**UNITED      STATES SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,      D.C. 20549**

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

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**TABLE      OF CONTENTS**

| PART                I        | Page                                                                                                                                                                    |
|------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Item                1.       | Description                of Business                                                                                                                                  | 2 |
| Item                2.       | Description                of Property                                                                                                                                  | 18 |
| Item                3.       | Legal                Proceedings                                                                                                                                        | 19 |
| Item                4.       | Submission                of Matters to a Vote of Security Holders                                                                                                      | 19 |
| PART                II       |
| Item                5.       | Market                for Common Equity and Related Stockholder Matters                                                                                                 | 20 |
| Item                6.       | Management’s                Discussion and Analysis or Plan of Operation                                                                                          | 23 |
| Item                6.       | Risk                Factors                                                                                                                                             | 40 |
| Item                7.       | Financial                Statements                                                                                                                                     | 53 |
| Item                8.       | Changes                in and Disagreements With Accountants on Accounting and Financial                Disclosure                                                      | 54 |
| Item                8A.      | Controls                and Procedures                                                                                                                                  | 54 |
| Item                8B.      | Other                Information                                                                                                                                        | 54 |
| PART                III      |
| Item                9.       | Directors,                Executive Officers, Promoters and Control Persons; Compliance with                Section                16(a) of the Securities Exchange Act | 55 |
| Item                10.      | Executive                Compensation                                                                                                                                   | 58 |
| Item                11.      | Security                Ownership of Certain Beneficial Owners and Management and Related                Stockholder Matters                                            | 67 |
| Item                12.      | Certain                Relationships and Related Transactions                                                                                                           | 71 |
| Item                13.      | Exhibits                                                                                                                                                                | 74 |
| Item                14.      | Principal                Accountant Fees and Services                                                                                                                   | 74 |
| SIGNATURES                   | 75                                                                                                                                                                      |
| EXHIBIT                INDEX | 76                                                                                                                                                                      |

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**PART        I**

**CAUTIONARY        NOTICE REGARDING FORWARD-LOOKING STATEMENTS**

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

**Recent        Events**

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*License        Agreement with Alteon*

**Recent        Convertible Debenture and Warrant Financing**

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**BioCheck        Acquisition**

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**BUSINESS**

**Overview**

** **

*in        vitro*

**OXIS        INTERNATIONAL, INC.**

** **

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*Marketed        Products*

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

*OXIS        Research Diagnostic Assays*

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*Ergothioneine*

** **

** **

**Marketing**

*OXIS*
*OXIS*

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**Foreign        Operations and Export Sales**

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

**Other        OXIS Therapeutic Compounds**

*BXT        (Organoselenium) Compounds*

*License        Agreement with Alteon*

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*Ergothioneine        as a Veterinary Product*

*Ergothioneine        as a Nutraceutical Supplement*

*Lipid        Soluble Antioxidants Patented Compound Group*

*Superoxide        Dismutase (SOD)*

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*Myeloperoxidase        Assay/Cardiovascular Predictor Product*

** **

*Out-Licensed        Technology*

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**BIOCHECK,        INC.**

*in        vitro*

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**BioCheck        Products and Services**

*in        vitro*

*BioCheck        Clinical Diagnostics*

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*BioCheck        Research Reagents and Assay Kits *

** **

*BioCheck        Cardiovascular Markers*

** **

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*BioCheck        Research Services*

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

**Further        Information Regarding OXIS and BioCheck**

**Research        and Development**

*Angiogenesis        Tumor Markers *

* *

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*Aggressive        Breast Cancer Marker *

**Patents        and Trademarks**

*OXIS        Patent Portfolio*

** **

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*OXIS        Research Assay Patents*

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

*OXIS        Ergothioneine Patents*

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

*Selected        Licensed BXT-51072 Patents*

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

*BioCheck        Patent Applications and Other Rights*

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*troponin*

**Competition**

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**Government        Regulation**

**Employees**

**Facilities**

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

**.        **

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

*Settlement        Agreement with Steve Guillen*

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

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**PART        II**

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

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

**Stockholders**

**DIVIDEND      POLICY**

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**Recent      Sales of Unregistered Securities**

*January      2004 Bridge Financing*

*December      2004 Common Stock and Warrant Financing*

*April      2005 Note Conversion*

*Series      B Preferred Stock Financing*

*October      2006 Convertible Debenture and Warrant Financing*

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*Anti-dilution      Adjustments Under Warrant to Fagan Capital*

*Anticipated      Investment by Alteon*

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

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**Introduction**

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

**Overview**

** **

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*in      vitro*

*Relocation      of Operations*

*Product      Development*

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

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

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

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

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

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*Loans      and Warrants*

*Debt      Financing*

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

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*Stockholder      Approval*

*License      Agreement with Alteon*

*Agreements      with Ambient Advisors LLC*

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*Appointment      of New President and Chief Executive Officer*

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

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*Preferred      Stock Conversion*

*Note      Conversion*

*Management      Team and Board of Directors*

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*Loan      Repayment*

*Acquisition      of BioCheck*

*Mutual      Services Agreement with BioCheck*

**Results      of Operations**

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*Revenues*

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

*Cost      of Product Revenues*

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

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*Research      and Development Expenses*

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

*Selling,      General and Administrative Expenses*

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

*Purchased      In-process Research and Development*

*Financing      Fees*

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*Interest      Expense*

**Liquidity      and Capital Resources**

*Net      cash provided by financing activities*

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**Commitments      and Contingencies**

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**Critical      Accounting Policies**

*Basis      of Consolidation*

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*Revenue      Recognition*

*Inventories*

*Long-Lived      Assets*

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*Certain      Expenses and Liabilities*

*Share-Based      Compensation*

**Inflation**

**Off-balance      Sheet Arrangements**

**Changes      or Disagreements with Accountants**

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**RISK      FACTORS**

**Risks      Related to Our Business **

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

** **

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

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

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

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

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

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

|         |  · |  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. |

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

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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 acquired                company.                                                                  |

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

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

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

**Our      future profitability is uncertain.**

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

**Risks      Related to Our Common Stock**

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

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

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

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

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

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

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

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

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

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

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

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

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

**ITEM      8B. OTHER INFORMATION**

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**PART      III**

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

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

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

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

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**Steven      T. Guillen,**

**S.      Colin Neill,**

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**Gary      M. Post,**

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

**Matthew      Spolar**

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**.      **

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

**Code      of Ethics**

**Audit      Committee and Audit Committee Financial Expert**

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

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**SUMMARY      COMPENSATION TABLE**

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

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

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

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

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

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

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

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

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**Director      Compensation**

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

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

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**Employment      Agreements**

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

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

----

----

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

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

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

----

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

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

----

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

**Series      C Preferred Stock**

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

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

----

**Equity      Compensation Plan Information**

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

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

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

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

*Engagement      Letter and Advisory Agreement with Director*

----

*Consulting      Agreement with Director*

----

*Agreements      with Former President, CEO and Director*

*Letter      Agreement with Vice President and Chief Financial Officer*

*Convertible      Debenture and Warrant Financing*

 *Indemnification      of Officers and Directors*

*Exclusion      of Liability*

----

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

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

*Audit      Fees*

*Audit      Related Fees*

*Tax      Fees*

*All      Other Fees*

----

**SIGNATURES**

**OXIS      International, Inc.**

**POWER      OF ATTORNEY**

| /s/                Marvin S. Hausman, M.D. | April                17, 2007 |   |                                    |                          |
|--------------------------------------------|-------------------------------|--------|-----------------------------------------|-------------------------------|
| Marvin                S. Hausman, M.D.     | Date                          |   |                                    |                          |
|                                       |                          |   |                                    |                          |
| /s/                S. Colin Neill          | April                17, 2007 |   | /s/                John E. Repine, M.D. | April                17, 2007 |
| S.                Colin Neill              | Date                          |   | John                E. Repine, M.D.     | Date                          |
|                                       |                          |   |                                    |                          |
| /s/                Matthew Spolar          | April                17, 2007 |   | /s/                Gary M. Post         | April                17, 2007 |
| Matthew                Spolar              | Date                          |   | Gary                M. Post             | Date                          |

----

**EXHIBIT      INDEX**

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

----

|                  |   |                                                                                                                                                                                                            |   | **Incorporated                by Reference**  |   |     |
|-----------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|--------|----------|
| **Exhibit****Number** |   | **Exhibit****Description**                                                                                                                                                                                      |   | **Form**                                           |   | **Date** |   | **Number** |   | **Filed                Herewith** |
| 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) |   |   |
|                  |   |                                                                                                                                                                                                            |   |                                               |   |     |   |   |   |   |
| 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 |   |   |

----

|                  |   |                                                                                                                                                                                                           |   | **Incorporated                by Reference**  |   |                          |
|-----------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|--------|-------------------------------|
| **Exhibit****Number** |   | **Exhibit****Description**                                                                                                                                                                                     |   | **Form**                                           |   | **Date**                      |   | **Number** |   | **Filed                Herewith** |
| 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 |   |   |
|                  |   |                                                                                                                                                                                                           |   |                                               |   |                          |   |   |   |   |
| 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 |   |   |
|                  |   |                                                                                                                                                                                                           |   |                                               |   |                          |   |   |   |   |

----

|                  |   |                                                                                                                                                               |   | **Incorporated                by Reference**  |   |     |
|-----------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|--------|----------|
| **Exhibit****Number** |   | **Exhibit****Description**                                                                                                                                         |   | **Form**                                           |   | **Date** |   | **Number** |   | **Filed                Herewith** |
| 10.38                 |   | Form                of Registration Rights Agreement dated October 25, 2006.                                                                                       |   | 8-K                                                |   | 10/26/06 |   | 10.4 |   |    |
|                  |   |                                                                                                                                                               |   |                                               |   |     |   |   |   |   |
| 10.39                 |   | Form                of Security Agreement dated October 25, 2006.                                                                                                  |   | 8-K                                                |   | 10/26/06 |   | 10.5 |   |   |
| 10.40                 |   | Employment                Agreement between OXIS International, Inc. and Marvin S. Hausman,                M.D.                dated November 6, 2006.             |   | 8-K                                                |   | 11/13/06 |   | 10.1 |   |   |
|                  |   |                                                                                                                                                               |   |                                               |   |     |   |   |   |   |
| 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                                                              |   |                                               |   |     |   |   |   | X |
|                  |   |                                                                                                                                                               |   |                                               |   |     |   |   |   |   |
| 21.1                  |   | Subsidiaries                of OXIS International, Inc.                                                                                                            |   |                                               |   |     |   |   |   | X |
|                  |   |                                                                                                                                                               |   |                                               |   |     |   |   |   |   |
| 31.1                  |   | Certification                pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                             |   |                                               |   |     |   |   |   | X |
|                  |   |                                                                                                                                                               |   |                                               |   |     |   |   |   |   |
| 31.2                  |   | Certification                pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                             |   |                                               |   |     |   |   |   | X |
|                  |   |                                                                                                                                                               |   |                                               |   |     |   |   |   |   |
| 32.1                  |   | Certification                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                pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section                906 of                the Sarbanes-Oxley Act of 2002 |   |                                               |   |     |   |   |   | X |
|                  |   |                                                                                                                                                               |   |                                               |   |     |   |   |   |   |

----

**OXIS      INTERNATIONAL, INC. AND SUBSIDIARIES**

**CONSOLIDATED      FINANCIAL STATEMENTS**

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

**Contents**

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

----

**REPORT      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

*      Share-Based Payment*

----

**OXIS      International, Inc. and Subsidiaries **

**Consolidated      Balance Sheets**

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

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

----

**OXIS      International, Inc. and Subsidiaries **

**Consolidated      Statements of Operations**

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

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

----

**OXIS      International, Inc. and Subsidiaries **

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

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

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

----

**OXIS      International, Inc. and Subsidiaries **

**Consolidated      Statements of Cash Flows**

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

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

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

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

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

*Accounts      receivable*

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

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

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

*Advertising      and promotional fees*

*Basis      of Consolidation and Comprehensive Income*

*Cash      and Cash Equivalents*

*Concentrations      of Credit Risk*

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

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

*Derivative      instruments*

*Fair      value of Financial Instruments*

*Goodwill*

*Inventories*

----

**OXIS      International, Inc. and Subsidiaries**

**Notes      To Consolidated Financial Statements**

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

*Impairment      of Long Lived Assets*

*Income      Taxes*

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

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

*Net      Loss Per Share*

*Patents*

*Property,      Plant and Equipment*

*Recent      Accounting Pronouncements*

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

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

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

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

*Fair      Value Measurements*

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

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

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

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

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

*Reclassifications*

*Research      and Development*

*Restricted      Cash*

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

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

*Revenue      Recognition*

*Stock-Based      Compensation*

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

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

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

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

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

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

*Use      of Estimates*

**2. Acquisition      of BioCheck**

----

**OXIS      International, Inc. and Subsidiaries**

**Notes      To Consolidated Financial Statements**

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

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

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

----

**OXIS      International, Inc. and Subsidiaries**

**Notes      To Consolidated Financial Statements**

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

**3. Inventories**

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

**4. Property,      Plant and Equipment**

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

**5. Patents**

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

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

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

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

**6. Goodwill      and Other Assets**

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

**7. Debt**

*Note      payable*

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

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

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

*Convertible      debentures*

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

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

----

**OXIS      International, Inc. and Subsidiaries**

**Notes      To Consolidated Financial Statements**

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

**8. Commitments      and Contingencies**

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

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

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

**9. Stockholders'      Equity**

*Common      Stock*

** **
** **

----

**OXIS      International, Inc. and Subsidiaries**

**Notes      To Consolidated Financial Statements**

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

*Preferred      Stock*

*Common      Stock Warrants*

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

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

*Stock      Options*

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

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

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

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

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

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

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

*Stock      Compensation*

----

**OXIS      International, Inc. and Subsidiaries**

**Notes      To Consolidated Financial Statements**

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

*Future      Warrants and Options Issuable to Consultants*

**10. Income      Taxes**

*Deferred      Taxes*

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

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

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

*Tax      Carryforward*

----

**OXIS      International, Inc. and Subsidiaries**

**Notes      To Consolidated Financial Statements**

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

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

**11. License      Agreement**

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

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

**12.       Geographical Reporting**

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

**13. Supplemental      Cash Flow Disclosures**

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

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

**14. Related      Party Transactions**

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

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

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

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

----

**OXIS        International, Inc. and Subsidiaries**

**Notes        To Consolidated Financial Statements**

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

**15. Subsequent      Events**

*Settlement      Agreement with Steve Guillen*

*License      Agreement with Alteon*

*Resignation        of Director*

----