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| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|--------------------------------------------------------------------------------------|

|  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|----------|------------------------------------------------------------------------------------------|

|                                                          |   |                                |
|---------------------------------------------------------------|--------|-------------------------------------|
| Delaware                                                      |   | 94-1620407                          |
| (State or Other Jurisdiction ofIncorporation or Organization) |   | (I.R.S. EmployerIdentification No.) |

|                                            |   |            |   |   |
|-------------------------------------------------|--------|-----------------|--------|--------|
| 468 N. Camden Dr., 2nd Floor, Beverly Hills, CA |   | 90210           |
| (Address of Principal Executive Offices)        |   | (Zip Code) |

|   |   |   |
|--------|--------|--------|

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|          |         |                                                                                                               |         |      |
|---------------|--------------|--------------------------------------------------------------------------------------------------------------------|--------------|-----------|
|          |    |                                                                                                               |    | Page      |
| PART I        |    |                                                                                                               |    |      |
|          |         |                                                                                                               |
| Item 1.  |    | Business                                                                                                           |    | 2         |
| Item 1A.      |    | Risk Factors                                                                                                       |    |   10 |
| Item 1B. |    | Unresolved Staff Comments                                                                                          |    |   10 |
| Item 2.       |    | Properties                                                                                                         |    |   10 |
| Item 3.       |    | Legal Proceedings                                                                                                  |    |   10 |
| Item 4.       |    | Submission of Matters to a Vote of Security Holders                                                                |    |   11 |
|          |         |                                                                                                               |
| PART II  |    |                                                                                                               |    |      |
| Item 5.       |    | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |    |   12 |
| Item 6.       |    | Selected Financial Data                                                                                            |    |   13 |
| Item 7.       |    | Management’s Discussion and Analysis of Financial Condition and Results of Operations                        |    |   13 |
| Item 7A. |    | Quantitative and Qualitative Disclosures About Market Risk                                                         |    |   26 |
| Item 8.       |    | Financial Statements and Supplementary Data                                                                        |    |   26 |
| Item 9.       |    | Changes in and Disagreements With Accountants on Accounting and Financial Disclosures                              |    |   26 |
| Item 9A. |    | Controls and Procedures                                                                                            |    |   27 |
| Item 9B. |    | Other Information                                                                                                  |    |   28 |
|          |         |                                                                                                               |
| PART III |    |                                                                                                               |    |      |
| Item 10. |    | Directors, Executive Officers and Corporate Governance                                                             |    |   29 |
| Item 11.      |    | Executive Compensation                                                                                             |    |   31 |
| Item 12.      |    | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters                     |    |   35 |
| Item 13.      |    | Certain Relationships and Related Transactions, and Director Independence                                          |    |   38 |
| Item 14.      |    | Principal Accounting Fees and Services                                                                             |    |   38 |
|          |         |                                                                                                               |
| PART IV  |    |                                                                                                               |    |      |
| Item 15. |    | Exhibits and Financial Statement Schedules                                                                         |    |   39 |
|          |         |
| Signatures    |    |   44                                                                                                          |

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| · | 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.                                 |

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| · | 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.                                                     |

| · | 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”.        |

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|   ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. |
|----------------|---------------------------------------------------------------------------------------------------------------------|

| YEAR             | PERIOD         |   | HIGH |   |   | LOW    |   |
|------------------|----------------|--------|------|--------|--------|--------|--------|
| Fiscal Year 2007 | First Quarter  |   | $    | 0.29   |   |   | $      | 0.20 |   |
|             | Second Quarter |   | $    | 0.29   |   |   | $      | 0.15 |   |
|             | Third Quarter  |   | $    | 0.17   |   |   | $      | 0.10 |   |
|             | Fourth Quarter |   | $    | 0.11   |   |   | $      | 0.07 |   |
| Fiscal Year 2008 | First Quarter  |   | $    | 0.13   |   |   | $      | 0.06 |   |
|             | Second Quarter |   | $    | 0.13   |   |   | $      | 0.01 |   |
|             | Third Quarter  |   | $    | 0.05   |   |   | $      | 0.02 |   |
|             | Fourth Quarter |   | $    | 0.07   |   |   | $      | 0.03 |   |

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| ITEM 6. | SELECTED FINANCIAL DATA |
|---------|-------------------------|

| ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
|---------|---------------------------------------------------------------------------------------------|

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On July 11, 2008 our board of directors appointed William John Reininger as a member of the board of directors, effective immediately, to serve until the next annual meeting of stockholders. 

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|             |   |   |      |   | Increase (Decrease) from 2007 |   |
|------------------|--------|--------|-----------|--------|-------------------------------|--------|
|             |   | 2008   |      |   | 2007                          |   |   | Amount |   |   | % |   |
|             |   |   |      |   |                          |   |   |   |   |   |   |   |
| Product revenues |   | $      | 1,143,000 |   |                          | $      | 1,224,000 |   |   | $ | (81,000 | ) |   |   | (7 | ) |
| License revenues |   |   | 0         |   |                          |   | 500,000 |   |   |   | (500,000 | ) |   |   | (100 | ) |
| Total revenues   |   | $      | 1,143,000 |   |                          | $      | 1,724,000 |   |   | $ | (581,000 | ) |   |   | (34 | ) |

|                     |   |   |    |   | Increase (Decrease) from 2007 |   |
|--------------------------|--------|--------|---------|--------|-------------------------------|--------|
|                     |   | 2008   |    |   | 2007                          |   |   | Amount |   |   | % |   |
|                     |   |   |    |   |                          |   |   |   |   |   |   |   |
| Cost of product revenues |   | $      | 909,000 |   |                          | $      | 728,000 |   |   | $ | 181,000 |   |   |   | 25 |   |

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|                     |   |   |   |   | Increase (Decrease) from 2007 |   |
|--------------------------|--------|--------|--------|--------|-------------------------------|--------|
|                     |   | 2008   |   |   | 2007                          |   |   | Amount |   |   | % |   |
|                     |   |   |   |   |                          |   |   |   |   |   |   |   |
| Research and development |   | $      | 44,000 |   |                          | $      | 423,000 |   |   | $ | (379,000 | ) |   |   | (905 | ) |

|                                |   |   |      |   | Increase (Decrease) from 2007 |   |
|-------------------------------------|--------|--------|-----------|--------|-------------------------------|--------|
|                                |   | 2008   |      |   | 2007                          |   |   | Amount |   |   | % |   |
|                                |   |   |      |   |                          |   |   |   |   |   |   |   |
| Selling, general and administrative |   | $      | 1,401,000 |   |                          | $      | 1,852,000 |   |   | $ | (451,000 | ) |   |   | (24 | ) |

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Liquidity and Capital Resources 

On a consolidated basis, we had cash and cash equivalents of $22,000 at December 31, 2008.  Cash used in operating activities was $169,000 during the year ended December 31, 2008.  In February 2008, we received $150,000 from BioCheck for reimbursement of management, market research, sales efforts, accountingfees and general corporate expenses incurred on their behalf.  Our cash holdings of $22,000 at December 31, 2008, including the additional $150,000 received in 2008 from BioCheck, are not sufficient to sustain our operations through 2009.The current rate of cash usage raises substantial doubt about our ability to continue as a going concern, absent any new sources of significant cash flows.   We plan to increase revenues by introducing new products, especially based on L-Ergothioneine.  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. 

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| ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. |
|---------|---------------------------------------------------------------------------------------|

| 1.   | application of accounting principles to any specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report was provided to the Company nor oral advice was provided that the New Auditor concluded was an important factor consideredby the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.   | any matter that was either the subject of a disagreement (as defined in Regulation S-K, Item 304(a)(1)(iv) and the related instructions) or reportable event (as defined in Regulation S-K, Item 304(a)(1)(v)). |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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ITEM 9A(T).    CONTROLS AND PROCEDURES 

| · | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;                                                                                                                                                                               |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and |

| · | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. 

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| ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE  |
|----------|--------------------------------------------------------------|

|  Name             |   | Age    |   |  Principal Occupation |                                 | Served asDirector Since |   |
|------------------------|--------|--------|--------|----------------------------|--------------------------------------|-------------------------|--------|
| Anthony J. Cataldo (1) |   |   | 57     |                       | Chairman and Chief Executive Officer |                    |   | 2009 |   |
| Sade Panahi (2)        |   |   | 47     |                       | Treasurer                            |                    |   | 2009 |   |
| Gary M. Post (3)       |   |   | 61     |                       | Director                             |                    |   | 2006 |   |
| William Reininger (4)  |   |   | 59     |                       | Director                             |                    |   | 2008 |   |
| Maurice Spitz (5)      |   |   | 64     |                       | Vice President, Director             |                    |   | 2008 |   |

| (1)(2)(3)(4) | Appointed Chairman and Chief Executive Officer on March 26, 2009.Elected a  director on July 11, 2009 and Treasurer on August 17, 2009.Resigned as Chief Operating Officer on June 20, 2008 and was elected Secretary on August 17, 2009.Elected a director on July 11, 2009. |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (5)          | Resigned as Chairman and Chief Executive Officer on March 26, 2009 and was appointed Vice President.  Resigned as Vice President on July 11, 2009. Spitz continues to serve as a director.                                                                                    |

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| ITEM 11. | EXECUTIVE COMPENSATION |
|----------|------------------------|

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| Name and Principal Position                                                                                | Year   |   | Salary |    |   | Bonus   | Stock Awards  |   | Option/Warrant Awards (1) | Non-EquityIncentive Plan Compen-sation | All Other Compensation | Total  |
|------------------------------------------------------------------------------------------------------------|--------|--------|--------|---------|--------|---------|---------------|--------|---------------------------|----------------------------------------|------------------------|--------|
| Dr. Marvin S. Hausman, Chairman of the Board, Chief Executive Officer, Acting Chief, Financial Officer (2) | 2008   |   | $      | — |   | — |  — | $      | —                   | $                                      | —                |   | $ | — | $ | — | $ | — | $ | — |
|                                                                                                       | 2007   |   | $      | — |   | — |  — | $      | —                   | $                                      | —                |   | $ | — | $ | — | $ | — | $ | — |
| Maurice Spitz, President, Acting Chief Executive Officer (3)                                               | 2008   |   | $      | — |   | — | —       | $      | —                   | $                                      | —                |   | $ | — | $ | — | $ | — | $ | — |
|                                                                                                       | 2007   |   | $      | — |   | — |  — | $      | —                   | $                                      | —                |   | $ | — | $ | — | $ | — | $ | — |
|                                                                                                       |   |   |   |    |   |    |          |   |                      |                                   |                   |   |   |   |   |   |   |   |   |   |

|  (1) |  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 serviceperiod 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. |
|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  (2) |  Dr. Hausman resigned as President, Chief Executive Officer and Acting Chief Financial Officer on June 20, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|  (3) |  Mr. Spitz was appointed by the board as President and Acting Chief Executive Officer on July 30, 2008 and resigned from this position on March 26, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

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| Outstanding Equity Awards at Fiscal Year-End |         |
|----------------------------------------------|--------------|
| Options Awards                               | Stock Awards |   |
| Name                                         |         | Number ofSecurities Underlying UnexercisedOptionsExercisable |   | Number of Securities Underlying UnexercisedOptions Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options |   | OptionExercisePrice |   | Option ExpirationDate | Number ofShares orUnits ofStockThat HaveNot Vested |   | Market Valueof SharesOr UnitsThat HaveNot Vested |   | EquityIncentivePlan Awards: Number ofUnearnedShares, Unitsor OtherRights ThatHave NotVested |   | EquityIncentive Plan Awards:Market orPayout Valueof UnearnedShares, Units,or OtherRights ThatHave NotVested |   |
|                                         |         | (#) |   | (#) | (#) |   | ( $ ) |   |   | (#) |   | ($) |   | (#) |   | ($) |   |
| Dr. Marvin S. Hausman                        |         |   | 30,000 |   | — | — |   | $  | 0.22 |   | 06/14/12 | — |   | $ | — |   | — |   | $ | — |   |
|                                         |         |   | 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 |   |   |   |   |   |   |   |   |   |   |
|                                         |         |   | 1,505,000 |   | — | — |   | $ | 0.20 |   | 11/05/16 |   |   |   |   |   |   |   |   |   |   |
| Maurice Spitz                                |         |   | — |   | — | — |   |   |   |   |   | — |   |   | — |   | — |   |   | — |   |

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| ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
|----------|------------------------------------------------------------------------------------------------|

|  Name and Address of Beneficial Owner                                                                              |   | Number of Shares of Common Stock Beneficially Owned |       |   | Percent ofShares of Outstanding Common Stock |   |
|-------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|------------|--------|---------------------------------------------------|--------|
| Bristol Investment Fund, Ltd. (1)Bristol Capital Advisors, LLC10990 Wilshire Boulevard, Suite 1410Los Angeles, CA 90024 |   |                                                | 22,928,510 |   |                                              |   | 32.86 | % |
| Marvin S. Hausman, M.D. (2)                                                                                             |   |                                                | 4,938,775  |   |                                              |   | 9.96 | % |
| Anthony J. Cataldo                                                                                                      |   |                                                | —    |   |                                              |   | 0.00 | % |
| Maurice Spitz                                                                                                           |   |                                                | —    |   |                                              |   | 0.00 | % |
| Gary M. Post (3)                                                                                                        |   |                                                | 1,258,066  |   |                                              |   | 2.64 | % |
| William Reininger                                                                                                       |   |                                                | —    |   |                                              |   | 0.00 | % |
| Executive officers and directors as a group — 4 persons (4)                                                       |   |                                                | 1,258,066  |   |                                              |   | 2.64 | % |

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| (1) | The holdings of Bristol Investment Fund, Ltd. include 6,933,800 shares of common stock, 25,000 shares of Series E Preferred Stock, 4,840,714 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 ofcommon 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 4,840,714 shares of common stock at a purchase price of $0.35 per share, and warrants to purchase 2,420,357 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 BristolInvestment Fund, Ltd. Mr. Kessler disclaims beneficial ownership of these securities. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | The holdings of Marvin S. Hausman, M.D. include 2,224,080 shares of common stock, 1,209,695 shares issuable upon exercise of options that are exercisable currently or within 60 days of April 1, 2009, and 1,505,000 warrant shares exercisable currently or within 60 days of April 1, 2009. These share holding amounts do not include additionalshares due, but not yet issued pursuant to Dr. Hausman’s employment agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (3) | The holdings of director Gary M. Post include 529,583 shares issuable upon exercise of options that are exercisable currently or within 60 days of April 1, 2009 and 728,483 warrant shares exercisable currently or within 60 days of April 1, 2009. These beneficial share holding amounts do not include additional shares due, but not yet issuedpursuant to the Advisory Agreement between the Company and Ambient Advisors, LLC dated November 6, 2006. Mr. Post is a Managing Director of Ambient Advisors, LLC.                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| (4) | The holdings of the executive officers and directors as a group include an aggregate 529,583 shares issuable upon exercise of options that are exercisable currently or within 60 days of April 1, 2009 and 728,483 warrant shares exercisable currently or within 60 days of April 1, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

| Name and address                      |   | Number of Shares of Series C Preferred Stock Beneficially Owned |   | Percent ofclass (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 shareswhich can be purchased within 60 days have been purchased by the respective person or group and are outstanding. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Name and address                     |   | Number of Shares of Series E Preferred Stock Beneficially Owned |   | Percent ofclass (1) |   |
|--------------------------------------|--------|-----------------------------------------------------------------|--------|--------------------------|--------|
|  Bristol Investment Fund, Ltd.  |   |                                                            | 25,000 |                     | 100    | % |
| 10990 Wilshire Boulevard, Suite 1410 |   |                                                            |   |                     |   |   |
| Los Angeles, CA 90024 (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 shareswhich can be purchased within 60 days have been purchased by the respective person or group and are outstanding. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   Plan Category                            | Number of Securities tobe 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)     |  4,427,254                                                                              |   |  $                                                                        |  0.33 |                                                                                                                                           |  1,457,812 |
| Equity compensation plans not approved by security holders (2) |  3,461,333                                                                              |   |  $                                                                        |  0.22 |                                                                                                                                           |  — |
| Total                                                          |  7,888,587                                                                              |   |                                                                           |       |                                                                                                                                           |  1,457,812 |

| (1)       | As of December 31, 2008, we had options issued and outstanding to purchase 4,123,282 shares of common stock under our 2003 Stock Incentive Plan and 303,972 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 approvedby stockholders, we may grant additional options to purchase up to 1,457,812 shares of common stock under our 2003 Stock Incentive Plan as of December 31, 2008. 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, 2008 pursuant to an evergreen provision in the stock option plan. |
|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  (2) |  As of December 31, 2008, we had options and warrants issued and outstanding for the purchase of an aggregate of 3,461,333 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 theboard of directors.                                                                                                                                                                                                                                                                                                                                                           |

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| ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE |
|----------|--------------------------------------------------------------------------|

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|          |   |                                                                                                                          |   | Incorporated by Reference |   |     |
|---------------|--------|-------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------|--------|----------|
| ExhibitNumber |   | ExhibitDescription                                                                                                            |   | 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 |   |   |
|          |   |                                                                                                                          |   |                      |   |     |   |   |   |   |
| 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 |   |   |

----

|          |   |                                                                                                                                                |   | Incorporated by Reference |   |     |
|---------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------|--------|----------|
| ExhibitNumber |   | ExhibitDescription                                                                                                                                  |   | Form                      |   | Date     |   | Number |   | Filed Herewith |
| 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 |   |   |
| 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 |   |   |   |
|          |   |                                                                                                                                                |   |                      |   |     |   |   |   |   |   |

----

|          |   |                                                                                                       |   | Incorporated by Reference |   |           |
|---------------|--------|------------------------------------------------------------------------------------------------------------|--------|---------------------------|--------|----------------|
| ExhibitNumber |   | ExhibitDescription                                                                                         |   | Form                      |   | Date           |   | Number |   | Filed Herewith |
| 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 |   |   |   |
|          |   |                                                                                                       |   |                      |   |           |   |   |   |   |   |
| 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 |   |   |   |
|          |   |                                                                                                       |   |                      |   |           |   |   |   |   |   |
| 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 |   |   |   |
|          |   |                                                                                                       |   |                      |   |           |   |   |   |   |   |

----

|          |   |                                                                                                             |   | Incorporated by Reference |   |     |
|---------------|--------|------------------------------------------------------------------------------------------------------------------|--------|---------------------------|--------|----------|
| ExhibitNumber |   | ExhibitDescription                                                                                               |   | Form                      |   | Date     |   | Number |   | Filed Herewith |
| 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                     |   | 5/3/07   |   | 99.1 |   |   |   |
|          |   |                                                                                                             |   |                      |   |     |   |   |   |   |   |
| 10.45         |   | Amended and Restated Exclusive License Agreement between OXIS and Alteon, Inc. dated April 2, 2007               |   | 10-QSB                    |   | 8/14/07  |   | 10.1 |   |   |   |
|          |   |                                                                                                             |   |                      |   |     |   |   |   |   |   |
| 10.46         |   | Amendment to Advisory Agreement between OXIS and Ambient Advisors, Inc. dated October 11, 2007                   |   | 8-K                       |   | 10/16/07 |   | 10.1 |   |   |   |
|          |   |                                                                                                             |   |                      |   |     |   |   |   |   |   |
| 10.47         |   | Notification of Disposition of Collateral dated June 5, 2008                                                     |   | 8-K                       |   | 6/13/08  |   | 10.1 |   |   |   |
|          |   |                                                                                                             |   |                      |   |     |   |   |   |   |   |
| 10.48         |   | Request to Retract Notice of Disposition of Collateral dated June 16, 2008                                       |   | 8-K                       |   | 6/17/08  |   | 99.1 |   |   |   |
|          |   |                                                                                                             |   |                      |   |     |   |   |   |   |   |
| 10.49         |   | Notice of Disposition of Collateral dated June 19, 2008                                                          |   | 8-K                       |   | 6/24/08  |   | 10.1 |   |   |   |
|          |   |                                                                                                             |   |                      |   |     |   |   |   |   |   |
| 10.50         |   | Asset Purchase Agreement between Percipio Biosciences, Inc. and OXIS International, Inc. dated December 11, 2008 |   | 8-K                       |   | 12/18/08 |   | 10.1 |   |   |   |
|          |   |                                                                                                             |   |                      |   |     |   |   |   |   |   |
| 10.51         |   | Secured Promissory Note from Percipio Biosciences, Inc. dated December 11, 2008                                  |   | 8-K                       |   | 12/18/08 |   | 10.2 |   |   |   |
|          |   |                                                                                                             |   |                      |   |     |   |   |   |   |   |
| 16.1          |   | Letter from Williams & Webster, P.S. dated December 8, 2008                                                  |   | 8-K                       |   | 12/8/08  |   | 16.1 |   |   |   |
|          |   |                                                                                                             |   |                      |   |     |   |   |   |   |   |

----

|          |   |                                                                                                                                                         |   | Incorporated by Reference |   |   |
|---------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------|--------|--------|
| ExhibitNumber |   | ExhibitDescription                                                                                                                                           |   | Form                      |   | Date   |   | Number |   | Filed Herewith |
| 21.1          |   | Subsidiaries of OXIS International, Inc.                                                                                                                     |   |                      |   |   |   |   |   | X |   |
|          |   |                                                                                                                                                         |   |                      |   |   |   |   |   |   |   |
|  23.1    |   |  Consent of Williams & Webster, P.S., Independent Registered Public Accounting Firm                                                                 |   |                      |   |   |   |   |   |  X |   |
|          |   |                                                                                                                                                         |   |                      |   |   |   |   |   |   |   |
|  23.2    |   |  Consent of Seligson & Giannattasio, LLP, Independent Registered Public Accounting Firm                                                             |   |                      |   |   |   |   |   |  X |   |
|          |   |                                                                                                                                                         |   |                      |   |   |   |   |   |   |   |
| 31.1          |   | Certification of the Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |   |                      |   |   |   |   |   | X |   |
|          |   |                                                                                                                                                         |   |                      |   |   |   |   |   |   |   |
| 31.2          |   | Certification of the Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |   |                      |   |   |   |   |   | X |   |
|          |   |                                                                                                                                                         |   |                      |   |   |   |   |   |   |   |
| 32.1          |   | Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.   |   |                      |   |   |   |   |   | X |   |
|          |   |                                                                                                                                                         |   |                      |   |   |   |   |   |   |   |
| 32.2          |   | Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.   |   |                      |   |   |   |   |   | X |   |
|          |   |                                                                                                                                                         |   |                      |   |   |   |   |   |   |   |

----

|   | By: | /s/ Anthony J. Cataldo |
|--------|-----|------------------------|

| Name                                     | Position                                                                                                                         | Date               |
|------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------|--------------------|
|                                     |                                                                                                                             |               |
| /s/ Anthony J. CataldoAnthony J. Cataldo | Chief Executive Officer and Director (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) | September 24, 2009 |
|                                     |                                                                                                                             |               |
|  /s/ Sade PanahiSade Panahi         | Treasurer and  Director                                                                                                | September 24, 2009 |
|                                     |                                                                                                                             |               |
| /s/ Gary M. PostGary M. Post             | Secretary and Director                                                                                                           | September 24, 2009 |
|                                     |                                                                                                                             |               |
| /s/ William ReiningerWilliam Reininger   | Director                                                                                                                         | September 24, 2009 |
| /s/ Maurice SpitzMaurice Spitz           | Director                                                                                                                         | September 24, 2009 |

----

|                                                                                                        | Page   |
|-------------------------------------------------------------------------------------------------------------|--------|
| Report of Independent Registered Public Accounting Firm                                                     |   |
| Seligson & Giannattasio, LLPWilliams & Webster, P.S.                                                | F-1    |
| Consolidated Financial Statements                                                                           |   |
| Balance Sheets as of December 31, 2008 and 2007                                                   | F-3    |
| Statements of Operations For Years Ended December 31, 2008 and 2007                          | F-4    |
| Statement of Stockholders’ Equity (Deficit) For Years Ended December 31, 2008 and 2007 | F-5    |
| Statements of Cash Flows For Years Ended December 31, 2008 and 2007                          | F-6    |
| Notes To Consolidated Financial Statements                                                                  | F-7    |

----

----

----

| OXIS International, Inc. and SubsidiariesConsolidated Balance SheetsDecember 31, 2008 and 2007 |
|----------------------------------------------------------------------------------------------------------|

|                                                                                                                                                                             |   | December 31, 2008 |        |   | December 31, 2007 |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|-------------|--------|-------------------|--------|
| ASSETS                                                                                                                                                                           |   |              |        |   |              |   |
| Current Assets:                                                                                                                                                                  |   |              |        |   |              |   |
| Cash and cash equivalents                                                                                                                                                        |   | $                 | 22,000      |   |              | $      | 191,000 |   |
| Accounts receivable, net                                                                                                                                                         |   |              | —     |   |              |   | 145,000 |   |
| Inventory                                                                                                                                                                        |   |              | 3,000       |   |              |   | 258,000 |   |
| Note receivable                                                                                                                                                                  |   |              | 250,000     |   |              |   | — |   |
| Prepaid expenses and other current assets                                                                                                                                        |   |              | —     |   |              |   | 119,000 |   |
| Current assets held for sale                                                                                                                                                     |   |              | --          |   |              |   | 1,914,000 |   |
| Total Current Assets                                                                                                                                                             |   |              | 275,000     |   |              |   | 2,627,000 |   |
| Property, plant and equipment, net                                                                                                                                               |   |              | —     |   |              |   | 45,000 |   |
| Patents, net                                                                                                                                                                     |   |              | 308,000     |   |              |   | 549,000 |   |
| Goodwill and other assets, net                                                                                                                                                   |   |              | 7,000       |   |              |   | -- |   |
| Other assets held for sale                                                                                                                                                       |   |              | --          |   |              |   | 1,636,000 |   |
| Total Other Assets                                                                                                                                                               |   |              | 315,000     |   |              |   | 2,230,000 |   |
| TOTAL ASSETS                                                                                                                                                                     |   | $                 | 590,000     |   |              | $      | 4,857,000 |   |
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)                                                                                                                             |   |              |        |   |              |   |   |   |
| Current Liabilities:                                                                                                                                                             |   |              |        |   |              |   |   |   |
| Accounts payable                                                                                                                                                                 |   | $                 | 919,000     |   |              | $      | 667,000 |   |
| Accrued expenses                                                                                                                                                                 |   |              | 1,029,000   |   |              |   | 904,000 |   |
| Warrant liability                                                                                                                                                                |   |              | 174,000     |   |              |   | 244,000 |   |
| Accrued derivative liability                                                                                                                                                     |   |              | —     |   |              |   | 89,000 |   |
| Demand note payable                                                                                                                                                              |   |              | 25,000      |   |              |   |   |   |
| Convertible debentures, net of discounts of $0 and $552,000                                                                                                                      |   |              | 2,123,000   |   |              |   | 797,000 |   |
| Current liabilities held for sale                                                                                                                                                |   |              |        |   |              |   | 1,368,000 |   |
| Total Current Liabilities                                                                                                                                                        |   |              | 4,270,000   |   |              |   | 4,069,000 |   |
| Other liabilities held for sale                                                                                                                                                  |   |              | —     |   |              |   | 25,000 |   |
| Total Liabilities                                                                                                                                                                |   |              | 4,270,000   |   |              |   | 4,094,000 |   |
| Stockholders’ Equity (Deficit):                                                                                                                                            |   |              |        |   |              |   |   |   |
| Convertible preferred stock - $0.01 par value; 15,000,000 shares authorized:                                                                                                     |   |              | —     |   |              |   | — |   |
| Series C - 96,230 and 96,230 shares issued and outstanding at December 31, 2008 and December 31, 2007, respectively                                                              |   |              | 1,000       |   |              |   | 1,000 |   |
| Series E – 25,000 and 0 shares issued and outstanding at December 31, 2008 and December 31, 2007, respectively                                                             |   |              | —     |   |              |   | — |   |
| Common stock - $0.001 par value; 150,000,000 shares authorized; 46,850,809 and 46,850,809 shares issued and outstanding at December 31, 2008 and December 31, 2007, respectively |   |              | 47,000      |   |              |   | 47,000 |   |
| Additional paid-in capital                                                                                                                                                       |   |              | 71,126,000  |   |              |   | 70,980,000 |   |
| Accumulated deficit                                                                                                                                                              |   |              | (74,854,000 | )      |              |   | (69,848,000 | ) |
| Accumulated other comprehensive loss                                                                                                                                             |   |              | —     |   |              |   | (417,000 | ) |
| Total Stockholders’ Equity (Deficit)                                                                                                                                       |   |              | (3,680,000  | )      |              |   | 763,000 |   |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)                                                                                                                       |   | $                 | 590,000     |   |              | $      | 4,857,000 |   |

----

| OXIS International, Inc. and SubsidiariesConsolidated Statements of OperationsYears Ended December 31, 2008 and 2007  |
|-------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                                                                                                                                                                                                                                                                                                                                |   | December 31 |       |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------|------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                |   | 2008        |       |   | 2007 |   |
| Revenue:                                                                                                                                                                                                                                                                                                                                                                                                            |   |        |       |   |   |   |
| Product revenues                                                                                                                                                         |   | $           | 1,143,000  |   |   | $ | 1,224,000 |   |
| License revenues                                                                                                                                                         |   |        | --         |   |   |   | 500,000 |   |
| TOTAL REVENUE                                                                                                                                                            |   |        | 1,143,000  |   |   |   | 1,724,000 |   |
| Cost of Product Revenue                                                                                                                              |   |        | 909,000    |   |   |   | 728,000 |   |
| Gross profit                                                                                                                                                        |   |        | 234,000    |   |   |   | 996,000 |   |
| Operating Expenses:                                                                                                                                                                                                                                                                                                                                                                                                 |   |        |       |   |   |   |   |   |
| Research and development                                                                                                                                       |   |        | 44,000     |   |   |   | 423,000 |   |
| Selling, general and administrative                                                                                                                                                                                                                                                                                                                                                                                 |   |        | 1,401,000  |   |   |   | 1,852,000 |   |
| Total operating expenses                                                                                                                                            |   |        | 1,445,000  |   |   |   | 2,275,000 |   |
| Income (Loss) from Operations                                                                                                                   |   |        | (1,211,000 | ) |   |   | (1,279,000 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                |   |        |       |   |   |   |   |   |
| Interest income                                                                                                                                                |   |        | --         |   |   |   | 6,000 |   |
| Other income                                                                                                                                                   |   |        | --         |   |   |   | 5,000 |   |
| Change in value of warrant and derivative liabilities                                                                                                                                                                                                                                                                                                                                                               |   |        | 159,000    |   |   |   | 2,659,000 |   |
| Interest expense                                                                                                                                               |   |        | (1,657,000 | ) |   |   | (1,014,000 | ) |
| Other expense                                                                                                                                                                                                                                                                                                                                                                                                       |   |        | —    |   |   |   | -- |   |
| Total Other Income (Expense)                                                                                                                                                                                                                                                                                                                                                                                        |   |        | (1,498,000 | ) |   |   | 1,656,000 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                |   |        |       |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                |   |        |       |   |   |   |   |   |
| Income (loss) before provision for income taxes                                                                                                                                                                                                                                                                                                                                                                     |   |        | (2,709,000 | ) |   |   | 377,000 |   |
| Provision for income taxes                                                                                                                 |   |        | 77,000     |   |   |   | 75,000 |   |
| Net income (loss) from continuing operations                                                                                                                                                                                                                                                                                                                                                                        |   |        | (2,786,000 | ) |   |   | 302,000 |   |
| Loss from discontinued operations                                                                                                                                                                                                                                                                                                                                                                                   |   |        |       |   |   |   |   |   |
| Net income from discontinued operations                                                                                                                                                                                                                                                                                                                                                                             |   |        | 758,000    |   |   |   | 169,000 |   |
| Net loss on disposal of discontinued operations                                                                                                                                                                                                                                                                                                                                                                     |   |        | (2,978,000 | ) |   |   | -- |   |
| Net loss from discontinue operations                                                                                                                                                                                                                                                                                                                                                                                |   |        | (2,220,000 | ) |   |   | 169,000 |   |
| Net income (loss)                                                                                                                                                                                                                                                                                                                                                                                                   |   |        | (5,006,000 | ) |   |   | 471,000 |   |
| Earnings (Loss) Per Share – basic and diluted                                                                                                                                                                                                                                                                                                                                                                 |   |        |       |   |   |   |   |   |
| Continuing operations                                                                                                                                                                                                                                                                                                                                                                                               |   | $           | (0.06      | ) |   | $ | 0.01 |   |
| Discontinued operations                                                                                                                                             |   | $           | (0.05      | ) |   | $ | 0.00 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                |   | $           | (0.11      | ) |   | $ | 0.01 |   |
| Weighted Average Shares Outstanding                                                                                                                                                                                                                                                                                                                                                                                 |   |        |       |   |   |   |   |   |
| Basic                                                                     |   |        | 46,850,809 |   |   |   | 45,449,394 |   |
| Diluted                                                                   |   |        | 46,850,809 |   |   |   | 45,511,028 |   |

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| OXIS International, Inc. and SubsidiariesConsolidated Statement of Stockholders’ Equity (Deficit)Years Ended December 31, 2008 and 2007 |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                  |            |   |         |               |        |       |    |    |   |
|---------------------------------------|-----------------|--------|--------------|--------------------|-------------|------------|---------|---------|--------|
|                                  |            |   |         |               |        |       |    |    |   |
|                                  | Preferred Stock |   | Common Stock | Additional Paid-in | Accumulated |       |
|                                  | Shares          |   | Amount       |               | Shares      | Amount     | Capital | Deficit |   |
| Balance, December 31, 2006            | 96,230          |   | $            | 1,000              |        | 44,527,476 | $       | 45,000  | $      | 70,115,000 | $ | (70,319,000 | ) |
| Issuance of common stock              |            |   |         |               |        | 2,083,333  |    | 2,000   |   | 498,000 |   |   |   |
| Issuance of common stock for services |            |   |         |               |        | 240,000    |    |    |   | 24,000 |   |   |   |
| Stock compensation expense for        |            |   |         |               |        |       |    |    |   |   |   |   |   |
| options issued to non-employees       |            |   |         |               |        |       |    |    |   | 174,000 |   |   |   |
| Stock compensation expense for        |            |   |         |               |        |       |    |    |   |   |   |   |   |
| options issued to employees           |            |   |         |               |        |       |    |    |   | 169,000 |   |   |   |
| Net income                            |            |   |         |               |        |       |    |    |   |   |   | 471,000 |   |
| Balance, December 31, 2007            | 96,230          |   | $            | 1,000              |        | 46,850,809 | $       | 47,000  | $      | 70,980,000 | $ | (69,848,000 | ) |
| Stock compensation expense for        |            |   |         |               |        |       |    |    |   |   |   |   |   |
| Issuance of preferred series E        | 25              |   |         |               |        |       |    |    |   | 19,000 |   |   |   |
| options issued to non-employees       |            |   |         |               |        |       |    |    |   | 77,000 |   |   |   |
| Stock compensation expense for        |            |   |         |               |        |       |    |    |   |   |   |   |   |
| options issued to employees           |            |   |         |               |        |       |    |    |   | 50,000 |   |   |   |
| Net income                            |            |   |         |               |        |       |    |    |   |   |   | (5,006,000 | )  |
| Balance, December 31, 2008            | 96,255          |   | $            | 1,000              |        | 46,850,809 | $       | 47,000  | $      | 71,126,000 | $ | (74,854,000 | ) |

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|                                                                                                    |   |   |       |
|---------------------------------------------------------------------------------------------------------|--------|--------|------------|
|                                                                                                    |   | 2008   |       |   | 2007 |   |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                                                   |   |   |       |   |   |   |
| Net income (loss)                                                                                       |   | $      | (5,006,000 | ) |   | $ | 471,000 |   |
| Adjustments to reconcile net loss to net cash used in operating activities:Loss on disposition of asset |   |   | 2,978,000  |   |   |   | —  |   |
| Depreciation of property, plant and equipment                                                           |   |   | 45,000     |   |   |   | 33,000 |   |
| Amortization of intangible assets                                                                       |   |   | 206,000    |   |   |   | 145,000 |   |
| Impairment of patents                                                                                   |   |   | —    |   |   |   | 152,000 |   |
| Stock compensation expense for options and warrants issued to employees and non-employees          |   |   | 146,000    |   |   |   | 367,000 |   |
| Amortization of debt discounts                                                                          |   |   | 552,000    |   |   |   | 673,000 |   |
| Change in value of warrant and derivative liabilities                                                   |   |   | (159,000   | ) |   |   | (2,659,000 | ) |
| Change in deferred taxes                                                                                |   |   | —    |   |   |   |   |   |
|                                                                                                    |   |   |       |   |   |   |   |   |
| Default costs on convertible debt                                                                       |   |   | 508,000    |   |   |   | — |   |
| Changes in operating assets and liabilities:                                                            |   |   |       |   |   |   |   |   |
| Accounts receivable                                                                                     |   |   | 145,000    |   |   |   | 14,000 |   |
| Inventory                                                                                               |   |   | 255,000    |   |   |   | (19,000 | )  |
| Prepaid expense and other current assets                                                                |   |   | 119,000    |   |   |   | (110,000 | ) |
| Net assets held for sale                                                                                |   |   | (334,000   | )  |   |   | (90,000 | ) |
| Accounts payable                                                                                        |   |   | 252,000    |   |   |   | 111,000 |   |
| Accrued expenses                                                                                        |   |   | 124,000    |   |   |   | 300,000 |   |
| Accounts payable to related party                                                                       |   |   | —    |   |   |   | (49,000 | ) |
| Net cash flows from operating activities                                                                |   |   | (169,000   | )  |   |   | (661,000 | ) |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                                                   |   |   |       |   |   |   |   |   |
| Acquisition and investment                                                                              |   |   | —    |   |   |   | -- | ) |
| Payment for acquisition of additional interest in subsidiary                                            |   |   | —    |   |   |   | -- | ) |
| Proceeds from restricted certificate of deposit                                                         |   |   | —    |   |   |   | -- |   |
| Capital expenditures                                                                                    |   |   | —    |   |   |   | — |   |
| Increase in patents                                                                                     |   |   | —    |   |   |   | (93,000 | ) |
| Net cash flows from investing activities                                                                |   |   | --         |   |   |   | (93,000 | )  |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                                                   |   |   |       |   |   |   |   |   |
| Proceeds from issuance of common stock                                                                  |   |   |       |   |   |   | 500,000 |   |
| Repayment of short-term borrowings                                                                      |   |   | —    |   |   |   | -- |   |
| Net cash flows from financing activities                                                                |   |   | —    |   |   |   | 500,000 | ) |
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                    |   |   | (169,000   | )  |   |   | (254,000 | ) |
| CASH AND CASH EQUIVALENTS - Beginning of period                                                         |   |   | 191,000    |   |   |   | 445,000 |   |
| CASH AND CASH EQUIVALENTS - End of period                                                               |   | $      | 22,000     |   |   | $ | 191,000 |   |

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|   | · | Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. The Company’s Level 1 assets include cash equivalents, primarily institutional money market funds, whose carrying value represents fair value because of their short-term maturities of the investments held by these funds. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. The Company’s Level 2 liabilities consist of two liabilities arising from the issuance of a convertible debenture in 2006 and in accordance withEITF 00-19: a warrant liability for detachable warrants, as well as an accrued derivative liability for the beneficial conversion feature. These liabilities are remeasured on a quarterly basis. Fair value is determined using the Black-Scholes valuation model based on observable market inputs, such as share price data and a discount rate consistent with that of a government-issued security of a similar maturity. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement. |
|--------|--------|-------------------------------------------------------------------------------------------------------------|

| Description       |   | Level 1 |   |   | Level 2 |   |    | Level 3 |   |
|-------------------|--------|---------|--------|--------|---------|--------|---------|---------|--------|
|              |   |    |   |   |    |   |    |    |   |
| Assets            |   |    |   |   |    |   |    |    |   |
| Cash equivalents  |   | $       | 22,000 |   |    | $      | -       |    |   | $ | - |   |
| Liabilities       |   |    |   |   |    |   |    |    |   |   |   |   |
| Warrant liability |   |    | -      |   |    |   | 174,000 |    |   |   | - |   |

|   | 1.  The period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2.  The circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3.  The disclosures that an entity should make about events or transactions that occurred after the balance sheet date. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------|

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|            |   | December 31, |    |
|-----------------|--------|--------------|---------|
|            |   | 2008         |    |   | 2007 |   |
| Raw materials   |   | $            | — |   |   | $ | 62,000 |   |
| Work in process |   |         | — |   |   |   | 112,000 |   |
| Finished goods  |   |         | 3,000   |   |   |   | 84,000 |   |
|            |   | $            | 3,000   |   |   | $ | 258,000 |   |

|                                   |   | December 31, |     |
|----------------------------------------|--------|--------------|----------|
|                                   |   | 2008         |     |   | 2007 |   |
| Laboratory and manufacturing equipment |   | $            | —  |   |   | $ | 274,000 |   |
| Furniture and office equipment         |   |         | —  |   |   |   | 131,000 |   |
| Leasehold improvements                 |   |         | —  |   |   |   | 31,000 |   |
|                                   |   |         | —  |   |   |   | 436,000 |   |
| Accumulated depreciation               |   |         | (— | ) |   |   | (391,000 | ) |
|                                   |   | $            | —  |   |   | $ | 45,000 |   |

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|                     | December 31, |   |
|--------------------------|--------------|--------|
|                     | 2008         |   | 2007 |   |
| Capitalized patent costs |         | $      | 1,110,000 |   |   | $ | 950,000 |   |
| Accumulated amortization |         |   | (802,000 | ) |   |   | (401,000 | ) |
|                     |         | $      | 308,000 |   |   | $ | 549,000 |   |

| 2009 |   | $  | 49,000 |   |
|------|--------|---------|--------|--------|
| 2010 |   |    | 47,000 |   |
| 2011 |   |    | 37,000 |   |
| 2012 |   |    | 23,000 |   |
| 2013 |   |    | 18,000 |   |

|                  |   | December 31, |    |
|-----------------------|--------|--------------|---------|
|                  |   | 2008         |    |   | 2007 |   |
| Goodwill              |   | $            | — |   |   | $ | 1,331,000 |   |
| Strategic investments |   |         | — |   |   |   | 145,000 |   |
| Lease deposits        |   |         | — |   |   |   | 24,000 |   |
|                  |   | $            | — |   |   | $ | 1,500,000 |   |

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|                                | Number of Warrants |    | Weighted Average Exercise Price |   |
|-------------------------------------|--------------------|---------|---------------------------------|--------|
| Outstanding, December 31, 2006 | 34,350,752         |    |                            | 0.54   |   |
| Granted                             | -                  |    |                            | -      |   |
| Exercised                           | -                  |    |                            | -      |   |
| Expired                             | (2,787,857         |  ) |                            | 0.47   |   |
| Outstanding, December 31, 2007 | 31,562,895         |    | $                               | 0.54   |   |
| Granted                             | 3,379,121          |    |                            | .011   |   |
| Exercised                           | -                  |    |                            | -      |   |
| Expired                             | (9,681,429         | )       |                            | 0.35   |   |
| Outstanding, December 31, 2008 | 25,260,587         |    | $                               | 0.55   |   |
|                                |               |    |                            |   |   |
| Exercisable warrants:          |               |    |                            |   |   |
| December 31, 2007              | 31,287,895         |    | $                               | 0.55   |   |
| December 31, 2008                   | 25,088,712         |    |                            | 0.56   |   |

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|                                |   | Number of Options |      |   | Weighted Average Exercise Price |   |
|-------------------------------------|--------|-------------------|-----------|--------|---------------------------------|--------|
| Outstanding, December 31, 2006 |   |              | 5,607,389 |   |                            |   | 0.33 |   |
| Granted                             |   |              | 80,000    |   |                            |   | 0.20 |   |
| Exercised                           |   |              | -         |   |                            |   | - |   |
| Expired                             |   |              | (407,117  | )      |                            |   | 0.50 |   |
| Outstanding, December 31, 2007 |   |              | 5,280,272 |   |                            | $      | 0.32 |   |
| Granted                             |   |              | 1,025,217 |   |                            |   | 0.385 |   |
| Exercised                           |   |              | -         |   |                            |   | - |   |
| Expired                             |   |              | (778,235  | )      |                            |   | 0.377 |   |
| Outstanding, December 31, 2008 |   |              | 5,527,254 |   |                            | $      | 0.33 |   |
|                                |   |              |      |   |                            |   |   |   |
| Exercisable options:           |   |              |      |   |                            |   |   |   |
| December 31, 2007              |   |              | 4,404,272 |   |                            | $      | 0.34 |   |
| December 31, 2008                   |   |              | 5,367,254 |   |                            | $      | 0.33 |   |

|                    |          |   | Outstanding Options |   | Exercisable Options                       |   |
|-------------------------|---------------|--------|---------------------|--------|-------------------------------------------|--------|
| Range ofExercise Prices |          |   | Number ofOptions    |   | Weighted-AverageRemainingContractual Life |   | Weighted-AverageExercise Price |   | Number ofOptions |   | Weighted-AverageExercise Price |   |
| $                       | 0.10 to $0.15 |   |                |   | 8,000                                     |   | 7.06 |   | $ | 0.12 |   | 8,000 |   | $ | 0.12 |   |
| $                       | 0.20 to $0.47 |   |                |   | 5,245,809                                 |   | 5.25 |   | $ | 0.30 |   | 5,085,809 |   | $ | 0.30 |   |
| $                       | 0.53 to $0.88 |   |                |   | 228,195                                   |   | 5.09 |   | $ | 0.63 |   | 228,195 |   | $ | 0.63 |   |
| $                       | 1.38 to $2.88 |   |                |   | 45,250                                    |   | 1.19 |   | $ | 1.78 |   | 45,250 |   | $ | 1.78 |   |
|                    |          |   |                |   | 5,527,254                                 |   |   |   |   |   |   | 5,367,254 |   |   |   |   |

----

|                                                                                                       |   | December 31, |        |
|------------------------------------------------------------------------------------------------------------|--------|--------------|-------------|
|                                                                                                       |   | 2008         |        |   | 2007 |   |
| Deferred tax assets:                                                                                       |   |         |        |   |   |   |
| Federal net operating loss carryforward                                                                    |   | $            | 8,929,000   |   |   | $ | 7,172,000 |   |
| Temporary deferred tax asset caused by capitalized research and development expenses                       |   |         | --          |   |   |   | 5,883,000 |   |
| Federal R&D tax credit carryforward                                                                    |   |         | 235,000     |   |   |   | 217,000 |   |
| State net operating loss carryforward and capitalized research and development expenses                    |   |         | 2,363,000   |   |   |   | 1,404,000 |   |
| Other                                                                                                      |   |         | --          |   |   |   | 80,000 |   |
| Deferred tax liabilities - book basis in excess and of noncurrent assets acquired in purchase transactions |   |         | --          |   |   |   | (142,000 | ) |
| Deferred tax assets before valuation                                                                       |   |         | 11,527,000  |   |   |   | 14,614,000 |   |
| Valuation allowance                                                                                        |   |         | (11,527,000 | ) |   |   | (14,614,000 | ) |
| Net deferred income tax assets                                                                             |   | $            | --          |   |   | $ | -- |   |

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|            |   | Year Ended December 31, |      |
|-----------------|--------|-------------------------|-----------|
|            |   | 2008                    |      |   | 2007 |   |
| North America   |   | $                       | 1,235,000 |   |   | $ | 2,154,000 |   |
| EMEA            |   |                    | 1,033,000 |   |   |   | 1,802,000 |   |
| Latin America   |   |                    | 339,000   |   |   |   | 591,000 |   |
| Asia Pacific    |   |                    | 766,000   |   |   |   | 1,336,000 |   |
| Other Countries |   |                    | 97,000    |   |   |   | 166,000 |   |
|            |   |                    |      |   |   |   |   |   |
| Total           |   | $                       | 3,470,000 |   |   | $ | 6,049,000 |   |

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