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|   | þ Annual report under Section 13 or      15(d) of the Securities Exchange Act of 1934 for the fiscal year ended      December 31, 2007. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ¨ Transition report pursuant to      Section 13 or 15(d) of the Securities Exchange Act of 1934 for the      transition period from _____ to  _____. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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| PART      I   | Page                                                                                                                      |   |   |
|---------------|---------------------------------------------------------------------------------------------------------------------------|--------|--------|
| Item 1.       | Description of Business                                                                                                   | 2      |   |
| Item 2.       | Description of Property                                                                                                   | 17     |   |   |
| Item 3.       | Legal Proceedings                                                                                                         | 17     |   |   |
| Item 4.       | Submission of Matters to a Vote of Security      Holders                                                                  | 17     |   |   |
| PART      II  |                                                                                                                      |   |
| Item 5.       | Market for Common Equity, Related Stockholder Matters and      Small Business Issuer Purchases of Equity    Securities    | 19     |   |   |
| Item 6.       | Management’s Discussion and Analysis or Plan of      Operation                                                      | 22     |   |   |
| Item 6.       | Risk Factors                                                                                                              | 34     |   |   |
| Item 7.       | Financial Statements                                                                                                      | 50     |   |   |
| Item 8.       | Changes in and Disagreements With Accountants on Accounting      and Financial Disclosure                                 | 50     |   |   |
| Item 8A.      | Controls and Procedures                                                                                                   | 50     |   |   |
| Item 8B.      | Other Information                                                                                                         | 51     |   |   |
| PART      III |                                                                                                                      |   |
| Item 9.       | Directors, Executive Officers, Promoters and Control      Persons; Compliance with Section 16(a) of the Exchange      Act | 52     |   |   |
| Item 10.      | Executive Compensation                                                                                                    | 55     |   |   |
| Item 11.      | Security Ownership of Certain Beneficial Owners and      Management and Related Stockholder Matters                       | 61     |   |   |
| Item 12.      | Certain Relationships and Related      Transactions                                                                       | 65     |   |   |
| Item 13.      | Exhibits                                                                                                                  | 65     |   |   |
| Item 14.      | Principal Accountant Fees and      Services                                                                               | 65     |   |   |
| SIGNATURES    | 66                                                                                                                        |   |   |
| EXHIBIT INDEX | 67                                                                                                                        |   |   |

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|                         |   | 2006   |    |   | 2007   |   |
|------------------------------|--------|--------|---------|--------|--------|--------|
| Japan                        |   | $      | 149,000 |   |   | $      | 133,000 |   |
| Korea                        |   |   | 55,000  |   |   |   | 55,000 |   |
| Poland                       |   |   | 53,000  |   |   |   | 42,000 |   |
| France                       |   |   | 50,000  |   |   |   | 41,000 |   |
| Canada                       |   |   | 37,000  |   |   |   | 46,000 |   |
| Other      foreign countries |   |   | 277,000 |   |   |   | 232,000 |   |

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| ·               | Reagents      for the detection of HMGA2, a marker for aggressive breast      cancer; |
|--------------------------------------------------------------|---------------------------------------------------------------------------------------|

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

| ·          | A      new myeloperoxidase research assay, based on an inflammatory protein that      has utility as a prognostic marker for cardiac  events; |
|--------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------|

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| ·           | Custom Immunoassay      Development. With over 30 years of experience and the development      over 40 immunoassay products, BioCheck’s in-house research and development      team provides antibodies and antigens, and assists biotechnology and      pharmaceutical customers with the development of their immunoassay test      kits. |
|--------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·           | Antibody Purification and      Conjugation. Using chromatography technology and proprietary      antibody conjugation methods, BioCheck offers antibody purification      services and antibody conjugates. Stability testing has indicated that      BioCheck’s conjugates remain active for five  years. |
|--------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·           | Immunoassay Assembly Services.      Having developed over 40 immunoassay products, BioCheck has      exceptional test kit packaging experience and can provide custom      immunoassay assembly services for ourcustomers. |
|--------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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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 5,438,151 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”.        |

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

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ITEM3

ITEM4

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| Nominee                      |   | Total      Votes For All Nominees |   | Total      Votes Withheld From All Nominees |
|------------------------------|--------|-----------------------------------|--------|---------------------------------------------|
| Marvin      S. Hausman, M.D. |   | 33,746,566                        |   | 1,942,555                                   |
| S.      Colin Neill          |   | 33,747,313                        |   | 1,941,808                                   |
| John      E. Repine, M.D.    |   | 33,748,908                        |   | 1,940,213                                   |
| Gary      M. Post            |   | 29,879,268                        |   | 5,809,853                                   |
| Matthew      Spolar          |   | 33,769,184                        |   | 1,919,937                                   |

| Total      Votes For |   | Total      Votes Against |   | Abstained |
|----------------------|--------|--------------------------|--------|-----------|
| 34,595,659           |   | 1,013,735                |   | 79,727    |

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| ITEM      5. | MARKET FOR COMMON EQUITY, RELATED      STOCKHOLDER MATTERS, AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY      SECURITIES |
|--------------|---------------------------------------------------------------------------------------------------------------------------|

| YEAR                  | PERIOD              |   | HIGH |   |   | LOW    |   |
|-----------------------|---------------------|--------|------|--------|--------|--------|--------|
| Fiscal      Year 2006 | First      Quarter  |   | $    | 0.38   |   |   | $      | 0.26 |   |
|                  | Second      Quarter |   | $    | 0.44   |   |   | $      | 0.32 |   |
|                  | Third      Quarter  |   | $    | 0.36   |   |   | $      | 0.21 |   |
|                  | Fourth      Quarter |   | $    | 0.28   |   |   | $      | 0.18 |   |
| 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 |   |

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| ITEM      6. | MANAGEMENT’S DISCUSSION AND      ANALYSIS OR PLAN OFOPERATION |
|--------------|---------------------------------------------------------------------|

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| · | Reagents      for the detection of HMGA2, a marker for aggressive breast      cancer; |
|--------|---------------------------------------------------------------------------------------|

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

| · | A      new myeloperoxidase research assay, based on an inflammatory protein that      has utility as a prognostic marker for cardiac  events; |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

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|                  |   |   |      |   | Increase      (Decrease) from 2006 |   |
|-----------------------|--------|--------|-----------|--------|------------------------------------|--------|
|                  |   | 2007   |      |   | 2006                               |   |   | Amount |   |   | % |   |
|                  |   |   |      |   |                               |   |   |   |   |   |   |   |
| Product      revenues |   | $      | 5,205,000 |   |                               | $      | 5,201,000 |   |   | $ | 4,000 |   |   |   | 0 | % |
| License      revenues |   |   | 844,000   |   |                               |   | 575,000 |   |   |   | 269,000 |   |   |   | 47 | % |
| Total      revenues   |   | $      | 6,049,000 |   |                               | $      | 5,776,000 |   |   | $ | 273,000 |   |   |   | 5 | % |

|                          |   |   |      |   | Increase      (Decrease) from 2006 |   |
|-------------------------------|--------|--------|-----------|--------|------------------------------------|--------|
|                          |   | 2007   |      |   | 2006                               |   |   | Amount |   |   | % |   |
|                          |   |   |      |   |                               |   |   |   |   |   |   |   |
| Cost      of product revenues |   | $      | 3,261,000 |   |                               | $      | 3,084,000 |   |   | $ | 177,000 |   |   |   | 6 | % |
|                          |   |   |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |

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|                          |   |   |      |   | Increase      (Decrease) from 2006 |   |
|-------------------------------|--------|--------|-----------|--------|------------------------------------|--------|
|                          |   | 2007   |      |   | 2006                               |   |   | Amount |   |   | % |   |
|                          |   |   |      |   |                               |   |   |   |   |   |   |   |
| Research      and development |   | $      | 1,037,000 |   |                               | $      | 708,000 |   |   | $ | 329,000 |   |   |   | 46 | % |

|                                     |   |   |      |   | Increase      (Decrease) from 2006 |   |
|------------------------------------------|--------|--------|-----------|--------|------------------------------------|--------|
|                                     |   | 2007   |      |   | 2006                               |   |   | Amount |   |   | % |   |
|                                     |   |   |      |   |                               |   |   |   |   |   |   |   |
| Selling,      general and administrative |   | $      | 2,867,000 |   |                               | $      | 4,654,000 |   |   | $ | (1,787,000 | ) |   |   | (38 | %) |

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RISK FACTORS

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

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

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

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

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

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

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

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

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ITEM7

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

ITEM8A

|   | Evaluation of Disclosure      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. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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material 
weakness is a deficiency, or acombination of deficiencies, in internal control over financial reporting, suchthat there is a reasonable possibility that a material misstatement of ourannual or interim financial statements will not be prevented or detected on atimely basis.

ITEM 8B

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

|  Name                       |   |  Age |   |  Principal      Occupation                                                                        |   | Served      asDirector      Since |
|----------------------------------|--------|-----------|--------|--------------------------------------------------------------------------------------------------------|--------|-----------------------------------|
| Marvin      S. Hausman, M.D. (2) |   | 66        |   | President,      Chief Executive Officer, Acting Chief Financial Officer and Chairman of      the Board |   | 2004                              |
| S.      Colin Neill (1) (3)      |   | 61        |   | Secretary,      Director                                                                               |   | 2004                              |
| John      E. Repine, M.D. (1)(3) |   | 63        |   | Director                                                                                               |   | 2005                              |
| Gary      M. Post (1)(4)         |   | 59        |   | Chief      Operating Officer, Director                                                                 |   | 2006                              |

| (1)    | Member      of the Audit Committee.                                                                                                                                                                                                                                                                                                                                      |   |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| (2)    | Appointed      President and Chief Executive Officer on September 15, 2006. Member of the      Compensation Committee. In addition, on November 15, 2006, following the      resignation of Michael Centron as our Vice President and Chief Financial      Officer, Dr. Hausman has assumed the role of chief financial and      accounting officer on an interim basis. |
| (3)(4) | Member      of the Nominating Committee.Appointed      Chief Operating Officer on September 24,2007.                                                                                                                                                                                                                                                                     |

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| ITEM      10. | EXECUTIVE      COMPENSATION |
|---------------|-----------------------------|

| 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 (2)   | 2007   |   | $      | — |   |   |   | $                 | — | $      |                           | — |                                        | $      | —                     |   | $      | — |   | $ | — |   | $ | — |
| Chairman      of the Board,      | 2006   |   | $      | 52,083  |   | (3     | )      | $                 | — | $      | 164,977                        | (3)     |                                        | $      | 208,870                     |   | $      | — |   | $ | — |   | $ | 425,930 |
| Chief      Executive Officer     |   |   |   |    |   |   |   |              |    |   |                           |    |                                        |   |                        |   |   |   |   |   |   |   |   |   |
| Acting      Chief                |   |   |   |    |   |   |   |              |    |   |                           |    |                                        |   |                        |   |   |   |   |   |   |   |   |   |
| Financial      Officer           |   |   |   |    |   |   |   |              |    |   |                           |    |                                        |   |                        |   |   |   |   |   |   |   |   |   |

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|  (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 service period over which the options      become exercisable (vest).  As a general rule, for time in      service based options, the company will immediately expense any option or      portion thereof which is vested upon grant, while expensing the balance on      a pro rata basis over the remaining vesting term of the      option.         |
|-----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  (2) |  Dr.      Hausman served as Acting Chief Executive Officer from December 8, 2004 to      February 28, 2005 and as Acting Chief Financial Officer from December 8,      2004 until January 6, 2006. On September 15, 2006, Dr. Hausman was      appointed as Chairman of the board of directors, President and Chief      Executive Officer and Acting Chief Financial Officer.                                                                                                                                                                                                                                                                                                                                                         |
|  (3) |  Dr.      Hausman was issued 330,769 shares of common stock on October 12, 2006, as      payment for compensation and expenses owed by us to NW Medical Research      Partners, Inc., of which Dr. Hausman is the sole member and manager. The      amount owed was $67,477, and the shares were valued at approximately      $0.204 per share, and are not subject to repurchase. Also includes dollar      amount expensed by the company during 2006 for financial statement      reporting purposes pursuant for FAS 123R in connection with a grant to Dr.      Hausman of 500,000 restricted shares of common stock vesting over a 180      day period, for agreeing to serve as our Chief Executive Officer and      President. |

| · | Dr.      Hausman will serve as our President and Chief Executive Officer for a      three year term from the commencement date of his employment, and after      this period, on a year-to-year basis;                                                                                                                                                                                                                                                                      |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Dr.      Hausman will receive annual compensation in the amount of $250,000,      payable quarterly in advance in cash, common stock based on a price equal      to 85% of average of the five closing prices for the five trading days      prior to the date that the issuance is authorized by the board of      directors, or in ten year warrants equal to that number of warrants equal      to 1.5 times the number of shares that would otherwise be      received; |
| · | For      the initial quarterly payment, Dr. Hausman was issued 347,222 restricted      shares of common stock;                                                                                                                                                                                                                                                                                                                                                              |

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

| · | Upon      termination for cause, all compensation due to Dr. Hausman under the      agreement will cease, other than a right to participate in continued group      health insurance for a certain period of time (this applies to all      terminations, except if Dr, Hausman terminates without good reason) and      any unexercised portions of his stock options shall expire upon such      termination; |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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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 |   |   | 347,500 |   | $ | 78,500 |   |   | — |   | $ | — |   |
|                                              |   |   | 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 |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                              |   |   | 400,000 |   |   | 100,000 |   |   | — |   | $ | 0.29 |   |   | 12/28/15 |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                              |   |   | 5,000 |   |   | — |   |   | — |   | $ | 0.27 |   |   | 07/31/16 |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                              |   |   | 247,500 |   |   | 247,500 |   |   | — |   | $ | 0.20 |   |   | 11/05/16 |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                              |   |   | 1,505,000 |   |   | — |   |   | — |   | $ | 0.20 |   |   | 11/05/16 |   |   |   |   |   |   |   |   |   |   |   |   |   |

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| Director      Compensation |   |
|----------------------------|--------|
| Name                       |   | Fees      Earnedor      Paid inCash      (1) |   | StockAwards |   | OptionAwards |   | Non-EquityIncentive      Plan Compensation |   | All      Other Compensation |   | Total |   |
|                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| S.      Colin Neill        |   | $ | 6,000 | (4) | $ | — |   | $ | 500 | (2) | $ | — |   | $ | — |   | $ | 6,500 |   |
| John      E. Repine, M.D   |   |   | 4,000 |   |   | — |   |   | 500 | (2) |   | — |   |   | — |   |   | 4,500 |   |
| Gary      M. Post          |   |   | 4,000 |   |   | — |   |   | 500 | (2) |   | — |   |   | — |   |   | 4,500 |   |
| Matthew      Spolar        |   |   | 4,000 |   |   | — |   |   | 500 | (2)      (3) |   | — |   |   | — |   |   | 4,500 |   |

| (4) | Colin      Neill accrued $4,000 for annual director fees and $1,000 each for his      services as chairman of the audit and nominating    committees. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ITEM      11. | 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 |   |
|---------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------|------------|--------|--------------------------------------------------------|--------|
| TorreyPines      Therapeutics, Inc. (1)11085      N. Torrey Pines RoadLa      Jolla, CA 92037                                               |   |                                                     | 13,982,567 |   |                                                   |   | 29.84 | % |
| Bristol      Investment Fund, Ltd. (2)Bristol      Capital Advisors, LLC10990      Wilshire Boulevard, Suite 1410Los      Angeles, CA 90024 |   |                                                     | 12,755,851 |   |                                                   |   | 21.40 | % |
| Alpha      Capital Anstalt (3)c/o      LH Financial150      Central Park South, 2nd      FloorNew      York, NY 10019                       |   |                                                     | 5,020,001  |   |                                                   |   | 9.68 | % |
| Whalehaven      Capital Fund Limited (4)3rd      Floor, 14 Par-La-Ville Rd.P.      O. Box HM1027Hamilton      HMDX Bermuda                  |   |                                                     | 3,764,999  |   |                                                   |   | 7.44 | % |
| Cranshire      Capital, LP (5)3100      Dundee Rd., Suite 703Northbrook,      IL 60062                                                      |   |                                                     | 3,703,538  |   |                                                   |   | 7.33 | % |
| Marvin      S. Hausman, M.D. (6)                                                                                                            |   |                                                     | 4,835,025  |   |                                                   |   | 9.80 | % |
| S.      Colin Neill (7)                                                                                                                     |   |                                                     | 407,500    |   |                                                   |   | * |   |
| John      E. Repine, M.D. (8)                                                                                                               |   |                                                     | 469,387    |   |                                                   |   | * | % |
| Gary      M. Post (9)                                                                                                                       |   |                                                     | 1,218,691  |   |                                                   |   | 2.54 | % |
| Executive      officers and directors as a group — 4 persons (10)                                                                     |   |                                                     | 6,930,603  |   |                                                   |   | 13.49 | % |

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

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| (1)  | Based      on a Schedule 13G filed with the SEC on February 14, 2006, filed on behalf      of TorreyPines Therapeutics Pursuant to the Schedule 13G, TorreyPines      has sole voting power as to 13,982,567 shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)  | The      holdings of Bristol Investment Fund, Ltd. include 3,867,925 shares of      common stock, 1,434,286 shares issuable upon the voluntary conversion by      Bristol Investment Fund of a secured convertible debenture at the current      conversion price of $0.35 per share, warrants to purchase 1,933,963 shares      of common stock at a price of $0.66 per share, warrants to purchase      1,933,962 shares of common stock at a purchase price of $1.00 per share,      warrants to purchase 2,868,572 shares of common stock at a purchase price      of $0.35 per share, and warrants to purchase 717,143 shares of common      stock at a purchase price of $0.385 per share. Paul Kessler, manager of      Bristol Capital Advisors, LLC, the investment advisor to Bristol      Investment Fund, Ltd., has voting and investment control over the      securities held by Bristol Investment Fund, Ltd. Mr. Kessler disclaims      beneficial ownership of these securities. |
| (3)  | The      holdings of Alpha Capital Anstalt include 1,434,286 shares issuable upon      the voluntary conversion by Alpha Capital Anstalt of a secured convertible      debenture at the current conversion price of $0.35 per share, warrants to      purchase 2,868,572 shares of common stock at a purchase price of $0.35 per      share, and warrants to purchase 717,143 shares of common stock at a      purchase price of $0.385 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |
| (4)  | The      holdings of Whalehaven Capital Fund Limited include 1,075,714 shares      issuable upon the voluntary conversion by Whalehaven Capital Fund of a      secured convertible debenture at the current conversion price of $0.35 per      share, warrants to purchase 2,151,428 shares of common stock at a purchase      price of $0.35 per share, and warrants to purchase 537,857 shares of      common stock at a purchase price of $0.385 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |
| (5)  | The      holdings of Cranshire Capital, LP. include 896,429 shares issuable upon      the voluntary conversion by Cranshire Capital of a secured convertible      debenture at the current conversion price of $0.35 per share, warrants to      purchase 283,019 shares of common stock at a price of $0.66 per share,      warrants to purchase 283,019 shares of common stock at a purchase price of      $1.00 per share, warrants to purchase 1,792,857 shares of common stock at      a purchase price of $0.35 per share, and warrants to purchase 448,214      shares of common stock at a purchase price of $0.385 per share. Mitchell      P. Kopin, the President of Downsview Capital, Inc., the General Partner of      Cranshire Capital, L.P., has sole investment power and voting control over      the securities held by Cranshire Capital, L.P.                                                                                                                               |   |
| (6)  | The      holdings of Marvin S. Hausman, M.D. include 2,344,080 shares of common      stock, 985,945 shares issuable upon exercise of options that are      exercisable currently or within 60 days of April 4, 2008, and 1,505,000      warrant shares exercisable currently or within 60 days of April 4,      2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |
| (7)  | The      holdings of S. Colin Neill include 220,000 shares issuable upon exercise      of options that are exercisable currently or within 60 days of April 4,      2008, and 187,500 warrant shares exercisable currently or within 60 days      of April 4, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |
| (8)  | The      holdings of director John E. Repine include 50,000 shares of common stock      and 419,387 shares issuable upon exercise of options that are exercisable      currently or within 60 days of April 4, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| (9)  | The      holdings of director Gary M. Post include 524,583 shares issuable upon      exercise of options that are exercisable currently or within 60 days of      April 4, 2008 and 694,108 warrant shares exercisable currently or within      60 days of April 4, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| (10) | The      holdings of the executive officers and directors as a group include an      aggregate 2,394,080 shares of common stock, 2,149,915 shares issuable upon      exercise of options that are exercisable currently or within 60 days of      April 4, 2008 and 2,386,608` warrant shares exercisable currently or      within 60 days of April 4, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

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| 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 shares which can be purchased      within 60 days have been purchased by the respective person or group and      are outstanding. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   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)        |   |                                                                                                              |  3,724,022 |                                                                                      |  $ |  0.35                                                                                                                                                            |   |   |  1,314,062 |   |
| Equity      compensation plans not approved by security holders    (2) |   |                                                                                                              |  3,761,333 |                                                                                      |  $ |  0.22                                                                                                                                                            |   |   |  — |   |
| Total                                                                  |   |                                                                                                              |  7,485,355 |                                                                                      |    |                                                                                                                                                                  |   |   |  1,314,062 |   |

|  (1) |  As      of December 31, 2007, we had options issued and outstanding to purchase      3,387,350 shares of common stock under our 2003 Stock Incentive Plan and      336,672 shares of common stock under the 1994 Stock Incentive Plan. Our      1994 Stock Incentive Plan terminated on April 30, 2004 and no additional      grants may be made under that plan. As approved by stockholders, we may      grant additional options to purchase up to 1,314,062 shares of common      stock under our 2003 Stock Incentive Plan as of December 31, 2007. 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, 2007      pursuant to an evergreen provision in the stock option    plan. |
|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  (2) |  As      of December 31, 2007, we had options and warrants issued and outstanding      for the purchase of an aggregate of 3,761,333 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 the board of      directors.                                                                                                                                                                                                                                                                                                                                                                                        |

ITEM 12

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ITEM13

ITEM14

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SIGNATURES

|   | By: | /s/      Marvin S. Hausman, M.D. |
|--------|-----|----------------------------------|

| /s/      Marvin S. Hausman, M.D. | April      11, 2008 |   | /s/      John E. Repine, M.D.* | April      11, 2008 |
|----------------------------------|---------------------|--------|--------------------------------|---------------------|
| Marvin      S. Hausman, M.D.     | Date                |   | John      E. Repine, M.D.      | Date                |
|                             |                |   |                           |                |
| /s/      S. Colin Neill*         | April      11, 2008 |   | /s/      Gary M. Post*         | April      11, 2008 |
| S.      Colin Neill              | Date                |   | Gary      M. Post              | Date                |
|                             |                |   |                           |                |
|                             |                |   |                           |                |
|                             |                |   |                           |                |

| *By:         | /s/ MARVIN      S. H AUSMAN , M.D.              |   | April      11, 2008 |
|------------------------|------------------------------------------------------|--------|---------------------|
|                   | Marvin      S. Hausman, M.D.As      Attorney-in-Fact |   |                |

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EXHIBIT INDEX

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

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

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

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Table of Contents

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

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Table of Contents

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

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|                                                                                                             | Page   |
|------------------------------------------------------------------------------------------------------------------|--------|
| Report      of Independent Registered Public Accounting Firm                                                     |   |
| Williams & Webster, P.S.                                                                                     | F-1    |
| Consolidated      Financial Statements                                                                           |   |
| Balance Sheets as of December 31, 2007 and      2006                                                   | F-2    |
| Statements of Operations For Years Ended      December 31, 2007 and 2006                          | F-3    |
| Statement of Stockholders’ Equity (Deficit) For      Years Ended December 31, 2007 and 2006 | F-4    |
| Statements of Cash Flows For Years Ended      December 31, 2007 and 2006                          | F-5    |
| Notes To Consolidated Financial    Statements                                                                    | F-6    |

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|                                                                                                                                                                               |   |                   |        |   |                   |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|-------------|--------|------------------------|--------|
|                                                                                                                                                                               |   | December      31, 2007 |        |   | December      31, 2006 |   |
| ASSETS                                                                                                                                                                             |   |                   |        |   |                   |   |
| Current      Assets:                                                                                                                                                               |   |                   |        |   |                   |   |
| Cash      and cash equivalents                                                                                                                                                     |   | $                      | 1,140,000   |   |                   | $      | 1,208,000 |   |
| Accounts      receivable, net                                                                                                                                                      |   |                   | 830,000     |   |                   |   | 732,000 |   |
| Inventory                                                                                                                                                                          |   |                   | 520,000     |   |                   |   | 561,000 |   |
| Prepaid      expenses and other current assets                                                                                                                                     |   |                   | 129,000     |   |                   |   | 130,000 |   |
| Deferred      tax assets                                                                                                                                                           |   |                   | 8,000       |   |                   |   | 10,000 |   |
| Restricted      cash                                                                                                                                                               |   |                   | —     |   |                   |   | 3,060,000 |   |
| Total      Current Assets                                                                                                                                                          |   |                   | 2,627,000   |   |                   |   | 5,701,000 |   |
| Property,      plant and equipment, net                                                                                                                                            |   |                   | 169,000     |   |                   |   | 244,000 |   |
| Patents,      net                                                                                                                                                                  |   |                   | 561,000     |   |                   |   | 761,000 |   |
| Goodwill      and other assets, net                                                                                                                                                |   |                   | 1,500,000   |   |                   |   | 1,291,000 |   |
| Total      Other Assets                                                                                                                                                            |   |                   | 2,230,000   |   |                   |   | 2,296,000 |   |
| TOTAL      ASSETS                                                                                                                                                                  |   | $                      | 4,857,000   |   |                   | $      | 7,997,000 |   |
| LIABILITIES      AND STOCKHOLDERS’ EQUITY (DEFICIT)                                                                                                                          |   |                   |        |   |                   |   |   |   |
| Current      Liabilities:                                                                                                                                                          |   |                   |        |   |                   |   |   |   |
| Accounts      payable                                                                                                                                                              |   | $                      | 1,034,000   |   |                   | $      | 714,000 |   |
| Accrued      expenses                                                                                                                                                              |   |                   | 1,039,000   |   |                   |   | 838,000 |   |
| Accounts      payable to related party                                                                                                                                             |   |                   | —     |   |                   |   | 49,000 |   |
| Warrant      liability                                                                                                                                                             |   |                   | 244,000     |   |                   |   | 2,314,000 |   |
| Accrued      derivative liability                                                                                                                                                  |   |                   | 89,000      |   |                   |   | 678,000 |   |
| Convertible      debentures, net of discounts of $552,000                                                                                                                          |   |                   | 797,000     |   |                   |   | — |   |
| Notes      payable                                                                                                                                                                 |   |                   | —     |   |                   |   | 3,060,000 |   |
| Total      Current Liabilities                                                                                                                                                     |   |                   | 3,203,000   |   |                   |   | 7,653,000 |   |
| Long-term      deferred taxes                                                                                                                                                      |   |                   | 25,000      |   |                   |   | 25,000 |   |
| Convertible      debentures, net of discounts of $1,226,000                                                                                                                        |   |                   | —     |   |                   |   | 124,000 |   |
| Total      Liabilities                                                                                                                                                             |   |                   | 3,228,000   |   |                   |   | 7,802,000 |   |
| Minority      interest                                                                                                                                                             |   |                   | 866,000     |   |                   |   | 770,000 |   |
| Commitments      and Contingencies                                                                                                                                                 |   |                   | —     |   |                   |   | — |   |
| Stockholders’      Equity (Deficit):                                                                                                                                         |   |                   |        |   |                   |   |   |   |
| Convertible      preferred stock - $0.01 par value; 15,000,000 shares      authorized:                                                                                             |   |                   |        |   |                   |   |   |   |
| Series      B - 0 and 0 shares issued and outstanding at December 31, 2007 and 2006,      respectively (aggregate liquidation preference of      $1,000)                           |   |                   | —     |   |                   |   | — |   |
| Series      C - 96,230 shares issued and outstanding at December 31, 2007 and      2006                                                                                            |   |                   | 1,000       |   |                   |   | 1,000 |   |
| Common      stock - $0.001 par value; 150,000,000 shares authorized; 46,850,809 and      44,527,476 shares issued and outstanding at December 31, 2007 and 2006,      respectively |   |                   | 47,000      |   |                   |   | 45,000 |   |
| Additional      paid-in capital                                                                                                                                                    |   |                   | 70,980,000  |   |                   |   | 70,115,000 |   |
| Accumulated      deficit                                                                                                                                                           |   |                   | (69,848,000 | )      |                   |   | (70,319,000 | ) |
| Accumulated      other comprehensive loss                                                                                                                                          |   |                   | (417,000    | )      |                   |   | (417,000 | ) |
| Total      Stockholders’ Equity (Deficit)                                                                                                                                    |   |                   | 763,000     |   |                   |   | (575,000 | )  |
| TOTAL      LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)                                                                                                                    |   | $                      | 4,857,000   |   |                   | $      | 7,997,000 |   |

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|                                                                   |   | 2007   |       |   | 2006   |   |
|------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
| Revenue:                                                               |   |   |       |   |   |   |
|   Product      revenues                                      |   | $      | 5,205,000  |   |   | $      | 5,201,000 |   |
|   License      revenues                                      |   |   | 844,000    |   |   |   | 575,000 |   |
|   TOTAL      REVENUE                                         |   |   | 6,049,000  |   |   |   | 5,776,000 |   |
| Cost      of Product Revenue                                           |   |   | 3,261,000  |   |   |   | 3,084,000 |   |
| Gross      Profit                                                      |   |   | 2,788,000  |   |   |   | 2,692,000 |   |
| Operating      Expenses:                                               |   |   |       |   |   |   |   |   |
|   Research and      development                              |   |   | 1,037,000  |   |   |   | 708,000 |   |
|   Selling, general      and administrative                   |   |   | 2,867,000  |   |   |   | 4,654,000 |   |
|   Total Operating      Expenses                              |   |   | 3,904,000  |   |   |   | 5,362,000 |   |
| Loss      from Operations                                              |   |   | (1,116,000 | )      |   |   | (2,670,000 | ) |
| Other      Income (expense):                                           |   |   |       |   |   |   |   |   |
|   Interest      income                                       |   |   | 52,000     |   |   |   | 80,000 |   |
|   Other      income                                          |   |   | 73,000     |   |   |   | 62,000 |   |
|   Financing cost      related to convertible debentures      |   |   | —    |   |   |   | (1,674,000 | ) |
|   Change in value of      warrant and derivative liabilities |   |   | 2,659,000  |   |   |   | 32,000 |   |
|   Interest      expense                                      |   |   | (1,014,000 | )      |   |   | (484,000 | ) |
|   Other      expense                                         |   |   | (13,000    | )      |   |   | — |   |
|   Total Other Income      (Expense)                          |   |   | 1,757,000  |   |   |   | (1,984,000 | ) |
| Minority      Interest in Subsidiary                                   |   |   | (95,000    | )      |   |   | (166,000 | ) |
| Income      (loss) before provision for income taxes                   |   |   | 546,000    |   |   |   | (4,820,000 | ) |
| Provision      for income taxes                                        |   |   | 75,000     |   |   |   | 120,000 |   |
| Net      income (loss)                                                 |   | $      | 471,000    |   |   | $      | (4,940,000 | ) |
| Earnings      (Loss) Per Share                                         |   |   |       |   |   |   |   |   |
| Basic                                                                  |   | $      | 0.01       |   |   | $      | (0.11 | ) |
| Diluted                                                                |   | $      | 0.01       |   |   | $      | (0.11 | ) |
| Weighted      Average Shares Outstanding                               |   |   |       |   |   |   |   |   |
| Basic                                                                  |   |   | 45,449,394 |   |   |   | 43,059,701 |   |
| Diluted                                                                |   |   | 45,511,028 |   |   |   | 43,059,701 |   |

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|                                                                |                 |   |              |   |                    |       |        |    |               |   |                      |       |        |    |        |   |
|---------------------------------------------------------------------|----------------------|--------|-------------------|--------|-------------------------|------------|-------------|---------|--------------------|--------|---------------------------|------------|-------------|---------|-------------|--------|
|                                                                |                 |   |              |   |                    |       |        |    |               |   |                      |       | Accumulated |    | Total       |   |
|                                                                | Preferred      Stock |   | Common      Stock |   | Additional      Paid-in |       | Accumulated |    | OtherComprehensive |   | Stockholders’Equity |       |
|                                                                | Shares               |   | Amount            |   | Shares                  |       | Amount      |    | Capital            |   | Deficit                   |       | Loss        |    | (Deficit)   |   |
| Balance,      December 31, 2005                                     | 96,230               |   |        $     | 1,000  |                    | 42,538,397 |        |  $ | 43,000             |   |  $                   | 68,686,000 |        | $       | (65,379,000 | )      |        $ | (417,000 | ) |        $ | 2,934,000 |   |
| Exercise      of stock options                                      |                 |   |              |   |                    | 528,588    |        |    | 1,000              |   |                      | 69,000     |        |    |        |   |   |   |   |   | 70,000 |   |
| Issuance      of common stock for servicesand      accounts payable |                 |   |              |   |                    | 1,460,491  |        |    | 1,000              |   |                      | 292,000    |        |    |        |   |   |   |   |   | 293,000 |   |
| Fair      value of warrants issued with debt                        |                 |   |              |   |                    |       |        |    |               |   |                      | 166,000    |        |    |        |   |   |   |   |   | 166,000 |   |
| Stock      compensation expense for                                 |                 |   |              |   |                    |       |        |    |               |   |                      |       |        |    |        |   |   |   |   |   |   |   |
| options      issued to employees and non-employees                  |                 |   |              |   |                    |       |        |    |               |   |                      | 692,000    |        |    |        |   |   |   |   |   | 692,000 |   |
| Repricing      of warrants                                          |                 |   |              |   |                    |       |        |    |               |   |                      | 210,000    |        |    |        |   |   |   |   |   | 210,000 |   |
| Net      loss                                                       |                 |   |              |   |                    |       |        |    |               |   |                      |       |        |    | (4,940,000  | )      |   |   |   |   | (4,940,000 | ) |
| Balance,      December 31, 2006                                     | 96,230               |   | $                 | 1,000  |                    | 44,527,476 |        | $       | 45,000             |   | $                         | 70,115,000 |        | $       | (70,319,000 | )      | $ | (417,000 | ) | $ | (575,000 | ) |
| Issuance      of common stock                                       |                 |   |              |   |                    | 2,083,333  |        |    | 2,000              |   |                      | 498,000    |        |    |        |   |   |   |   |   | 500,000 |   |
| Issuance      of common stock for services                          |                 |   |              |   |                    | 240,000    |        |    |               |   |                      | 24,000     |        |    |        |   |   |   |   |   | 24,000 |   |
| Stock      compensation expense for                                 |                 |   |              |   |                    |       |        |    |               |   |                      |       |        |    |        |   |   |   |   |   |   |   |
| options      issued to non-employees                                |                 |   |              |   |                    |       |        |    |               |   |                      | 174,000    |        |    |        |   |   |   |   |   | 174,000 |   |
| Stock      compensation expense for                                 |                 |   |              |   |                    |       |        |    |               |   |                      |       |        |    |        |   |   |   |   |   |   |   |
| options      issued to employees                                    |                 |   |              |   |                    |       |        |    |               |   |                      | 169,000    |        |    |        |   |   |   |   |   | 169,000 |   |
| Net      income                                                     |                 |   |              |   |                    |       |        |    |               |   |                      |       |        |    | 471,000     |   |   |   |   |   | 471,000 |   |
| Balance,      December 31, 2007                                     | 96,230               |   |        $     | 1,000  |                    | 46,850,809 |        |  $ | 47,000             |   |        $             | 70,980,000 |        |  $ | (69,848,000 | )      |        $ | (417,000 | ) |        $ | 763,000 |   |

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|                                                                                                                                               |   | 2007   |       |   | 2006   |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
| CASH      FLOW FROM OPERATING ACTIVITIES:                                                                                                          |   |   |       |   |   |   |
|   Net income      (loss)                                                                                                                 |   | $      | 471,000    |   |   | $      | (4,940,000 | ) |
|   Adjustment to      reconcile net income (loss) to net cash used in operating      activities:                                          |   |   |       |   |   |   |   |   |
|      Depreciation of property,      plant and equipment                                                                   |   |   | 75,000     |   |   |   | 63,000 |   |
|     Amortization of      intangible assets                                                                                     |   |   | 145,000    |   |   |   | 114,000 |   |
|     Impairment of      patents                                                                                                 |   |   | 152,000    |   |   |   | — |   |
|     Accretion of      interest on discounted note payable                                                                      |   |   | —    |   |   |   | 166,000 |   |
|     Common      stock issued to vendor for accounts payable                                                                    |   |   | —    |   |   |   | 21,000 |   |
|     Stock      compensation expense for options and warrants issued to    employees and      non-employees |   |   | 367,000    |   |   |   | 692,000 |   |
|     Repricing of      warrants                                                                                                 |   |   | —    |   |   |   | 210,000 |   |
|     Stock      compensation expense                                                                                            |   |   | —    |   |   |   | 272,000 |   |
|     Amortization of      debt discounts                                                                                        |   |   | 673,000    |   |   |   | 124,000 |   |
|     Change      in value of warrant and derivative liabilities                                                                 |   |   | (2,659,000 | )      |   |   | (32,000 | ) |
|     Financing cost      related to convertible debentures                                                                      |   |   | —    |   |   |   | 1,674,000 |   |
|     Change      in deferred taxes                                                                                              |   |   | 2,000      |   |   |   | (12,000 | ) |
|     Minority      interest in subsidiary                                                                                       |   |   | 96,000     |   |   |   | 166,000 |   |
|   Changes in      operating assets and liabilities:                                                                                      |   |   |       |   |   |   |   |   |
|    Accounts      receivable                                                                                                         |   |   | (98,000    | )      |   |   | 133,000 |   |
|    Inventory                                                                                                                        |   |   | 41,000     |   |   |   | 89,000 |   |
|     Prepaid      expense and other current assets                                                                              |   |   | (7,000     | )      |   |   | 155,000 |   |
|     Accounts      payable                                                                                                      |   |   | 320,000    |   |   |   | 209,000 |   |
|     Accrued      expenses                                                                                                      |   |   | 201,000    |   |   |   | 370,000 |   |
|     Taxes      payable                                                                                                         |   |   |       |   |   |   |   |   |
|     Accounts      payable to related party                                                                                     |   |   | (49,000    | )      |   |   | (145,000 | ) |
| Net      cash used in operating activities                                                                                                         |   |   | (270,000   | )      |   |   | (671,000 | ) |
| CASH      FLOW INVESTING ACTIVITIES:                                                                                                               |   |   |       |   |   |   |   |   |
|   Investment in      restricted certificate of deposit                                                                                   |   |   | —    |   |   |   | (3,060,000 | ) |
|   Purchase of      investment                                                                                                            |   |   | (69,000    | )      |   |   | — |   |
|   Payment for      acquisition of additional interest in subsidiary                                                                      |   |   | (132,000   | )      |   |   | — |   |
|   Proceeds from      restricted certificate of deposit                                                                                   |   |   | 3,060,000  |   |   |   | 3,060,000 |   |
|   Capital      expenditures                                                                                                              |   |   | —    |   |   |   | (64,000 | ) |
|   Increase in      patents                                                                                                               |   |   | (97,000    | )      |   |   | (44,000 | ) |
| Net      cash provided by (used in) investing activities                                                                                           |   |   | 2,762,000  |   |   |   | (108,000 | ) |
| CASH      FLOW FROM FINANCING ACTIVITIES:                                                                                                          |   |   |       |   |   |   |   |   |
|   Proceeds from      issuance of common stock                                                                                            |   |   | 500,000    |   |   |   | — |   |
|   Proceeds from      issuance of convertible debenture                                                                                   |   |   | —    |   |   |   | 1,350,000 |   |
|   Payment of offering      costs and expenses                                                                                            |   |   | —    |   |   |   | (47,000 | ) |
|   Proceeds from      exercise of stock options                                                                                           |   |   | —    |   |   |   | 70,000 |   |
|   Proceeds from      short-term borrowing                                                                                                |   |   | —    |   |   |   | 3,666,000 |   |
|   Repayment of      short-term borrowings                                                                                                |   |   | (3,060,000 | )      |   |   | (3,666,000 | ) |
| Net      cash provided by (used in) financing activities                                                                                           |   |   | (2,560,000 | )      |   |   | 1,373,000 |   |
| NET      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                                                          |   |   | (68,000    | )      |   |   | 594,000 |   |
| CASH      AND CASH EQUIVALENTS, Beginning of year                                                                                                  |   |   | 1,208,000  |   |   |   | 614,000 |   |
| CASH      AND CASH EQUIVALENTS, End of year                                                                                                        |   | $      | 1,140,000  |   |   | $      | 1,208,000 |   |

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

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|                              |   | Balance      at Beginning of Period |   |   IncreasesAdditions |   | Decreases |   | Balance      at End of Period |
|-----------------------------------|--------|-------------------------------------|--------|--------------------------------|--------|-----------|--------|-------------------------------|
| Year      ended December 31, 2006 |   | $                                   | 2,000  |                           | 25,000 |      |   | --                            |   | 27,000 |
| Year      ended December 31, 2007 |   |                                | 27,000 |                           | 17,000 |      |   | --                            |   | 44,000 |

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|                 |   | December      31, |    |
|----------------------|--------|-------------------|---------|
|                 |   | 2007              |    |   | 2006 |   |
| Raw      materials   |   | $                 | 129,000 |   |   | $ | 83,000 |   |
| Work      in process |   |              | 174,000 |   |   |   | 110,000 |   |
| Finished      goods  |   |              | 217,000 |   |   |   | 368,000 |   |
|                 |   | $                 | 520,000 |   |   | $ | 561,000 |   |

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|                                        |   | December      31, |      |
|---------------------------------------------|--------|-------------------|-----------|
|                                        |   | 2007              |      |   | 2006 |   |
| Laboratory      and manufacturing equipment |   | $                 | 798,000   |   |   | $ | 798,000 |   |
| Furniture      and office equipment         |   |              | 225,000   |   |   |   | 225,000 |   |
| Leasehold      improvements                 |   |              | 73,000    |   |   |   | 73,000 |   |
|                                        |   |              | 1,096,000 |   |   |   | 1,096,000 |   |
| Accumulated      depreciation               |   |              | (927,000  | ) |   |   | (852,000 | ) |
|                                        |   | $                 | 169,000   |   |   | $ | 244,000 |   |

|                          | December      31, |   |
|-------------------------------|-------------------|--------|
|                          | 2007              |   | 2006 |   |
| Capitalized      patent costs |              | $      | 963,000 |   |   | $ | 1,158,000 |   |
| Accumulated      amortization |              |   | (402,000 | ) |   |   | (397,000 | ) |
|                          |              | $      | 561,000 |   |   | $ | 761,000 |   |

| 2008                    |   |  $ | 91,000  |   |
|-------------------------|--------|---------|---------|--------|
| 2009                    |   |    | 74,000  |   |
| 2010                    |   |    | 71,000  |   |
| 2011                    |   |    | 71,000  |   |
| 2012                    |   |    | 79,000  |   |
| Thereafter              |   |    | 175,000 |   |
| Total      amortization |   | $       | 561,000 |   |

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|                       |   | December      31, |      |
|----------------------------|--------|-------------------|-----------|
|                       |   | 2007              |      |   | 2006 |   |
| Goodwill                   |   | $                 | 1,331,000 |   |   | $ | 1,199,000 |   |
| Strategic      investments |   |              | 145,000   |   |   |   | 75,000 |   |
| Lease      deposits        |   |              | 24,000    |   |   |   | 17,000 |   |
|                       |   | $                 | 1,500,000 |   |   | $ | 1,291,000 |   |

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|   | Operating      Leases |   |
|--------|-----------------------|--------|
|   | Minimum      Rental   |   | Sublease      Rental |   | Net      Rental Payments |   |
| 2008   |                  |   | 501,000 |   |   |   | (44,000 | ) |   |   | 457,000 |   |
| 2009   |                  |   | 454,000 |   |   |   | - |   |   |   | 454,000 |   |
|   |                  | $      | 955,000 |   |   | $ | (44,000 | ) |   | $ | 911,000 |   |

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| OXIS      International, Inc. and SubsidiariesNotes      To Consolidated Financial StatementsYears Ended      December 31, 2007  and 2006  |
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|                                     | Number      of Warrants |   | Weighted      Average Exercise Price |   |
|------------------------------------------|-------------------------|--------|--------------------------------------|--------|
| Outstanding,      December 31, 2005 | 14,717,835              |   | $                                    | 0.83   |   |
| Granted                                  | 19,632,917              |   |                                 | 0.32   |   |
| Exercised                                | -                       |   |                                 | -      |   |
| Forfeited                                | -                       |   |                                 | -      |   |
| Outstanding,      December 31, 2006 | 34,350,752              |   |                                 | 0.54   |   |
| Granted                                  | -                       |   |                                 | -      |   |
| Exercised                                | -                       |   |                                 | -      |   |
| Forfeited                                | (2,787,857)             |   |                                 | 0.47   |   |
| Outstanding,      December 31, 2007 | 31,562,895              |   | $                                    | 0.54   |   |
|                                     |                    |   |                                 |   |   |
| Exercisable      warrants:          |                    |   |                                 |   |   |
| December 31,      2006              | 34,017,419              |   | $                                    | 0.54   |   |
| December 31,      2007              | 31,287,895              |   | $                                    | 0.54   |   |

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|                                     |   | Number      of Options |       |   | Weighted      Average Exercise Price |   |
|------------------------------------------|--------|------------------------|------------|--------|--------------------------------------|--------|
| Outstanding,      December 31, 2005 |   | $                      | 6,377,790  |   |                                 | $      | 0.60 |   |
| Granted                                  |   |                   | 1,884,370  |   |                                 |   | 0.30 |   |
| Exercised                                |   |                   | (528,588   | )      |                                 |   | 0.13 |   |
| Forfeited                                |   |                   | (2,126,183 | )      |                                 |   | 1.07 |   |
| Outstanding,      December 31, 2006 |   |                   | 5,607,389  |   |                                 |   | 0.33 |   |
| Granted                                  |   |                   | 80,000     |   |                                 |   | 0.20 |   |
| Exercised                                |   |                   | -          |   |                                 |   | - |   |
| Forfeited                                |   |                   | (407,117   | )      |                                 |   | 0.50 |   |
| Outstanding,      December 31, 2007 |   |                   | 5,280,272  |   |                                 | $      | 0.32 |   |
|                                     |   |                   |       |   |                                 |   |   |   |
| Exercisable      options:           |   |                   |       |   |                                 |   |   |   |
| December 31,      2006              |   | $                      | 2,271,576  |   |                                 | $      | 0.42 |   |
| December 31,      2007              |   | $                      | 4,404,272  |   |                                 | $      | 0.34 |   |

|                            |   | Options      Approved by Stockholders |      | Options      Not Approved by Stockholders |   | Total      Outstanding Options |   |
|---------------------------------|--------|---------------------------------------|-----------|-------------------------------------------|--------|--------------------------------|--------|
| Outstanding      options:  |   |                                  |      |                                      |   |                           |   |
| December 31,      2006     |   |                                  | 2,578,019 |                                      |   | 3,029,370                      |   |   | 5,607,389 |   |
| December 31,      2007     |   |                                  | 3,880,272 |                                      |   | 1,400,000                      |   |   | 5,280,272 |   |

|                              |   | Outstanding      Options |      | Exercisable      Options                    |   |
|-----------------------------------|--------|--------------------------|-----------|--------------------------------------------------|--------|
| Range      ofExercise      Prices |   | Number      ofOptions    |      | Weighted-Average      Remaining Contractual Life |   | Weighted-AverageExercise      Price |   | Number      ofOptions |   | Weighted-AverageExercise      Price |   |
| $0.10      to $0.15               |   |                     | 318,000   |                                             |   | 0.79 |   |   | $0.14 |   |   | 303,000 |   |   | $0.14 |   |
| $0.20      to $0.47               |   |                     | 4,589,592 |                                             |   | 6.65 |   |   | $0.28 |   |   | 3,728,592 |   |   | $0.29 |   |
| $0.53      to $0.88               |   |                     | 294,730   |                                             |   | 6.17 |   |   | $0.62 |   |   | 294,730 |   |   | $0.62 |   |
| $1.38      to $3.44               |   |                     | 77,950    |                                             |   | 1.49 |   |   | $2.40 |   |   | 77,950 |   |   | $2.40 |   |
|                              |   |                     | 5,280,272 |                                             |   |   |   |   |   |   |   | 4,404,272 |   |   |   |   |

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|                                                                                                                 |   | December      31, |        |
|----------------------------------------------------------------------------------------------------------------------|--------|-------------------|-------------|
|                                                                                                                 |   | 2007              |        |   | 2006 |   |
| Deferred      tax assets:                                                                                            |   |              |        |   |   |   |
| Federal      net operating loss carryforward                                                                         |   | $                 | 7,172,000   |   |   | $ | 6,589,000 |   |
| Temporary      deferred tax asset caused by capitalized research and development      expenses                       |   |              | 5,883,000   |   |   |   | 5,883,000 |   |
| Federal      R&D tax credit carryforward                                                                         |   |              | 217,000     |   |   |   | 235,000 |   |
| State      net operating loss carryforward and capitalized research and development      expenses                    |   |              | 1,404,000   |   |   |   | 1,464,000 |   |
| Other                                                                                                                |   |              | 80,000      |   |   |   | 80,000 |   |
| Deferred      tax liabilities - book basis in excess and of noncurrent assets acquired      in purchase transactions |   |              | (142,000    | ) |   |   | (142,000 | ) |
| Deferred      tax assets before valuation                                                                            |   |              | 14,614,000  |   |   |   | 14,109,000 |   |
| Valuation      allowance                                                                                             |   |              | (14,614,000 | ) |   |   | (14,109,000 | ) |
| Net      deferred income tax assets                                                                                  |   | $                 | --          |   |   | $ | -- |   |

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|                    |   | United      States     |                                                                                                                                  | R&D      Tax |    |
|-------------------------|--------|------------------------|---------------------------------------------------------------------------------------------------------------------------------------|------------------|---------|
|                    |   | Net      Operating     |                                                                                                                                  | Credit           |    |
| Year      of Expiration |   | Loss      Carryforward |                                                                                                                                  | Carryforward     |    |
| 2008                    |   |  $                | 675,000                                                                                                                               |             |  $ | 6,000 |   |
| 2009                    |   |                   |                       - |             |    | 30,000 |   |
| 2010                    |   |                   | 29,000                                                                                                                                |             |    |                           - |   |
| 2011                    |   |                   | 49,000                                                                                                                                |             |    | - |   |
| 2012-2027               |   |                   | 20,334,000                                                                                                                            |             |    | 181,000 |   |
|                    |   | $                      | 21,087,000                                                                                                                            |             | $       | 217,000 |   |

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| OXIS      International, Inc. and SubsidiariesNotes      To Consolidated Financial StatementsYears Ended      December 31, 2007 and 2006 |
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|                 |   | Year      Ended December 31, |      |
|----------------------|--------|------------------------------|-----------|
|                 |   | 2007                         |      |   | 2006 |   |
| North      America   |   | $                            | 2,154,000 |   |   | $ | 2,173,000 |   |
| EMEA                 |   |                         | 1,802,000 |   |   |   | 1,607,000 |   |
| Latin      America   |   |                         | 591,000   |   |   |   | 523,000 |   |
| Asia      Pacific    |   |                         | 1,336,000 |   |   |   | 1,332,000 |   |
| Other      Countries |   |                         | 166,000   |   |   |   | 141,000 |   |
|                 |   |                         |      |   |   |   |   |   |
| Total                |   | $                            | 6,049,000 |   |   | $ | 5,776,000 |   |

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