **Non-Equity****Incentive                    Plan Compensation** |   | **All                    Other Compensation** |   | **Total** |   |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| S.                    Colin Neill            |   | $ | 6,000 |   | $ | — |   | $ | 11,858 |   | $ | — |   | $ | — |   | $ | 17,858 |   |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| John                    E. Repine, M.D       |   | $ | 5,000 |   | $ | 7,785 | (2) | $ | 21,874 | (3) | $ | — |   | $ | — |   | $ | 34,659 |   |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gary                    Post                 |   | $ | 5,000 |   | $ | — |   | $ | 101,138 | (4) | $ | — |   | $ | — |   | $ | 106,138 |   |

|               | (1) | Accrued                  but not paid.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|--------------------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|               | (2) | Includes                  39,925 shares of common stock valued at $7,785 on the date of the                  grant,                  as compensation under a consulting agreement between us and Dr.                  Repine,                  for the period between October 15, 2006 and December 31,                  2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|               | (3) | In                  addition to automatic annual option grants made to all directors                  for their                  service on the board, includes the value of an option for the purchase                  of                  up to 9,787 shares of common stock at an exercise price of $0.24                  per                  share, immediately exercisable, in lieu of cash payment under a                  consulting                  agreement between us and Mr. Repine.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|     | (4) | In                  addition to automatic annual option grants made to all directors                  for their                  service on the board, includes the value of following options and                  warrants                  granted to Mr. Post under an advisory agreement between us and                  him: (i) a                  ten-year option for the purchase of up to 333,333 shares of common                  stock,                  with an exercise price of $0.20 per share, which vests and becomes                  exercisable in six equal installments over a 180 day period beginning                  November 14, 2006, (ii) a ten-year warrant for the purchase of                  173,608                  shares of common stock, with an exercise price of $0.20 per share,                  fully                  vested and immediately exercisable, (iii) a ten-year warrant for                  the                  purchase of 550,000 shares of common stock, with an exercise price                  of                  $0.20 per share, which vests and becomes exercisable with respect                  to                  225,000 shares in four quarterly installments from January 15,                  2007 to                  January 15, 2008, and which vests and becomes exercisable with                  respect to                  an additional 225,000 shares in eight equal installments from January                  15,                  2008 to January 15, 2010, and (iv) a ten-year option for the purchase                  of                  156,250 shares with an exercise price of $0.24 per share, fully                  vested and                  immediately exercisable. |

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**Employment        Agreements**

| · | Dr.                  Hausman will serve as our President and Chief Executive Officer                  for a                  three year term from the commencement date of his employment, and                  after                  this period, on a year-to-year basis;                                                                                                                                                                                                                                                                                                                                                                         |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Dr.                  Hausman will receive annual compensation in the amount of $250,000,                  payable quarterly in advance in cash, common stock based on a price                  equal                  to 85% of average of the five closing prices for the five trading                  days                  prior to the date that the issuance is authorized by the board                  of                  directors, or in ten year warrants equal to that number of warrants                  equal                  to 1.5 times the number of shares that would otherwise be                  received;                  |
| · | For                  the initial quarterly payment, Dr. Hausman was issued 347,222 restricted                  shares of common stock;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| · | During                  the three year term of the agreement, Dr. Hausman will receive                  an annual                  bonus based upon the attainment of agreed upon goals and milestones                  as                  determined by the board of directors and its compensation                  committee;                                                                                                                                                                                                                                                                                                                    |
| · | During                  the remainder of calendar year 2006, Dr. Hausman’s bonus will be pro rated                  on an annual bonus rate in the range of 25% to 50% of his base                  salary, and                  the bonus for subsequent years of the term of the agreement will                  be in a                  similar target range;                                                                                                                                                                                                                                                                              |
| · | The                  bonuses payable will be paid in cash, although at Dr. Hausman’s sole                  option, they may be paid in stock (or in the form of ten year warrants                  with cashless exercise provisions, with 1.5 times the number of                  warrant                  shares to be issued in lieu of the number of shares of common stock),                  based upon the average of the closing bid and asked prices for                  the 5                  trading days immediately prior to the awarding to Dr. Hausman of                  the bonus                  for a particular year; |
| · | Once                  we have raised at least $2.5 million in one or more financings                  (equity,                  debt or convertible debt, in addition to the financing closed on                  October                  25, 2006) or in a strategic transaction, Dr. Hausman may elect,                  at any                  time, in lieu of receiving a quarterly issuance of stock (or warrants                  in                  lieu thereof), to receive his base salary in cash, payable monthly                  on our                  regular pay cycle for professional employees;                             |
| · | As                  part of his compensation, we granted Dr. Hausman a ten year a                  non-qualified option to purchase 495,000 shares of our common stock                  at an                  exercise price of $0.20 per share, vesting as follows: (i) 247,500                  option                  shares vesting in four equal quarterly installments commencing                  on January                  15, 2007 and every three months thereafter and (ii) and the remaining                  247,500 option shares vesting in eight quarterly installments over                  two                  years;        |
| · | Additionally,                  we granted Dr. Hausman, as a sign on bonus, 500,000 restricted                  shares of                  common stock and a ten year common stock purchase warrant to purchase                  1,505,000 shares at an exercise price of $0.20 per share, with                  vesting in                  six equal installments, commencing on November 14, 2006, through                  the 180th                  day after the Commencement Date;                                                                                                                                                           |
| · | We                  are providing Dr. Hausman with an annual office expense allowance                  of                  $50,000, for the costs of maintaining an office in the Stevenson,                  Washington area, payable quarterly in advance in the form of common                  stock,                  at a price equal to 85% of the market price;                                                                                                                                                                                                                                                                              |
| · | For                  the first installment, representing $12,500 of the above office                  expense                  allowance, Dr. Hausman was issued 69,444 restricted shares of common                  stock;                                                                                                                                                                                                                                                                                                                                                                                                                          |
| · | Once                  we have completed a qualifying financing, the above office expense                  allowance will be paid in cash in advance, commencing for the quarter                  next                  following the quarter in which the Qualifying Financing                  occurred.                                                                                                                                                                                                                                                                                                                                            |
| · | Additionally,                  Dr. Hausman will receive family health and dental insurance benefits                  and                  short-term and long-term disability                  policies;                                                                                                                                                                                                                                                                                                                                                                                                                                             |

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|   · |  Upon                  termination for cause, all compensation due to Dr. Hausman under                  the                  agreement will cease, other than a right to participate in continued                  group                  health insurance for a certain period of time (this applies to                  all                  terminations, except if Dr, Hausman terminates without good reason)                  and                  any unexercised portions of his stock options shall expire upon                  such                  termination;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   · |  In                  the event that we terminate Dr. Hausman’s employment within one year of a                  change of control, Dr. Hausman shall receive an amount equal to                  twelve                  months of his base salary for the then current term of the agreement                  (which is in addition to the base salary paid to Dr. Hausman after                  our                  delivery of notice of termination and the actual date of termination)                  plus                  an amount equal to his bonus in the prior year (and if occurring                  before                  the determination of the 2007 bonus, an amount equal to 50% of                  the then                  current base salary), and the full vesting of Dr. Hausman’s stock options,                  and extended exercisability of the options until their respective                  expiration dates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   · |  In                  the event that we terminate our relationship with Dr. Hausman,                  including a                  non-renewal of the agreement by us, but other than upon a change                  of                  control, death, disability or cause, Dr. Hausman shall receive                  the                  following: (i) if employment was terminated during the calendar                  year 2006,                  an amount equal to six months of the then current base salary;                  if                  employment was terminated commencing in the calendar year 2007                  or if we                  elect not to renew the agreement, an amount equal to twelve months                  of base                  salary for the then current term of the agreement plus an amount                  equal to                  the prior year’s bonus (and if occurring before the bonus for 2007 has                  been determined, an amount equal to 50% of the then current base                  salary);                  (ii) if employment was terminated during the calendar year 2006,                  50% of                  the previously unvested portion of the Initial Option Grant shall                  vest and                  such vested options shall be exercisable until their respective                  expiration                  dates; if employment was terminated commencing in the calendar                  year 2007                  and thereafter or if we elect not to renew the agreement following                  the                  initial three year term or any additional term, all stock options                  granted                  to Dr. Hausman (including without limitation the Initial Option                  Grant)                  shall immediately vest and shall remain exercisable until their                  respective                  expiration dates.                                                                                                                                                                                                                                                                                                                                                       |
|   · |  In                  the event Dr. Hausman terminates his relationship with us for good                  reason                  within one (1) year of the occurrence of the event which established                  good                  reason, or for good reason within one year of a change of control,                  Dr.                  Hausman shall receive the following: (i) if the termination occurred                  during the calendar year 2006 for good reason, an amount equal                  to six                  months of base salary; if the termination occurred during the calendar                  year 2006 due to a change of control, an amount equal to twelve                  months of                  base salary; if termination for good reason occurred during the                  calendar                  year 2007 or thereafter, an amount equal to twelve months of the                  then                  current base salary plus an amount equal to the prior year’s bonus (and if                  occurring before the bonus for 2007 has been determined, an amount                  equal                  to 50% of the then current base salary); (ii) if termination occurred                  during the calendar year 2006, 50% of the previously unvested portion                  of                  the Initial Option Grant shall vest and such vested options shall                  be                  exercisable until their respective expiration dates, except that                  if                  termination is by Dr. Hausman for good reason subsequent to a change                  of                  control, then 100% of any option grants to Dr. Hausman (including, without                  limitation, the Initial Option Grant) shall vest and shall remain                  exercisable until its respective expiration dates; if employment                  was                  terminated commencing in the calendar year 2007 and thereafter,                  all stock                  options granted to Dr. Hausman (including, without limitation,                  the Initial                  Option Grant) shall immediately vest and shall remain exercisable                  until                  their respective expiration dates. |

----

----

**ITEM        11.** **SECURITY        OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER        MATTERS**

The        following table sets forth certain information known by us with respect to        the        beneficial ownership of our common stock as of December 31, 2006 by (i) each        person who is known by us to own beneficially more than 5% of common stock,        (ii)        each of the Named Executive Officers (see the section above entitled “Executive        Compensation”), (iii) each of our directors and (iv) all of our current officers        and directors as a group. Except as otherwise listed below, the address of        each        person is c/o OXIS International, Inc., 323 Vintage Park Drive, Suite B,        Foster        City, California 94404.

|  **Name                  and Address of Beneficial Owner**                                                                                                                             | **Number                  of Shares of Common Stock****Beneficially                  Owned** |    | **Percent of****Shares                  of Outstanding****Common                  Stock** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------|--------------|------------------------------------------------------------------------------------------------|
| TorreyPines                  Therapeutics, Inc. (1)11085                  N. Torrey Pines RoadLa                  Jolla, CA 92037                                                           |  16,386,647                                                                             |         |  36.80%                                                                                   |
| Bristol                  Investment Fund, Ltd. (2)Bristol                  Capital Advisors, LLC10990                  Wilshire Boulevard, Suite 1410Los                  Angeles, CA 90024 |  13,472,994                                                                             |         |  25.57%                                                                                   |
| Alpha                  Capital Anstalt (3)c/o                  LH Financial150                  Central Park South, 2nd                  FloorNew                  York, NY 10019           |  5,737,143                                                                              |         |  12.01%                                                                                   |
| Whalehaven                  Capital Fund Limited (4)3rd                  Floor, 14 Par-La-Ville Rd.P.                  O. Box HM1027Hamilton                  HMDX Bermuda                  |  4,302,857                                                                              |         |  9.01%                                                                                    |
| Cranshire                  Capital, LP (5)3100                  Dundee Rd., Suite 703Northbrook,                  IL 60062                                                                  |  4,717,791                                                                              |         |  9.99%                                                                                    |
|  Marvin                  S. Hausman, M.D. (6)                                                                                                                                          |  17,410,717                                                                             |    |  38.22%                                                                                   |
| S.                  Colin Neill (7)                                                                                                                                                         | 181,875                                                                                      |    | *                                                                                              |
| Steven                  T. Guillen (8)                                                                                                                                                      | 1,175,000                                                                                    |         | 2.61%                                                                                          |
| John                  E. Repine, M.D. (9)                                                                                                                                                   | 233,387                                                                                      |    | 0.52%                                                                                          |
| Gary                  M. Post (10)                                                                                                                                                          | 688,275                                                                                      |         | 1.52%                                                                                          |
| Executive                  officers and directors as a group — 5 persons (11)                                                                                                         | 19,689,254                                                                                   |    | 41.73%                                                                                         |

----

|  * |  Less                  than one percent. |
|---------|-----------------------------------------------|

| (1) | Based                    in part on a Schedule 13D/A filed with the SEC on March 5, 2004,                    filed on                    behalf of Axonyx Inc., which was acquired by TorreyPines Therapeutics                    in                    October 2006, and Dr. Hausman. Pursuant to the Schedule 13D/A                    Axonyx has                    sole voting power as to 13,982,567 and (with a correction to                    the number of                    shares reported in such Schedule 13D/A as being held by Dr. Hausman)                    shared voting power as to 16,386,647 shares. In addition, Axonyx                    has sole                    dispositive power as to 13,982,567 shares and (with a correction                    to the                    number of shares reported in such Schedule 13D/A as being held                    by Dr.                    Hausman) shared dispositive power as to 16,386,647 shares. Axonyx                    in the                    Schedule 13D/A disclaims beneficial ownership of Dr. Hausman’s                    shares.                                                                                                                                                                                                                                              |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | The                    holdings of Bristol Investment Fund, Ltd. include 3,867,925 shares                    of                    common stock, 1,434,286 shares issuable upon the voluntary conversion                    by                    Bristol Investment Fund of a secured convertible debenture at                    the current                    conversion price of $0.35 per share, warrants to purchase 1,933,963                    shares                    of common stock at a price of $0.66 per share, warrants to purchase                    1,933,962 shares of common stock at a purchase price of $1.00                    per share,                    warrants to purchase 2,151,429 shares of common stock at a purchase                    price                    of $0.35 per share, and warrants to purchase 717,143 shares of                    common                    stock at a purchase price of $0.385 per share. Paul Kessler,                    manager of                    Bristol Capital Advisors, LLC, the investment advisor to Bristol                    Investment Fund, Ltd., has voting and investment control over                    the                    securities held by Bristol Investment Fund, Ltd. Mr. Kessler                    disclaims                    beneficial ownership of these securities. |
| (3) | The                    holdings of Alpha Capital Anstalt include 1,434,286 shares issuable                    upon                    the voluntary conversion by Alpha Capital Anstalt of a secured                    convertible                    debenture at the current conversion price of $0.35 per share,                    warrants to                    purchase 2,151,429 shares of common stock at a purchase price                    of $0.35 per                    share, and warrants to purchase 717,143 shares of common stock                    at a                    purchase price of $0.385 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (4) | The                    holdings of Whalehaven Capital Fund Limited include 1,075,714                    shares                    issuable upon the voluntary conversion by Whalehaven Capital                    Fund of a                    secured convertible debenture at the current conversion price                    of $0.35 per                    share, warrants to purchase 1,613,571 shares of common stock                    at a purchase                    price of $0.35 per share, and warrants to purchase 537,857 shares                    of                    common stock at a purchase price of $0.385 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| (5) | The                    holdings of Cranshire Capital, LP. include 896,429 shares issuable                    upon                    the voluntary conversion by Cranshire Capital of a secured convertible                    debenture at the current onversion price of $0.35 per share,                    warrants to                    purchase 283,019 shares of common stock at a price of $0.66 per                    share,                    warrants to purchase 283,019 shares of common stock at a purchase                    price of                    $1.00 per share, warrants to purchase 1,344,643 shares of common                    stock at                    a purchase price of $0.35 per share, and warrants to purchase                    448,214                    shares of common stock at a purchase price of $0.385 per share.                    Mitchell                    P. Kopin, the President of Downsview Capital, Inc., the General                    Partner of                    Cranshire Capital, L.P., has sole investment power and voting                    control over                    the securities held by Cranshire Capital, L.P.                                                                                                                                                                               |
| (6) | The                    holdings of Marvin S. Hausman, M.D. include 2,404,080 shares                    of common                    stock, 271,570 shares issuable upon exercise of options that                    are                    exercisable currently or within 60 days of December 31, 2006,                    752,500                    warrant shares exercisable currently or within 60 days of December                    31,                    2006, and 13,982,567 shares held by TorreyPine Therapeutics,                    which                    acquired Axonyx Inc. in October 2006. Dr. Hausman has sole dispositive                    power as to 2,404,080 shares and shared dispositive power as                    to 16,386,647                    shares, including 13,982,567 shares held by TorreyPine Therapeutics.                    Dr.                    Hausman is a director of TorreyPine Therapeutics. Dr. Hausman                    in the                    Schedule 13D/A disclaims beneficial ownership of TorreyPine’s shares.                                                                                                                                                                                                                                                                                         |
| (7) | The                    holdings of S. Colin Neill include 135,000 shares issuable upon                    exercise                    of options that are exercisable currently or within 60 days of                    December 1,                    2006, and 46,875 warrant shares exercisable currently or within                    60 days of                    December 31, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| (8) | The                    holdings of Steven T. Guillen include 600,000 shares of common                    stock and                    575,000 shares issuable upon exercise of options that are exercisable                    currently or within 60 days of December 31,                    2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

----

|  (9)  |  The                    holdings of director John E. Repine include 50,000 shares of                    common stock                    and 183,387 shares issuable upon exercise of options that are                    exercisable                    currently or within 60 days of December 31, 2006.                                                                                                                                                                                                               |
|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  (10) |  The                    holdings of director Gary M. Post include 337,917 shares issuable                    upon                    exercise of options that are exercisable currently or within                    60 days of                    December 31, 2006 and 350,358 warrant shares exercisable currently                    or                    within 60 days of December 31, 2006.                                                                                                                     |
|  (11) |  The                    holdings of the executive officers and directors as a group include                    an                    aggregate 17,036,647 shares of common stock, 1,502,874 shares                    issuable                    upon exercise of options that are exercisable currently or within                    60 days                    of December 31, 2006 and 1,149,733 warrant shares exercisable                    currently or                    within 60 days of December 31, 2006. |

**Series        C Preferred Stock**

| **Name                  and address**                  |   | **Number                  of Shares of Series C Preferred Stock Beneficially                  Owned** |   | **Percent of****class                  (1)** |   |
|--------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------|--------|
|  American                  Health Care Fund, L.P. |   |                                                                                                  | 77,000 |                                              |   | 80 | % |
| 2748                  Adeline, Suite A                 |   |                                                                                                  |   |                                              |   |   |   |
| Berkeley,                  CA 94703 (1)                |   |                                                                                                  |   |                                              |   |   |   |
|                                                   |   |                                                                                                  |   |                                              |   |   |   |
| Megapolis                  BV                          |   |                                                                                                  | 19,230 |                                              |   | 20 | % |
| Javastraaat                  10                        |   |                                                                                                  |   |                                              |   |   |   |
| 2585                  The Hague, Netherlands (1)       |   |                                                                                                  |   |                                              |   |   |   |

| (1) | As                  required by SEC rules, the number of shares in the table includes                  shares                  which can be purchased within 60 days, or, shares with respect                  to which a                  person may obtain voting power or investment power within 60 days.                  Also                  required by such regulations, each percentage reported in the table                  for                  these individuals is calculated as though shares which can be purchased                  within 60 days have been purchased by the respective person or                  group and                  are outstanding. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**Equity        Compensation Plan Information**

|   **Plan                  Category**                        |   | **Number                  of Securities to****be                  Issued Upon Exercise of Outstanding Options,****Warrants                  and Rights** **(a)** |            | **Weighted-Average                  Exercise Price of Outstanding Options, Warrants and                  Rights** **(b)** |    | **Number                  of Securities Remaining Available for Future Issuance Under Equity                  Compensation Plans (Excluding Securities Reflected in Column                  (a))**                   **(c)**  |   |
|---------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------|--------------------------------------------------------------------------------------------------------------------------------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Equity                  compensation plans approved by security holders (1)     |   |                                                                                                                                                                  |  2,578,019 |                                                                                                                           |  $ |  0.46                                                                                                                                                                                                                              |   |   |  962,233 |   |
| Equity                  compensation plans not approved by security holders (2) |   |                                                                                                                                                                  |  3,029,370 |                                                                                                                           |  $ |  0.22                                                                                                                                                                                                                              |   |   |  — |   |
| Total                                                                           |   |                                                                                                                                                                  |  5,607,389 |                                                                                                                           |    |                                                                                                                                                                                                                                    |   |   |  962,233 |   |

|  (1) |  As                  of December 31, 2006, we had options issued and outstanding to                  purchase                  2,261,730 shares of common stock under our 2003 Stock Incentive                  Plan and                  316,289 shares of common stock under the 1994 Stock Incentive Plan.                  Our                  1994 Stock Incentive Plan terminated on April 30, 2004 and no additional                  grants may be made under that plan. As approved by stockholders,                  we may                  grant additional options to purchase up to 962,233 shares of common                  stock                  under our 2003 Stock Incentive Plan as of December 31, 2006. The                  number of                  shares reserved for issuance pursuant to options under the 2003                  Stock                  Incentive Plan was increased by 300,000 shares on January 1, 2006                  pursuant                  to an evergreen provision in the stock option plan. On August 1,                  2006, at                  the OXIS 2006 Annual Meeting of Stockholders, a proposal to increase                  the                  number of shares reserved for issuance under the OXIS 2003 Stock                  Incentive                  Plan from 3,600,000 shares to 5,600,000 shares was approved by                  the                  stockholders. |
|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  (2) |  As                  of December 31, 2006, we had options and warrants issued and outstanding                  for the purchase of an aggregate of 3,029,370 shares of our common                  stock                  to officers, directors, consultants and advisors outside of our                  1994 Stock                  Incentive Plan and our 2003 Stock Incentive Plan, which were issued                  on a                  case by case basis at the discretion of the board of                  directors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

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**ITEM        12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS **

*Consulting        and Employment Agreements with President, CEO and Chairman*

*Engagement        Letter and Advisory Agreement with Director*

----

*Consulting        Agreement with Director*

----

*Agreements        with Former President, CEO and Director*

*Letter        Agreement with Vice President and Chief Financial Officer*

*Convertible        Debenture and Warrant Financing*

 *Indemnification        of Officers and Directors*

*Exclusion        of Liability*

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**ITEM        13. **
**EXHIBITS**

**ITEM        14.**
**PRINCIPAL        ACCOUNT**
**ANT        FEES AND SERVICES**

*Audit        Fees*

*Audit        Related Fees*

*Tax        Fees*

*All        Other Fees*

----

**SIGNATURES**

**OXIS        International, Inc.**

**POWER        OF ATTORNEY**

| /s/                  Marvin S. Hausman, M.D. | May                  21, 2007 |   |                                       |                          |
|----------------------------------------------|-------------------------------|--------|--------------------------------------------|-------------------------------|
| Marvin                  S. Hausman, M.D.     | Date                          |   |                                       |                          |
|                                         |                          |   |                                       |                          |
| /s/                  S. Colin Neill*         | May                  21, 2007 |   | /s/                  John E. Repine, M.D.* | May                  21, 2007 |
| S.                  Colin Neill              | Date                          |   | John                  E. Repine, M.D.      | Date                          |
|                                         |                          |   |                                       |                          |
| /s/                  Matthew Spolar*         | May                  21, 2007 |   | /s/                  Gary M. Post*         | May                  21, 2007 |
| Matthew                  Spolar              | Date                          |   | Gary                  M. Post              | Date                          |

| *By:                       | /s/ MARVIN                    S. H AUSMAN , M.D.                                    |   | May                    21, 2007 |
|--------------------------------------|------------------------------------------------------------------------------------------|--------|---------------------------------|
|                                 | **Marvin                    S. Hausman, M.D.****As                    Attorney-in-Fact** |   |                            |

----

**EXHIBIT            INDEX**

|                  |   |                                                                                                                                                                                   |   | **Incorporated                    by Reference**  |   |     |
|-----------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------|--------|----------|
| **Exhibit****Number** |   | **Exhibit****Description**                                                                                                                                                             |   | **Form**                                               |   | **Date** |   | **Number** |   | **Filed                    Herewith** |
| 3.1                   |   | Restated                    Certificate of Incorporation as filed in Delaware September 10,                    1996 and                    as thereafter amended through March 1, 2002 |   | 10-KSB                                                 |   | 04/01/02 |   | 3.A |   |   |
|                  |   |                                                                                                                                                                                   |   |                                                   |   |     |   |   |   |   |
| 3.2                   |   | Bylaws                    of the Company as restated effective September 7, 1994 and as                    amended                    through April 29, 2003                           |   | 10-QSB                                                 |   | 08/13/03 |   | 3 |   |   |
|                  |   |                                                                                                                                                                                   |   |                                                   |   |     |   |   |   |   |
| 10.1                  |   | Series                    C Preferred Stock Subscription and Purchase Agreement (form);                    dated April                    1996 (1,774,080 shares in total)             |   | 10-KSB                                                 |   | 04/01/02 |   | 10.B |   |   |
|                  |   |                                                                                                                                                                                   |   |                                                   |   |     |   |   |   |   |
| 10.2                  |   | Subscription                    Agreement, Warrant to Purchase Common Stock and Form of Subscription                    dated                    July 2003 - August 2003               |   | 10-KSB                                                 |   | 03/26/04 |   | 10.D |   |   |
|                  |   |                                                                                                                                                                                   |   |                                                   |   |     |   |   |   |   |
| 10.3                  |   | Note                    and Warrant Purchase Agreement dated January 9, 2004                                                                                                           |   | 10-KSB                                                 |   | 03/26/04 |   | 10.I |   |   |
|                  |   |                                                                                                                                                                                   |   |                                                   |   |     |   |   |   |   |
| 10.4                  |   | Form                    of Convertible Promissory Note dated January 9, 2004                                                                                                           |   | 10-KSB                                                 |   | 03/26/04 |   | 10.J |   |   |
|                  |   |                                                                                                                                                                                   |   |                                                   |   |     |   |   |   |   |
| 10.5                  |   | Form                    of Warrant to Purchase Common Stock dated January 9, 2004                                                                                                      |   | 10-KSB                                                 |   | 03/26/04 |   | 10.K |   |   |
|                  |   |                                                                                                                                                                                   |   |                                                   |   |     |   |   |   |   |
| 10.6                  |   | Form                    of Loan Agreement between OXIS International, Inc. and Axonyx,                    Inc. dated                    June 2004                                 |   | 8-K                                                    |   | 06/10/04 |   | 99.2 |   |   |
|                  |   |                                                                                                                                                                                   |   |                                                   |   |     |   |   |   |   |
| 10.7                  |   | Form                    of Promissory Note between OXIS International, Inc. and Axonyx,                    Inc. dated                    June 2004                                |   | 8-K                                                    |   | 06/10/04 |   | 99.3 |   |   |
|                  |   |                                                                                                                                                                                   |   |                                                   |   |     |   |   |   |   |

----

|                  |   |                                                                                                                                                                                                                            |   | **Incorporated                    by Reference**  |   |     |
|-----------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------|--------|----------|
| **Exhibit****Number** |   | **Exhibit****Description**                                                                                                                                                                                                      |   | **Form**                                               |   | **Date** |   | **Number** |   | **Filed                    Herewith** |
| 10.8                  |   | Form                    of Security Agreement between OXIS International, Inc. and Axonyx,                    Inc.                    dated June 2004                                                                      |   | 8-K                                                    |   | 06/10/04 |   | 99.4 |   |   |
|                  |   |                                                                                                                                                                                                                            |   |                                                   |   |     |   |   |   |   |
| 10.9                  |   | Form                    of License Agreement between OXIS International, Inc. and Haptoguard,                    dated September 28, 2004                                                                                       |   | 10-QSB                                                 |   | 11/12/04 |   | 10.N |   |   |
|                  |   |                                                                                                                                                                                                                            |   |                                                   |   |     |   |   |   |   |
| 10.10                 |   | Securities                    Purchase Agreement, dated December 30, 2004                                                                                                                                                       |   | 8-K/A                                                  |   | 02/10/05 |   | 99.1 |   |   |
|                  |   |                                                                                                                                                                                                                            |   |                                                   |   |     |   |   |   |   |
| 10.11                 |   | Registration                    Rights Agreement, dated December 30, 2004                                                                                                                                                       |   | 8-K/A                                                  |   | 02/10/05 |   | 99.2 |   |   |
|                  |   |                                                                                                                                                                                                                            |   |                                                   |   |     |   |   |   |   |
| 10.12                 |   | Form                    of Common Stock Purchase Warrant, dated December 30, 2004                                                                                                                                               |   | 8-K/A                                                  |   | 02/10/05 |   | 99.3 |   |   |
|                  |   |                                                                                                                                                                                                                            |   |                                                   |   |     |   |   |   |   |
| 10.13                 |   | Consulting                    Agreement between OXIS International, Inc. and Marvin D, Hausman,                    M.D.,                    dated October 14, 2004                                                              |   | SB-2                                                   |   | 02/25/05 |   | 10.O |   |   |
|                  |   |                                                                                                                                                                                                                            |   |                                                   |   |     |   |   |   |   |
| 10.14                 |   | Form                    of Indemnification Agreement between OXIS International, Inc.                    and its                    Officers and Directors                                                                      |   | SB-2                                                   |   | 02/25/05 |   | 10.P |   |   |
|                  |   |                                                                                                                                                                                                                            |   |                                                   |   |     |   |   |   |   |
| 10.15                 |   | Letter                    Agreement between OXIS International, Inc. and Steven T. Guillen,                    dated                    February 28, 2005                                                                  |   | 8-K                                                    |   | 03/04/05 |   | 10.1 |   |   |
|                  |   |                                                                                                                                                                                                                            |   |                                                   |   |     |   |   |   |   |
| 10.16                 |   | Restricted                    Stock Purchase Agreement between OXIS International, Inc. and                    Steven T.                    Guillen, dated February 28, 2005                                               |   | 8-K                                                    |   | 03/04/05 |   | 10.2 |   |   |
|                  |   |                                                                                                                                                                                                                            |   |                                                   |   |     |   |   |   |   |
| 10.17                 |   | Notice                    of Stock Option Award and related Stock Option Agreement between                    OXIS                    International Inc. and Steven T. Guillen, dated February 28,                    2005 |   | SB-2/A                                                 |   | 04/29/05 |   | 10.T |   |   |
|                  |   |                                                                                                                                                                                                                            |   |                                                   |   |     |   |   |   |   |

----

|                  |   |                                                                                                                                                                                                                           |   | **Incorporated                    by Reference**  |   |     |
|-----------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------|--------|----------|
| **Exhibit****Number** |   | **Exhibit****Description**                                                                                                                                                                                                     |   | **Form**                                               |   | **Date** |   | **Number** |   | **Filed                    Herewith** |
| 10.18                 |   | Nonqualified                    Stock Option Agreement between OXIS International, Inc. and Steven                    T.                    Guillen, dated February 28, 2005                                              |   | SB-2/A                                                 |   | 04/29/05 |   | 10.U |   |   |
|                  |   |                                                                                                                                                                                                                           |   |                                                   |   |     |   |   |   |   |
| 10.19                 |   | Conversion                    Agreement between OXIS International, Inc. and Equitis Entreprise,                    dated                    May 23, 2005                                                                      |   | 8-K                                                    |   | 05/25/05 |   | 99.1 |   |   |
|                  |   |                                                                                                                                                                                                                           |   |                                                   |   |     |   |   |   |   |
| 10.20                 |   | Agreement                    between OXIS International, Inc. and Timothy C. Rodell date July                    31,                    2005                                                                                   |   | 8-K                                                    |   | 08/04/05 |   | 99.1 |   |   |
|                  |   |                                                                                                                                                                                                                           |   |                                                   |   |     |   |   |   |   |
| 10.21                 |   | Stock                    Purchase Agreement between OXIS International, Inc. and BioCheck                    Inc.                    dated September 19, 2005                                                                  |   | 8-K                                                    |   | 09/23/05 |   | 99.1 |   |   |
|                  |   |                                                                                                                                                                                                                           |   |                                                   |   |     |   |   |   |   |
| 10.22                 |   | Tenth                    Amendment to Lease between OXIS International, Inc. and Rosan,                    Inc. dated                    October 28, 2005                                                                      |   | 8-K                                                    |   | 11/02/05 |   | 10.1 |   |   |
|                  |   |                                                                                                                                                                                                                           |   |                                                   |   |     |   |   |   |   |
| 10.23                 |   | Consulting                    Agreement between OXIS International, Inc. and NW Medical Research                    Partners dated November 17, 2005                                                                           |   | 8-K                                                    |   | 11/23/05 |   | 10.1 |   |   |
| 10.24                 |   | Executive                    Employment Agreement between OXIS International, Inc., BioCheck,                    Inc. and                    John Chen dated December 6, 2005                                                  |   | 10-KSB                                                 |   | 03/31/06 |   | 10.24 |   |   |
|                  |   |                                                                                                                                                                                                                           |   |                                                   |   |     |   |   |   |   |
| 10.25                 |   | Option                    and Reimbursement Agreement between EverNew Biotech, Inc., OXIS                    International, Inc. and the shareholders of EverNew, dated December                    6,                    2005 |   | 10-KSB                                                 |   | 03/31/06 |   | 10.25 |   |   |
|                  |   |                                                                                                                                                                                                                           |   |                                                   |   |     |   |   |   |   |
| 10.26                 |   | Letter                    Agreement between OXIS International, Inc. and Michael D. Centron                    dated                    January 6, 2006                                                                        |   | 8-K                                                    |   | 01/10/06 |   | 10.1 |   |   |
|                  |   |                                                                                                                                                                                                                           |   |                                                   |   |     |   |   |   |   |
| 10.27                 |   | Lease                    Agreement between OXIS International, Inc. and Westcore Peninsula                    Vintage                    LLC dated February 8, 2006                                                            |   | 8-K                                                    |   | 02/13/06 |   | 10.1 |   |   |
|                  |   |                                                                                                                                                                                                                           |   |                                                   |   |     |   |   |   |   |

----

|                  |   |                                                                                                                                                       |   | **Incorporated                    by Reference**  |   |                              |
|-----------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------|--------|-----------------------------------|
| **Exhibit****Number** |   | **Exhibit****Description**                                                                                                                                 |   | **Form**                                               |   | **Date**                          |   | **Number** |   | **Filed                    Herewith** |
| 10.28                 |   | Promissory                    Note issued by OXIS International, Inc. to Steven T. Guillen                    dated March                    10, 2006      |   | 8-K                                                    |   | 03/14/06                          |   | 10.1 |   |   |
|                  |   |                                                                                                                                                       |   |                                                   |   |                              |   |   |   |   |
| 10.29                 |   | Promissory                    Note issued by OXIS International, Inc. to Fagan Capital, Inc.                    dated March                    31, 2006    |   | 8-K                                                    |   | 04/04/06                          |   | 10.1 |   |   |
|                  |   |                                                                                                                                                       |   |                                                   |   |                              |   |   |   |   |
| 10.30                 |   | Engagement                    Letter with Ambient Advisors                                                                                                 |   | 8-K                                                    |   | 5/31/06                           |   | 10.1 |   |   |
|                  |   |                                                                                                                                                       |   |                                                   |   |                              |   |   |   |   |
| 10.31                 |   | Mutual                    Services Agreement between OXIS International, Inc. and BioCheck,                    Inc.                    dated June 23, 2006 |   | 8-K                                                    |   | 6/29/06                           |   | 10.1 |   |   |
|                  |   |                                                                                                                                                       |   |                                                   |   |                              |   |   |   |   |
| 10.32                 |   | Renewal                    and Modification Promissory Note dated June 2, 2006.                                                                            |   | 8-K                                                    |   | 7/26/06                           |   | 10.1 |   |   |
|                  |   |                                                                                                                                                       |   |                                                   |   |                              |   |   |   |   |
| 10.33                 |   | Common                    Stock Purchase Warrant dated June 2, 2006.                                                                                       |   | 8-K                                                    |   | 7/26/06                      |   | 10.2 |   |   |
|                  |   |                                                                                                                                                       |   |                                                   |   |                              |   |   |   |   |
|  10.34           |   | Amendment                    #2 to Exclusive License and Supply Agreement dated July 19,                    2006.                                          |   | 8-K                                               |   | 7/26/06                      |   | 10.3 |   |   |
|                  |   |                                                                                                                                                       |   |                                                   |   |                              |   |   |   |   |
| 10.35                 |   | Form                    of Securities Purchase Agreement dated October 25, 2006.                                                                           |   | 8-K                                                    |   | 10/26/06                          |   | 10.1 |   |   |
|                  |   |                                                                                                                                                       |   |                                                   |   |                              |   |   |   |   |
| 10.36                 |   | Form                    of Secured Convertible Debenture dated October 25, 2006.                                                                           |   | 8-K                                                    |   | 10/26/06                          |   | 10.2 |   |   |
|                  |   |                                                                                                                                                       |   |                                                   |   |                              |   |   |   |   |
| 10.37                 |   | Form                    of Series A, B, C, D, E Common Stock Purchase Warrant dated October                    25,                    2006.                |   | 8-K                                                    |   | 10/26/06                          |   | 10.3 |   |   |
|                  |   |                                                                                                                                                       |   |                                                   |   |                              |   |   |   |   |
| 10.38                 |   | Form                    of Registration Rights Agreement dated October 25, 2006.                                                                           |   | 8-K                                                    |   | 10/26/06                          |   | 10.4 |   |    |
|                  |   |                                                                                                                                                       |   |                                                   |   |                              |   |   |   |   |

----

|                  |   |                                                                                                                                                               |   | **Incorporated                    by Reference**  |   |     |
|-----------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------|--------|----------|
| **Exhibit****Number** |   | **Exhibit****Description**                                                                                                                                         |   | **Form**                                               |   | **Date** |   | **Number** |   | **Filed                    Herewith** |
| 10.39                 |   | Form                    of Security Agreement dated October 25, 2006.                                                                                              |   | 8-K                                                    |   | 10/26/06 |   | 10.5 |   |   |
|                  |   |                                                                                                                                                               |   |                                                   |   |     |   |   |   |   |
| 10.40                 |   | Employment                    Agreement between OXIS International, Inc. and Marvin S. Hausman,                    M.D.                    dated November 6, 2006. |   | 8-K                                                    |   | 11/13/06 |   | 10.1 |   |   |
|                  |   |                                                                                                                                                               |   |                                                   |   |     |   |   |   |   |
| 10.41                 |   | Advisory                    Agreement between OXIS International, Inc. and Ambient Advisors,                    LLC dated                    November 6, 2006.     |   | 8-K                                                    |   | 11/13/06 |   | 10.2 |   |   |
|                  |   |                                                                                                                                                               |   |                                                   |   |     |   |   |   |   |
| 10.42                 |   | Consulting                    Agreement between OXIS International, Inc. and John E. Repine,                    M.D. dated                    November 6, 2006.    |   | 8-K                                                    |   | 11/13/06 |   | 10.3 |   |   |
|                  |   |                                                                                                                                                               |   |                                                   |   |     |   |   |   |   |
| 10.43                 |   | Separation                    Agreement between OXIS and Steve Guillen dated March 8,                    2007                                                      |   | 10-KSB                                                 |   | 4/17/07  |   | 10.43 |   |   |
|                  |   |                                                                                                                                                               |   |                                                   |   |     |   |   |   |   |
| 10.44                 |   | Registration                    Rights Agreement between OXIS and Steve Guillen dated March 30,                    2007                                            |   | 8-K/A                                                  |   | 5/3/2007 |   | 99.1 |   |   |
|                  |   |                                                                                                                                                               |   |                                                   |   |     |   |   |   |   |
| 21.1                  |   | Subsidiaries                    of OXIS International, Inc.                                                                                                        |   | 10-KSB                                                 |   | 04/17/07 |   | 21.1 |   |   |
|                  |   |                                                                                                                                                               |   |                                                   |   |     |   |   |   |   |
| 23.1                  |   | Consent                    of Independent Registered Public Accounting Firm                                                                                        |   |                                                   |   |     |   |   |   | X |

----

**OXIS        INTERNATIONAL, INC. AND SUBSIDIARIES**

**CONSOLIDATED      FINANCIAL STATEMENTS**

**YEARS      ENDED DECEMBER 31, 2006 AND 2005**

**Contents**

|                                                                                                                                            | **Page**  |
|-------------------------------------------------------------------------------------------------------------------------------------------------|----------------|
|  **Report                of Independent Registered Public Accounting Firm**                                                                |           |
|  Williams                & Webster, P.S.                                                                                               |  F-1      |
|  **Consolidated                Financial Statements**                                                                                      |           |
|  Balance                Sheets as of December 31, 2006 and 2005                                                                  |  F-2      |
|  Statements                of Operations For Years Ended December 31, 2006                and 2005                          |  F-3      |
|  Statement                of Stockholders’ Equity (Deficit) For Years Ended                December 31, 2006 and 2005 |  F-4      |
|  Statements                of Cash Flows For Years Ended December 31, 2006                and 2005                          |  F-5      |
|  Notes                To Consolidated Financial Statements                                                                                 |  F-6      |

----

**REPORT      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

*      Share-Based Payment*

----

**OXIS      International, Inc. and Subsidiaries **

**Consolidated      Balance Sheets**

**As      of December 31, 2006 and 2005**

|                                                                                                                                                                                                              |   | **December                31,** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|--------|
|                                                                                                                                                                                                              |   |                            |   | **2006** |   | **2005** |   |
| ASSETS                                                                                                                                                                                                            |   |                            |   |   |   |   |   |
| Current                Assets:                                                                                                                                                                                    |   |                            |   |   |   |   |   |   |   |   |
| Cash                and cash equivalents                                                                                                                                                                          |   |                            |   |   | $ | 1,208,000 |   | $ | 614,000 |   |
| Accounts                receivable, net                                                                                                                                                                           |   |                            |   |   |   | 732,000 |   |   | 865,000 |   |
| Inventory                                                                                                                                                                                                         |   |                            |   |   |   | 561,000 |   |   | 650,000 |   |
| Prepaid                expenses and other current assets                                                                                                                                                          |   |                            |   |   |   | 130,000 |   |   | 238,000 |   |
| Deferred                tax assets                                                                                                                                                                                |   |                            |   |   |   | 10,000 |   |   | 14,000 |   |
| Restricted                cash                                                                                                                                                                                    |   |                            |   |   |   | 3,060,000 |   |   | 3,060,000 |   |
| Total                Current Assets                                                                                                                                                                               |   |                            |   |   |   | 5,701,000 |   |   | 5,441,000 |   |
| Property,                plant and equipment, net                                                                                                                                                                 |   |                            |   |   |   | 244,000 |   |   | 243,000 |   |
| Patents,                net                                                                                                                                                                                       |   |                            |   |   |   | 761,000 |   |   | 831,000 |   |
| Goodwill                and other assets, net                                                                                                                                                                     |   |                            |   |   |   | 1,291,000 |   |   | 1,291,000 |   |
| Total                Other Assets                                                                                                                                                                                 |   |                            |   |   |   | 2,296,000 |   |   | 2,365,000 |   |
| TOTAL                ASSETS                                                                                                                                                                                       |   |                            |   |   | $ | 7,997,000 |   | $ | 7,806,000 |   |
|                                                                                                                                                                                                              |   |                            |   |
| LIABILITIES                AND SHAREHOLDERS’ EQUITY (DEFICIT)                                                                                                                                               |   |                            |   |
| Current                Liabilities:                                                                                                                                                                               |   |                            |   |   |   |   |   |   |   |   |
| Accounts                payable                                                                                                                                                                                   |   |                            |   |   | $ | 714,000 |   | $ | 505,000 |   |
| Accrued                expenses                                                                                                                                                                                   |   |                            |   |   |   | 838,000 |   |   | 468,000 |   |
| Accounts                payable to related party                                                                                                                                                                  |   |                            |   |   |   | 49,000 |   |   | 194,000 |   |
| Warrant                liability                                                                                                                                                                                  |   |                            |   |   |   | 2,314,000 |   |   | — |   |
| Accrued                derivative liability                                                                                                                                                                       |   |                            |   |   |   | 678,000 |   |   | — |   |
| Notes                Payable                                                                                                                                                                                      |   |                            |   |   |   | 3,060,000 |   |   | 3,060,000 |   |
| Total                Current Liabilities                                                                                                                                                                          |   |                            |   |   |   | 7,653,000 |   |   | 4,227,000 |   |
| Long-term                deferred taxes                                                                                                                                                                           |   |                            |   |   |   | 25,000 |   |   | 41,000 |   |
| Convertible                debentures, net of discounts of $1,226,000                                                                                                                                             |   |                            |   |   |   | 124,000 |   |   | — |   |
| Total                Liabilities                                                                                                                                                                                  |   |                            |   |   |   | 7,802,000 |   |   | 4,268,000 |   |
| Minority                interest                                                                                                                                                                                  |   |                            |   |   |   | 770,000 |   |   | 604,000 |   |
| Commitments                and Contingencies                                                                                                                                                                      |   |                            |   |   |   | — |   |   | — |   |
| Stockholders’                Equity (Deficit):                                                                                                                                                              |   |                            |   |   |   |   |   |   |   |   |
| Convertible                preferred stock - $0.01 par value; 15,000,000 shares                authorized:                                                                                                        |   |                            |   |   |   |   |   |   |   |   |
| Series                B - 0 and 0 shares issued and outstanding at December 31, 2006 and                2005,                respectively (aggregate liquidation preference of $1,000)                            |   |                            |   |   |   | — |   |   | — |   |
| Series                C - 96,230 shares issued and outstanding                                                                                                                                                    |   |                            |   |   |   | 1,000 |   |   | 1,000 |   |
| Common                stock - $0.001 par value; 150,000,000 shares authorized; 44,527,476                and                42,538,397 shares issued and outstanding at December 31, 2006 and                2005 |   |                            |   |   |   | 45,000 |   |   | 43,000 |   |
| Additional                paid-in capital                                                                                                                                                                         |   |                            |   |   |   | 70,115,000 |   |   | 68,686,000 |   |
| Accumulated                deficit                                                                                                                                                                                |   |                            |   |   |   | (70,319,000 | ) |   | (65,379,000 | ) |
| Accumulated                other comprehensive loss                                                                                                                                                               |   |                            |   |   |   | (417,000 | ) |   | (417,000 | ) |
| Total                stockholders’ equity (deficit)                                                                                                                                                         |   |                            |   |   |   | (575,000 | ) |   | 2,934,000 |   |
| TOTAL                LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)                                                                                                                                         |   |                            |   |   | $ | 7,997,000 |   | $ | 7,806,000 |   |

----

**OXIS      International, Inc. and Subsidiaries **

**Consolidated      Statements of Operations**

**Years      Ended December 31, 2006 and 2005**

|                                                                   |   | **2006** |       |  **2005** |   |
|------------------------------------------------------------------------|--------|----------|------------|----------------|--------|
| Revenue:                                                               |   |     |       |           |   |   |   |
| Product                revenues                                        |   | $        | 5,201,000  |           | $      | 2,397,000 |   |
| License                revenues                                        |   |     | 575,000    |           |   | 100,000 |   |
| TOTAL                REVENUE                                           |   |     | 5,776,000  |           |   | 2,497,000 |   |
| Cost                of Product Revenue                                 |   |     | 3.084,000  |           |   | 1,345,000 |   |
| Gross                Profit                                            |   |     | 2,692,000  |           |   | 1,152,000 |   |
| Operating                Expenses:                                     |   |     |       |           |   |   |   |
| Research                and development                                |   |     | 708,000    |           |   | 499,000 |   |
| Selling,                general and administrative                     |   |     | 4,654,000  |           |   | 2,342,000 |   |
| Purchased                in-process research and development           |   |     | —    |           |   | 1,500,000 |   |
| Total                Operating Expenses                                |   |     | 5,362,000  |           |   | 4,341,000 |   |
| Loss                from Operations                                    |   |     | (2,670,000 | )              |   | (3,189,000 | ) |
| Other                Income (expense):                                 |   |     |       |           |   |   |   |
| Interest                income                                         |   |     | 80,000     |           |   | 110,000 |   |
| Other                income                                            |   |     | 62,000     |           |   | 4,000 |   |
| Financing                cost related to convertible debentures        |   |     | (1,674,000 | )              |   | — |   |
| Change                in value of warrant and derivative liabilities   |   |     | 32,000     |           |   | — |   |
| Interest                expense                                        |   |     | (484,000   | )              |   | (26,000 | ) |
| Total                Other Income (Expense)                            |   |     | (1,984,000 | )              |   | 88,000 |   |
| Minority                Interest in Subsidiary                         |   |     | (166,000   | )              |   | (6,000 | ) |
| Loss                before provision for income taxes                  |   |     | (4,820,000 | )              |   | (3,107,000 | ) |
| Provision                for income taxes                              |   |     | 120,000    |           |   | 2,000 |   |
| Net                Loss                                                |   | $        | (4,940,000 | )              | $      | (3,109,000 | ) |
| Loss                Per Share - Basic and Diluted                      |   | $        | (0.11      | )              | $      | (0.07 | ) |
| Weighted                Average Shares Outstanding - Basic and Diluted |   |     | 43,059,701 |           |   | 42,213,275 |   |

----

**OXIS      International, Inc. and Subsidiaries **

**Consolidated      Statement of Stockholders’ Equity (Deficit)**

**Years      Ended December 31, 2006 and 2005**

|                                                                                    |   |                               |     |                            |   |        |   |            |       |              |   |        |   | **Accumulated** |       | **Total**               |   |
|-----------------------------------------------------------------------------------------|--------|------------------------------------|----------|---------------------------------|--------|-------------|--------|-----------------|------------|-------------------|--------|-------------|--------|-----------------|------------|-------------------------|--------|
|                                                                                    |   |                               |     |                            |   |        |   |            |       | **Additional**    |   |        |   | **Other**       |       | **Stockholders’** |   |
|                                                                                    |   | **Preferred                Stock** |     | **Common                Stock** |   | **Paid-in** |   | **Accumulated** |       | **Comprehensive** |   | **Equity**  |   |
|                                                                                    |   | **Shares**                         |     | **Amount**                      |   | **Shares**  |   | **Amount**      |       | **Capital**       |   | **Deficit** |   | **Loss**        |       | **(Deficit)**           |   |
| Balance,                December 31, 2004                                               |   |                               | 524,619  |                            |   | 5,000       |   |            | 41,071,198 |              |   | 41,000      |   |            | 68,437,000 |                    |   | (62,270,000 | ) |   | (417,000 | ) |   | 5,796,000 |   |
| Cost                of registration statement related                                   |   |                               |     |                            |   |        |   |            |       |              |   |        |   |            |       |                    |   |   |   |   |   |   |   |   |   |
| to                private placement                                                     |   |                               |     |                            |   |        |   |            |       |              |   |        |   |            | (302,000   | )                       |   |   |   |   |   |   |   | (302,000 | ) |
| Exercise                of stock options                                                |   |                               |     |                            |   |        |   |            | 322,166    |              |   |        |   |            | 45,000     |                    |   |   |   |   |   |   |   | 45,000 |   |
| Issuance                of common stock                                                 |   |                               |     |                            |   |        |   |            | 600,000    |              |   | 1,000       |   |            | 239,000    |                    |   |   |   |   |   |   |   | 240,000 |   |
| Stock                compensation expense for                                           |   |                               |     |                            |   |        |   |            |       |              |   |        |   |            |       |                    |   |   |   |   |   |   |   |   |   |
| options                issued to non-employees                                          |   |                               |     |                            |   |        |   |            |       |              |   |        |   |            | 20,000     |                    |   |   |   |   |   |   |   | 20,000 |   |
| Conversion                of shareholder note payable                                   |   |                               |     |                            |   |        |   |            |       |              |   |        |   |            |       |                    |   |   |   |   |   |   |   |   |   |
| into                common stock                                                        |   |                               |     |                            |   |        |   |            | 459,355    |              |   | 1,000       |   |            | 243,000    |                    |   |   |   |   |   |   |   | 244,000 |   |
| Conversion                of Series B preferred stock                                   |   |                               |     |                            |   |        |   |            |       |              |   |        |   |            |       |                    |   |   |   |   |   |   |   |   |   |
| into                common stock                                                        |   |                               | (428,389 | )                               |   | (4,000      | )      |            | 85,678     |              |   |        |   |            | 4,000      |                    |   |   |   |   |   |   |   | — |   |
| Net                loss                                                                 |   |                               |     |                            |   |        |   |            |       |              |   |        |   |            |       |                    |   | (3,109,000 | ) |   |   |   |   | (3,109,000 | ) |
| Balance,                December 31, 2005                                               |   |                               | 96,230   |                            |   | 1,000       |   |            | 42,538,397 |              |   | 43,000      |   |            | 68,686,000 |                    |   | (65,379,000 | ) |   | (417,000 | ) |   | 2,934,000 |   |
| Exercise                of stock options                                                |   |                               |     |                            |   |        |   |            | 528,588    |              |   | 1,000       |   |            | 69,000     |                    |   |   |   |   |   |   |   | 70,000 |   |
| Issuance                of common stock for servicesand                accounts payable |   |                               |     |                            |   |        |   |            | 1,460,491  |              |   | 1,000       |   |            | 292,000    |                    |   |   |   |   |   |   |   | 293,000 |   |
| Fair                value of warrants issued with debt                                  |   |                               |     |                            |   |        |   |            |       |              |   |        |   |            | 166,000    |                    |   |   |   |   |   |   |   | 166,000 |   |
| Stock                compensation expense for                                           |   |                               |     |                            |   |        |   |            |       |              |   |        |   |            |       |                    |   |   |   |   |   |   |   |   |   |
| options                issued to employees and non-employees                            |   |                               |     |                            |   |        |   |            |       |              |   |        |   |            | 692,000    |                    |   |   |   |   |   |   |   | 692,000 |   |
| Repricing                of warrants                                                    |   |                               |     |                            |   |        |   |            |       |              |   |        |   |            | 210,000    |                    |   |   |   |   |   |   |   | 210,000 |   |
| Net                loss                                                                 |   |                               |     |                            |   |        |   |            |       |              |   |        |   |            |       |                    |   | (4,940,000 | ) |   |   |   |   | (4,940,000 | ) |
| Balance,                December 31, 2006                                               |   |                               | 96,230   |                            | $      | 1,000       |   |            | 44,527,476 |              | $      | 45,000      |   | $               | 70,115,000 |                    | $      | (70,319,000 | ) | $ | (417,000 | ) | $ | (575,000 | ) |

----

**OXIS      International, Inc. and Subsidiaries **

**Consolidated      Statements of Cash Flows**

**Years      Ended December 31, 2006 and 2005**

|                                                                                                                  |   | **2006**     |       | **2005**     |   |
|-----------------------------------------------------------------------------------------------------------------------|--------|--------------|------------|--------------|--------|
| CASH                FLOW FROM OPERATING ACTIVITIES:                                                                   |   |    |       |    |   |
| Net                loss                                                                                               |   | $            | (4,940,000 | )            | $      | (3,109,000 | ) |
| Adjustment                to reconcile net loss to net cash used in operating                activities:              |   |         |       |         |   |   |   |
| Depreciation                of property, plant and equipment                                                          |   |         | 63,000     |         |   | 28,000 |   |
| Amortization                of intangible assets                                                                      |   |         | 114,000    |         |   | 126,000 |   |
| Accretion                of interest on discounted note payable                                                       |   |         | 166,000    |         |   | — |   |
| Common                stock issued to vendor for accounts payable                                                     |   |         | 21,000     |         |   | — |   |
| Stock                compensation expense for options issued toemployees                and non-employees             |   |         | 692,000    |         |   | — |   |
| Purchased                in-process research and development expense                                                  |   |         | —    |         |   | 1,500,000 |   |
| Repricing                of warrants                                                                                  |   |         | 210,000    |         |   | — |   |
| Write-off                of capitalized patent costs                                                                  |   |         | —    |         |   | 105,000 |   |
| Stock                compensation expense                                                                             |   |         | 272,000    |         |   | 20,000 |   |
| Amortization                of debt discounts                                                                         |   |         | 124,000    |         |   | — |   |
| Change                in value of warrant and derivative liabilities                                                  |   |         | (32,000    | )            |   | — |   |
| Financing                cost related to convertible debentures                                                       |   |         | 1,674,000  |         |   | — |   |
| Change                in deferred taxes                                                                               |   |         | (12,000    | )            |   | — |   |
| Minority                interest in subsidiary                                                                        |   |         | 166,000    |         |   | 6,000 |   |
| Changes                in operating assets and liabilities:                                                           |   |         |       |         |   |   |   |
| Accounts                receivable                                                                                    |   |         | 133,000    |         |   | (26,000 | ) |
| Inventory                                                                                                             |   |         | 89,000     |         |   | (108,000 | ) |
| Prepaid                expense and other current assets                                                               |   |         | 155,000    |         |   | (62,000 | ) |
| Other                assets                                                                                           |   |         | —    |         |   | — |   |
| Accounts                payable                                                                                       |   |         | 209,000    |         |   | (152,000 | ) |
| Accrued                expenses                                                                                       |   |         | 370,000    |         |   | (431,000 | ) |
| Accounts                payable to related party                                                                      |   |         | (145,000   | )            |   | 10,000 |   |
| Net                cash used in operating activities                                                                  |   |         | (671,000   | )            |   | (2,093,000 | ) |
| CASH                FLOW INVESTING ACTIVITIES:                                                                        |   |         |       |         |   |   |   |
| Acquisition                of common shares of subsidiary                                                             |   |         | —    |         |   | (3,215,000 | ) |
| Investment                in restricted certificate of deposit                                                        |   |         | (3,060,000 | )            |   | (3,060,000 | ) |
| Proceeds                from restricted certificate of deposit                                                        |   |         | 3,060,000  |         |   | — |   |
| Cash                acquired in business combination                                                                  |   |         | —    |         |   | 407,000 |   |
| Capital                expenditures                                                                                   |   |         | (64,000    | )            |   | (33,000 | ) |
| Increase                in patents                                                                                    |   |         | (44,000    | )            |   | (172,000 | ) |
| Net                cash used in investing activities                                                                  |   |         | (108,000   | )            |   | (6,073,000 | ) |
| CASH                FLOW FROM FINANCING ACTIVITIES:                                                                   |   |         |       |         |   |   |   |
| Collection                of private placement proceeds receivable,net                of registration statement costs |   |         | —    |         |   | 1,948,000 |   |
| Proceeds                from issuance of common stock                                                                 |   |         | —    |         |   | 240,000 |   |
| Proceeds                from issuance of convertible debenture                                                        |   |         | 1,350,000  |         |   | — |   |
| Payment                of offering costs and expenses                                                                 |   |         | (47,000    | )            |   | — |   |
| Proceeds                from exercise of stock options                                                                |   |         | 70,000     |         |   | 45,000 |   |
| Proceeds                from short-term borrowing                                                                     |   |         | 3,666,000  |         |   | 3,060,000 |   |
| Repayment                of short-term borrowings                                                                     |   |         | (3,666,000 | )            |   | (1,200,000 | ) |
| Net                cash provided by financing activities                                                              |   |         | 1,373,000  |         |   | 4,093,000 |   |
| NET                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                   |   |         | 594,000    |         |   | (4,073,000 | ) |
| CASH                AND CASH EQUIVALENTS, Beginning of year                                                           |   |         | 614,000    |         |   | 4,687,000 |   |
| CASH                AND CASH EQUIVALENTS, End of year                                                                 |   | $            | 1,208,000  |         | $      | 614,000 |   |

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

**Years        Ended December**
** 31**
**, 2**
**006        and 2005**

| **1.  ** | **The                Company and Summary of Significant Accounting                Policies** |
|--------------------|----------------------------------------------------------------------------------------------|

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

**Years        Ended December**
** 31**
**, 2**
**006        and 2005**

*Accounts        receivable*

|                                        |   | **Balance                at Beginning of Period** |   |   **Increases****Additions** |   |  **Decreases** |   | **Balance                at End of Period** |   |
|---------------------------------------------|--------|---------------------------------------------------|--------|----------------------------------------|--------|---------------------|--------|---------------------------------------------|--------|
| Year                ended December 31, 2005 |   | $                                                 | 7,000  |                                   | $      | --                  |   | $                                           | (5,000 | ) | $ | 2,000 |   |
| Year                ended December 31, 2006 |   |                                              | 2,000  |                                   |   | 25,000              |   |                                        | --     |   |   | 27,000 |   |

*Advertising      and promotional fees*

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

**Years        Ended December**
** 31**
**, 2**
**006        and 2005**

*Basis      of Consolidation and Comprehensive Income*

*Cash      and Cash Equivalents*

*Concentrations      of Credit Risk*

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

**Years        Ended December**
** 31**
**, 2**
**006        and 2005**

*Derivative      instruments*

*Fair      value of Financial Instruments*

*Goodwill*

----

**OXIS      International, Inc. and Subsidiaries**

**Notes      To Consolidated Financial Statements**

**Years      Ended December**
** 31**
**, 2**
**006      and 2005**

*Inventories*

*Impairment      of Long Lived Assets*

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

**Years        Ended December**
** 31**
**, 2**
**006        and 2005**

*Income        Taxes*

*       Net          Loss Per          Share*

*Patents*

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

**Years        Ended December**
** 31**
**, 2**
**006        and 2005**

* Property,        Plant and Equipment*

*Accounting      for Certain Hybrid Financial Instruments.*
*Accounting      for Derivative Instruments and Hedging Activities*
*Accounting      for Transfers and Servicing of Financial Assets and Extinguishments of      Liabilities*

*Accounting      for Servicing of Financial Assets.” *
*Accounting      for Transfers and Servicing of Financial Assets and Extinguishments of      Liabilities,”*

*Fair      Value Measurements*

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

**Years        Ended December**
** 31**
**, 2**
**006        and 2005**

*Employers'          Accounting for Defined Benefit Pension and Other Postretirement Plans−An          amendment of FASB Statements No. 87, 88, 106,          and 132(R*

*FASB        Interpretation No. 48,*
*Accounting        for Uncertainty in Income Taxes, an interpretation of FASB        Statement No.109*

----

**OXIS        International, Inc. and Subsidiaries**

**Notes          To Consolidated Financial Statements**

**Years          Ended December**
** 31**
**, 2**
**006          and 2005**

*Considering      the Effects of Prior Year Misstatements when Quantifying Misstatements in      Current Year Financial Statements*
*SAB      108*

*Reclassifications*

*Research      and Development*

*Restricted      Cash*

*Revenue        Recognition*

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

**Years        Ended December**
** 31**
**, 2**
**006        and 2005**

*Stock-Based      Compensation*

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

**Years        Ended December**
** 31**
**, 2**
**006        and 2005**

|                                                                                                                                          |   | **Loss                from** **Operations** |       | **Loss                Before** ** ** **Provision                for** **Income                Taxes** |   | **Net                Loss** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|--------|
| Results                as reported                                                                                                       |   | $                                                | (2,670,000 | )                                                                                                                         | $      | (4,820,000                  | )      | $ | (4,940,000 | ) |
| Additional                compensation expense - effect of adoption of SFAS 123R                                                         |   |                                             | 314,000    |                                                                                                                      |   | 314,000                     |   |   | 314,000 |   |
| Proforma                results applying the original provisions of SFAS 123 using the intrinsic                value method of APB 25   |   | $                                                | (2,356,000 | )                                                                                                                         | $      | (4,506,000                  | )      | $ | (4,626,000 | ) |

| **For                the year ended December 31, 2005**                                                                       |   |   |       |
|-------------------------------------------------------------------------------------------------------------------------------|--------|--------|------------|
|                                                                                                                          |   |   |       |
| Net                loss as reported                                                                                           |   | $      | (3,109,000 | ) |
| Stock                based employee compensation expense determined                using the fair value method for all awards |   |   | (195,000   | ) |
| Pro                forma net loss                                                                                             |   | $      | (3,304,000 | ) |
| Pro                forma loss per share:                                                                                      |   | $      | (0.08      | ) |
| Net                loss per share:                                                                                            |   | $      | (0.07      | ) |
|                                                                                                                          |   |   |       |   |
| Basic                and diluted as reported                                                                                  |   | $      | (0.07      | ) |
| Basic                and diluted pro forma                                                                                    |   | $      | (0.08      | ) |

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

**Years        Ended December**
** 31**
**, 2**
**006        and 2005**

*Use      of Estimates*

**2. Acquisition      of BioCheck**

----

**OXIS      International, Inc. and Subsidiaries**

**Notes      To Consolidated Financial Statements**

**Years      Ended December**
** 31**
**, 2**
**006      and 2005**

| Cash                                                          |   | $      | 407,000   |   |
|---------------------------------------------------------------|--------|--------|-----------|--------|
| Accounts                receivable                            |   |   | 610,000   |   |
| Inventory                                                     |   |   | 296,000   |   |
| Other                current assets                           |   |   | 62,000    |   |
| Property,                plant and equipment                  |   |   | 177,000   |   |
| In-process                research and development (expensed) |   |   | 1,500,000 |   |
| Patents                and other assets                       |   |   | 107,000   |   |
| Goodwill                                                      |   |   | 1,199,000 |   |
| Minority                interest                              |   |   | (598,000  | )      |
| Assumed                liabilities                            |   |   | (423,000  | )      |
| Total                acquisition costs                        |   | $      | 3,337,000 |   |

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

**Years        Ended December**
** 31**
**, 2**
**006        and 2005**

|                                                  |   |  **2005** |       |
|-------------------------------------------------------|--------|----------------|------------|
| Revenues                                              |   | $              | 6,299,000  |   |
| Net                loss                               |   | $              | (1,492,000 | ) |
| Net                loss per share - basic and diluted |   | $              | (0.04      | ) |

**3. Inventories**

|                             |   | **December                  31,** |    |
|----------------------------------|--------|-----------------------------------|---------|
|                             |   | **2006**                          |    | **2005** |   |
| Raw                  materials   |   | $                                 | 83,000  |   | $ | 304,000 |   |
| Work                  in process |   |                              | 110,000 |   |   | 185,000 |   |
| Finished                  goods  |   |                              | 368,000 |   |   | 161,000 |   |
|                             |   | $                                 | 561,000 |   | $ | 650,000 |   |

----

**OXIS      International, Inc. and Subsidiaries**

**Notes      To Consolidated Financial Statements**

**Years      Ended December**
** 31**
**, 2**
**006      and 2005**

**4. Property,      Plant and Equipment**

|                                                  |   | **December                31,** |      |
|-------------------------------------------------------|--------|---------------------------------|-----------|
|                                                  |   | **2006**                        |      | **2005** |   |
| Laboratory                and manufacturing equipment |   | $                               | 798,000   |   | $ | 1,165,000 |   |
| Furniture                and office equipment         |   |                            | 225,000   |   |   | 408,000 |   |
| Leasehold                improvements                 |   |                            | 73,000    |   |   | 105,000 |   |
|                                                  |   |                            | 1,096,000 |   |   | 1,678,000 |   |
| Accumulated                depreciation               |   |                            | (852,000  | ) |   | (1,435,000 | ) |
|                                                  |   | $                               | 244,000   |   | $ | 243,000 |   |

**5. Patents**

|                                    |   | **December                31,** |      |
|-----------------------------------------|--------|---------------------------------|-----------|
|                                    |   | **2006**                        |      | **2005** |   |
| Capitalized                patent costs |   | $                               | 1,158,000 |   | $ | 1,114,000 |   |
| Accumulated                amortization |   |                            | (397,000  | ) |   | (283,000 | ) |
|                                    |   | $                               | 761,000   |   | $ | 831,000 |   |

| 2007                                |   | $      | 125,000 |   |
|-------------------------------------|--------|--------|---------|--------|
| 2008                                |   |   | 114,000 |   |
| 2009                                |   |   | 97,000  |   |
| 2010                                |   |   | 94,000  |   |
| 2011                                |   |   | 94,000  |   |
| Thereafter                          |   |   | 237,000 |   |
| Total                  amortization |   | $      | 761,000 |   |

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

**Years        Ended December**
** 31**
**, 2**
**006        and 2005**

**6. Goodwill      and Other Assets**

|                                 |   | **December                31,** |      |
|--------------------------------------|--------|---------------------------------|-----------|
|                                 |   | **2006**                        |      | **2005** |   |
| Goodwill                             |   | $                               | 1,199,000 |   | $ | 1,199,000 |   |
| Strategic                investments |   |                            | 75,000    |   |   | 75,000 |   |
| Lease                deposits        |   |                            | 17,000    |   |   | 17,000 |   |
|                                 |   | $                               | 1,291,000 |   | $ | 1,291,000 |   |

**7. Debt**

*Note      payable*

|                                         |   | **December                31,** |      |
|----------------------------------------------|--------|---------------------------------|-----------|
|                                         |   | **2006**                        |      | **2005** |   |
| Note                payable to KeyBank, N.A. |   | $                               | -         |   | $ | 3,060,000 |   |
| Note                payable to Bridge Bank   |   |                            | 3,060,000 |   |   | - |   |
| Total                debt                    |   | $                               | 3,060,000 |   | $ | 3,060,000 |   |

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

**Years        Ended December**
** 31**
**, 2**
**006        and 2005**

*Convertible      debentures*

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

**Years        Ended December**
** 31**
**, 2**
**006        and 2005**

----

**OXIS      International, Inc. and Subsidiaries**

**Notes      To Consolidated Financial Statements**

**Years      Ended December**
** 31**
**, 2**
**006      and 2005**

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

**Years        Ended December**
** 31**
**, 2**
**006        and 2005**

**8. Commitments      and Contingencies**

|   |   | **Operating                Leases** |    |
|--------|--------|-------------------------------------|---------|
|   |   | **Minimum                Rental**   |    | **Sublease                Rental** |   | **Net                Rental Payments** |   |
| 2007   |   | $                                   | 257,000 |   | $ | (38,000 | ) | $ | 219,000 |   |
| 2008   |   |                                | 265,000 |   |   | (38,000 | ) |   | 227,000 |   |
| 2009   |   |                                | 50,000  |   |   | (6,000 | ) |   | 44,000 |   |
|   |   | $                                   | 572,000 |   | $ | (82,000 | ) | $ | 490,000 |   |

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

**Years        Ended December**
** 31**
**, 2**
**006        and 2005**

**9. Stockholders'      Equity**

*Common      Stock*

** **
** **

----

**OXIS      International, Inc. and Subsidiaries**

**Notes      To Consolidated Financial Statements**

**Years      Ended December**
** 31**
**, 2**
**006      and 2005**

*Preferred      Stock*

*Common      Stock Warrants*

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

**Years        Ended December**
** 31**
**, 2**
**006        and 2005**

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

**Years        Ended December**
** 31**
**, 2**
**006        and 2005**

*Stock        Options*

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

**Years        Ended December**
** 31**
**, 2**
**006        and 2005**

|                                               |   | **Number                of Options** |       | **Weighted                Average Exercise Price** |   |
|----------------------------------------------------|--------|--------------------------------------|------------|----------------------------------------------------|--------|
| Outstanding,                December 31, 2004 |   |                                 | 4,672,863  |                                               | $      | 0.75 |   |
| Granted                                            |   |                                 | 2,671,000  |                                               |   | 0.33 |   |
| Exercised                                          |   |                                 | (322,166   | )                                                  |   | 0.14 |   |
| Forfeited                                          |   |                                 | (643,907   | )                                                  |   | 0.76 |   |
| Outstanding,                December 31, 2005 |   |                                 | 6,377,790  |                                               |   | 0.60 |   |
| Granted                                            |   |                                 | 1,884,370  |                                               |   | 0.30 |   |
| Exercised                                          |   |                                 | (528,588   | )                                                  |   | 0.13 |   |
| Forfeited                                          |   |                                 | (2,126,183 | )                                                  |   | 1.07 |   |
| Outstanding,                December 31, 2006 |   |                                 | 5,607,389  |                                               | $      | 0.33 |   |
|                                               |   |                                 |            |                                               |   |  |   |
| Exercisable                options:           |   |                                 |            |                                               |   |  |   |
| December 31,                2005              |   |                                 | 4,040,290  |                                               | $      | 0.75 |   |
| December 31,                2006              |   |                                 | 2,271,576  |                                               | $      | 0.42 |   |

|                                      |   | **Options                Approved by Stockholders** |      | **Options                Not Approved by Stockholders** |   | **Total                Outstanding Options** |   |
|-------------------------------------------|--------|-----------------------------------------------------|-----------|---------------------------------------------------------|--------|----------------------------------------------|--------|
| Outstanding                options:  |   |                                                |           |                                                    |   |                                              |   |   |  |   |
| December 31,                2005     |   |                                                | 4,874,352 |                                                    |   | 1,503,438                                    |   |   | 6,377,790 |   |
| December 31,                2006     |   |                                                | 2,578,019 |                                                    |   | 3,029,370                                    |   |   | 5,607,389 |   |

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

**Years        Ended December**
** 31**
**, 2**
**006        and 2005**

|                                                          |   | **Outstanding                Options**  |      | **Exercisable                Options**                    |   |
|---------------------------------------------------------------|--------|-----------------------------------------|-----------|----------------------------------------------------------------|--------|
| **Range                of****Exercise                Prices** |   | **Number                of****Options** |      | **Weighted-Average                Remaining Contractual Life** |   | **Weighted-Average****Exercise                Price** |   | **Number                of****Options** |   | **Weighted-Average****Exercise                Price** |   |
| $0.08                to $0.15                                 |   |                                    | 328,000   |                                                           |   | 1.24 |   | $ | 0.10 |   |   | 328,000 |   | $ | 0.10 |   |
| $0.20                to $0.47                                 |   |                                    | 4,803,689 |                                                           |   | 8.31 |   | $ | 0.28 |   |   | 1,567,876 |   | $ | 0.31 |   |
| $0.53                to $0.88                                 |   |                                    | 373,950   |                                                           |   | 6.08 |   | $ | 0.62 |   |   | 273,950 |   | $ | 0.63 |   |
| $1.38                to $3.44                                 |   |                                    | 93,750    |                                                           |   | 2.21 |   | $ | 2.48 |   |   | 93,750 |   | $ | 2.48 |   |
| $4.53                to $11.41                                |   |                                    | 8,000     |                                                           |   | 0.36 |   | $ | 4.53 |   |   | 8,000 |   | $ | 4.53 |   |
|                                                          |   |                                    | 5,607,389 |                                                           |   |   |   |   |   |   |   | 2,271,576 |   |   |   |   |

----

**OXIS      International, Inc. and Subsidiaries**

**Notes      To Consolidated Financial Statements**

**Years      Ended December**
** 31**
**, 2**
**006      and 2005**

*Stock        Compensation*

*Future      Warrants and Options Issuable to      Consultants*

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

**Years        Ended December**
** 31**
**, 2**
**006        and 2005**

**10. Income      Taxes**

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

**Years        Ended December**
** 31**
**, 2**
**006        and 2005**

*Deferred        Taxes*

|                                                                                                                                     |   | **December                31,** |        |
|------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|-------------|
|                                                                                                                                     |   | **2006**                   |        | **2005** |   |
| Deferred                tax assets:                                                                                                      |   |                            |             |   |   |  |   |
| Federal                net operating loss carryforward                                                                                   |   | $                               | 6,589,000   |   | $ | 5,731,000 |   |
| Temporary                deferred tax asset caused by capitalized research and development                expenses                       |   |                            | 5,883,000   |   |   | 5,883,000 |   |
| Federal                R&D tax credit carryforward                                                                                   |   |                            | 235,000     |   |   | 412,000 |   |
| State                net operating loss carryforward and capitalized research and development                expenses                    |   |                            | 1,464,000   |   |   | 1,393,000 |   |
| Other                                                                                                                                    |   |                            | 80,000      |   |   | 55,000 |   |
| Deferred                tax liabilities - book basis in excess and of noncurrent assets acquired                in purchase transactions |   |                            | (142,000    | ) |   | (142,000 | ) |
| Deferred                tax assets before valuation                                                                                      |   |                            | 14,109,000  |   |   | 13,332,000 |   |
| Valuation                allowance                                                                                                       |   |                            | (14,109,000 | ) |   | (13,332,000 | ) |
| Net                deferred income tax assets                                                                                            |   | $                               | --          |   | $ | -- |   |

----

**OXIS      International, Inc. and Subsidiaries**

**Notes      To Consolidated Financial Statements**

**Years      Ended December**
** 31**
**, 2**
**006      and 2005**

*Tax        Carryforward*

|                                  |   | **United                States**     |       | **R&D                Tax** |   |
|---------------------------------------|--------|--------------------------------------|------------|--------------------------------|--------|
|                                  |   | **Net                Operating**     |       | **Credit**                     |   |
| **Year                of Expiration** |   | **Loss                Carryforward** |       | **Carryforward**               |   |
| 2007                                  |   | $                                    | 6,000      |                           | $      | 18,000 |   |
| 2008                                  |   |                                 | 675,000    |                           |   | 6,000 |   |
| 2009                                  |   |                                 | -          |                           |   | 30,000 |   |
| 2010                                  |   |                                 | 29,000     |                           |   | - |   |
| 2011-2026                             |   |                                 | 18,668,000 |                           |   | 181,000 |   |
|                                  |   | $                                    | 19,378,000 |                           | $      | 235,000 |   |

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

**Years        Ended December**
** 31**
**, 2**
**006        and 2005**

**11. License      Agreement**

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

**Years        Ended December**
** 31**
**, 2**
**006        and 2005**

**12.       Geographical Reporting**

|                         |   | **Year                Ended December 31,** |      |
|------------------------------|--------|--------------------------------------------|-----------|
|                         |   | **2006**                                   |      | **2005** |   |
| North                America |   | $                                          | 5,319,000 |   | $ | 1,553,000 |   |
| EMEA                         |   |                                       | 248,000   |   |   | 493,000 |   |
| Latin                America |   |                                       | -         |   |   | 7,000 |   |
| Asia                Pacific  |   |                                       | 224,000   |   |   | 344,000 |   |
| Total                        |   | $                                          | 5,791,000 |   | $ | 2,397,000 |   |

**13. Supplemental      Cash Flow Disclosures**

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

**Years        Ended December**
** 31**
**, 2**
**006        and 2005**

**14. Related      Party Transactions**

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

**Years        Ended December**
** 31**
**, 2**
**006        and 2005**

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

**Years        Ended December**
** 31**
**, 2**
**006        and 2005**

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

**Years        Ended December**
** 31**
**, 2**
**006        and 2005**

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

**Years        Ended December**
** 31**
**, 2**
**006        and 2005**

**15. Subsequent      Events**

*Settlement      Agreement with Steve Guillen*

*License      Agreement with Alteon*

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**OXIS          International, Inc. and Subsidiaries**

**Notes          To Consolidated Financial Statements**

**Years          Ended December**
** 31**
**, 2**
**006          and 2005**

*Resignation        of Director*

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