OXIS International, Inc (OTCMKTS:OXIS) Authorizes Reverse Split
At the very end of March the stock of OXIS Internationa, Inc (OTCMKTS:OXIS) spiked to a new 52-week high of $0.07. Just a couple of days earlier the company talked about its intention to try to move out of the OTC Market and uplist to the NASDAQ National exchange. Whatever positive momentum was generated quickly disappeared though and the stock went through a series of corrections.
Yesterday the ticker had a turbulent trading day as it opened at $0.0209, way below Monday’s closing price of $0.217, but clawed its way up and actually finished the session with a gain of over 15% at $0.025. The 8.39 million shares that changed hands throughout the session far surpassed the 30-day average of 3 million traded shares.
Despite the encouraging performance investors should be extremely cautious when approaching the stock of the company. The recently filed financial report for the first quarter of the year showed that at the end of March OXIS had:
• $1,418,000 cash
• $1,420,000 total current assets
• $50.5 million total current liabilities
• $7000 total revenue
• $1.8 million loss from operations
• $20.5 million net loss
Even if you exclude the $44 million non-cash warrant liabilities and accrued expenses the company still has a working capital deficit of nearly $5.9 million. The accumulated deficit has by now surpassed $133 million. In the report OXIS state that their current resources won’t be sufficient to carry them through the end of the year and additional capital will need to be raised. For the next twelve months the company projects that it will need around $11.4 million in fresh funds.
Unfortunately the red flags don’t stop with the lackluster balance sheet. As of May 8 OXIS had run out of room for the issuance of new shares – the company had 600 million outstanding shares out of the 600 million authorized. Not surprisingly on May 19 a Schedule 14C Information Statement was submitted announcing that a reverse split had been authorized. The exact ratio of the split will be between 1-for-50 and 1-for-250. Although the reverse split won’t affect the authorized shares OXIS has decided to change their authorized amount to less than the current 600 million.
The main goal of the reverse split according to the filing is to align the share price of the company with the minimum bid requirements of the NASDAQ stock exchange. A rather admirable decision but it could lead to a couple of problems. If OXIS fail to maintain their post-split share price investors could face significant losses. Not to mention that with the reduction of the outstanding shares the owners of some of the convertible debt could start turning it into common shares.
The stock of OXIS could remain rather volatile both prior and after the split gets implemented. That is why any trades involving the ticker should be preceded by extensive research and careful planning.
