News Column

OXYSURE SYSTEMS INC - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

May 15, 2014

The following discussion and analysis summarizes the significant factors affecting our results of operations, financial conditions and liquidity position for the three months ended March 31, 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 months ended March 31, 2014, as compared to the same metric for the three months ended March 31, 2013, include the following:

? Total revenue increased by approximately 48% to $356,229 as compared to $240,420 for the prior period; ? Net loss increased by approximately $134,168 to $376,320 or $(0.01) per share for the quarter as compared to a loss of $242,152 or $(0.01) per share during the prior period; and ? Sales and marketing expense decreased 18% to $87,949 as compared to $107,347 for the prior period, offset by an increase in general and administrative expense which increased to $345,757 as compared to $256,617 for the prior period, and an increase in interest expense to $107,607 from $28,716 in the prior period;



Some of our key non-financial highlights and milestones achieved during the first quarter of 2014 include the following:

? We received CE Marking approval of our flagship product, the OxySure Model 615, paving the way for the launching of the product into the thirty countries belonging to the European Economic Area (EEA); ? We announced that we removed approximately $967,609 of claimed indebtedness from our balance sheet by converting notes and other indebtedness to restricted common stock at conversion prices ranging from $1.50 per share to $.76 per share. ? We made significant progress in respect if the enhancement of Model 615 and replacement cartridges to for European markets and direct to consumer markets, by developing new molds and modifying existing molds; and



? We made significant progress on our corporate development initiatives.

2



--------------------------------------------------------------------------------

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.

3



--------------------------------------------------------------------------------

The OxySure Strategy

The following summarizes the principal elements of our strategy:

? 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. 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.

4



--------------------------------------------------------------------------------

Three months ended March 31, 2014 2013 Net income loss $ (376,320 )$ (248,152 )



Shares used in computing basic loss per share amounts (weighted ave.)

25,889,334 22,665,515 Shares used in computing diluted loss per share amounts (weighted ave.) 25,889,334 22,665,515 Net loss per share: Basic and Diluted $ (0.01 )$ (0.01 )



Results for the Three Months Ended March 31, 2014 Compared to the Three Months Ended March 31, 2013 (unaudited)

Revenues

We had $376,320 in revenues from operations for the three months ended March 31, 2014 as compared to revenues of $240,420 for the three months ended March 31, 2013. The increase in revenues is primarily attributable to an increase in US product sales.

Expenses

Total expenses for the three months ended March 31, 2014 were $748,444, which amount includes $435,247 of operating expenses, $205,590 in cost of goods sold, and $107,607 in interest expense, as compared to total expenses for the three months ended March 31, 2013 of $482,572, which amount includes $400,675 of operating expenses, $53,181 in cost of goods sold, and $28,716 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, offset by a decrease in research and development expense. The decrease in interest expense is primarily attributable to a decrease in interest expense related to convertible notes.

Research and Development

Research and development expenses of $1,541 and $36,711 were incurred in the three months periods ended March 31, 2014 and 2013, respectively. The decrease in research and development expense is primarily attributable to a decrease in research and development expense associated with products for military markets.

Net Income (Loss)

Net loss for the three months ended March 31, 2014 was $ 376,320 basic and diluted net loss per share was $(0.01) as compared to a net loss for the three months ended March 31, 2013 of $242,152 and basic and diluted net loss per share of $(0.01). The increase in net loss during the period ended March 31, 2014 as compared to the three months ended March 31, 2013 is primarily due to the combined effect of an increase in revenues and a decrease in research and development expense, offset by a decrease in gross margins, an increase in interest expense, an increase in sales and marketing expense and an increase in other general and administrative expenses. The decrease in gross margins is primarily attributable to an increase in third party product sales as we took our molds offline for improvements and modifications.

Liquidity and Capital Resources

We had a cash balance of approximately $150,669 as of March 31, 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 $271,956 as of March 31, 2014 as compared to a working capital of $747,473 as of December 31, 2013.

We had total notes payable of $392,633 and $377,973 as of March 31, 2014 and December 31, 2013, respectively. The increase in Notes Payable was primarily due to an increase in accrued but unpaid interest and a decrease in debt discount, offset by two partial note conversions in the amount of $25,000, and a note extinguishment in the amount of $110,000.

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 $319,999 and $47,183 as at March 31, 2014 and December 31, 2013, respectively.

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 $15,663,968 at March 31, 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 $2.1 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.

5



--------------------------------------------------------------------------------


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Edgar Glimpses


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters