Oxis warns that default remedies could endanger repayment efforts

By Devika Patel

Knoxville, Tenn., June 16 - Oxis International Inc. said in a press release that it notified its four debenture holders the sale of its majority interest in BioCheck Inc. and its diagnostic businesses is proceeding in a timely manner with strong interest from multiple potential buyers.

The company also warned the investors that the recent foreclosure efforts disclosed in Oxis' 8-K filed Friday with the Securities and Exchange Commission related to their collateral will jeopardize repayment efforts and also harm shareholder value.

"It would be completely irresponsible to attempt foreclosure proceedings when a prospective sale is on track that will clearly benefit our shareholders, debt holders, employees, suppliers and customers," the company's chairman and chief executive officer Marvin S. Hausman said in the release. "We are hopeful that our debt holders will recognize this fact and allow us to move forward toward finalizing an asset sale."

As reported in its 8-K, Oxis has four letters of intent from interested parties.

Proceeds from the asset sales will be used to repay debenture holders in full, as well as to generate funds to implement a growth strategy based on its neutraceutical and therapeutic assets.

Last fall, Oxis retained Burrill & Co., a San Francisco investment bank, to assist in the sale of its diagnostic businesses and informed the debenture holders of its plan to repay them with the sale proceeds.

In a separate letter sent today, Hausman requested that debenture holders Alpha Capital Anstalt, Bristol Investment Fund, Ltd., Cranshire Capital, LP and Whalehaven Capital Fund Ltd. end their foreclosure proceedings.

Hausman noted that Oxis, with the assistance of Burrill, is better equipped and motivated to sell the assets itself to maximize value as compared to a post-foreclosure sale attempt by the debenture holders, which could reduce the asset values as well as prohibit the company from arranging financing required to continue operations.

Should this happen, Hausman noted, it would be harmful to shareholder value.

Hausman added that Oxis is open to discussions related to restructuring of the debentures, but said that negotiating with each fund individually would be onerous and unnecessarily time-consuming given the deadline set by the foreclosure actions. He requested that one of the four debenture holders act as a coordinator for negotiations, while recognizing that each fund has to make its own decision on any restructuring.

Hausman said that, should the debenture holders continue to move forward with foreclosure proceedings, Oxis will consider all legal options necessary to preserve and enhance shareholder value.

"We are continuing our discussions with the debenture holders regarding a restructuring and are hopeful all parties can reach a satisfactory and timely resolution," Hausman said in the release.

Located in Foster City, Calif., Oxis develops clinical and research assays, diagnostics, nutriceutical and therapeutic products.

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