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EXCEL - IDEA: XBRL DOCUMENT - OxySure Therapeutics, Inc. | Financial_Report.xls |
EX-31.1 - CERTIFICATION - OxySure Therapeutics, Inc. | f10q0914ex31i_oxysure.htm |
EX-32 - CERTIFICATION - OxySure Therapeutics, Inc. | f10q0914ex32_oxysure.htm |
EX-31.2 - CERTIFICATION - OxySure Therapeutics, Inc. | f10q0914ex31ii_oxysure.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2014
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 000-54137
OXYSURE SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware | 71-0960725 | |
(State or other jurisdiction of | (IRS Employer | |
incorporation or organization) | Identification No.) |
10880 John W. Elliott Drive, Suite 600, Frisco, TX 75033
(Address of principal executive offices)
(972) 294-6450
(Registrant’s telephone number)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☒ |
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Our common stock is traded in the over-the-counter market and quoted on the OTCQB under the symbol “OXYS.”
The number of shares outstanding of the registrant’s class of $0.0004 par value common stock as of November 13, 2014 was 26,889,517.
INDEX
Page | ||
Number | ||
PART I - FINANCIAL INFORMATION | ||
Item 1. | Condensed Financial Statements (Unaudited) | 3 |
Condensed Balance Sheets – September 30, 2014 and December 31, 2013 | 3 | |
Condensed Statements of Operations – For the three and nine months ended September 30, 2014 and 2013 | 4 | |
Condensed Statements of Cash Flows – For the three and nine months ended September 30, 2014 and 2013 | 5 | |
Condensed Notes to Financial Statements | 6 – 15 | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16 |
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 20 |
Item 4. | Controls and Procedures | 20 |
PART II - OTHER INFORMATION | ||
Item 1. | Legal Proceedings | 21 |
Item 1A. | Risk Factors | 21 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 21 |
Item 3. | Defaults upon Senior Securities | 21 |
Item 4. | Mine Safety Disclosures | 21 |
Item 5. | Other Information | 21 |
Item 6. | Exhibits | 21 |
SIGNATURES | 22 |
2 |
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
OXYSURE SYSTEMS INC.
BALANCE SHEETS
September 30, | December 31, | |||||||
2014 | 2013 | |||||||
Unaudited | ||||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 8,654 | $ | 657,673 | ||||
Accounts receivable, net | 492,098 | 47,183 | ||||||
Inventories | 299,284 | 287,666 | ||||||
License fee receivable | 463,308 | 500,000 | ||||||
Prepaid expenses and other current assets | 68,702 | 107,305 | ||||||
Total current assets | 1,332,046 | 1,599,827 | ||||||
Property and equipment, net | 128,061 | 70,249 | ||||||
Intangible assets, net | 370,321 | 392,746 | ||||||
Other assets | 266,066 | 289,532 | ||||||
TOTAL ASSETS | $ | 2,096,494 | $ | 2,352,354 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable and accrued expenses | $ | 572,545 | $ | 147,719 | ||||
Related party payable | 17,501 | 118,627 | ||||||
Capital leases - current | 27 | 309,129 | ||||||
Notes payable - current, net of discount | 40,897 | 44,000 | ||||||
Convertible notes payable, net of discount | 394,192 | 229,903 | ||||||
Deferred revenue | - | 2,976 | ||||||
Total current liabilities | 1,025,162 | 852,354 | ||||||
Long-term liabilities | ||||||||
Capital leases | $ | 554 | $ | 554 | ||||
Notes payable | 44,484 | 76,072 | ||||||
Total long-term liabilities | 45,038 | 76,627 | ||||||
TOTAL LIABILITIES | 1,070,200 | 928,980 | ||||||
STOCKHOLDERS’ EQUITY | ||||||||
Preferred stock, par value $0.0005 per share; 25,000,000 shares authorized; | ||||||||
643,750 Series A convertible preferred shares issued and outstanding as of September 30, 2014 and 743,750 shares issued and outstanding as of December 31, 2013. | 321 | 371 | ||||||
730 Series B convertible preferred shares issued and outstanding as of September 30, 2014 and 750 shares issued and outstanding as of December 31, 2013. | - | - | ||||||
Common stock, par value $0.0004 per share; 100,000,000 shares authorized; | ||||||||
26,653,323 shares of voting common stock issued and outstanding as of September 30, 2014 and 25,854,307 shares issued and outstanding as of December 31, 2013. | 10,664 | 10,343 | ||||||
Additional Paid-in Capital | 17,461,133 | 16,700,307 | ||||||
Accumulated deficit | (16,445,824 | ) | (15,287,647 | ) | ||||
TOTAL STOCKHOLDERS’ EQUITY | 1,026,294 | 1,423,374 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 2,096,494 | $ | 2,352,354 |
See accompanying notes to financial statements
3 |
OXYSURE SYSTEMS INC.
CONDENSED STATEMENTS OF OPERATIONS
For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Unaudited | Unaudited | Unaudited | Unaudited | |||||||||||||
Revenues, net | $ | 818,456 | $ | 545,820 | $ | 1,852,796 | $ | 1,262,311 | ||||||||
Cost of goods sold | 321,932 | 111,110 | 792,378 | 316,763 | ||||||||||||
Gross profit | 496,524 | 434,710 | 1,060,418 | 945,548 | ||||||||||||
Operating expenses | ||||||||||||||||
Research and development | $ | 155,869 | $ | 134,357 | $ | 433,384 | $ | 354,515 | ||||||||
Sales and marketing | 202,825 | 77,841 | 444,818 | 269,918 | ||||||||||||
Other general and administrative | 527,289 | 266,320 | 1,132,276 | 697,417 | ||||||||||||
Total operating expenses | 885,983 | 478,518 | 2,010,478 | 1,321,850 | ||||||||||||
Loss from operations | $ | (389,459 | ) | $ | (43,808 | ) | $ | (950,060 | ) | $ | (376,302 | ) | ||||
Other income (expenses) | ||||||||||||||||
Other income | 96,161 | 8,375 | 154,521 | 27,400 | ||||||||||||
Interest expense | (169,051 | ) | (47,180 | ) | (362,638 | ) | (95,669 | ) | ||||||||
Total other income (expenses) | (72,890 | ) | (38,805 | ) | (208,117 | ) | (68,270 | ) | ||||||||
Net loss | (462,349 | ) | (82,613 | ) | (1,158,177 | ) | (444,572 | ) | ||||||||
Basic and diluted net loss per common share | $ | (0.02 | ) | $ | (0.00 | ) | $ | (0.04 | ) | $ | (0.02 | ) | ||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic and diluted | 26,120,974 | 24,076,789 | 26,042,971 | 23,308,417 |
See accompanying notes to financial statements
4 |
OXYSURE SYSTEMS INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the nine months ended | ||||||||
September 30, | ||||||||
2014 | 2013 | |||||||
Restated | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (1,158,175 | ) | $ | (474,089 | ) | ||
Adjustments to reconcile net loss to net cash from operating activities: | ||||||||
Depreciation and amortization expense | 35,462 | 24,531 | ||||||
Amortization of debt discount, beneficial conversion features and warrant fair values | 254,944 | 79,773 | ||||||
Expenses paid by related parties | 4,374 | - | ||||||
Issuance of common stock options to employees as compensation | 62,137 | - | ||||||
Gain on extinguishment of debt | (123,667 | ) | - | |||||
Stock issued for services | - | 7,101 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (444,915 | ) | (62,431 | ) | ||||
Inventories | (11,618 | ) | (67,178 | ) | ||||
License fees receivable | 36,692 | - | ||||||
Prepaid expenses and other current assets | 87,070 | 51,202 | ||||||
Accounts payable and accrued liabilities | 476,772 | 374,813 | ||||||
Deferred revenue | (2,976 | ) | (237,500 | ) | ||||
NET CASH USED IN OPERATING ACTIVITIES | (783,900 | ) | (303,778 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Purchase of property and equipment | (70,651 | ) | (5,471 | ) | ||||
Purchase of intangible assets | (198 | ) | (3,961 | ) | ||||
NET CASH USED IN INVESTING ACTIVITIES | (70,849 | ) | (9,432 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Common stock subscribed and issued for cash | 29,672 | 459,634 | ||||||
Cash received from related parties | 9,800 | 92,261 | ||||||
Payments made to related parties | (115,300 | ) | (145,750 | ) | ||||
Cash received from convertible notes payable | 475,000 | (9,134 | ) | |||||
Payments made on convertible notes payable | (192,000 | ) | - | |||||
Payments on capital leases | (1,440 | ) | (1,107 | ) | ||||
NET CASH USED IN FINANCING ACTIVITIES | 205,732 | 395,904 | ||||||
Net change in cash and cash equivalents | (649,019 | ) | 82,694 | |||||
Cash and cash equivalents, at beginning of period | 657,673 | 13,513 | ||||||
Cash and cash equivalents, at end of period | $ | 8,656 | $ | 96,207 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid during the period for: | ||||||||
Interest | $ | 12,996 | $ | 10,817 | ||||
Income taxes | $ | - | $ | - | ||||
Non Cash Investing and Financing Activities: | ||||||||
Common stock issued for prepaid services | 25,000 | - | ||||||
Common stock issued upon conversion of convertible notes | 188,358 | - |
5 |
OXYSURE® SYSTEMS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2014
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of significant accounting policies of OxySure® Systems, Inc. (“OxySure” or the “Company”) is presented to assist in understanding the Company’s financial statements. The accounting policies presented in these footnotes conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the accompanying financial statements. These financial statements and notes are representations of the Company’s management who are responsible for their integrity and objectivity.
Basis of Presentation - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Actual results could differ from those estimates. The interim financial statements include all adjustments which, in the opinion of management, are necessary in order to make the financial statements not misleading.
The accompanying Condensed Financial Statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”) and therefore do not contain all of the information and footnotes required by GAAP and the SEC for annual financial statements. The Company's Condensed Financial Statements reflect all adjustments (consisting of normal recurring adjustments) that management believes are necessary for the fair presentation of their financial position, results of operations, comprehensive loss and cash flows for the periods presented. The information at December 31, 2013 in the Company's Condensed Balance Sheet included in this quarterly report was derived from the audited Balance Sheet included in the Company's Annual Report on Form 10-K for the year ended December 31, 2013 filed with the SEC on April 14, 2014. Where applicable, the Company's 2013 Annual Report on Form 10-K is referred to in this quarterly report as the “2013 Annual Report.” This quarterly report should be read in conjunction with the 2013 Annual Report.
6 |
OXYSURE® SYSTEMS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2014
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Deferred Revenue and Income - We defer revenue and income when we invoice a customer or a customer makes a payment and the requirements of revenue recognition have not been met (i.e. persuasive evidence of an arrangement exists, shipment from a company warehouse has occurred, the price is fixed or determinable and collectability is reasonably assured). Deferred Revenue was $0 and $2,976 as at September 30, 2014 and December 31, 2013, respectively.
Inventories – Our inventories consist of raw material and components for our portable oxygen systems as well as completed products and accessories. Inventories are computed using the lower of cost or market, which approximates actual cost on a first-in first-out basis. Inventory components are parts, work-in-process and finished goods. Finished goods are reported as inventories until the point of title transfer to the customer.
At
September 30, 2014 inventories consisted of the following: OXYSURE® SYSTEMS,
INC. NOTES
TO CONDENSED FINANCIAL STATEMENTS September
30, 2014 (Unaudited) NOTE
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Cash
and Cash Equivalents - We invest our cash in deposits and money market funds with major financial institutions. We
place our cash investments in instruments that meet high credit quality standards, as specified in our investment policy guidelines.
These guidelines also limit the amount of credit exposure to any one issue, issuer or type of instrument. Fair
Value of Financial Instruments - Our financial instruments consist principally of cash and cash equivalents, accounts
receivable and accounts payable. We believe that the recorded values of all of our other financial instruments approximate
their fair values because of their nature and respective maturity dates or durations. The fair value of our long-term debt is
determined by using estimated market prices. Assets and liabilities measured at fair value are categorized based on whether or
not the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial instruments
within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The
hierarchy is prioritized into three levels (with Level 3 being the lowest) defined as follows: Level
1: Inputs are based on quoted market prices for identical assets or liabilities in active markets at the measurement
date. Level
2: Inputs include quoted prices for similar assets or liabilities in active markets and/or quoted prices for identical
or similar assets or liabilities in markets that are not active near the measurement date. Level
3: Inputs include management’s best estimate of what market participants would use in pricing the asset or liability
at the measurement date. The inputs are unobservable in the market and significant to the instrument’s valuation. The
fair value of the majority of our cash equivalents was determined based on “Level 1” inputs. We do not have any marketable
securities in the “Level 2” and “Level 3” category. We believe that the recorded values of all our other
financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates
or durations. Property
and Equipment – Property and equipment are recorded at cost with depreciation and amortization provided over the
shorter of the remaining lease term or the estimated useful life of the improvement ranging from three to seven years. Renewals
and betterments that materially extend the life of an asset are capitalized. Expenditures for maintenance and repairs are charged
to expense when incurred. Furniture and fixtures are depreciated over five years. Machinery and equipments are depreciated over
five to seven years. Software is depreciated over three years. Leasehold improvements are computed using the shorter
of the estimated useful lives of the assets or the lease terms. Depreciation expense was $3,052 and $26,450 for the
three month periods ended September 30, 2014 and 2013, respectively. Depreciation expense was $12,838 and $14,147 for the nine
month periods ended September 30, 2014 and 2013, respectively Other
Long-Lived Assets – We have two types of intangible assets – patents and trademarks. Intangible assets are carried
at cost, net of accumulated amortization. Amortization expense for patents and trademarks was $7,557 and $7,508 for the three
month periods ended September 30, 2014 and 2013, respectively. Amortization expense for patents and trademarks was $22,623 and
$22,487 for the nine month periods ended September 30, 2014 and 2013, respectively. Intangible
assets with definite useful lives and other long-lived assets are tested for impairment if certain impairment indicators are identified.
Management evaluates the recoverability of its identifiable intangible assets in accordance with applicable accounting guidance,
which requires the assessment of these assets for recoverability when events or circumstances indicate a potential impairment
exists. If impairment is indicated based on a comparison of the assets’ carrying values and the undiscounted cash flows,
the impairment loss is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.
Impairment charges for patents were $0 for each of the three month periods ended September 30, 2014 and 2013. 5-Year amortization
expense for patents and trademarks is as follows: OXYSURE® SYSTEMS,
INC. NOTES
TO CONDENSED FINANCIAL STATEMENTS September
30, 2014 (Unaudited) NOTE
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Other
Assets– We record Other Assets net of accumulated amortization. Amortization expense for Other Assets was $9,654 and
$25,601 for the three month periods ended September 30, 2014 and 2013, respectively. Amortization expense for Other Assets was
$47,216 and $76,803 for the nine month periods ended September 30, 2014 and 2013, respectively. Capitalization
of software: The Company accounts for internal-use software and website development costs, including the development of its
partner marketplaces in accordance with ASC 350-50 (Intangibles – Website cost). The Company capitalizes internal costs
consisting of payroll and direct payroll-related costs of employees who devote time to the development of internal-use software,
as well as any external direct costs. It amortizes these costs over their estimated useful lives, which typically range between
three to five years. The Company’s judgment is required in determining the point at which various projects enter the stages
at which costs may be capitalized, in assessing the ongoing value of the capitalized costs, and in determining the estimated useful
lives over which the costs are amortized. The estimated life is based on management’s judgment as to the product life cycle. Research
and Development Costs – Costs associated with the development of our products are charged to expense as incurred. $155,869
and $134,357 were incurred in the three month periods ended September 30, 2014 and 2013, respectively. We incurred $433,384 and
$354,515 in research and development expense for the nine months ended September 30, 2014 and 2013, respectively. Equity
Warrants - We issued warrants to purchase shares of our common stock in connection with convertible notes. In accordance
with ASC 470-20, Debt with conversions and other options, the proceeds from the notes were allocated based on the relative fair
values of the notes without the warrants issued in conjunction with the notes and of the warrants themselves at the time of issuance.
We record the fair value of the warrants at the time of issuance as additional paid in capital and as a debt discount to the notes. We
amortize this debt discount as interest expense over the life of the note. Additionally, as a result of issuing the
warrants with the convertible notes, a beneficial conversion option is recorded as a debt discount reflecting the incremental
conversion option intrinsic value of the conversion option provided to the holders of the notes. We also amortize this debt discount
as interest expense over the life of the notes. The intrinsic value of each conversion option was calculated as the
difference between the effective conversion price and the fair value of the common stock, multiplied by the number of shares into
which the note is convertible. Stock-Based
Compensation – We account for share-based payments, including grants of stock options to employees, consultants
and non-employees; moreover, we issue warrants to the consultants and related parties. We are required to estimate
the fair value of share-based awards and warrants on the date of grant. The value of the award is principally recognized as expense
ratably over the requisite service periods. We have estimated the fair value of stock options and warrants as of the date of grant
or assumption using the Black-Scholes option pricing model. OXYSURE® SYSTEMS,
INC. NOTES
TO CONDENSED FINANCIAL STATEMENTS September
30, 2014 (Unaudited) NOTE
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) For the three month periods ended September
30, 2014 and 2013, stock based compensation expense was approximately $42,437 and $31,930, respectively, which consisted primarily
of stock-based compensation expense related to stock options issued to the employees and recognized under GAAP. For the nine month
periods ended September 30, 2014 and 2013, stock based compensation expense was approximately $60,025 and $22,587, respectively. Shipping
and Handling Costs - Shipping and handling charges to customers are included in net revenues, and the associated costs
incurred are recorded in cost of revenues. Advertising
Costs - Advertising costs are charged to operations when incurred. We incurred $202,825 and $74,741 in advertising
and promotion costs during the three month periods ended September 30, 2014 and 2013, respectively. We incurred $444,818 and $315,818
in advertising and promotion costs during the nine month periods ended September 30, 2014 and 2013, respectively. Net Loss Per Share - Basic
loss per share is computed based on the weighted average number of common shares outstanding. However, basic loss per share excludes
anti-dilutive securities. Diluted earnings per share is computed based on the weighted average number of common shares outstanding,
increased by the number of additional shares that would have been outstanding had the potentially dilutive common shares been issued,
and reduced by the number of shares the Company could have repurchased from the proceeds from issuance of the potentially dilutive
shares. Potentially dilutive shares of common stock include stock options and other stock-based awards granted under stock-based
compensation plans and shares committed to be purchased under the employee stock purchase plan. As of September 30, 2014 there
were 4,837,904 potentially dilutive shares. Restatements
and Reclassifications - Certain financial statement items have been reclassified to conform to the current
periods’ presentation. These reclassifications had no impact on previously reported net loss. Recent
Accounting Pronouncements We
have reviewed recent accounting pronouncements and concluded that they are either not applicable to our business or that no material
effect is expected on the financial statements as a result of future adoption. OXYSURE® SYSTEMS,
INC. NOTES
TO CONDENSED FINANCIAL STATEMENTS September
30, 2014 (Unaudited) NOTE
2 – NOTES PAYABLE We
have issued warrants for the purchase of shares of our restricted common stock in connection with raising equity and debt financing
and for other professional services. The fair value of warrants issued is determined in accordance with Codification
topic 470-20. Frisco Promissory Note –
During the nine months ended September 30, 2014 we received a performance credit from the Frisco Economic Development Corporation
(“FEDC”) in the amount of $44,000. The unamortized discount at September 30, 2014 was $18,619, and the net amount of
the Frisco Note as at September 30, 2014 was $85,381. During the nine months ended September
30, 2014 we issued eight convertible notes with a total principal value of $475,000 for $412,500 in cash. The notes contained original
issuance discounts for a total of $62,500, and interest rates of 12%. The maturity dates of the notes range from January 28, 2015
to September 10, 2015. The creditors have the option at any time to convert the principal and any accrued interest into common
stock of the Company at a an average discount rate of approximately thirty eight percent off the market price of the Company’s
common stock. During the nine months ended September 30, 2014 we paid two notes with principal values totaling $167,500 for $207,000
in cash and the two notes were extinguished in their entirety pursuant to these transactions. During the nine months ended September
30, 2014 we exchanged a lease with an outstanding amount of $307,662 for a convertible note with a principal value of $150,000
and 75,000 shares of our common stock. The lease was extinguished in its entirety pursuant to the exchange transaction. OXYSURE® SYSTEMS,
INC. NOTES
TO CONDENSED FINANCIAL STATEMENTS September
30, 2014 (Unaudited) NOTE
3 - SHAREHOLDERS’ EQUITY Preferred
Shares Rights We
have 25,000,000 shares of preferred stock authorized, par value $0.0005 per share. Series
A Convertible Preferred Stock: As of September 30, 2014 we had authorized 3,143,237 shares of preferred stock designated
as Series A Convertible Preferred Stock (“Series A Preferred”). The original issue price of the Series A Preferred
is $1.00 per share. There were 643,750 and 743,750 Series A Preferred shares issued and outstanding as of September 30, 2014
and December 31, 2013, respectively. During the three months ended September 30, 2014 the Company did not issue any shares
of the Series B Preferred and we issued 36,364 shares of our common stock pursuant to the cashless conversion of 20 shares of
Series B Preferred. Series
B Convertible Preferred Stock: On December 19, 2013, the Company’s Board of Directors authorized the issuance of 750
shares of preferred stock designated as Series B Convertible Preferred Stock (“Series B Preferred”). The original
issue price of the Series B Preferred is $1,000 per share. There were 730 and 750 Series B Preferred shares issued and outstanding
as of September 30, 2014 and December 31, 2013, respectively. During the three months ended September 30,
2014 the Company did not issue any shares of the Series B Preferred and we issued 36,364 shares of our common stock pursuant to
the cashless conversion of 20 shares of Series B Preferred. Common
Stock The
Company has authorized 100,000,000 shares of $0.0004 par value common stock. During
the three months ended September 30, 2014 we issued 26,580 shares of common stock for $19,000 in cash. During the nine months
ended September 30, 2014 we issued 41,580 shares of common stock for $29,700 in cash. During the
three months ended September 30, 2014 none of the shares of Series A Preferred was converted into common stock. During the nine
months ended September 30, 2014 we issued 122,000 shares of common stock pursuant to the cashless conversion of 100,000 shares
of Series A Preferred. During the three months ended September 30,
2014 we issued 360,781 shares of common stock pursuant to cashless conversions of convertible notes payable and accrued interest,
valued at $150,858. During the nine months ended September 30, 2014 we issued 444,072 shares of common stock pursuant to cashless
conversions of convertible notes payable and accrued interest, valued at $188,358. As
of September 30, 2014 we had approximately 26,653,323 shares of common stock issued and outstanding. OXYSURE® SYSTEMS,
INC. NOTES
TO CONDENSED FINANCIAL STATEMENTS September
30, 2014 (Unaudited) NOTE
4 - STOCK OPTIONS AND WARRANTS Equity
Incentive Plans In
April 2004, our Board of Directors and the stockholders at that time approved the adoption of a Voting Stock Option Plan (“the
Plan”), which provides for the issuance of stock options to eligible employees, consultants, Board members and Advisory
Board members of the Company to acquire up to a maximum of 5,000,000 shares of common stock. Our
Board of Directors, which determines the number of options that will be granted, the effective dates of the grants, the option
process and the vesting schedules, administers the Plan. In the absence of an established market for the common stock of the Company,
the Board of Directors determines the fair market value of our common stock. Options generally expire between five and ten years
from the date of grant and automatically terminate 90 days after such optionee ceases to be an eligible individual under the Plan
other than by reason of death or disability. The
portion of options granted that is not exercisable on the date the optionee ceases to be an eligible individual under the Plan
by reason other than death, shall terminate and be forfeited to the Company on the date of such cessation. An optionee has no
right as a stockholder with respect to any shares covered by the options granted to him until a certificate representing such
shares is issued to them. Stock
Options The
following table summarizes information about the number and weighted average of the options that were forfeited or expired under
the Plan as at September 30, 2014: We
used the following assumptions to estimate the fair value of options granted under the Plan for the three and nine months ended
September 30, 2014 and 2013: The
expected term of stock options represents the weighted average period the stock options are expected to remain outstanding. The
expected term is based on the observed and expected time to exercise and post-vesting cancellations of options by optionees. We
use historical volatility in deriving our expected volatility assumption because it believes that future volatility over the expected term
of the stock options is not likely to differ from the past. The
expected dividend assumption is based on our history and expectation of dividend payouts. The fair value of the shares
of common stock underlying the stock options has historically been determined by the board of directors. On or before February
2012, when our common stock commenced trading on the over the counter bulletin board (OTCQB), there has been no public market
for our common stock. Consequently, the board of directors has historically determined the fair value of the common stock at the
time of grant of the option by considering a number of objective and subjective factors including valuation of comparable companies,
operating and financial performance, the lack of liquidity of capital stock and general and industry specific economic outlook,
amongst other factors. FASB
ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures
differ from those estimates. The Company only records stock-based compensation expense for awards that are expected to vest. While
we generally consider historical forfeitures in its estimates, judgment is also required in estimating the amount of stock-based
awards that are expected to be forfeited. The Company’s estimates for forfeitures may differ from actual forfeitures. If
actual results differ significantly from these estimates, stock-based compensation expense and its results of operations could
be materially impacted when the Company records a true-up for the difference in the period that the awards vest. We adjust stock-based
compensation expense based on our actual forfeitures on an annual basis, if necessary. OXYSURE® SYSTEMS,
INC. NOTES
TO CONDENSED FINANCIAL STATEMENTS September
30, 2014 (Unaudited) NOTE
4 - STOCK OPTIONS AND WARRANTS (CONTINUED) Stock compensation cost, using the graded
vesting attribute method in accordance with Codification topic 718, is recognized over the requisite service period, generally
5 years, during which each tranche of shares is earned (zero, one, two, three, and four years). The value of each tranche
is generally amortized on a straight-line basis. For the three months ended September 30, 2014 and 2013, stock based
compensation expense was approximately $42,437 and $31,930, respectively, which consisted primarily of stock-based compensation
expense related to stock options recognized under GAAP issued to employees. For the nine months ended September 30,
2014 and 2013, stock based compensation expense was approximately $60,025 and $22,587, respectively. For each of the three months
ended September 30, 2014 and 2013, the number of options exercised was 0, and for each of the nine months ended September 30,
2014 and 2013, the number of options exercised was also 0. Compensation expense is recognized only for
the portion of stock options that are expected to vest, assuming an expected forfeiture rate in determining stock-based compensation
expense, which could affect the stock-based compensation expense recorded if there is a significant difference between actual
and estimated forfeiture rates. As of September 30, 2014, total unrecognized compensation cost related to stock-based awards granted
to employees and non-employee directors was $77,227 to be recognized over a weighted average period of 17.02 months. Warrants. The
following table summarizes our warrant activities for the nine months ended September 30, 2014: NOTE
5 – RELATED PARTY TRANSACTIONS A summary
of the related party financings and notes as at September 30, 2014 is as follows: (1)
Our CEO, Mr. Ross provides us shareholder cash advances and other consideration from time to time to fund working capital. OXYSURE® SYSTEMS,
INC. NOTES
TO CONDENSED FINANCIAL STATEMENTS September
30, 2014 (Unaudited) NOTE 6
– OFF BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS We
have not entered into any transactions with unconsolidated entities whereby we have financial guarantees, subordinated retained
interests, or other contingent arrangements that expose us to material continuing risks, contingent liabilities, or any other
obligation under a variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk
support to us. NOTE 7
– SEGMENT INFORMATION We
are organized as, and operate in, one reportable segment: the development, distribution and sale of specialty respiratory products
and related medical products, accessories, and services. Our chief operating decision-maker is our Chief Executive Officer. Our
Chief Executive Officer reviews financial information presented for purposes of evaluating financial performance and allocating
resources, accompanied by information about revenue by geographic regions. Our assets are primarily located in the United States
of America and not allocated to any specific region and we do not measure the performance of our geographic regions based upon
asset-based metrics. Therefore, geographic information is presented only for revenue. Revenue by geographic region is based on
the ship to address on our customer orders. The
following presents total revenue by geographic region for the three and nine month periods ended September 30, 2014 and 2013: NOTE
8 – GOING CONCERN Our financial statements are prepared using
accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the
realization of assets and satisfaction of liabilities in the normal course of business. Historically we have been suffering from
recurring loss from operations. We have an accumulated deficit of $16,445,824 and $15,287,647 at September 30, 2014 and December
31, 2013, respectively, and stockholders’ equity of $1,026,293 and $1,423,374 as of September 30, 2014 and December 31,
2013, respectively. We require substantial additional funds to manufacture and commercialize our products. Our management is actively
seeking additional sources of equity and/or debt financing; however, there is no assurance that any additional funding will be
available. In
view of the matters described above, recoverability of a major portion of the recorded asset amounts shown in the accompanying
September 30, 2014 balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s
ability to meet its financing requirements on a continuing basis, to maintain present financing, and to generate cash from future
operations. These factors, among others, raise substantial doubt about our ability to continue as a going concern. The financial
statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts
and classification of liabilities that might be necessary should we be unable to continue in existence. NOTE 9 – SUBSEQUENT EVENTS
On October 21, 2014 we entered into
an Agreement and Plan of Merger (the “Merger Agreement”) to merge with Estill Medical Technologies, Inc. (“Estill”),
a Texas based medical device company. Subject to the terms and conditions set forth in the Merger Agreement, at the effective time
of the Merger, in exchange for 100% of the stock of Estill the shareholders of Estill will collectively have the right to receive
12,516,334 shares (the “Merger Shares”) of our common stock and warrants to purchase an additional 2,500,000 shares
of our common stock at an exercise price of $1.20 per share. There is also a promote provision more fully described and disclosed
in the current filing on form 8K and the Merger Agreement, which we filed with the Securities and Exchange Commission on October
24, 2014. ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The
following discussion and analysis summarizes the significant factors affecting our results of operations, financial conditions
and liquidity position for the three months ended September 30, 2014 and 2013, and should be read in conjunction with our financial
statements, including the notes thereto, appearing elsewhere in this report. Forward-Looking
Statements Statements
and information included in this Quarterly Report on Form 10-Q that are not purely historical, including, without limitation,
statements that relate to the Company's expectations with regard to the future impact on the Company's results from new products
in development, are forward-looking statements within the “safe harbor” provisions of the Private Securities Litigation
Reform Act of 1995. When used in this report, words such as “believe,” “expect,” “intend,”
“goal,” “plan,” “pursue,” “likely,” “believe,” “project,”
“anticipate,” “intend,” “estimate,” “evaluate,” “opinion,” “may,”
“could,” “future,” “potential,” “probable,” “if,” “will”
and similar expressions generally identify forward-looking statements. These statements are subject to risks and uncertainties. Forward-looking
statements in this Quarterly Report on Form 10-Q represent our beliefs, projections and predictions about future events. These
statements are necessarily subjective and involve known and unknown risks, uncertainties and other important factors that could
cause our actual results, performance or achievements, or industry results, to differ materially from any future results, performance
or achievement described in or implied by such statements. Actual results may differ materially from the expected results described
in our forward-looking statements, including with respect to the correct measurement and identification of factors affecting our
business or the extent of their likely impact, the accuracy and completeness of publicly available information relating to the
factors upon which our business strategy is based, or the success of our business. The factors or uncertainties that could cause
actual results, performance or achievement to differ materially from forward-looking statements contained in this report can be
found in our filings with the Securities and Exchange Commission, including our filings on Form 10-K. Highlights Some
of our key financial performance statistics for the three and nine months ended September 30, 2014, as compared to the same metric
for the three and nine months ended September 30, 2013, include the following: Some
of our key highlights and milestones achieved during the third quarter of 2014 include the following: Overview OxySure
Systems, Inc. was formed on January 15, 2004 as a Delaware “C” Corporation for the purpose of developing products
with the capability of generating medical grade oxygen “on demand,” without the necessity of storing oxygen in compressed
tanks. Our technology, process and methodologies involve the creation of medically pure (USP) oxygen from two dry, inert powders.
We believe that other available chemical oxygen generating technologies contain hazards that make them commercially unviable for
broad-based emergency use by lay rescuers or the general public. Our launch product is the OxySure Model 615 portable emergency
oxygen system. We believe that the OxySure Model 615 is currently the only product on the market that can be safely pre-positioned
in public and private venues for emergency administration of medical oxygen by lay persons, without the need for training. To
date, we have been issued 9 patents and we have other patents pending on this process and technology that we believe is revolutionizing
the emergency/short duration oxygen supply marketplace. We believe that OxySure makes the delivery devices lighter, safer, more
affordable and easier to use. We believe our products can improve access to emergency oxygen that affects the survival, recovery
and safety of individuals in several areas of need: (1) Public and private places and settings where medical emergencies can occur;
(2) Individuals at risk for cardiac, respiratory or general medical distress needing immediate help prior to emergency medical
care arrival; and (3) Those requiring immediate protection and escape from exposure situations or oxygen-deficient situations
in industrial, mining, military, or other “Immediately Dangerous to Life or Health” (IDLH) environments. The
OxySure Model 615 emergency oxygen device was cleared by the Food and Drug Administration (“FDA”) (510k, Class II)
for over-the-counter purchase in December 2005. We believe it bridges the gap between the onset of a medical emergency and the
time first responders arrive on the scene. We believe it allows a lay rescuer – a bystander or loved one – to administer
medical oxygen during those first, critical minutes after an emergency occurs, improving medical outcomes and saving lives in
the process. In March 2014 we also received CE Marking approval for Model 615, allowing us to begin commercializing it in the
European Union. We
have diversified our product portfolio to provide include solutions focused on the emergency medical preparedness and respiratory
needs of our education, commercial and government customers. Our solutions include Automated External Defibrillators (AEDs) and
accessories, resuscitation equipment, and respiratory and monitoring equipment and supplies. The
OxySure Strategy The following
summarizes the principal elements of our strategy: Results
of Operations You
should read the selected financial data set forth below along with our discussion and our financial statements and the related
notes. We have derived the financial data from our unaudited financial statements. We believe the financial data shown in the
table below include all adjustments consisting only of normal recurring adjustments, that we consider necessary for a fair presentation
of such information. Operating results for the period are not necessarily indicative of the results that may be expected in the
future. Results
for the Three Months Ended September 30, 2014 Compared to the Three Months Ended September 30, 2013 (unaudited) Revenues We
had $818,456 in revenues from operations for the three months ended September 30, 2014 as compared to revenues of $545,820 for
the three months ended September 30, 2013. The increase in revenues is primarily attributable to an increase in sales related
to military markets. Expenses Total expenses for the three months ended
September 30, 2014 were $1,376,966, which amount includes $885,983 of operating expenses, $321,932 in cost of goods sold, and
$169,051 in interest expense, as compared to total expenses for the three months ended September 30, 2013 of $636,808, which amount
includes $478,518 of operating expenses, $111,110 in cost of goods sold, and $47,180 in interest expense. The increase in total
selling, general and administrative expenses is primarily attributable to an increase in advertising and promotional expense,
an increase in other general and administrative expense, and an increase in interest expense. Research
and Development Research
and development expenses of $155,869 and $134,357 were incurred in the three months periods ended September 30, 2014 and 2013,
respectively. The increase in research and development expense is primarily attributable to an increase in research and development
expense associated with products related to military markets. Net
Income Loss Net loss for the three months ended September
30, 2014 was $462,349 and basic and diluted net loss per share was $(0.02) as compared to a net loss for the three months ended
September 30, 2013 of $82,613 and basic and diluted net loss per share of $(0.00). The increase in net loss during the period
ended September 30, 2014 as compared to the three months ended September 30, 2013 is primarily due to the combined effect of an
increase in revenues, offset by a decrease in gross margin, an increase in interest expense, an increase in sales, marketing and
administrative expense and an increase in research and development expense. Results
for the Nine Months Ended September 30, 2014 Compared to the Nine Months Ended September 30, 2013 (unaudited) Revenues We
had $1,852,796 in revenues from operations for the nine months ended September 30, 2014 as compared to revenues of $1,262,311
for the nine months ended September 30, 2013. The increase in revenues is primarily attributable to an increase in US product
sales and products related to military markets. Expenses Total expenses for the nine months ended September
30, 2014 were $3,165,494, which amount includes $2,010,478 of operating expenses, $792,378 in cost of goods sold, and $362,638
in interest expense, as compared to total expenses for the nine months ended September 30, 2013 of $1,734,282, which amount includes
$1,321,850 of operating expenses, $316,763 in cost of goods sold, and $95,669 in interest expense. The increase in total selling,
general and administrative expenses is primarily attributable to an increase in advertising and promotional expense, an increase
in other general and administrative expense, and an increase in research and development expense. Research
and Development Research
and development expenses of $433,384 and $354,515 were incurred in the nine months periods ended September 30, 2014 and 2013,
respectively. The increase in research and development expense is primarily attributable to an increase in research and development
expense associated with products related to military markets. Net Loss Net loss for the nine months ended September
30, 2014 was $1,158,177 and basic and diluted net loss per share was $(0.04) as compared to a net loss for the nine months ended
September 30, 2013 of $444,572 and basic and diluted net loss per share of $(0.02). The increase in net loss during the nine month
period ended September 30, 2014 as compared to the nine months ended September 30, 2013 is primarily due to the combined effect
of an increase in revenues, offset by a decrease in gross margin, an increase in interest expense, an increase in sales, marketing
and administrative expense and an increase in research and development expense. Liquidity
and Capital Resources We
had a cash balance of $8,654 as of September 30, 2014, as compared to $657,673 as of December 31, 2013. Our funds are kept in
financial institutions located in the United States of America. We had positive working capital
of approximately $306,884 as of September 30, 2014 as compared to a working capital of $747,473 as of December 31, 2013. We had total notes payable of $479,573 and
$349,975 as of September 30, 2014 and December 31, 2013, respectively. The increase in Notes Payable was primarily due to an increase
in convertible notes payable, offset by a decrease in notes payable due to an economic incentive received by the Company. We
generally provide our customers with terms of up to 30 days on our accounts receivable. In some cases we require prepayment, depending
on history or credit review. Further, we generally require pre-payment on orders shipped to international destinations. Our accounts
receivable, net of allowances, were $492,098 and $47,183 as at September 30, 2014 and December 31, 2013, respectively. The increase
in accounts receivable was primarily due to increased sales levels and payment terms provided to qualified, repeat customers. During
the nine months ended September 30, 2014 our cash decreased by approximately $649,019 or 99%. The decrease in cash was primarily
attributable to the combined effect of debt extinguishment, as well as investments in: equipment; sales and market share acquisition,
marketing and branding; auditing and accounting expenses; professional fees and legal expenses; research & development; and
operational improvements. We paid off $472,662 in debt and leases, offset by cash inflow of $654,700 from new financings. Since inception, we have been engaged primarily
in product research and development, obtaining certain regulatory approvals, investigating markets for our products, developing
manufacturing and supply chain partners, developing our production capability, and developing distribution, licensing and other
channel relationships. In the course of funding research and development activities, we have sustained operating losses since
inception and have an accumulated deficit of $16,445,824 at September 30, 2014. We
completed product development of our launch product, the OxySure Model 615 and launched sales thereof in 2008. We have and will
continue to use significant capital to manufacture and commercialize our products. These factors raise doubt about our ability
to continue as a going concern. In this regard, management is proposing to raise any necessary additional funds not provided by
operations through loans or through additional sales of our common stock. During
the remainder of 2014 and 2015, we will need additional capital to market and sell our products, and to further develop and enhance
our current product offerings, introduce new products and address unanticipated competitive threats, technical problems, economic
conditions or other requirements. We estimate that we will require approximately $2.52 million over the next 12 months to remain
viable. There is no assurance that we will be successful in raising this additional capital or in achieving profitable operations.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts
or amounts and classification of liabilities that might result from this uncertainty. However, there can be no assurance that
any additional financing will be available to us. Additional equity financing may involve substantial dilution to our then existing
stockholders. In the event we are unable to raise additional capital, we may be required to substantially reduce or curtail our
activities. ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We
are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide
information under this item. ITEM
4. CONTROLS AND PROCEDURES Evaluation
of Disclosure Controls and Procedures Our
President and Chief Financial Officer has evaluated the effectiveness of our disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) as of the end of period covered by this report. Based upon
such evaluation, the President and Chief Financial Officer concluded that our disclosure controls and procedures were not effective
to ensure that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms,
and is accumulated and communicated to our management, including our President and Chief Financial Officer, as appropriate to
allow timely decisions regarding required disclosure. Changes
in Internal Control Over Financial Reporting There
were no changes in our internal control over financial reporting during the period covered by this report that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting. PART
II - OTHER INFORMATION ITEM
1. LEGAL PROCEEDINGS The
Company is subject to litigation in the normal course of business, none of which management believes will have a material adverse
effect on the Company’s financial statements. On
or about December 13 of 2013, Wall Street Buy Sell Hold, Inc., (“WSBSH”) filed a lawsuit against the Company in the
New York Supreme Court, Nassau County. The suit seeks damages in the form of money, stock and warrants for breach of a marketing
agreement entered into on October 22, 2012 and another entered into on March 11, 2013. We have answered the complaint and filed
a counterclaim against WSBSH seeking the return of all moneys and shares we paid or transferred to WSBSH, as well as punitive
damages for fraud. Management believes the WSBSH claims have no merit, and we intend to vigorously defend our interests in this
matter. ITEM
1A. RISK FACTORS We
are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide
information under this item. ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None. ITEM
3. DEFAULTS UPON SENIOR SECURITIES None. ITEM
4. MINE SAFETY DISCLOSURES Not
applicable. ITEM
5. OTHER INFORMATION None. ITEM
6. EXHIBITS The
following Exhibits are filed herein: SIGNATURES Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized. (Principal
Executive Officer, Principal
Financial Officer and Principal Accounting Officer) 22
September 30, 2014
Parts inventory
$ 151,716
Work in process
81,992
Finished goods
$ 65,576
Total inventories
$ 299,284 7
Remainder of 2014
$ 7,558
2015
30,133
2016
30,034
2017
30,034
Thereafter
272,563
$ 370,321 8 9 10 11 12
Employee
Non-Employee
Weighted
Weighted
Number
Average
Number
Average
Combined
Of
Exercise
Of
Exercise
Total
Outstanding at December 31, 2013
1,552,991
$ 2.19
15,900
$ 2.50
1,568,891
Granted
330,000
$ 0.46
-
$ -
330,000
Exercised
-
$ -
-
$ -
-
Forfeited/Cancelled
(215,503 )
$ 0.87
(15,900 )
$ 0.96
(231,403 )
Outstanding at September 30, 2014
1,667,488
$ 0.30
-
$ -
1,667,488
Equity Incentive Plans for the
Three Months Ended
September 30,
Equity Incentive Plans for the
Nine Months Ended
September 30,
2014
2013
2014
2013
Expected terms (in years)
5-10
5-10
5-10
5-10
Volatility (weighted ave.)
40.45%
40.45%
40.45%
40.45%
Risk-free interest rate (weighted ave.)
1.66% - 1.70%
1.60%
1.63% - 1.71%
1.02%
Expected dividend rate
0%
0%
0%
0% 13
Weighted
Number
Average
Of
Exercise
Warrants
Price
Outstanding at December 31, 2013
2,967,009
$ 1.13
Granted
415,850
$ 1.40
Exercised
-
$ -
Forfeited/Cancelled
(368,700 )
$ 0.10
Outstanding at September 30, 2014
3,014,159
$ 1.27
Related party
Julian Ross (1)
Amount
$ 17,500
Stated interest rate
0 %
Maturity
n/a 14
Three Months Ended
September 30,
Nine Months Ended
September 30,
2014
2013
2014
2013
United States - product sales
$ 814,619
$ 284,540
$ 1,793,729
$ 762,782
ROW - product sales
3,837
2,530
41,567
3,279
ROW - license fees/service revenue
-
$ 258,750
17,500
496,250
Totals
$ 818,456
$ 545,820
$ 1,852,796
$ 1,262,311 15
●
Total
revenue for the three months ended September 30, 2014 increased by approximately 50% to $818,456 as compared to $545,820
for the prior period; Total revenue for the nine months ended September 30, 2014 increased by approximately 47% to $1,852,796
as compared to $1,262,311 for the prior period.
●
Net loss for the three months ended
September 30, 2014 increased to $(462,349) or $(0.02) per share as compared to a loss of $82,613 or $(0.00) per share during the
prior period; Net loss for the nine months ended September 30, 2014 increased to $(1,158,177) or $(0.04) per share as compared
to a loss of $444,572 or $(0.02) per share during the prior period.
●
Sales
and marketing expense for the three months ended September 30, 2014 increased 161% to $202,825 as compared to $77,841 for
the prior period; Sales and marketing expense for the nine months ended September 30, 2014 increased 65% to $444,818 as compared
to $269,918 for the prior period.
●
Research
and development expense for the three months ended September 30, 2014 increased 16% to $155,869 as compared to $134,357 for
the prior period; Research and development expense for the nine months ended September 30, 2014 increased 22% to $433,384
as compared to $354,515 for the prior period.
●
Other general and administrative expense for
the three months ended September 30, 2014 increased 98% to $527,289 as compared to $266,320 for the prior period; Other general
and administrative expense for the nine months ended September 30, 2014 increased 62% to $1,132,276 as compared to $697,417
for the prior period.
●
We
signed a $2.4 million exclusive contract with medical device company to be our agent and distributor in the Kingdom of Saudi
Arabia. The contract requires a minimum purchase of 18,000 units of our portable emergency oxygen system (Model 615) and replacement
cartridges over three years to maintain exclusivity.
●
We
were selected by the United States Patent and Trademark Office (USPTO) to exhibit our OxySure Model 615 portable emergency
oxygen system and other technologies at the USPTO’s Innovation Expo held at The Smithsonian. The expo was held on Saturday
and Sunday, November 1-2, 2014 at the National Air and Space Museum at the National Mall in Washington, D.C.; and
●
We
appointed Clark E. Hood, a 16 year veteran in the AED and resuscitation industry as Vice President of Worldwide Resuscitation
Sales. 16 17
●
We
launched the OxySure Model 615 into the K-12 education market in the United States, and we subsequently diversified into other
institutional markets, such as colleges, churches and places of worship, manufacturing facilities and other commercial and
municipal buildings. We plan to continue to pursue institutional customers in these and other vertical markets, both in the
United States and internationally.
●
We
believe that Model 615 is a natural complement and companion product to an Automated External Defibrillator (AED). We plan
to continue to market Model 615 as a companion product to AEDs, and our goal in the foreseeable future is to pursue the placement
of the OxySure Model 615 next to as many AEDs as possible, in the United States as well as internationally. We believe in
the long term, however, Model 615 has the potential to become a standard issue item for public and private settings, just
like a fire extinguisher.
●
We
plan to continue to leverage our core competencies in oxygen, breathing technologies, research and manufacturing to pursue
revenue opportunities in new vertical markets, including the military.
●
We
plan to continue to build our sales force by recruiting dedicated sales professionals focusing on former first responders,
paramedics and firefighters as well individuals from other medical, first aid and safety sales areas to market our products
and craft solutions for our customers.
●
Our
channel strategy includes leveraging distribution partnerships to enhance market penetration, and we plan to increase our
efforts to partner with distributors, including distributors of AEDs, safety products and medical devices. We
plan to invest resources in training and tools for our distribution partners’ sales, systems and support organizations,
in order to improve the overall efficiency and effectiveness of these partnerships.
●
We
plan to continue our increasing efforts to promote market awareness and education of our products and their critical need,
and our efforts may include partnerships with industry, medical thought leaders, and community and advocacy organizations.
●
We
plan to pursue market catalysts such as a legislative agenda for state and federal mandates, medical reimbursement for at
risk markets, and insurance underwriting benefits and discounts for product users.
●
We
plan to continue to diversify our product offerings through the addition of complimentary or additive products and solutions
that enhance our core product usability, feasibility, appeal or application, or that enhances our ability to access or add
value to existing and new customers. In addition, we plan to continue our development efforts focused on developing new products
incorporating our core “oxygen from powder” technology for other vertical markets, such as aviation, mining, and
sports and recreation as applicable.
●
We
plan to pursue strategic alliances where applicable to accelerate our growth and access to new customers, sales channels,
markets and products. 18
Three Months Ended
September 30,
2014
2013
Net loss
$ (462,349 )
$ (82,613 )
Shares used in computing basic and diluted loss per share amounts (weighted ave.)
26,120,974
24,076,789
Net loss per share: Basic and diluted
$ (0.02 )
$ (0.00 )
Nine Months Ended
September 30,
2014
2013
Net loss
$ (1,158,177 )
$ (444,572 )
Shares used in computing basic and diluted loss per share amounts (weighted ave.)
26,042,971
23,308,417
Net loss per share: Basic and diluted
$ (0.04 )
$ (0.02 ) 19 20
No.
Title
31.1
Certification
of President Pursuant to the Securities Exchange Act of 1934, Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
31.2
Certification
of Chief Financial Officer Pursuant to the Securities Exchange Act of 1934, Rules 13a-14(a) and 15d-14(a), as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
32
Certifications
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 21
DATED:
November 14, 2014
OXYSURE
SYSTEMS, INC.
/s/
Julian T. Ross
BY:
Julian T. Ross
ITS: President
and Chief Financial Officer