10-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No.1 to

FORM 10-K/A

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2012

Commission File No. 000-54137

OXYSURE SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Delaware	71-0960725
(State of Incorporation)	(IRS Employer I.D. Number)

10880 John W. Elliott Drive, Suite 600, Frisco, TX  75033

(Address of Principal Executive Offices) (Zip Code)

Registrant’s Telephone Number and area code: (972) 294-6450

Securities registered pursuant to Section 12(g) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, $0.0004 par value per share	OTCQB

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  o No  þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  o No  þ

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  þ No  o

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  þ No  o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.

Large Accelerated Filer	o	Accelerated Filer	o
Non-Accelerated Filer	o	Smaller Reporting Company	þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o No  þ

Our common stock is traded in the over-the-counter market and quoted on the OTCQB under the symbol “OXYS.”

The aggregate market value of the issuer’s common stock held by non-affiliates of the registrant as of April 1, 2013, was approximately $3,190,659 based on $.75, the per share price at which the registrant’s common stock was last sold on that date.

The number of shares outstanding of the registrant’s class of $0.0004 par value common stock as of April 1, 2013 was 23,101,496.

DOCUMENTS INCORPORATED BY REFERENCE:

None.

EXPLANATORY NOTE

The sole purpose of this Amendment No.1 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2012 ( the “Form 10-K”) is to submit Exhibit 101 to the Form 10-K in accordance with Rule 405 of Regulation S-T. Exhibit 101 consists of the Interactive Data Files from the Registrant’s Form 10-K for the year ended December 31, 2012.

TABLE OF CONTENTS

ITEM NUMBER AND CAPTION			Page
Part I
	1.	Business	3
	1A.	Risk Factors	17
	1B.	Unresolved Staff Comments	27
	2.	Properties	27
	3.	Legal Proceedings	27
	4.	(Removed and Reserved)	27
Part II
	5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	28
	6.	Selected Financial Data	29
	7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
	7A.	Quantitative and Qualitative Disclosures About Market Risk	47
	8.	Financial Statements and Supplementary Data	47
	9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	93
	9A.	Controls and Procedures	93
	9B.	Other Information	93
Part III
	10.	Directors, Executive Officers, and Corporate Governance	94
	11.	Executive Compensation	95
	12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	97
	13.	Certain Relationships and Related Transactions, and Director Independence	98
	14.	Principal Accountant Fees and Services	101
Part IV
	15.	Exhibits and Financial Statement Schedules	102

PART I

FORWARD-LOOKING STATEMENTS

All statements contained in this report, other than statements of historical fact, which address activities, actions, goals, prospects, or new developments, that we expect or anticipate will or may occur in the future, including plans for clinical tests and other such matters pertaining to testing and development products, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “intends,” “is intended,” “potential” or “continue” or the negative of such terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including, but not limited to, progress in our product development and testing activities, obtaining financing for operations, development of new technologies and other competitive pressures, legal and regulatory initiatives affecting our products, conditions in the capital markets, the risks discussed in Item 1A – “Risk Factors,” and the risks discussed elsewhere in this report that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activities, performance or achievements expressed or implied by such forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such statements. We are under no duty to update any of the forward-looking statements after the date of filing of this report or to conform such statements to actual results.

All references in this Annual Report to “OxySure,” “OxySure Systems,” the “Company,” “we,” “our” and “us” means OxySure Systems, Inc.

ITEM 1—BUSINESS

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.  We developed a unique technology that generates medically pure (USP) oxygen from two dry, inert powders.  Utilizing our technology, we commenced the commercialization of our launch product, a lightweight, portable emergency oxygen system designed for lay person use, known as the OxySure Model 615 (“OxySure Model 615” or “Model 615”).  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. We believe that the OxySure Model 615 bridges the gap between the onset of a medical emergency and the time first responders arrive on the scene. We believe that it allows a lay rescuer – a bystander, friend, colleague or loved one – to administer medical oxygen during those first, critical minutes after an emergency occurs, improving medical outcomes and potentially saving lives in the process.

We believe that the OxySure Model 615 can be used in any medical emergency, prior to the arrival of first responders. We also believe that the OxySure Model 615 is well suited for placement next to an Automated External Defibrillator (AED) for post-resuscitation use in a cardiac arrest incident.

We launched Model 615 initially into the K-12 education markets in the United States, followed by commercial markets. We also sell complimentary products and solutions with Model 615, including replacement cartridges for Model 615, display wall boxes, oxygen wall signage, resuscitation bags, pulse oximeters, thermal bags for Model 615 and AEDs.

We were founded by our current Chairman, Chief Executive Officer, President, and Chief Financial Officer, Julian T. Ross, who conducted or managed all of the related research and development, a function Mr. Ross continues to oversee.  In early 2004, Mr. Ross moved his research and development efforts into the North Texas Enterprise Center for Medical Technology (“NTEC”).  NTEC is a Frisco, Texas based medical technology accelerator, and we were selected as an NTEC program company in early 2004, and we were the first program company to graduate from the accelerator program in November 2005.  In December 2005, we received Food and Drug Administration (“FDA”) clearance for Model 615 (510(K), Class II).  The approval number for our FDA clearance is K052396, and Model 615 is cleared for over the counter sale, without the need for a prescription.

3

Emergency/Short Duration Oxygen Market Overview

We believe that our process and methodology is unique in the emergency/short duration oxygen supply marketplace. We believe that our process and technology enable the delivery devices to be lighter, safer, and easier to use. We believe that our technology, process and methodology allows us to develop and commercialize solutions that improves 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 utilizes a simple, one-step activation using a dispenser that includes a self-contained, disposable cartridge, within which the oxygen is generated. The dispensers are made of lightweight, thermoplastic materials and weigh less than 11 pounds. Model 615 is designed to bridge the gap between the onset of a medical emergency and the time first responders arrive on the scene. It is intended to allow 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 potentially saving lives in the process.

We believe that the advantages of Model 615 include: (1) Safety: the powders are dry and inert until actuation occurs through the turn of a knob, instantly creating medical grade oxygen. We believe that risks such as an explosion hazard, a fire hazard, an environmental hazard, or a toxicity hazard, are minimized or otherwise eliminated. (2) No Training Required: A simple turn of the knob starts the oxygen generation process. We believe the ease of use makes the Model 615 ideal for lay person use. (3) We believe that Model 615 requires no maintenance mandated by regulation. (4) We believe that Model 615 does not require any hydrostatic testing. (5) We believe that Model 615 can be shipped "rescue ready," subject to applicable Department of Transportation (DOT) regulations. (6) No prescription is required. Model 615 is FDA cleared for over the counter sale. (8) We believe that Model 615 does not require any licenses or permits to place into service. (9) We believe that Model 615 can be placed in any public access venue or private venue. (10) We believe that Model 615 can be used in any medical emergency, prior to the arrival of first responders. (11) We believe that Model 615 is also ideal for placement next to or otherwise in conjunction with an Automated External Defibrillator (AED) for post-resuscitation use in a cardiac arrest incident.

Business Strategy

The following summarizes the principal elements of our strategy:

●           We plan to grow revenue by continuing to pursue institutional customers in our core markets, which include the K-12 education market and colleges, as well as other commercial markets, including churches and places of worship, manufacturing facilities and other commercial and municipal buildings, both in the United States and internationally.

●           We plan to grow revenue by pursuing relationships with large OEM customers.

●           We believe that Model 615 is a natural complement and companion product to an Automated External Defibrillator (AED). We plan to grow revenue by continuing 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 grow revenue by continuing our current channel strategy, which 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 grow revenue by increasing our 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. Our efforts may include increasing market awareness and education of the need for early administration of emergency or supplemental oxygen for initial stabilization, safety, survival and recovery in medical emergencies.

●           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 grow revenue by continuing 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. Some of these additional products and services may be sourced or supplied by third parties. In addition, we plan to continue our development efforts focused on developing new products incorporating both our core “oxygen from powder” technology, as well as other oxygen related technologies for other vertical markets, such as aviation, mining, military, wound care, skin care, automotive, and sports and recreation, as applicable.

●           We plan to implement technologies and processes that enhance the performance, appeal and functionality of our product family, enhance manufacturing scalability and reduce manufacturing and operating cost. We will seek to leverage new technologies as they become available.

4

Market Analysis

We believe that Model 615 may create a new market category of emergency oxygen availability for the early administration or treatment of cardiovascular, respiratory and other medical emergencies.  By empowering a lay person to augment the services of first responders, we believe that Model 615 may follow a similar model to that of an Automated External Defibrillator (“AED”) or a fire extinguisher.  We believe that Model 615 can be safely pre-positioned in public venues as well as private settings to provide immediate medical grade oxygen in an emergency, but without the risk associated with compressed gas containers, and without the training required to operate such equipment.  We believe that the OxySure Model 615 enables a loved one, bystander or even the victim themselves to administer medical oxygen in a convenient, safe and inexpensive manner while awaiting the arrival of emergency medical responders.  We believe Model 615 may also be helpful as a standby solution by providing temporary oxygen to aid escape in hazardous exposure situations, or when necessary long-term oxygen supplies are interrupted.  We believe that Model 615 significantly strengthens the pre-responder market.

We believe there is significant clinical support for the critical need for early oxygen administration during cardiovascular or respiratory emergencies.  During a cardiovascular or respiratory distress emergency, the availability of oxygen to the heart, brain, other vital organs or injured area is either stopped or impaired.  In less than three minutes without oxygen, brain cells can begin to die.  In less than eight minutes, the heart muscle cells can begin to die.  Both of these conditions typically lead to permanent disability, since neither brain cells nor the heart tissue is considered regenerative.  In less than ten minutes the ability to sustain life can be at risk.  Even if a victim survives, their future quality of life can be directly related to the number of minutes that they were deprived of oxygen.  Given that the response time of first responders can be between six and 15 minutes (in the United States) from the time 911 is called, the clinical significance and appeal of the Model 615 becomes apparent.

We have begun to introduce Model 615 into education and commercial markets and plan to expand into those markets on a larger scale.  As a general rule, these markets may comprise one or more of the following customer categories: (i) emergency placement markets; (ii) at risk markets; and (iii) preventative buyers.  There is a certain measure of overlap between or among these customer categories, but we believe the following market definitions to be generally accurate.

(i) Emergency Placement Markets:

We launched Model 615 initially into the K-12 education market, and we plan to continue to grow our sales into this market segment. We have also commenced the sale of Model 615 into other education segments, such as colleges and universities, as well as commercial market segments, such as churches, manufacturing facilities, office buildings and restaurants.  We believe that organizations, corporations, educational customers, and governmental entities will continue to purchase Model 615 as an emergency response measure, and that these markets will grow significantly. By pre-positioning it in an easily accessible way, either by itself, right next to an AED, or right next to a fire extinguisher, Model 615 can serve as a first line of defense in the event of any medical or civil emergency.

There are approximately 40 million injury-related emergency room visits in the United States, and we believe that there is a significant number of potential emergencies that would benefit from the immediate application of oxygen, prior to the arrival of professional first responders.  For example, each year over 1 million Americans suffer a potentially fatal cardiac emergency - one person every 34 seconds.  About 460,000 of those cardiac emergencies are fatal, with death occurring before the victim can get professional medical attention.  There are nearly 4.5 million on-the-job injuries and illnesses each year in the US, many of which would be administered oxygen if available.  Approximately 5,000 to 7,000 school-aged children die from sudden cardiac arrest each year without exhibiting prior symptoms.  Many of these deaths occur at school and related sporting events. We believe that with a growth of market awareness and education, Model 615 has the potential to become a standard issue item for most public and private venues.

Our initial target locations for emergency placement are summarized below.  It is apparent that many of these targets would have multiple buildings and/or be of a facility size that would justify multiple units of Model 615 on-site.  We believe that the availability of an on-demand oxygen supply, without the dangers generally associated with pressurized tanks, at Model 615’s selected price point may have the potential for governments, regulatory agencies and regulatory boards to require locating one or more such devices pre-positioned on-site. While there can be no assurance that we will be successful, we plan to pursue such legislative and regulatory efforts, in the United States as well as in countries outside of the United States.

Educational Facilities

There are approximately 102,265 educational campuses in the United States.  Of these, there are approximately:

● 87,125 U.S. schools representing grades Kindergarten through 12th grade.4

● 11,000 accredited programs for infants to children of 8 years.  This includes day care and after school programs.5

● 4,140 United States College and Universities.6

Manufacturing Facilities

According to the U.S. Department of Commerce, Economics and Statistics Administration, there are approximately 350,735 manufacturing facilities in the United States in 2002.

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4 National Association of State Boards of Education (1998-99 school year).

5 National Association for Education for Young Children’s annual report (August 2005).

6 National Center for Education Statistics, Digest of Education Statistics, 2005.

5

Recreational Vehicles

According to a study completed by the University of Michigan, approximately 8 million US households own a least one RV.  This represents a 15% increase in RV ownership since 2001 and is largely attributed to the enormous baby boomer generation.7

Restaurants

The National Restaurant Association’s 37th Annual Industry Forecast (2004) reported approximately 925,000 restaurants in the United States.

Occupational Safety & Health Act (OSHA) Compliant Buildings

There are approximately 20 million locations for first aid alone called for in the OSHA Compliance Locations Publication.

U.S. Federal Government

We were awarded a multi-year contract by the General Services Administration (“GSA”) to allow us to supply our products to all branches of the U.S. Federal Government.  Our Federal Supply Schedule Contract number V797P-4153b is unrestricted, or a 100% set-aside contract for small business, and has an initial term ending November 14, 2013.  Thereafter, the contract may be renewed for up to three additional five-year terms.  Federal buyers are able to purchase our products either directly from us or via GSA Advantage!®, the U.S. government’s online shopping and ordering system for government buyers.

(ii) At Risk Markets:

At risk markets comprise individuals at risk of specific medical emergencies as a result of either being diagnosed with or having at least one risk factor associated with cardiovascular disease or respiratory diseases or ailments.  Respiratory diseases or ailments can include chronic obstructive pulmonary disease (“COPD”) and asthma.  We believe that buyers in this At Risk segment will include persons, or relatives of persons, with known existing medical conditions such as cardiovascular disease, COPD or asthma in which the presence of a safe, easy-to-use source of on-demand emergency oxygen is highly appealing.

People with Cardiovascular Disease

The American Heart Association estimates that there are approximately 80 million Americans who are afflicted with cardiovascular disease in one form or another.  Of the 80 million potential victims: (a) approximately 40 million, or 50% are diagnosed with cardiovascular disease; (b) approximately 40 million, or 50% exhibit at least one risk factor associated with cardiovascular disease; and (c) more than 2/3 are 50 years of age or older.  Management projects that, given the rapid onset of the aging baby boomer population, this ratio will increase substantially over the next decade and will likely increase the number of Americans suffering from such diseases.8

People with COPD

Chronic obstructive pulmonary disease (“COPD”) is a term which refers to a large group of lung diseases characterized by obstruction of air flow that interferes with normal breathing.  Emphysema and chronic bronchitis are the most important conditions that compose COPD and they frequently coexist.9  COPD is the fourth-ranked cause of death in the United States.   In 2007, approximately 10.2 million U.S. adults aged 18 years and older were estimated to have COPD.10 Oxygen supplementation is one of the few known effective treatments for a COPD exacerbation.  Similar to a severe asthma attack, these individuals never know when or where they will be when an exacerbation may occur.  Model 615 provides a portable, non-battery driven source of oxygen that will allow those with COPD to bridge the gap between the onset of an exacerbation and the availability of emergency care.

People with Asthma

According to the American Lung Association (“ALA”), there are approximately 22.9 million Americans that have been diagnosed with asthma; 12.4 million had an asthma attack in 2006.11  The ALA states that asthma is the leading chronic illness of children in the United States. In 2006, over 6.8 million children under age 18 had asthma; 4.1 million had an asthma attack that year. The highest asthma prevalence rate was seen in those 5 to 17 years of age (106.3 per 1,000 population). The rate in those under age 18 (92.8 per 1,000) was much greater than those aged 18 to 44 (72.4 per 1,000).12

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7 New University of Michigan Study: RV Ownership Reaches All-Time High (December 18, 2005).

8 American Heart Association, Heart Disease and Stroke Statistics, 2008.

9 American Lung Association, “Trends in COPD,” April 2009, Page 3.

10 Id. at Page 5. 

11 American Lung Association, “American Lung Association Lung Disease Data: 2008,” Page 29.

12 Id. at Page 30. 

(iii) Preventive Buyers:

Management believes that many individuals and homeowners may purchase Model 615 as a preventive/first aid measure in the event of an unforeseen emergency, including cardiovascular emergencies, respiratory emergencies and general medical emergencies.  Preventive buyers are defined as buyers with no known history or diagnosis of chronic disease, but are likely to buy Model 615 in preparation for or in anticipation of a possible emergency.

Management believes that for the same reasons smoke alarms, first aid kits, AEDs and fire extinguishers are purchased for home use, the same consumers may be predisposed to purchase the Model 615 as part of their standard arsenal in the event of an emergency.

6

Sales and Marketing Plan

Our sales strategy is focused primarily on an indirect sales strategy for developing push sales of our products.  We currently have in excess of 40 independent third party distributors in the United States. These distributors are typically businesses focused on selling AED’s, medical products or safety products. We have targeted the education market as an early adopter market and have already achieved some initial success in penetrating that market.  As a result of our sales efforts so far, Model 615 was sold into K-12 schools and school districts in more than 40 states.  We plan to continue to build on this early success in the education market.  In addition, we have had initial success in selling Model 615 into colleges, places of worship, manufacturing facilities, and other commercial placement markets, and we will continue our effort to grow sales in those early markets in the foreseeable future.  We also have a limited number of distributors outside of the United States. These include distributors in Australia, New Zeeland, United Kingdom, Brazil, South Africa and Turkey. We plan to increase our sales capability by adding independent distributors both in the US and internationally.  Distributors that we may pursue include:

● distributors that have an established presence within the first aid and occupational safety, medical emergency and industrial safety markets;

● automated external defibrillator (AED) manufacturers and distributors; and

● specialty medical distributors that can tap into the (at risk) cardiovascular disease, asthma and COPD market segments.

We also plan to increase the number of sub-distributors and sales agents we will appoint in the U.S. to sell our products.

Our current marketing efforts are limited, and comprise limited advertising in safety related media, participation in shows and exhibitions, and press releases.  We plan to continue and expand these activities, and we plan to implement a marketing strategy designed to create market demand and sales through increased market awareness and education.

Product Diversification

Our early sales efforts are focused primarily on institutional customers, such as for example schools and school districts, colleges, places of worship, manufacturing facilities and commercial buildings.  We sell to these customers primarily through distributors but also through sub-distributors and sales agents.  Generally, the buying decisions for our customers are made or influenced by individuals such as safety managers, risk managers, nurses, administrators, facilities managers and medical directors.  These individuals are usually also responsible for acquiring other safety or health emergency solutions or products, such as Automated External Defibrillators (AEDs), Resuscitator Bags (used for CPR), First Aid Kits, and so on.  We source AEDs, Resuscitator Bags, and other complimentary products in order to provide our customers with a total solution for their health emergency and preparedness requirements.  We believe that we there is incremental value in providing our customers the ability to order these products from a single source.  We generally source these ancillary or complimentary products from third party manufacturers or suppliers, and we generally act as a distributor in such cases.

Strategic Branding

We do not currently have any significant strategic branding activity.  We plan to, in the future, implement a plan to increase our overall strategic branding efforts.  Targeted industry publications that appeal to key decision makers within the specialty medical community will be a focus of these branding and product awareness efforts.  Branded collateral with a targeted message, focus, and call to action will also be part of these planned efforts.

7

Retail Channels

We do not currently have any relationships with traditional “brick and mortar” retailers. We plan to pursue distribution partnerships with traditional “brick and mortar” retailers that can merchandise Model 615 or any line extensions thereof for at risk and preventive buyers. We currently have distribution partnership with online retailers Amazon.com, GlobalIndustrial.com and Drugstore.com. In addition, our authorized distribution partners typically have online web stores where they offer our products for sale, in addition to the sales activities of their sales teams.

Direct Response Television (DRTV)

We believe that a direct response appeal to customers may be a cost-effective method for rapidly building awareness of the features, advantages and benefits of the Model 615, or a line extension(s) thereof.  We plan to test a DRTV campaign to appeal directly to at-risk customers through a targeted pilot in the form of short-duration commercials.  Utilizing space-available national media, sufficient audience reach can be obtained cost-effectively.  Based on the pilot validation, we plan to evaluate the potential of ongoing direct response television marketing efforts, possibly on larger scales.  To date, we have not conducted any direct response television campaigns or pilots, and there can be no assurance that we will do so in the future.

Competition and Buying Patterns

We believe that our Model 615 portable emergency oxygen device is highly differentiated from all other emergency-duration medical oxygen supply products (compressed gas, cryogenic, thermal decomposition).  We believe that Model 615 makes on-demand, emergency-duration medical oxygen safer and more readily accessible for various classes of user markets.  Its process and the resulting product allow lay person use, as compared to all other competitive technologies where training is typically required and usage can be hazardous.  During oxygen generation in Model 615, there is minimal pressure, and no compressed tanks, regulators, gauges, flames, electrical charge or other hazards typically associated with existing oxygen dispensing devices.  We believe that Model 615 allows a lay person, without training to administer medical oxygen in a medical emergency while waiting for first responders to arrive on the scene.

Model 615 is indicated for emergency use, and compressed tanks can be utilized in certain instances for emergency use.  We believe that Model 615 is differentiated from compressed tanks for emergency use as follows:

● Model 615 requires minimal to no training to operate, as it is designed for lay person use.  Compressed tanks generally require training to be used.

● Model 615 is a safer option, as it does not represent an explosion hazard in fire situations.

● Model 615 does not require a prescription to be purchased, whereas compressed tanks may require a prescription if the regulator is not pre-set to a flow rate equal to 6 liters per minute or higher for a minimum of 15 minutes.

Research and Development

To enhance our product quality, reduce cost, and keep pace with technological advances and evolving market trends, we plan to continue to engage in research and development.  We spent $25,816 and $260 on research and development in 2012 and 2011 respectively, which includes direct expenses related to development, and indirect expenses.  We plan to increase these activities in the future as budgets allow. We plan to focus on enhancing our technology by improving the performance of our current products and developing new products, in addition to developing related and alternative technologies.  We have made investments of capital and time to develop technology, intellectual property and industry expertise in technologies that we believe provide us with competitive advantages in the markets that we serve.  Our technologies are based on complex formulas which require extensive amounts of data and expertise.  We plan to continue to invest in technologies to maintain our market position and to develop new applications and products.

Historically, we have conducted substantially all of our research and development with an in-house staff, including research staff holding advanced degrees.  The focus of our core research function has been on research and development management and market analysis, as well as the establishment and management of production projects.  Historically, our departments have worked together to research new material and techniques, test product performance, inspect products and to test the performance of parts used in the manufacturing process.

Design and Production Capabilities

We employ a systematic approach to product design and production.  We have developed Standard Operating Procedures (SOPs) specific to our design and production processes, and we develop and track new concepts and ideas from a variety of sources, including direct customer feedback, trade shows, and industry conferences.

Customer Service

We believe we are highly responsive to our customers. We plan to continue to work closely with our major customers in order to ensure high levels of customer satisfaction.  We plan to constantly evaluate and identify our strongest customers in each distribution channel and focus our sales efforts towards the largest and fastest growing distributors and resellers.  While we do not currently do so, we expect to be an Original Equipment Manufacturer, or OEM, for certain customers in the future.

Brand Awareness

We currently only sell Model 615 and certain other products under the OxySure name and we intend to aggressively promote our self-branded products, marketed under the brand-name OxySure, to with a goal of becoming a recognized brand name in the United States, which we expect will assist us in growing our business over the course of the next few years.  We plan to develop and commercialize additional products targeted at various vertical markets under the OxySure brand name, and we believe that in time our consumer oxygen products will develop a solid reputation and an established a brand name in the U.S.

8

Intellectual Property

We rely on a combination of patent, trademark and trade secret protection and other unpatented proprietary information to protect our intellectual property rights and to maintain and enhance our competitiveness in the consumer medical industry.  As a matter of practice, we require assignment of intellectual property rights provisions in all our employment, consultant and subcontractor agreements.  We have legal ownership of six U.S. patents, two Australian patents and one South African patent, in addition to other patent applications, that we use in our business operations.  These patents include design, utility, and invention patents that relate to our products.  In January 2004, we entered into an assignment and transfer agreement with Julian T. Ross, our current Chairman, Chief Executive Officer, President, and Chief Financial Officer and his affiliates for the transfer and assignment of the initial patent application to us, and for the transfer to us of any and all other initial intellectual property related to the prior research and development conducted by him in relation to our business.

We also rely on unpatented technologies to protect the proprietary nature of our product and manufacturing processes.  We require that our management team and key employees enter into confidentiality agreements that require the employees to assign the rights to any inventions developed by them during the course of their employment with us.  All of the confidentiality agreements include non-competition and non-solicitation provisions that remain effective during the course of employment and for periods following termination of employment, which vary depending on position and location of the employee.

We have four registered trademarks in the United States.

(1) Registration Number 3346008 entitled “Oxysure Emergency Oxygen”

(2) Registration Number 3330496 entitled “Oxysure”

(3) Registration Number 3528998 entitled “Oxysure Pure Oxygen”

(4) Registration Number 3514251 entitled “Technology at Work Saving Lives”

In addition, we own numerous domain names relevant to our business, such as www.oxysure.com, www.oxysuresystemsinc.com, www.theoxysuregroup.com, www.oxypure.com, www.oxycure.com, www.oxysport.com, www.oxysave.com, www.safeoxygen.com, and many others.

Our success will depend in part on our ability to obtain patents and preserve other intellectual property rights covering the design and operation of our products.  We intend to continue to seek patents on our inventions when we deem it commercially appropriate.  The process of seeking patent protection can be lengthy and expensive, and there can be no assurance that patents will be issued for currently pending or future applications or that our existing patents or any new patents issued will be of sufficient scope or strength or provide meaningful protection or any commercial advantage to us.  We may be subject to, or may initiate, litigation or patent office interference proceedings, which may require significant financial and management resources.  The failure to obtain necessary licenses or other rights or the advent of litigation arising out of any such intellectual property claims could have a material adverse effect on our operations.

We hold six U.S. patents comprising three utility patents and three design patents as follows:

(1) 7,407,632 entitled “Apparatus and delivery of medically pure oxygen,” which expires on May 27, 2024

(2) 7,381,377 entitled “Method for controlled production of a gas,” which expires on June 21, 2025

(3) 7,465,428 entitled “Method and apparatus for controlled production of a gas,” which expires on June 21, 2025

(4) D549,341 entitled “Breathing device utilizing a catalytic oxygen generation method,” which expires on July 30, 2026

(5) D549,342 entitled “Breathing device utilizing a catalytic oxygen generation method,” which expires on July 30, 2026

(6) D615,186 entitled “Chemical reaction activation plunger,” which expires on June 24, 2022

In addition, we hold one South African patent, number 2006/5051 entitled “Method and apparatus for generating oxygen.” We also hold two Australian patents, number 2007101246 entitled “Method and system for portable breathing devices,” and number 2007101247 entitled “Method and system for providing breathable air in a closed circuit.”

U.S. patents numbered 1 through 3 are utility patents and are valid for 20 years from the date of each respective filing.  U.S. patents numbered 4 through 6 are design patents and are valid for 14 years from the grant date of each respective design patent.  The South African patent is valid for 20 years from the date of application. The Australian patents are innovation patents and expire as follows: patent number 2007101246 expires on January 16, 2015 and patent number 2007101247 expires on January 4, 2015.  The U.S. utility patents cover methods and apparatuses associated with the production (from our chemical process), control, containment and delivery of oxygen (or a gas containing oxygen).  The U.S. design patents cover aspects of the design and features of our product, the Model 615.  The South African patent covers the process by which oxygen is generated. Australian patent number 2007101246 covers certain engineering elements of our system for activation and management of our catalytic oxygen producing system.  Australian patent number 2007101247 covers certain engineering aspects of a system that combines our catalytic process for generating oxygen, with a scrubbing process that removes at least one element of expired air.

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Strategy

Our goal is to become a global leader in the development, manufacture and sale of emergency/short duration oxygen solutions and medical emergency solutions for pre-hospital markets.

We plan to leverage our expertise in product design and development, our intellectual property platform, and develop our distribution network by continuing to develop and introduce new and enhanced products.  We plan to strengthen the performance of our technology to provide users with easy-to-use products.  Our goal is to continue to enhance the functionality of our core features and making our products simpler to use.  We intend to invest additional resources in our research and development, applications and intellectual property to promote innovation and maintain customer preference for our products.

Build Partnerships with New and Existing Customers

We intend to strengthen relationships with our existing customers and our strategy is to establish partnerships with our current customers whereby we develop and manufacture new products based on their needs.

We also seek to leverage our technology to develop relationships and strategic alliances with third-party distributors, vendors, and manufacturers.  We believe OEMs of respiratory products and safety products, distributors and value-added resellers (“VARs”) can simplify the use and increase the safety of their products and services by integrating our products, resulting in broader market opportunities and significant competitive advantages.

Expand Global Presence

Though we have concentrated in the United States, we believe a strong and growing market for our products exists in countries outside of America, primarily in Europe, Canada, Asia, and South and North America.  We intend to further expand our international resources to better serve global customers and business associates and to leverage opportunities in markets such as Brazil, Canada, Europe, Australia, South Korea, India, and China.  We plan to add regional sales representatives and distributors in different geographic regions to better address demand for our products.

Expand Sales Network and Distribution Channels

We intend to expand our sales network in America and develop relationships with a broader set of wholesalers, distributors and resellers, all in order to expand the market availability of our products in the United States.  We believe there exists vast opportunities to expand market presence.  We hope that these relationships will allow us to diversify our customer base and significantly increase the availability and exposure of our products.

Augment Marketing and Promotion Efforts to Increase Brand Awareness

We continue to devote our efforts towards brand development and utilize marketing concepts in an attempt to strengthen the marketability of our products.  We plan to carry out a brand development strategy based on product innovation, quality, and design excellence.  We have also participated and intend to continue to participate in various exhibitions and similar promotional events to promote our products and brand.

Supply of Raw Materials

We intend to procure materials to meet forecasted customer requirements.  Special products and large orders are quoted for delivery after receipt of orders at specific lead times.  We will maintain minimum levels of finished goods based on market demand in addition to inventories of raw materials, work in process, and sub-assemblies and components.  We reserve for inventory items determined to be either excess or obsolete.

At the current time, we have no material minimum purchase requirements with our raw material suppliers and we place orders with our suppliers on as needed basis.  Because we place orders on an as needed basis our pricing and availability of raw materials from all suppliers can be volatile, attributable to numerous factors beyond our control, including general economic conditions, currency exchange rates, industry cycles, production levels or a supplier’s limited supply.  To the extent that we experience cost increases we may seek to pass such cost increases on to our customers, but cannot provide any assurance that we will be able to do so successfully or that our business, results of operations and financial condition would not be adversely affected by increased volatility of the cost and availability of raw materials.

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Suppliers

We are actively pursuing agreements with multiple manufacturers to ensure we are able to consistently obtain our raw materials and topical products timely, within our defined specifications, and at competitive prices.

Our primary current suppliers and the products they supply to us are listed below:

Name of Supplier	Products Supplied
AAA Aircare Systems	Air purification products
Activar Construction Products Group	Display systems
AMS Filling Systems, Inc.	Filling equipment
Avid Business Networks, Inc.	Voice & data products and services
Branson Ultrasonics Corporation	Ultrasonic welding equipment
Brenntag Southwest, Inc.	Chemical supplies
Cardiac Science	AED equipment and supplies
Colder Products	Fitments and connectors
D.B. Roberts Company	Hardware parts
Displays2go	Display systems
Dymax Corporation	Adhesive products, systems and supplies
ETI Incorporated	Sealing parts
EXFO America Inc.	Production equipment and supplies
Filtertek Inc.	Filtration supplies
Fisher Scientific	Chemical and other supplies
GlobalMed Inc.	Tubing products
HeartSafe America	Medical safety equipment
Heartsine	AED equipment and supplies
Kaps-All Packaging Systems, Inc.	Filling equipment and supplies
Newcomb Spring	Springs
Marking Systems, Inc.	Labeling and related supplies
McMaster-Carr	Hardware parts
Micro Plastics, Inc.	Clamps
Packaging Technologies, Inc.	Sealing Equipment and supplies
Pfaltz & Bauer	Chemical supplies
Plastiform	Plastic Molds
Polo Custom Products	Carrying bags
Polymer Technology Corporation	Injection molding services
Purest Colloids, Inc.	Water purification products
R.  S.  Hughes Company, Inc.	Sealing parts
Salter Labs	Tubing and respiratory supplies
Sealed Air Corporation	Insulation materials
Selig Sealing Products, Inc.	Sealing and separation equipment and materials
Smart Products, Inc.	Plastic Parts and valves
Spectrum Chemical Mfg.  Corp.	Chemical supplies
Stephen Gould Corporation	Packaging supplies
Texas Valve & Fitting Co.	Valves and fittings
ULINE	Labels and packaging supplies
Unisource Worldwide Inc.	Shipping products and supplies

Presently, we believe our relationships with our suppliers are good and we expect that our suppliers will be able to meet the anticipated demand for our products in the future.  However, due to our dependence on a few suppliers for certain raw materials, we could experience delays in development and/or the ability to meet our customer demand for new products.  In addition, we have a number of longstanding business relationships with certain suppliers, and we believe that alternative suppliers are available.  Although we have not been subject to shortages for any of our components, we may be subject to cutbacks and price increases which we may not be able to pass on to our customers in the event that the demand for components generally exceeds the capacity of our suppliers.

Production Operations

Our production operations involve the assembly of parts and components and the final assembly of all parts and sub-assemblies that comprise our products.  Many of the parts and components are manufactured by third party manufacturers.  Currently, our production operations are conducted Frisco, Texas, in a 16,200 square-foot facility, which houses a production and warehousing area of approximately 10,000 square feet.  We use automated machinery to process key aspects of the production process to ensure high uniformity and precision, while leaving the other aspects of the production process to manual labor.  Some of the production is very labor intensive, thus, putting constraints and limitations in our production process.  The current constraints could be eliminated if we automate some or all of the production.  We intend to seek greater production capacity, production efficiencies and lower production costs in the future.  In doing so, we may elect to invest further in our production process, or we may elect to outsource some or all of our production processes as demand for our products grow.  If we invest further in our production processes, our goal would be to further streamline our production process and continue investing in our production infrastructure, which will allow us to further increase our production capacity, helping us to control the per unit cost of our products.  We do not currently have any material contracts with third party manufacturers or sub-contractors for the supply of parts, raw materials or components that require forecasting or minimum order quantities.

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Quality Control

We consider quality control an important element of our business practices.  We have stringent quality control systems that are implemented by company-trained staff members to ensure quality control over each phase of the production process, from the purchase of raw materials through each step in the manufacturing process.  We utilize a scientific management system and precision inspection measurement, capable of ensuring our products are of high quality.

Our quality control process consists of the following functions:

●      setting internal controls and regulations for semi-finished and finished products;

●      testing samples of raw materials from suppliers;

●      implementing sampling systems and sample files;

●      maintaining quality of equipment and instruments; and

●      articulating the responsibilities of quality control staff.

Research and Development

To enhance our product quality, reduce cost, and keep pace with technological advances and evolving market trends, we plan to continue to engage in research and development, as budgets allow.  We spent $25,816 and $260 on research and development in 2012 and 2011, respectively.  Our research and development effort is focused on enhancing our technology by improving the performance of our current products and developing new products, in addition to developing related and alternative technologies.  We have made investments of capital and time to develop technology engines, intellectual property and industry expertise in technologies that we believe provide us with a competitive advantage in the markets where we compete.  Our technologies are based on complex formulas which require extensive amounts of data and expertise.  We plan to continue to invest in technologies to maintain our market position and to develop new applications and products.

Historically, we have conducted substantially all of our research and development with an in-house staff, including research staff holding advanced degrees.  The duties of our core research function are to improve research and development management and market analysis, in addition to establishing and regulating the production projects.  All departments have worked together to research new material and techniques, test product performance, inspect products and to test performance of machines used in the manufacturing process.

In addition to the advancement of our current product, we believe that the future success of our business depends upon our ability to enhance our existing product, to develop compelling new products, to develop cost effective products, to qualify these products with our customers, to effectively introduce these products to existing and new markets on a timely basis, and to commence and sustain volume production to meet customer demands.  To avoid product obsolescence, we will continue to monitor technological changes, as well as users' demands for new technologies.  Failure to keep pace with future changes could adversely affect our revenues and operating results in the future.  Although we have attempted to determine the specific needs of the markets in which we participate, there can be no assurance that the markets will, in fact, materialize or that our existing and future products designed for these markets will gain market acceptance.

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Warranties and Return Policy

We offer limited warranties for our products, comparable to those offered to consumers by our competitors.  Our customers may return products to us for a variety of reasons, such as damage to goods in transit, cosmetic imperfections and other issues, if within the warranty period.  Our customers may generally return products within 30 days and we generally charge a restocking fee if the product is returned within 30 days.

Product Liability and Insurance

We currently carry $4 million in product liability insurance.  Because of the nature of the products sold by us, we may be periodically subject to product liability claims resulting from personal injuries.  We may become involved in various lawsuits incidental to our business.  To date, we have not been subject to products liability litigation. Our product liability insurance may not sufficiently shield us from any potential product liability claims, and we might not have sufficient funds available to pay any claims over the limits of our insurance.  Furthermore, any potential product liability claim may lead to our product liability insurance being cancelled, or we may not be able to obtain such insurance at a rate that is acceptable to us or at all.  Because personal injury claims based on product liability may be very large, an underinsured or an uninsured claim could financially damage our company.  Accordingly, there can be no assurance that we will have sufficient product liability insurance and/or capital sufficient to cover any successful product liability claims made against us in the future, which could have a material adverse effect on our financial condition and results of operations.

Competition

We face competition from many other manufacturers, most of which have significantly greater name recognition and financial, technical, manufacturing, personnel, marketing, and other resources than we have.  The market in which we compete is subject to rapid technology changes, highly fragmented, and cyclical.

We compete primarily on the basis of quality, price, design, reliability, and quality service and support to our customers.  We believe that our standard products are comparable in quality and performance with competitors in our market category.  Many of our competitors have a stronger competitive position than we do in that they have greater brand recognition and longer-standing customer relationships.

Environmental Regulations

We are subject to various federal, state and local environmental laws and regulations, including those governing the use, discharge and disposal of hazardous substances in the ordinary course of our manufacturing process.  We believe that our current manufacturing operations comply in all material respects with applicable environmental laws and regulations.  Although we believe that our current manufacturing operations comply in all material respects with applicable environmental laws and regulations, it is possible that future environmental legislation may be enacted or current environmental legislation may be interpreted to create environmental liability with respect to our other facilities, operations, or products.

We constructed our manufacturing facilities with the environmental laws and requirements in mind.  If we fail to comply with the provisions of the environmental laws under which we are governed, we could be subject to fines, criminal charges or other sanctions by regulators, including the suspension or termination of our manufacturing operations.

Employees

As of the date hereof, we had twelve full-time employees, including six employees in production and five employees in management, sales and marketing.  In addition, we had two part time employees, and several independent consultants that we employ on a retained basis and on an as needed basis. All of our employees are based in the United States.  Our employees are not represented by any labor union and are not organized under a collective bargaining agreement, and we have never experienced a work stoppage due to union activity.

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Government Regulation

Our primary product, the OxySure portable oxygen device, Model 615, is a medical device, subject to extensive and rigorous regulation by the FDA, as well as other Federal and state regulatory bodies in the United States and comparable authorities in other countries.  These regulatory approvals can be lengthy and can cause delays in getting our products into other countries.  Our South African distributor has not yet obtained approval from the South African Medicines Control Council for the importation of Model 615.  We expect that many of our future products will also be similarly subject to regulation by the FDA and other regulatory bodies both in the United States and in other countries.  We currently market our primary product, the Model 615 in the United States under a pre-market notification, or 510(k), clearance for emergency use.  Model 615 was cleared by the FDA for over the counter sale, without the need for a prescription, and the FDA approval number is K052396.  If we seek to market new products or to market new indications for our existing product, we may be required to file for and obtain either 510(k) clearances or Premarket Approval Applications (“PMAs”).

The FDA regulations govern the following activities that we perform, or that are performed on our behalf, to ensure that medical devices distributed domestically or exported internationally are safe and effective for their intended uses:

● product design, development and manufacture;

● product safety, testing, labeling and storage;

● pre-marketing clearance or approval;

● record keeping procedures;

● product marketing, sales and distribution; and

● post-marketing surveillance, complaint handling, medical device reporting, reporting of deaths or serious injuries and repair or recall of products.

Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include any of the following sanctions:

● warning letters, untitled letters, fines, injunctions, consent decrees and civil penalties;

● repair, replacement, refunds, recall or seizure of our products;

● operating restrictions, partial suspension or total shutdown of production;

● refusing our requests for 510(k) clearance or PMA approval of new products, new intended uses or modifications to existing products;

● withdrawing 510(k) clearance or PMA approvals that have already been granted; and

● criminal prosecution.

The FDA’s Pre-market Clearance and Approval Requirements

Unless an exemption applies, each medical device we wish to distribute commercially in the United States will require either prior 510(k) clearance or a PMA approval from the FDA.  Medical devices are classified into one of three classes - Class I, Class II, or Class III - depending on the degree of risk associated with each medical device and the extent of control needed to ensure safety and effectiveness.  Devices deemed to pose lower risks are placed in either Class I or II, which requires the manufacturer to submit to the FDA a pre-market notification requesting permission to commercially distribute the device.  This process is generally known as 510(k) clearance.  Some low risk devices are exempted from this requirement.  Devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices, or devices deemed not substantially equivalent to a previously cleared 510(k) device, are placed in Class III, requiring PMA approval.  Our Model 615 is considered a Class II device for its current primary marketed indication.

Pre-market Approval Pathway

A PMA application must be submitted to the FDA if the device cannot be cleared through the 510(k) process.  The PMA application process is much more demanding than the 510(k) pre-market notification process.  A PMA application must be supported by extensive data, including but not limited to technical information, preclinical data, clinical trials, manufacturing information and labeling to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device.

Devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices, or devices which have a new intended use or use advanced technology, are Class III devices that almost always require formal clinical studies.  The PMA application, which is intended to demonstrate safety and efficacy, must contain data from clinical trials and a full description of the device and its components, the methods, facilities and controls used for manufacturing, and the proposed labeling.  If the FDA determines that a PMA application is sufficiently complete to permit a substantive review, the FDA will accept the application for review.  The Federal Food, Drug, and Cosmetic Act permits a modular review approach, whereby applicants are allowed to submit discrete sections of the PMA for review after each is completed.

The FDA has 180 days to review a PMA application, although the review of an application generally occurs over a significantly longer period of time and can take up to several years.  During this review period, the FDA may request additional information or clarification of the information already provided.  Also, an advisory panel of experts from outside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device.  In addition, the FDA will conduct a pre-approval inspection of the manufacturing facility to ensure compliance with quality system regulations.

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510(k) Clearance Pathway

When a 510(k) clearance is required, we must submit a pre-market notification to the FDA demonstrating that our proposed device is substantially equivalent to a previously cleared and legally marketed 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for the submission of a PMA application.  By regulation, the FDA is required to clear or deny a 510(k) pre-market notification within 90 days of submission of the application.  As a practical matter, clearance often takes significantly longer.  The FDA may require further information, including clinical data, to make a determination regarding substantial equivalence.  If the FDA determines that the device, or its intended use, is not substantially equivalent to a previously-cleared device or use, the FDA will place the device, or the particular use, into Class III.

Clinical Trials

Clinical trials are almost always required to support PMA approval and are sometimes required for 510(k) clearance.  In the United States, these trials generally require submission of an application for an investigational device exemption, or IDE, to the FDA.  The IDE application must be supported by appropriate data, such as animal and laboratory testing results, showing that it is safe to test the device in humans and that the testing protocol is scientifically sound.  The IDE must be approved in advance by the FDA for a specific number of patients unless the product is deemed a non-significant risk device eligible for more abbreviated IDE requirements.  Clinical trials for significant risk devices may not begin until the IDE application is approved by the FDA and the appropriate institutional review boards, or IRBs, at the clinical trial sites.  Any clinical trials we may do must be conducted under the oversight of an IRB at the relevant clinical trial sites and in accordance with the FDA regulations, including but not limited to those relating to good clinical practices.  We are also required to obtain patients’ informed consent that complies with both the FDA requirements and state and Federal privacy regulations.  Failure to meet these standards can result in the clinical data not being accepted by the FDA.

If we are required to pursue an IDE in the future, we will need to enroll patients in a feasibility study to evaluate the safety and effectiveness of the intended product for its intended indication.  A feasibility study involves a limited number of patients and is the first opportunity to evaluate device performance in humans under clinical conditions.  It is used to gather information on treatment methods of using a new device, clinical measures to be used in a pivotal study, and evaluate features that may be modified to optimize use of the device.  If the study results are favorable, we will be required to conduct a larger, pivotal, study to demonstrate the device’s safety and effectiveness.  A pivotal study usually involves a larger population at multiple locations and is designed to provide objective evidence of effectiveness based on significant clinical outcomes.  If any pivotal trial conducted by us in the future is successful, all the study data will form the clinical basis of the applicable PMA application for FDA approval of the intended product.

We, the FDA or the IRB at each site at which a clinical trial is being performed may suspend a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh the benefits.  Even if a trial is completed, the results of clinical testing may not demonstrate the safety and effectiveness of the device, may be equivocal or may otherwise not be sufficient to obtain PMA approval of the product.  Similarly, in Europe the clinical study must be approved by the local ethics committee and in some cases, including studies with high-risk devices, by the Ministry of Health in the applicable country.

Pervasive and Continuing Regulation

After a device is placed on the market, numerous regulatory requirements continue to apply.  These include:

● the FDA’s QSR requires manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the manufacturing process;  

● labeling regulations and the FDA prohibitions against the promotion of products for uncleared or unapproved uses (known as off-label uses), as well as requirements to provide adequate information on both risks and benefits during promotion of the product;

● clearance or approval of product modifications that could significantly affect safety or efficacy or that would constitute a major change in intended use;

● medical device reporting, or MDR, regulations, which require that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur;

● post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device; and

● the FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is in violation of governing laws and regulations.

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After a device receives 510(k) clearance or PMA approval, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, will require a new clearance or approval.  The FDA requires each manufacturer to review changes that it makes and determine whether they are of a type that would require a new 510(k) or PMA filing.  This determination must be documented by us.  While we make this determination initially, the FDA can review any such decision and can disagree with a manufacturer’s determination.  The FDA may also make this determination on its own initiative.

The MDR regulations require that we report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in which our product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury.  We have not filed any MDR reports to the FDA for Model 615 since we started selling the product.

We have registered with the FDA as a medical manufacturer.  The FDA has broad post-market and regulatory enforcement powers.  We are subject to unannounced inspections by the FDA to determine our compliance with the QSR and other regulations, and these inspections may include the manufacturing facilities of our suppliers.

Promotion and Advertising Restrictions

We may promote and advertise Model 615 only for emergency use.  However, physicians may prescribe Model 615 for uses that are not described in its FDA-approved labeling and for uses that differ from those tested by us and approved by the FDA.  Such off-label uses are common across medical specialties.  Physicians may believe that such off-label uses are the best treatment for some patients in varied circumstances.  The FDA does not regulate the behavior of physicians in their choice of treatments.  The FDA does, however, strictly prohibit a manufacturer’s communications regarding off-label uses.  Companies cannot actively promote FDA-approved devices for off-label uses.  If the FDA believes we are promoting Model 615 for off-label uses, we could be subject to negative publicity, warning letters, fines, civil and criminal penalties, injunctions and product seizures.

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ITEM 1A—RISK FACTORS

Risks Relating to the Early Stage of our Company, our Financial Position and our Need for Additional Capital

We are an early stage company and have a history of net losses. Currently, we have one product that we manufacture and make available for commercial sale, and to date we have not generated any significant product revenue. As a result, we expect to continue to incur substantial net losses for the foreseeable future, which raises substantial doubt about our ability to continue as a going concern.

We were incorporated on January 15, 2004 and we do not have a long operating history or realized any substantial revenues.  We do not have any sufficient operating history upon which an evaluation of our future success or failure can be made.  Our accumulated deficit from inception through December 31, 2012 was $14,258,667 and we have an overall deficit of $652,125 in stockholders’ equity as of December 31, 2012.

We have devoted most of our financial resources to research and development, FDA and other regulatory approvals, and the development our production capability. We have had limited revenues from our launch product, the OxySure Model 615.  We expect to continue to incur research and development expenses as well as significant expenses related to investment in sales and marketing and organizational growth in the foreseeable future related to the ongoing product development, completion of new development and commercialization of our products.  In addition, if we are required by applicable regulatory authorities, including the FDA, to perform studies related to any future products, our expenses will increase beyond expectations and the timing of any potential product approval may be delayed. We also expect an increase in our expenses associated with our manufacturing and the commercialization of future products, if any. In addition, we expect to continue to incur costs to support operations as a public company. As a result, we may continue to incur substantial net losses and negative cash flow for the foreseeable future. These losses and negative cash flows have had, and will continue to have, an adverse effect on our stockholders’ equity and working capital. We expect our net losses to continue into the foreseeable future.  There is no assurance our future operations will result in profitable revenues.

Our ability to achieve and maintain profitability and positive cash flow is dependent upon our ability to:

● raise additional funds from debt and/or equity;

● raise awareness and achieve widespread market acceptance of our technology and our products;

● identify and pursue channels and mediums through which we will be able to market and sell our products, including distributors and retailers;

● attract and retain performing employees;

● lower our production costs significantly;

● obtain any regulatory approvals where needed to market our products, including approvals in international markets;

● procure and maintain on commercially reasonable terms relationships with third parties for the supply of services, parts and other manufacturing inputs; and

● manage growth by managing administrative overhead.

Because of the numerous risks and uncertainties associated with medical device product development, we are unable to accurately predict the timing or amount of substantial expenses or when, or if, we will be able to achieve or maintain profitability. We have financed our operations primarily through the sale of equity securities and debt financings. The size of our future net losses will depend, in part, on the rate of growth of our expenses and the rate of growth of our revenues. If we are unable to develop and commercialize our other product candidates or if sales revenue from Model 615 and our existing offerings are insufficient, we will not achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability.

As a result of the foregoing circumstances our independent registered public accounting firm has included, and is likely in the future to include, an explanatory paragraph in their audit opinions based on substantial uncertainty regarding our ability to continue as a going concern.  An audit opinion of this type may interfere with our ability to obtain debt or equity financing in the future.

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We are at a very early operational stage and our success is subject to the substantial risks inherent in the establishment of a new business venture.

The implementation of our business strategy is in a very early stage.  We only produce one product, a portable emergency oxygen device, and the commercialization of this product is in its infancy.  Our intended markets may not adopt this product, and it may not be commercially successful.  We intend to develop additional product candidates but none have proven to be commercially viable or successful.  Our business and operations should be considered to be in a very early stage and subject to all of the risks inherent in the establishment of a new business venture.  Accordingly, our intended business and operations may not prove to be successful in the near future, if at all.  Any future success that we might enjoy will depend upon many factors, several of which may be beyond our control, or which cannot be predicted at this time, and which could have a material adverse effect upon our financial condition, business prospects and operations and the value of an investment in our company.

We have a very limited operating history and our business plan is unproven and may not be successful.

Our company was formed in January 2004, but we only began commercial product shipment of our first product in earnest in 2008 after we moved into our new, purpose built production facility.  Since January 2004, our primary activities have been research and development, the obtainment of our FDA approval, the identification of collaborative partners, intellectual property protection such as patent applications and capital raising activities.  We have not licensed or sold any substantial amount of products commercially and do not have any definitive agreements to do so.  We have not proven that our business model will allow us to identify and develop commercially feasible products in the long term.

We have limited organizational and management resources.

Our management and organizational resources are limited, and this may adversely impact our ability to execute our business plan, successfully continue the commercialization of our portable emergency oxygen device, maintain regulatory compliance, or capitalize on market opportunities, if any.  We have significant intellectual capital invested in our current employees and management, and any loss in organizational resources may have an adverse impact on our business.  In particular, we have been, and we expect to continue to be reliant on, the experience and talents of our CEO and President, Mr. Ross.

We may have difficulty raising additional capital, which could deprive us of necessary resources.

We expect to continue to devote significant capital resources to provide working capital, and to fund sales and marketing as well as research and development.  In order to support the initiatives envisioned in our business plan, we will need to raise additional funds through the sale of assets, public or private debt or equity financing, collaborative relationships or other arrangements.  Our ability to raise additional financing depends on many factors beyond our control, including the state of capital markets, the market price of our common stock and the development or prospects for development of competitive technology by others.  Because our common stock is currently traded on the OTCQB and trading volumes are minimal, many investors may not be willing to purchase it or may demand steep discounts.  Sufficient additional financing may not be available to us or may be available only on terms that would result in further dilution to the current owners of our common stock.

We expect to raise additional capital during 2013 and 2014, but we do not have any firm commitments for additional funding.  If we are unsuccessful in raising additional capital, or the terms of raising such capital are unacceptable, we may suffer liquidity issues that may have a material adverse impact on our ability to continue operations or we may have to modify our business plan and/or significantly curtail our planned activities and other operations.

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Failure to effectively manage our growth could place strains on our managerial, operational, and financial resources and could adversely affect our business and operating results.

Our growth has placed, and is expected to continue to place, a strain on our managerial, operational and financial resources.  Further, we will be required to manage those multiple relationships.  Any further growth by us or an increase in the number of our distributors, strategic relationships or alliances will increase this strain on our managerial, operational and financial resources.  This strain may inhibit our ability to achieve the timely execution necessary to implement our business plan, and could have a material adverse effect upon our financial condition, business prospects and operations and the value of our stock.

Our success is dependent on key personnel.

Our ability to succeed is substantially dependent on the performance of our officers and directors.  Our success also depends on our ability to attract, hire, retain and motivate future officers and key employees.  The loss of the services of any of these executive officers or other key employees could have a material adverse effect on our business, prospects, financial condition and results of operations.  We have entered into employment agreements with our executive officers and key employees.  We currently have no “Key Person” life insurance policies.  Our future success may also depend on our ability to identify, attract, hire, train, retain and motivate other highly skilled technical, managerial, sales, marketing and customer service personnel.  We have been, and we expect to continue to be reliant on, the experience and talents of our CEO and President, Mr. Ross.

Competition for such personnel is intense, and there can be no assurance that we will be able to successfully attract, assimilate or retain sufficiently qualified personnel.  The failure to attract and retain the necessary technical, managerial, sales, marketing and customer service personnel could have a material adverse effect on our business, prospects, and financial condition.

Risks Relating to our Research and Development Business

There are substantial inherent risks in attempting to commercialize new technological applications, and, as a result, we may not be able to successfully develop additional products or technology for commercial use.

We conduct ongoing development on our portable emergency oxygen device, and we conduct research and development of products in various vertical markets and industries.  Historically, our product development team has worked on developing technology and products in various stages.  However, commercial feasibility and acceptance of such product candidates are unknown.  Scientific research and development requires significant amounts of capital and takes an extremely long time to reach commercial viability, if at all.  Other than our portable emergency oxygen device, to date, our research and development projects have not produced commercially viable applications, and may never do so.  Even our portable emergency oxygen device may not prove to be commercially viable in the long term.  During the research and development process, we may experience technological barriers that we may be unable to overcome.  Because of these uncertainties, it is possible that none of our product candidates will be successfully developed.  If our portable emergency oxygen device fails to achieve widespread commercial success, or we are unable to successfully develop new products or technology for commercial use, we will be unable to generate revenue or build a sustainable or profitable business.

We will need to achieve commercial acceptance of our applications to generate revenues and achieve profitability.

While we began shipping our portable emergency oxygen device in earnest during 2008, there can be no assurance that there will be market acceptance for our portable emergency oxygen device, its need, or its use in the long term, and there can be no assurance of its commercial acceptance or profitabilityin the long term.  While we intend to develop additional products, even if our research and development yields technologically feasible applications, we may not successfully develop commercial products, and even if we do, we may not do so on a timely basis.  If our research efforts are technologically successful, it could take years before this technology is commercially viable.  During this period, superior competitive technologies may be introduced or customer needs may change, which will diminish or extinguish the commercial uses for our applications.  We cannot predict when significant commercial market acceptance for our portable emergency oxygen device or any of our potential new products will develop, if at all, and we cannot reliably estimate the projected size of any such potential market.  If markets fail to accept our portable emergency oxygen device or any new products we may develop, we may not be able to generate revenues from the commercial application of our products and technologies.  Our revenue growth and achievement of profitability will depend substantially on our ability to have our portable emergency oxygen device and any new products we may introduce be accepted by customers.  If we are unable to cost-effectively achieve acceptance of our products and technology by customers, or if the associated products do not achieve wide market acceptance, our business will be materially and adversely affected.

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We will need to establish relationships with collaborative and development partners to fully develop and market our existing and new products.

We do not possess all of the resources necessary to develop and commercialize existing and new products on a mass scale resulting from or that may result from our technologies.  Unless we expand our product development capacity and enhance our internal marketing capability, we will need to make appropriate arrangements with collaborative partners to develop and commercialize current and future products.

If we do not find appropriate partners, our ability to develop and commercialize products could be adversely affected.  Even if we are able to find collaborative partners, the overall success of the development and commercialization of product candidates in those programs will depend largely on the efforts of other parties and is beyond our control.  In addition, in the event we pursue our commercialization strategies through collaboration, there are a variety of attendant technical, business and legal risks, including, but not limited to:

● a partner would likely gain access to our proprietary information, potentially enabling the partner to develop products without us or design around our intellectual property;

● we may not be able to control the amount and timing of resources that our partners may be willing or able to devote to the development or commercialization of our product candidates or to their marketing and distribution; and

● disputes may arise between us and our partners that will result in the delay or termination of the research, development or commercialization of our products and product candidates or that may result in costly litigation or arbitration that diverts our resources.

The occurrence of any of the above risks could impair our ability to generate revenues and harm our business and financial condition.

We rely on third parties to manufacture many of our product parts and subassemblies and we expect to rely on third parties for new product candidates and our business will suffer if they do not perform.

Our production activity is primarily focused on the final assembly of our portable emergency oxygen device, and we outsource the manufacturing of most of the parts, components or subassemblies.  We expect to continue to utilize this manufacturing model for this product as well as for new product candidates.  As a result, we do not expect to manufacture many of our products and product inputs and will engage third party contractors, molders and packagers to provide manufacturing or contract manufacturing, molding or production services.  If our contractors do not operate in accordance with regulatory requirements and quality standards, our business will suffer.  We expect to use or rely on components and services that are provided by sole source suppliers.  The qualification of additional or replacement vendors is time consuming and costly.  If a sole source supplier has significant problems supplying our products or product inputs, our sales and revenues will suffer until we find a new source of supply.

Our production process is very labor intensive.

Due to resource constraints and current limitations in our production process, our production process is very labor intensive.  We hope in the future to increase the level of automation in our process, and if we do, there is no assurance that we will be able to realize any production efficiencies through such automation.  If we are not able to automate our processes or do not realize any production efficiencies though automation, we may need a larger production force, and if we do, our production costs may rise.  Furthermore, if our production process stays labor intensive then our production cycle times may be slower which will prevent us from responding to large orders effectively and timeously.  We may elect to outsource some or all of our production process in an effort reduce costs and increase production capacity.  If we do, we may experience quality issues and long production lead times, which will adversely impact customer satisfaction and sales.  In addition, quality issues may lead to enforcement action by the FDA.

Moving to higher production volumes could be accompanied by quality problems.

To date, we have produced and shipped limited quantities of our first product, the portable emergency oxygen device.  In the event that demand for this product increases, we will have to accommodate such increases in demand by increasing our production throughput.  There can be no assurance that we would be successful in increasing our production throughput in response to any increases in demand, or that we would not suffer losses in product quality.  Any upward pressure on production capacity requirements may have an adverse impact on quality, production cost and delivery times.  Furthermore, we may seek to outsource some, part or all of our production process to meet demand.  Any such outsourcing of production may have an adverse impact on quality, production cost and delivery times.

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We rely on third parties for the sales and distribution of our products, who may not be successful in selling our products, or who may not perform to their sales commitments or obligations.

We currently do not have adequate resources to market, sell and distribute any products outside of the U.S. and engage third party marketing and distribution companies to perform these tasks.  We also do not have adequate resources to effectively market, sell and distribute products in the U.S.  While we believe that distribution partners will be available, we cannot assure you that the distribution partners, if any, will succeed in selling our products.  We may not be able to maintain satisfactory arrangements with our sales and distribution partners, who may not devote adequate resources to selling our products.

Our distribution partners may not honor their agreements with us or they may not honor the provisions of the sales quotas or minimum sales requirements prescribed in those agreements, where applicable. Our Brazilian and South African distributors have minimum sales commitments with us that they have not met. While we may have remedies available to us under our distribution agreements with our South African and Brazilian distributors, we have elected not to seek the relief provided by those remedies. There can be no assurance that these distributors, or any other distributors in the future will adhere to their minimum sales commitments to us.

If any of these situations occurs or remains unresolved, we may not be able to successfully market and sell our products, which would decrease or eliminate our ability to generate revenues.

We may not be successful at marketing and selling our technology or products.

We began commercializing our first product, our portable emergency oxygen device, in earnest in 2008.  We also intend to develop additional products and technologies for various vertical market applications.  We may not be able to market and sell our technology or products and any financial or research efforts we exert to develop, commercialize or promote such products may not result in revenue or earnings.

We may not be able to compete with better-established competitors.

While our portable emergency oxygen device is a medical device, it is targeted at commercial, education and government markets, as well as consumer markets.  In addition, our intended future products are targeted at various commercial, education, government and consumer markets.  The industries in which we operate, which include, but are not limited to, the medical device and biotechnology industries, are intensely competitive.  Most of our competitors have significantly greater financial, technical, manufacturing, marketing and distribution resources as well as greater industry experience than we have.  The particular medical conditions, illnesses or diseases our portable emergency oxygen device and future product lines are intended to address can also be addressed by other medical devices, products, procedures or drugs.  Many of these alternatives are widely accepted by physicians and our target customers and have a long history of use.  Physicians and target customers may use our competitors’ products and/or our products may not be competitive with other technologies.  If these things happen, our sales and revenues will be adversely impacted.  In addition, our current and potential competitors may establish cooperative relationships with large medical equipment companies or companies with competitive technologies to gain access to greater research and development or marketing resources.  Competition may result in price reductions, reduced gross margins and loss of market share.

Our products may be displaced by newer technology.

The medical device and biotechnology industries are undergoing rapid and significant technological change.  Third parties may succeed in developing or marketing technologies and products that are more effective than those developed or marketed by us, or that would make our technology and products obsolete or non-competitive.  Additionally, researchers and engineers could develop new technologies and products that could replace our technologies and products or reduce their importance.  Accordingly, our success will depend, in part, on our ability to respond quickly to medical and technological changes through the development and introduction of new products.  We may not have the resources to do this.  If our product candidates become obsolete and our efforts to develop new products do not result in any commercially successful products, our sales and revenues will suffer.

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We may not have sufficient legal protection against infringement or loss of our intellectual property and we may lose rights to our licensed intellectual property if diligence requirements are not met.

Our success depends, in part, on our ability to secure and maintain patent protection, to preserve our trade secrets, and to operate without infringing on the patents of third parties.  While we intend to protect our proprietary positions by filing United States and foreign patent applications for our important inventions and improvements, domestic and foreign patent offices may not issue these patents.

To date we have filed various patents with respect to our technology and product candidates.  Some of these applications include applications for provisional patents which are not reviewed by the United States Patent and Trademark Office (“PTO”) and will not result in the issuance of a patent, unless a regular patent application is filed within one year after the filing of the provisional patent application.  Generally, our provisional patent applications do not contain all of the detailed design and other information required by a regular patent application.  As a result, it may be uncertain whether the description of the invention in a provisional patent meets the “best mode and enablement” requirements for issuance of a patent.  Failure to adequately describe the invention may result in the loss of certain claims.  Although we intend to file regular patent applications with respect to any of our provisional patent applications, such filings require substantial expenditures of management time and legal fees.  If we do not have the funds or resources to prepare, file and maintain patent applications, we could lose proprietary rights to our technology.

Even if we file patent applications and patents are issued, third parties may challenge, invalidate, or circumvent our patents or patent applications in the future.  Competitors, many of which have significantly more resources than we have and have made substantial investments in competing technologies, may apply for and obtain patents that will prevent, limit, or interfere with our ability to make, use, or sell our products either in the United States or abroad.

In the United States, patent applications are secret until patents are issued, and in foreign countries, patent applications are secret for a time after filing.  Publications of discoveries tend to significantly lag the actual discoveries and the filing of related patent applications.  Third parties may have already filed applications for patents for products or processes that will make our products obsolete or will limit our patents or invalidate our patent applications.

We require our employees, consultants, advisers and suppliers to execute confidentiality and assignment of invention agreements in connection with their employment, consulting, advisory, or supply relationships with us.  They may breach these agreements and we may not obtain an adequate remedy for breach.  Further, third parties may gain access to our trade secrets or independently develop or acquire the same or equivalent information.

We could be damaged by product liability claims.

Our portable emergency oxygen device is intended for use by laypersons, without any training requirements. If one of our products malfunctions or a person misuses it and injury results to a user or operator, the injured party could assert a product liability claim against our company. While we currently carry a limited amount of product liability insurance in the amount of $4 million, it may not sufficiently shield us from any potential product liability claims, and we might not have sufficient funds available to pay any successful claims in excess of the limits of our insurance. Furthermore, any potential product liability claim may lead to our product liability insurance being cancelled, or we may not be able to obtain such insurance at a rate that is acceptable to us or at all. Because personal injury claims based on product liability may be very large, an underinsured or an uninsured claim could financially damage our company.

We may encounter unforeseen costs in supplying products.

Our estimates of the costs and time to be consumed in receiving components or input products supplied by outside vendors or third party companies may not be accurate.  There can be no assurance that we will not experience supply chain issues such as supply interruptions, fluctuations in supply or demand, or fluctuations in shipping costs caused by fluctuations in fuel costs.  If we were to experience such supply issues, they may have a material adverse effect on our business and operations.  We may not be able to transfer any adverse cost variations to our customers.

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Risks Relating to the Regulatory Environment

We may have compliance issues with the FDA which could prevent or delay our ability to generate revenues.

Our primary product, the portable emergency oxygen device is considered a Class II medical device by the FDA.

The FDA regulations govern the following activities that we perform, or that are performed on our behalf, to ensure that medical devices distributed domestically or exported internationally are safe and effective for their intended uses:

● product design, development and manufacture;

● product safety, testing, labeling and storage;

● pre-marketing clearance or approval;

● record keeping procedures;

● product marketing, sales and distribution; and

● post-marketing surveillance, complaint handling, medical device reporting, reporting of deaths or serious injuries and repair or recall of products.

Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include any of the following sanctions:

● warning letters, untitled letters, fines, injunctions, consent decrees, and civil penalties;

● repair, replacement, refunds, recall, or seizure of our products;

● operating restrictions, partial suspension or total shutdown of production;

● refusing our requests for 510(k) clearance or Pre-market Approval (“PMA”) of new products, new intended uses or modifications to existing products;

● withdrawing 510(k) clearance or PMA approvals that have already been granted; and

● criminal prosecution.

We may face problems related to the Department of Transportation regarding the shipment of our product which could potentially increase our shipping costs and limit our revenue potential.

The U.S. Department of Transportation (“DOT”) issued an interpretation letter on October 3, 2008 determining that our primary product, the portable emergency oxygen device, should be classified as “Oxygen Generator, Chemical, UN3356” for the purposes of shipment.  As a result of this interpretation, we are required to maintain at least one certified shipping personnel on staff to conduct shipping from our warehouse.  This DOT interpretation also requires us to put certain hazardous materials labeling on our packages upon shipment.

Furthermore, delivery and logistics providers such as United Parcel Service (“UPS”) and Federal Express typically charge a hazardous materials fee (“hazmat fee”) for products shipped with a UN3356 designation.  These issues have caused us to experience problems related to shipping, including the following:

● To date, we have typically passed any shipping hazmat fees on to our customers, but we have experienced customer resistance to these fees.

● During the period that we are shipping under the UN3356 shipping designation, the OxySure Model 615 can be transported by all modalities, including rail, road, ocean, and air.  However, when transported by air it has to be: (i) transported on cargo aircraft; (ii) appropriately labeled; and (iii) no more than 25 kilograms gross in weight.  However, several air cargo transporters have declined to transport “chemical oxygen generators,” especially internationally.  This has caused problems for us in shipping limited quantities of products by air to international destinations.

During the period that we are shipping under the UN3356 shipping designation, we may not be able to continue to pass the hazmat fees on to our customers.  If we elect to absorb these hazmat fees, it may significantly increase our shipping costs.  If we continue to pass these hazmat fees on to our customers, it may limit our revenue potential.  Further, during the period that we are shipping under the UN3356 shipping designation we could suffer a temporary or permanent suspension of our ability to ship our products if we were to fail to comply with the applicable shipping requirements, which could result in a total loss or large decrease in the sales of our product.  A permanent suspension of our ability to ship could result from, without limitation, repeated, gross violations of applicable regulations that have remained uncured, while we are shipping under the UN3356 shipping designation.

While the FDA has deemed the Model 615 sufficiently safe for over the counter purchase by lay persons, and while we have obtained independent, third party validation of the non-hazardous nature of Model 615, we are required, for shipment purposes, to comply with requirements of this interpretation letter until we can obtain a Special Permit or other similar relief, removing these shipping requirements.  We intend to pursue such a Special Permit or other similar relief. However, there can be no assurance that we will be able to obtain such a Special Permit or that we will be able to obtain some other, similar relief from DOT.  If we are able to obtain such a Special Permit or other similar relief, there can be no assurance that it won’t take a very long time to achieve.  Any delay or inability to obtain such a Special Permit or other, similar relief could have a material adverse impact on the marketability of our product, which in turn could limit our revenue potential.

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We are subject to regulations and limitations set forth by the Federal Aviation Administration which could limit our ability to generate revenues.

The Federal Aviation Administration (“FAA”) maintains control over any oxygen devices that are carried by commercial aircraft, either as commercial cargo, passenger luggage or as passenger on-board items.  The DOT interpretation letter dated October 3, 2008 determined that our primary product, the portable emergency oxygen device should be classified as “Oxygen Generator, Chemical, UN3356” for the purposes of shipment.  This means, in part, that the product can only be shipped on cargo aircraft and cannot be carried on board commercial aircraft unless the FAA grants us specific approval for our product to be allowed on commercial aircraft.  Currently, we have not sought approval from the FAA for passengers to carry our portable emergency oxygen device on board commercial aircraft.  We intend to seek approval by the FAA for passengers to be allowed to carry our portable emergency oxygen device on board commercial aircraft.  There can be no assurance that we will be able to obtain such approval.  If we are able to obtain such approval, there can be no assurance that it won’t take a long time to obtain.  Any delay or inability to obtain such FAA approval could have a material adverse impact on the marketability of our product and could limit our revenue potential.

We may face problems or delays in obtaining regulatory approval in international markets which could prevent or delay our ability to generate revenues.

As a medical device, our product is highly regulated.  We anticipate that most of the international markets we expect to operate in will require some sort of regulatory approval.  There can be no assurance that we will be able to obtain the regulatory approvals we will need to operate in our intended international markets. If we do pursue such regulatory approvals, it may take a long time to obtain. Further, we are generally reliant on third parties to pursue and obtain regulatory approvals in international markets, including our distribution partners in those markets. There can be no assurance that these partners will pursue these approvals timeously, if at all. Our South African distributor has not obtained approval from the South African Medicines Control Council for the marketing and sale of Model 615 in South Africa.

Risks Relating to Owning our Common Stock

Our common stock is traded over the counter, which may deprive stockholders of the full value of their shares.

While we intend to move the quotation of our common stock to a more senior exchange as soon as practicable, our common stock is currently quoted on the OTC Bulletin Board (“OTCQB”).  There can be no assurance that we will be successful in listing on a more senior exchange.  Because we are on the OTCQB, our common stock has very few market makers, low trading volumes and larger spreads between bid and asked prices than securities listed on an exchange such as the New York Stock Exchange or the NASDAQ Stock Market.  These factors may result in higher price volatility and less market liquidity for our common stock.

If our stock price drops significantly, we may become subject to securities litigation that could result in a harmful diversion of our resources.

In the past, following periods of volatility in the market price of a particular company’s stock, securities class action litigation has been brought against such companies.  Any litigation arising from the volatility in the price of our common stock could have an adverse effect upon our business, financial condition, and results of operations.

The share prices of our common stock may not bear any relationship to our book value.

The share prices of our common stock may not bear any direct relationship to the value of our physical assets, our book value, or any other general accepted criteria of valuation.  Additionally, the share prices for our common stock may be highly volatile as has been the case with the securities of other companies in emerging businesses.  Factors such as our financial results, the introduction of new products or services, the strength of our competitors, and various factors affecting our industry generally, may have a significant impact on the share price of our securities.  In recent years, the stock market has experienced a high level of price and volume volatility.  Market prices for the securities of many companies, particularly of small and emerging growth companies like ours whose common stock is traded in the over-the-counter market, have experienced wide price fluctuations which have not necessarily been related to the operating performance of these companies.

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A low share price severely limits the potential market for our common stock.

Our common stock has been trading at a price below $5.00 per share, subjecting trading in the stock to certain Securities and Exchange Commission (“SEC”) rules requiring additional disclosures by broker-dealers.  These rules generally apply to any non-NASDAQ equity security that has a market price per share of less than $5.00 per share, subject to certain exceptions (a “penny stock”).  Such rules require the delivery, prior to any penny stock transaction, of a disclosure schedule explaining the penny stock market and the risks associated therewith and impose various sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and institutional or wealthy investors.  For these types of transactions, the broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to the sale.  The broker-dealer also must disclose the commissions payable to the broker-dealer, current bid and offer quotations for the penny stock and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market.  Such information must be provided to the customer orally or in writing before or with the written confirmation of trade sent to the customer.  Monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.  The additional burdens imposed upon broker-dealers by such requirements could discourage broker-dealers from effecting transactions in our common stock.

FINRA sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.

In addition to the penny stock rules promulgated by the SEC, which are discussed in the immediately preceding risk factor, Financial Industry Regulatory Authority (“FINRA”) rules require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer.  Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information.  Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers.  FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit the ability to buy and sell our stock and have an adverse effect on the market value for our shares.

An investor’s ability to trade our common stock may be limited by trading volume.

A consistently active trading market for our common stock may not develop on the OTCQB.  A limited trading volume may prevent our shareholders from selling shares at such times or in such amounts as they may otherwise desire.

We have a concentration of stock ownership and control, which may have the effect of delaying, preventing, or deterring a change of control.

Our common stock ownership is highly concentrated.  Through their ownership of shares of our common stock, two individuals, our President, Julian T. Ross and Donald Reed, a member of our Board of Directors, beneficially own approximately 73.26% of our total outstanding shares of common stock.  This amount includes warrants, options, and convertible notes held by JTR Investments, Limited and Agave Resources, LLC.  As a result of the concentrated ownership of the stock, these two stockholders, acting together, will be able to control all matters requiring stockholder approval, including the election of directors and approval of mergers and other significant corporate transactions.  This concentration of ownership may have the effect of delaying, preventing or deterring a change in control of our company.  It could also deprive our stockholders of an opportunity to receive a premium for their shares as part of a sale of our company and it may affect the share price of our common stock.

Failure to design, implement and maintain effective internal controls could have a material adverse effect on our business and stock price.

As a public company, we have significant requirements for enhanced financial reporting and internal controls.  The process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company.  If we are unable to establish or maintain appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations on a timely basis, result in material misstatements in our financial statements and harm our operating results.  Testing and maintaining internal controls may divert our management’s attention from other matters that are important to our business.  We may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 or our independent registered public accounting firm may not issue a favorable assessment.  If either we are unable to conclude that we have effective internal control over financial reporting or our independent registered public accounting firm are unable to provide us with an unqualified report, investors could lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.

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Our lack of sufficient personnel creates a material weakness in our internal controls.  If we fail to implement a remediation plan to cure our lack of internal controls over our financial reporting, we may lose credibility with investors and the market price of our common stock may be adversely impacted.

While there are internal controls and procedures in place that relate to financial reporting and the prevention and detection of material misstatements, it is our management’s opinion that a material weakness in the financial reporting process resulted from insufficient personnel.  We are currently working to improve our internal financial reporting controls.  We plan to continue to assess our internal controls and procedures and intend to take further action as necessary or appropriate to address our material weaknesses, including to effect ongoing compliance with Section 404 of the Sarbanes-Oxley Act of 2002.  The existence of a material weakness is an indication that there is a more than remote likelihood that a material misstatement of our financial statements will not be prevented or detected in a future period while that material weakness continues to exist.  The process of designing and implementing effective internal controls and procedures is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company.  We cannot assure you that additional material weaknesses or significant deficiencies in our internal controls will not be discovered in the future.  In the event that we cannot implement a remediation plan in a timely manner, investors and others may lose confidence in the reliability of our financial statements, which in turn could harm our business and negatively impact the trading price of our stock.

Our board of directors has the authority to issue shares of “blank check” preferred stock, which may make an acquisition of our company by another company more difficult.

We may in the future adopt certain measures that may have the effect of delaying, deferring or preventing a takeover or other change in control of our company that a holder of our common stock might consider in its best interest.  Specifically, our board of directors, without further action by our stockholders, currently has the authority to issue shares of preferred stock and to fix the rights (including voting rights), preferences and privileges of these shares (“blank check” preferred).  Such preferred stock may have rights, including economic rights, senior to our common stock.  As a result, the issuance of the preferred stock could have a material adverse effect on the price of our common stock and could make it more difficult for a third party to acquire a majority of our outstanding common stock.

Because we will not pay dividends in the foreseeable future, stockholders will only benefit from owning common stock if it appreciates.

We have never paid dividends on our common stock and we do not intend to do so in the foreseeable future.  We intend to retain any future earnings to finance our growth.  Accordingly, stockholders will only benefit from owning our common stock if it appreciates.

We are likely to attempt to raise additional capital through issuances of debt or equity securities, which may cause our stock price to decline, dilute the ownership interests of our existing stockholders, and/or limit our financial flexibility.

Historically we have financed our operations through the issuance of equity securities and debt financings, and we expect to continue to do so for the foreseeable future.  To the extent that we raise additional funds by issuing equity securities, our stockholders may experience significant dilution of their ownership interests.  Debt financing, if available, may involve restrictive covenants that limit our financial flexibility or otherwise restrict our ability to pursue our business strategies. Additionally, if we issue shares of common stock, or securities convertible or exchangeable for common stock, the market price of our existing common stock may decline. There can be no assurance that we will be successful in obtaining any additional capital resources in a timely manner, on favorable terms, or at all.

Our share price has been volatile and may continue to be volatile which may subject us to securities class action litigation in the future.

The market price of shares of our common stock has been, and may be in the future, subject to wide fluctuations in response to many risk factors listed in this section, and others beyond our control, including:

● actual or anticipated fluctuations in our financial condition and operating results;

● status and/or results of any regulatory approvals;

● regulatory actions with respect to our products or our competitors’ products;

● actions and decisions by our collaborators or partners;

● actual or anticipated changes in our growth rate relative to our competitors;

● actual or anticipated fluctuations in our competitors’ operating results or changes in their growth rate;

● competition from existing products or new products that may emerge;

● issuance of new or updated research or reports by securities analysts;

● fluctuations in the valuation of companies perceived by investors to be comparable to us;

● share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;

● market conditions for medical device stocks in general;

● status of our search and selection of future management and leadership; and

● general economic and market conditions.

Some companies that have had volatile market prices for their securities have had securities class action lawsuits filed against them. Such lawsuits, should they be filed against us in the future, could result in substantial costs and a diversion of management’s attention and resources. This could have a material adverse effect on our business, results of operations and financial condition.

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ITEM 1B—UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2—PROPERTIES

We do not own any property at the present time and have no agreements to acquire any property.  Our executive offices are located at 10880 John W. Elliot Drive, Suite 600, Frisco Texas, 75033.  The space is approximately 16,200 square feet, and comprises approximately 6,200 square feet of office space and approximately 10,000 square feet of production and warehouse space.  This space was purpose built for our production needs.  We believe that this space is adequate for our needs at this time, and we believe that we will be able to locate additional space in the future, if needed, on commercially reasonable terms.  We entered into a lease on this facility in March 2007 (the “March 2007 Lease”) and it expired on October 15, 2012. We are currently renting our space on a month to month basis as negotiations for a new lease with our landlord are being completed. There can be no assurance that we will enter into a new lease in our current facility, or if we do, that we will be able to do so on commercially reasonable terms. The cost for the March 2007 Lease was as follows:

Lease Year	Base Rent per Square Foot of Rentable Area (per year)		Annual Base Rent		Monthly Base Rent
1	$	8.50	$	137,700.00	$	11,475.00
2	$	10.75	$	174,150.00	$	14,512.50
3	$	12.00	$	194,400.00	$	16,200.00
4	$	12.25	$	198,450.00	$	16,537.50
5	$	12.50	$	202,500.00	$	16,875.00

ITEM 3—LEGAL PROCEEDINGS

We are not involved in any legal proceedings and we do not know of any legal proceedings, which are threatened or contemplated against us.

ITEM 4—REMOVED AND RESERVED

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PART II

ITEM 5—MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Price and Number of Stockholders

Our common stock is listed on the OTCQB under the symbol “OXYS.” The following table sets forth, for the past fiscal year, the range of high and low sales prices in each fiscal quarter for our common stock.

For the year ended December 31, 2012
	High		Low
Fourth quarter	$	2.75	$	0.47
Third quarter	$	0.88	$	0.45
Second quarter	$	2.50	$	0.50
First quarter	$	2.75	$	0.05

We were approved for trading on December 20, 2011. There has been no trading of our common stock during fiscal year 2011, and no high and low sales are reportable.

As of April 1, 2013, there were approximately 77 holders of record of our common stock, and 22 holders of record of our Series A convertible preferred stock. In addition, we believe that a significant number of beneficial owners of our common stock hold their shares in nominee or in “street name” accounts through brokers.  On April 1, 2013, the last sale price reported on the OTCQB for our common stock was $.75 per share.

Dividend Policy

Since inception of OxySure, no dividends have been paid on our common stock. We intend to retain any earnings for use in our business activities, so it is not expected that any dividends on our common stock will be declared and paid in the foreseeable future.

Repurchases of Common Stock

None.

Unregistered Sales of Equity Securities

During the year ended December 31, 2012:

(1)           We issued 1,711,952 shares of common stock pursuant to the conversion of convertible subordinated promissory notes totaling $2,433,850 at an aggregate conversion price of $1.42 per share.

(2)           We issued 2,815,374 shares of common stock pursuant to the cashless conversion of 2,307,684 shares of our Series A Preferred at a conversion ratio of 1.22:1.

(3)           We issued 374,808 shares of common stock pursuant to the exercise of 374,808 stock options and received proceeds of $98,284.

(4)           We issued 882,616 shares of common stock pursuant to the exercise of 882,616 warrants and received proceeds of $6,106.

(5)           We issued 68,889 shares of common stock for $41,250 in cash at an aggregate price of $.60 per share.

(6)           We issued 97,500 shares of common stock for services valued at approximately $20,748.

(7)           We issued 77,674 shares of common stock in connection with the acquisition of assets valued at approximately $95,062.

All of the securities described above were issued in reliance on the exemption from registration set forth in Section 4(2) of the Securities Act of 1933.

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ITEM 6—SELECTED FINANCIAL DATA

Not Applicable.

ITEM 7—MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis together with the financial statements and the related notes to those statements included in “Item 8 – Financial Statements and Supplementary Data.” This discussion contains forward-looking statements that involve risks and uncertainties. As a result of many factors, such as those set forth under “Risk Factors” and elsewhere in this Annual Report on Form 10-K, our actual results may differ materially from those anticipated in these forward-looking statements.

Forward-Looking Statements

Statements and information included in this Annual Report on Form 10-K 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 Annual Report on Form 10-K 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.

Results of operations- Comparison of the years ended December 31, 2012 and 2011

The following table sets forth our condensed statement of operations data and presentation of that data as amount of change from period-to-period.

	For the year ended December 31,
	2012			2011			Increase/ (Decrease)			% Increase/  (Decrease)
Revenues, net	$	269,697		$	185,209		$	84,488			46	%
Cost of goods sold		95,587			103,389		$	(7,802	)		-8	%
Gross profit		174,110			81,820			92,290			113	%
		64.6	%		44.2	%
		59.3	%
Operating expenses
Selling, general and administrative		1,020,298			1,150,786			(2,171,084	)		-189	%
Loss from operating expenses		(846,188	)		(1,068,966	)		1,915,154			-179	%
Other income (expenses)
Other income (expense)		224,639			144,882			79,757
Interest expense		(206,722	)		(608,316	)		401,594
Total other income (expenses)		17,917			(463,434	)		481,351
Net loss	$	(828,271	)	$	(1,532,399	)		704,128			-45.95	%

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Revenue

We generate revenue primarily through the sale of Model 615 and related accessories and complimentary products through distribution partners and dealers.  Revenue and percentage changes for the years ended December 31, 2012 and 2011, respectively, are as follows:

	For the year ended December 31,
	2012		2011		Increase/ (Decrease)		% Increase/ (Decrease)
Revenues, net	$	269,697	$	185,209	$	84,488		45.6	%

Revenues increased during the twelve months ended December 31, 2012 primarily due to an increase in product sales in the United States as well as international territories.

Gross Profit

Gross profit as a percent of revenue was 64.6% and 44.2% for the years ended December 31, 2012 and 2011, respectively. This increase was primarily due to the combined effect of an increase in service revenues, and an increase in product gross margins.

Marketing and Sales Expenses

Marketing and sales expenses consisted primarily of personnel-related costs, including sales commissions, and the costs of marketing programs aimed at increasing revenue, such as advertising, trade shows, public relations, investor relations and other market development and investor awareness programs. Marketing and sales expenses and percentage changes for the years ended December 31, 2012 and 2011, respectively, are as follows:

	For the year ended December 31,
	2012		2011		Increase/ (Decrease)		% Increase/  (Decrease)
Marketing and sales expenses	$	76,427	$	15,141	$	61,286		405	%

The increase in marketing and sales expenses for the twelve months ended December 31, 2012 was primarily as a result of an increase in expenses associated with marketing and awareness building of our products and investor relations expenses. 

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General and Administrative Expenses

General and administrative expenses consist primarily of compensation for executive, administrative and production personnel, including stock-based compensation. Other general and administrative expenses include facility costs, legal and accounting services, other professional services, and consulting fees. General and administrative expenses and percentage changes for the years ended December 31, 2012 and 2011, respectively, are as follows:

	For the year ended December 31,
	2012		2011		Increase/ (Decrease)			% Increase/  (Decrease)
General and administrative expense	$	943,872	$	1,094,374	$	(150,502	)		-14	%

The decrease in general and administrative expenses for the twelve months ended December 31, 2012 was primarily as a result of a decrease in depreciation expense and employee stock option expense, offset by an increase in amortization expense. The decrease in employee stock option expense was primarily due to options forfeitures.

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Research and Development Expense

Costs associated with research and development increased to $25,816 from $260 in the years ended December 31, 2012 and 2011, respectively, primarily due to an increase in costs associated with laboratory testing and new product development.

Interest expense

Interest expense decreased approximately $401,596 in the twelve months ended December 31, 2012, primarily due to a decrease in amortization expense related to debt discount amortization and the amortization of warrant fair values in connection with convertible notes. We had approximately $189,611 in non-cash amortization expense related to convertible notes in 2012, as compared to approximately $546,104 in non-cash amortization expense related to convertible notes in 2011. We incurred other non-cash interest expenses of $16,430 and $57,845 in 2012 and 2011, respectively, related to stated, accrued but unpaid interest on convertible loans.

Interest expenses and percentage changes for the years ended December 31, 2012 and 2011, respectively, are as follows:

	For the year ended December 31,
	2012		2011		Increase/ (Decrease)			% Increase/  (Decrease)
Interest expense:
Amortization of debt discount and warrant fair values related to convertible notes	$	189,611	$	546,104	$	(356,493	)		-65	%
Other Interest		17,110		62,213	$	(45,104	)		-72	%
Total interest expense	$	206,720	$	608,316	$	(401,596	)		-66	%

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Other income and expense

During the twelve months ended December 31, 2012, other income increased approximately $79,757 compared to the same period in the prior year. This increase was primarily due to the receipt of an economic incentive in the amount of $39,000 from the Frisco Economic Development Corporation, and gains recognized from the impairment of certain accounts payable and notes payable.

Liquidity, capital resources and plan of operation

We have incurred losses since our inception and as of December 31, 2012 we had an accumulated deficit of approximately $14,258,667 and a deficit in stockholders equity of approximately $652,125. We expect to continue to incur losses until we generate sufficient revenue to offset our expenses, and we anticipate that we will continue to incur net losses for the foreseeable future. We expect to incur increased expenses related to our anticipated growth, as well as the development and commercialization of other product candidates and, as a result, we will need to generate significant net product sales, royalty and other revenues to achieve profitability. 

Liquidity

Since inception, we have been engaged primarily in technology and product research and development, 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 these activities, we have sustained operating losses since inception and have an accumulated deficit of $14,258,667 at December 31, 2012.  We have financed our operations since inception through the issuance of debt and equity securities and loans and advances from stockholders. We had $253,346 and $315,833 of total current assets and negative working capital of $1,536,239 and $2,244,219 as of December 31, 2012 and 2011, respectively. We had a cash balance of approximately $13,514 as of December 31, 2012, as compared to $65,118 as of December 31, 2011.  Our funds are kept in financial institutions located in the United States of America.

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 for sales returns and allowance for doubtful accounts, were $18,487 and $2,758 as at December 31, 2012 and December 31, 2011, respectively.

We had total notes payable of $474,661 and $2,727,449 as of December 31, 2012 and December 31, 2011, respectively.  The decrease in total notes payable was primarily due to the combined effect of a decrease in current notes payable, from $1,565,059 at December 31, 2011 to $398,589 at December 31, 2012, and a decrease in long term notes payable from $1,162,390 at December 31, 2011 to $76,072 at December 31, 2012. These decreases are primarily due to the conversion of convertible subordinated promissory notes totaling $2,433,850 at an aggregate conversion price of $1.42 per share, primarily related to the JTR/Agave conversions and the conversion of the Sinacola First Landlord Note and the Sinacola Second Landlord Note.

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On April 3, 2007 we entered into a note agreement with the City of Frisco, Texas for $243,000 (the “Frisco Note”) pursuant to an economic incentive package provided through the Frisco Economic Development Corporation (“FEDC”). The note required varying annual principal payments through August 2012.  The note was non-interest bearing; however, interest has been imputed at 12.18% per annum. The unamortized discount at December 31, 2010 was $66,198. Individual annual payments were to be forgiven if certain performance targets are achieved, which include the number of full time employees, square feet occupied in the city of Frisco and the taxable value of business and personal property in the City of Frisco. The first annual payment for 2008 in the amount of $30,000 was forgiven and we recognized the entire $30,000 under “Other income” in the Statement of Operations and Accumulated Deficit for the year ended December 31, 2008.  On March 22, 2011 we entered into an Amended and Restated Performance Agreement with the FEDC. In terms of the Amended and Restated Performance Agreement, the FEDC provided us with economic assistance in the form of the renewal and extension of the outstanding forgivable loan of $213,000 together with revised performance credits over 5 years, commencing on March 22, 2011 and ending on the earlier to occur of: (i) the full payment of the economic incentives; or (ii) March 31, 2016.

The renewed Frisco Note requires varying annual principal payments through December 2015. The Frisco Note is non-interest bearing; however, interest has been imputed at 12.34% per annum.

On December 1, 2011 we received the first performance credit from the FEDC in the amount of $26,000 pursuant to the Amended and Restated Performance Agreement. The unamortized discount at December 31, 2011 was $52,752, and the net amount of the Frisco Note as at December 31, 2011 was $134,248.

Effective December 1, 2012 we received the performance credit from the FEDC in the amount of $39,000 pursuant to the Amended and Restated Performance Agreement. The unamortized discount at December 31, 2012 was $40,340, and the net amount of the Frisco Note as at December 31, 2012 was $107,660.

Future principal payments of the Frisco Note payable are as follows:

2013		44,000
2014		52,000
2015		52,000
	$	148,000

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During 2013, 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 $2.43 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.  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.

In estimating the needed amount, the following assumptions were made:

● There are no deferments of accounts payable or exchange of rent expense for equity; and

● There are no refinancings of our debt obligations.

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The following table sets out the major components of our estimates of cash needs over the next 12 months to remain viable, subject to the above assumptions:

Accounts Payable & Accrued Expenses	$	652,125
Capital leases - current		296,116
Notes payable- current		398,589
Subtotal	$	1,290,360
Rent expense		202,500
Insurance & taxes		38,000
Regulatory compliance costs		100,000
Salaries & wages		550,000
Inventory		125,000
General corporate expenses		125,000
Subtotal	$	1,140,500
Total estimate	$	2,430,860

Our business is relatively new, and we are not aware of any material trends that are at least likely to impact our financial condition, liquidity and results of operation.

Going Concern

Our continuation as a going concern is dependent upon our ability to generate sufficient cash flow from operations to meet our obligations on a timely basis and/or obtain financing as may be required.  As of December 31, 2012 and 2011, we have incurred net losses from operations and had stockholders’ deficits of $14,258,667 and $13,430,659, respectively, since inception.  We had a working capital deficit of $1,536,239 as of December 31, 2012 and $2,244,219 as of December 31, 2011. We have had limited revenues from the marketing of our primary product, the OxySure Model 615 as we are early in its commercialization and it currently operates in this single industry segment.  These factors raise significant doubt about our ability to continue as a going concern.

During the next 12 months, our foreseeable cash requirements will relate to continual development of the operations of our business, maintaining our good standing and making the requisite filings with the Securities and Exchange Commission, and the payment of expenses associated with reviewing or investigating any potential business ventures.  We may experience a cash shortfall and may be required to raise additional capital. Historically, we have relied upon internally generated funds and funds from the sale of shares of stock and loans and advances from our shareholders and private investors to finance our operations and growth. We may raise additional capital through future public or private offerings of our stock or through loans from investors, although there can be no assurance that we will be able to obtain such financing.  Our failure to do so could have a material and adverse effect upon us and our shareholders.

We have a series of plans to mitigate the going concern:

1.   Management is seeking additional sources of equity and/or debt financing on terms that are reasonable for us; however, there is no assurance that any such additional funding will be available.

2.   We anticipate that sales during 2013 and 2014 from existing markets will grow, and we believe that we will be able to generate sales from new markets. Existing markets include education customers such as schools, school districts and colleges, and commercial customers such as manufacturing facilities, churches and other commercial venues. New markets will include, but not be limited to, government customers and new international territories and markets.

3.   We plan to increase our market penetration through the addition of new distributors, both the US and outside the US during 2013 and beyond. We also plan to increase the number of sub-distributors and sales agents we will appoint in the U.S. to sell our products.

4.   We plan to continue to diversify our product range through the addition of complementary products and solutions. Some of these products will be sourced from third party manufacturers and suppliers.

5.   We may seek or consider strategic business combinations with other companies to complement our resources and create synergies.

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Cash Flows

The following table shows a summary of our cash flows for the periods indicated:

	For the year ended December 31,
	2012		2011
Net cash used in operating activities		(120,457)		(689,461	)
Net cash used in investing activities		(36,048)		(44,808	)
Net cash provided by financing activities		104,901		759,500

Net cash used in operating activities.  Net cash used in operating activities was $(120,457) and $(689,461) for the years ended December 31, 2012 and 2011, respectively. The improvement in cash flows from the operating activities was due primarily to the combined effects of a reduction in net loss and an improvement in amortization expense.

Net cash used in investing activities. Net cash used in investing activities was $(36,048) and $(44,808) for the years ended December 31, 2012 and 2011, respectively. The decrease in cash used for investing activities was due primarily to a decrease in cash used to acquire other assets, offset by an increase in cash used for property and equipment.

Net cash provided by financing activities. Net cash provided by financing activities was $104,901 and $759,500 for the years ended December 31, 2012 and 2011, respectively. The decrease in net cash provided by financing activities was due primarily to a decrease in net loan proceeds, offset by an increase in cash received from the exercise of common stock options and warrants.

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Operating Capital and Capital Expenditure Requirements

Our future capital requirements will depend on many factors and include, but are not limited to the following:

● the progress, timing and success of the commercialization of Model 615 and our other product candidates and potential product candidates;

● the outcome, timing and cost of regulatory approvals and the regulatory approval process;

● delays that may be caused by changing regulatory requirements;

● the number of product candidates that we pursue;

● the costs involved in filing and prosecuting patent applications and enforcing and defending patent claims;

● the timing and terms of future in-licensing and out-licensing transactions, if any;

● the cost and timing of establishing new or increasing existing sales, marketing, manufacturing and distribution capabilities;

● the cost of procuring commercial supplies;

● the extent to which we acquire or invest in businesses, products or technologies; and

● the possible costs of litigation.

We anticipate that we will need additional capital in the future to fund growth. Until we can generate a sufficient amount of product revenue, if ever, we expect to finance future cash needs through public or private equity offerings, debt financings or corporate collaboration and licensing arrangements. Such funding, if needed, may not be available on favorable terms, if at all. In the event we are unable to obtain additional capital, we may delay or reduce the scope of our current activities and other expenses.

To the extent that we raise additional funds by issuing equity securities, our stockholders may experience additional significant dilution, and debt financing, if available, may involve restrictive covenants. To the extent that we raise additional funds through collaboration and licensing arrangements, it may be necessary to relinquish some rights to our technologies or our product candidates or grant licenses on terms that may not be favorable to us. We may seek to access the public or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital.

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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.

OxySure Systems, Inc. (OXYS: OTCQB) (the “Company,” “OSI,” “we,” “us,” or “our”) was incorporated on January 15, 2004 as a Delaware corporation. The Company is located in Frisco, Texas and is a medical technology company that focuses on the design, manufacture and distribution of specialty respiratory and emergency medical solutions. The company pioneered a safe and easy to use solution to produce medically pure (USP) oxygen from inert powders. The company owns nine (9) issued patents and patents pending on this technology which makes the provision of emergency oxygen safer, more accessible and easier to use than traditional oxygen provision systems. OxySure's products 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.

In 2008 the Company launched its first product utilizing this technology – a portable emergency oxygen system for lay person use, called the OxySure Model 615. On December 9, 2005, the Company received approval from the Food and Drug Administration (510K, Class II) for Model 615. The FDA approval is for over-the-counter purchase, without the need of a prescription.

The Company has, at the present time, not paid any dividends and any dividends that may be paid in the future will depend upon the financial requirements of the Company and other relevant factors.

On July 19, 2004, the Company affected a 1-for-5 reverse stock split of the Company’s common stock. All share numbers and common stock numbers, including stock options and warrants, have been retroactively adjusted to reflect the reverse stock split.

While the Company has effectively managed its working capital deficit the going concern risk remains an issue for the company to manage.  The Company has implemented, and plans to further implement several different strategies in order to help the Company ease the going concern issue.  Refer to Note 15, “Going concern” of the Notes to Financial Statements for a partial list of the Company’s plans to mitigate the going concern issue.

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. Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company’s system of internal accounting control is designed to assure, among other items, that (1) recorded transactions are valid; (2) all valid transactions are recorded; and (3) transactions are recorded in the period in a timely manner to produce financial statements which present fairly the financial condition of the Company.

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Use of estimates - The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reported period.  Actual results could differ from those estimated.

Revenue Recognition - We recognize revenue when persuasive evidence of an arrangement exists, shipment has occurred, the price is fixed or determinable, and collectability is reasonably assured.  Revenues are recognized from product sales, net of discounts and rebates.  This revenue recognition policy is applied to both customers and distributors.

Fees from licensees desiring to manufacture and distribute our products or derivative products using our intellectual property include initial license fees and royalties.  Initial license fees are generally recognized upon granting of the license to the licensee.  Royalties are recognized in the period earned.

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 $499,225 and $421,713 for the years ended December 31, 2012 and 2011 respectively.

Cash and Cash Equivalents - Cash consists of all highly liquid investments purchased with maturity of three months or less to be cash equivalents. Cash and cash equivalents may at times exceed Federally-insured limits. To minimize this risk, we place our cash and cash equivalents with high credit quality institutions.

Inventory – Our inventory consists 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. We write down our inventory value for estimated obsolescence equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. These factors are impacted by market and economic conditions, technology changes, new product introductions and changes in strategic direction and require estimates that may include uncertain elements. Actual demand may differ from forecasted demand, and such differences may have a material effect on recorded inventory values. Management has established inventory reserves to cover estimated inventory losses for all work-in-process and finished goods related to products we manufactured, as well as raw material and components for those products that had no potential use in products to be manufactured in the future. Management is required to make judgments about the future benefit of our raw materials and components. Actual reserve requirements could differ significantly from Management’s estimates, which could have a significant unfavorable impact on our future gross margins.

At December 31, 2012 inventories consisted of the following:

	December 31, 2012
Parts inventory	$	105,647
Work in process		76,106
Finished goods		39,591
Total inventories	$	221,345

Concentration of Credit Risk – We sell our products throughout the United States as well as in certain other countries.  Sales to its recurring customers in the United States are generally granted on net 30-day credit terms. We perform periodic credit evaluations of our recurring customers and generally do not require collateral. In general, we require prepayment on all sales to customers outside the United States. An allowance for doubtful accounts is maintained for potential credit losses, which losses historically have not been significant.

40

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 $138,936 and $174,173 for the years ended December 31, 2012 and 2011, 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.

41

Amortization expense for patents and trademarks was $29,861 and $29,566 for the years ended December 31, 2012 and 2011, 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. Certain events and circumstances we considered in determining whether the carrying value of identifiable intangible assets may not be recoverable include, but are not limited to: significant changes in performance relative to expected operating results; significant changes in the use of the assets; significant negative industry or economic trends; and changes in its business strategy.  In determining if impairment exists, we estimate the undiscounted cash flows to be generated from the use and ultimate disposition of these assets.  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 years ended December 31, 2012 and 2011.

Other Assets – We record Other Assets net of accumulated amortization. During 2012 we recorded total deferred loan costs in the amount of $249,723. Amortization expense for Other Assets was $24,972 and $0 for the years ended December 31, 2012 and 2011, 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.

Allowance for Doubtful Accounts - We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make payments.  We periodically review these allowances, including an analysis of the customers’ payment history and information regarding the customers’ creditworthiness.  Actual write-offs have not been materially different from the estimated allowance. We recorded bad debt expense of $1,376 and $0 for the years ended December 31, 2012 and 2011, respectively.

Research and Development Costs – Costs associated with the development of our products are charged to expense as incurred.  $25,816 and $260 were incurred in the years ended December 31, 2012 and 2011, respectively.

Income Taxes – In accordance withAccounting Standards Codification (“ASC”) Topic 740, “Income Taxes” (“ASC 740”), we account for income taxes using an asset and liability approach, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our Consolidated Financial Statements, but have not been reflected in our taxable income.  A valuation allowance has been established to reduce deferred tax assets to their estimated realizable value.  Therefore, we provide a valuation allowance to the extent that we do not believe it is more likely than not that we will generate sufficient taxable income in future periods to realize the benefit of our deferred tax assets.  We recognize interest and penalties related to unrecognized tax benefits in income tax expense.

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.

42

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, which was developed for use in estimating the value of traded options that have no vesting restrictions and that are freely transferable. The Black-Scholes model requires the input of certain assumptions.  Changes in the assumptions used in Black-Scholes model can materially affect the fair value estimates. We evaluate the assumptions used to value stock options on an annual basis. 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 employees.  Upon the adoption of the accounting guidance, we continued to use historical volatility in deriving its expected volatility assumption as allowed under GAAP because we believe that future volatility over the expected term of the stock options is not likely to differ materially from the past. The risk-free interest rate assumption is based on 5-year U.S Treasury zero-coupon rates appropriate for the expected term of the stock options. The expected dividend assumption is based on the history and expectation of dividend payouts.  The fair values generated by the Black-Scholes model may not be indicative of the actual fair values of the equity awards, as we do not consider other factors important to those awards to employees, such as continued employment, periodic vesting requirements and limited transferability.  The amount of stock based compensation expenses is net of an estimated forfeiture rate, which is also based on historical data. For the years ended December 31, 2012 and 2011, stock based compensation expense was approximately $7,999 and $104,419 respectively, which consisted primarily of stock-based compensation expense related to stock options recognized under GAAP issued to the employees.

The Company follows ASC Topic 505-50, formerly EITF 96-18, “Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling Goods and Services,” for stock options and warrants issued to consultants and other non-employees. In accordance with ASC Topic 505-50, these stock options and warrants issued as compensation for services to be provided to the Company are accounted for based upon the fair value of the services provided or the estimated fair market value of the option or warrant, whichever can be more clearly determined. We recognize this expense over the period in which the services are provided. For the years ended December 31, 2012 and 2011, stock based compensation expense was approximately $0 and $29,354 respectively, which consisted primarily of stock-based compensation expense related to stock options and warrants recognized under GAAP issued to consultants and other non-employees.

43

The following table shows the components of our stock based compensation expense for employees, consultants and other non-employees:

	Year ended December 31,
	2012		2011
Common Stock options issued for compensation	$	7,999	$	104,419
Common Stock options and warrants issued for services		-		29,354
Total	$	7,999	$	133,773

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.  During the years ended December 31, 2012 and 2011 we incurred $76,427 and $15,141 respectively, in advertising and promotion costs.

Litigation and Settlement Costs - Legal costs are expensed as incurred. We record a charge equal to at least the minimum estimated liability for a loss contingency when both of the following conditions are met: (i) information available prior to issuance of the financial statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements and (ii) accrue the best estimate within a range of loss if there is a loss or, whenthere is no amount within a range that forms a better estimate, we will accrue the minimum amount in the range. We are not presently involved in any legal proceedings, litigation or other legal actions.

Loss Per Share - Basic loss per share, which excludes anti-dilutive securities, is computed by dividing loss available to common shareholders by the weighted-average number of common shares outstanding for that particular period. In contrast, diluted loss per share considers the potential dilution that could occur from other equity instruments that would increase the total number of outstanding shares of common stock. Such amounts include shares potentially issuable under outstanding options, warrants, convertible preferred stock and convertible notes.

44

A reconciliation of the numerator and denominator used in the calculation of basic and diluted net loss per share follows:

	Year ended December 31,
	2012			2011
Historical net loss per share:
Numerator
Net loss, as reported		(828,271	)		(1,532,399	)
Less: Effect of amortization of interest expense on convertible notes		-			-
Net loss attributed to common stockholders (diluted)		(828,271	)		(1,532,399	)
Denominator
Weighted-average common shares outstanding		19,862,088			15,930,327
Effect of dilutive securities		-			-
Denominator for diluted net loss per share		19,862,088			15,930,327
Basic and diluted net loss per share	$	(0.04	)	$	(0.10	)

The following outstanding options, warrants, convertible preferred shares and convertible note shares were excluded from the computation of basic and diluted net loss per share for the periods presented because including them would have had an anti-dilutive effect.

	Year ended December 31,
	2012		2011
Options to purchase common stock		1,461,096		1,852,204
Warrants to purchase common stock		1,877,034		2,842,983
Common shares issuable upon conversion of convertible preferred stock		998,875		3,814,249
Convertible note shares outstanding		350,560		1,962,935

Restatements and Reclassifications - Certain financial statement items have been reclassified to conform to the current year’s presentation.

45

Recent Accounting Pronouncements

In April 2011, the FASB issued ASU 2011-02, “Receivables (Topic 310) A Creditors Determination of Whether a Restructuring Is a Troubled Debt Restructuring.”  The update clarifies the guidance on a creditors evaluation of whether it has granted a concession as well as clarifying the guidance when a creditor’s evaluation of whether a debtor is experiencing financial difficulties.  The guidance clarifies when a Company should record impairment due to concessions or the financial difficulties of the debtor.  The new standard is effective for fiscal years and interim periods ending after June 15, 2011.  The guidance should be applied retrospectively to restructurings occurring on or after the beginning of the fiscal year of adoption.  The adoption did not have a material effect on our consolidated financial position or results of operations.

In April 2011, the FASB issued ASU 2011-03, “Transfers and Servicing (Topic 860) Reconsideration of Effective Control for Repurchase Agreements.”  ASU 2011-03 applies to transactions where the seller transfers financial assets that both entitle and obligate the transferor to repurchase or redeem the financial assets before their maturity.  The amendments in this guidance remove from the assessment of effective control the criteria requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms even in the event of default by the transferee and the collateral maintenance guidance related to that criterion.  The new standard is effective for fiscal years and interim periods ending after December 15, 2011 and should be applied on a prospective basis. The adoption did not have a material effect on our consolidated financial position or results of operations.

In May 2011, the FASB issued ASU 2011-04, “Fair Value Measurement (Topic 820), Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS.”  The amendment results in a consistent definition of fair value and ensures the fair value measurement and disclosure requirements are similar between GAAP and International Financial Reporting Standards (“IFRS”). This amendment changes certain fair value measurement principles and enhances the disclosure requirements particularly for Level 3 fair value measurements. This amendment will be effective for the Company on January 1, 2012. The adoption did not have a material effect on our consolidated financial position or results of operations.

In June 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-05, “Comprehensive Income (Topic 220), and Presentation of Comprehensive Income.”  ASU 2011-05 amends the presentation of other comprehensive income and the Statement of Consolidated Operations. Under this amendment, entities will be required to present the total of comprehensive income, the components of net income,  and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. Regardless of which reporting option is selected, the Company is required to present on the face of the financial statements, reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statements where the components of net income and the components of other comprehensive income are presented.   The current option to report other comprehensive income and its components in the statement of changes in equity has been eliminated. This amendment will be effective for the Company on January 1, 2012 and full retrospective application is required. The amendment did not have a material impact on our financial statements.

Effecting certain sections covered under ASU 2011-05, in December, 2011, the FASB issued ASU 2011-12, “Comprehensive Income (Topic 220),” Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items out of Accumulated Other Comprehensive Income in ASU 2011-05.”  The pronouncement is effective for fiscal years and interim periods beginning January 1, 2012 with retrospective application for all comparative periods presented.  The Company’s adoption of the new standard did not have a material effect on our consolidated financial position or results of operations.

In September 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-08, “Intangibles – Goodwill and Other (Topic 350), Testing Goodwill for Impairment.”  ASU 2011-08 amends the required annual impairment testing of goodwill by providing an entity an option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.  If, after assessing the totality of events and circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test under Topic 350-24 and Topic 350-20-35-9 is unnecessary.  However, if an entity concludes otherwise, then it is required to perform the impairment testing under Topic 350-24 by calculating the fair value of the reporting unit and comparing the results with the carrying amount.  If the fair value exceeds the carrying amount, then the entity must perform the second step test of measuring the amount of the impairment test under Topic 350-20-35-9.

An entity has the option to bypass the qualitative assessment and proceed directly to the two step goodwill impairment test.  Additionally, the entity has the option to resume with the qualitative testing in any subsequent period.  The amendment became effective for the Company on January 1, 2012 and did not have a material effect on our consolidated financial position or results of operations.

In December 2011, the FASB issued ASU 2011-11, “Balance Sheet (Topic 210), Disclosures about Offsetting Assets and Liabilities.”  The guidance in this update requires us to disclose information about offsetting and related arrangements to enable users of our financial statements to understand the effect of those arrangements on our financial position.  The pronouncement is effective for fiscal years and interim periods beginning on or after January 1, 2013 with retrospective application for all comparative periods presented.  Our adoption of the new standard is not expected to have a material effect on our consolidated financial position or results of operations.

46

ITEM 7A—QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 8—FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

OXYSURE SYSTEMS, INC.

INDEX TO FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm	48
Balance Sheets	49
Statements of Operations	50
Statements of Stockholders’ Equity (Deficit)	51
Statements of Cash Flows	52
Notes to Financial Statements	53

47

SAM KAN & COMPANY 1151 Harbor Bay Pkwy., Suite 202 Alameda, CA 94502 Phone: 510 .355 .0492 Fax: 866 .828 .1446 http://www .skancpa .com

Report of Independent Registered Public Accounting Firm

To the Board of Directors of 

OxySure Systems, Inc.

Frisco, Texas

We have audited the accompanying balance sheet of OxySure Systems, Inc. (hereinafter the "Company") as of December 31, 2012 and 2011, and the related statements of operations, stockholders' equity (deficit), and cash flows for the years then ended. These financial  statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to from the above presented fairly, in all material respects, the financial position of the Company as of December 31, 2012 and 2011, and the results of their operations and their cash flows for the years then ended were in conformity with U .S . generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 15 to the financial statements, the Company has suffered recurring losses and has experienced negative cash flows from operations, which raises substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to those matters are also described in Note 15 to the financial statements. The financial statements do not include any adjustments that mightresult from the outcome of this uncertainty.

/s/ Sam Kan & Company 

Sam Kan & Company

April 1, 2013

Alameda, California

48

OXYSURE SYSTEMS INC.
BALANCE SHEETS
	December 31,
	2012			2011
ASSETS
Current assets
Cash and cash equivalents	$	13,514		$	65,118
Accounts receivable, net of allowances for sales returns and allowance for doubtful accounts		18,487			2,758
Inventories		221,345			247,956
Prepaid expenses and other current assets		-			-
Total current assets		253,346			315,833
Property and equipment, net		27,599			133,659
Intangible assets, net		418,479			445,168
Other assets		516,373			53,274
TOTAL ASSETS	$	1,215,797		$	947,934
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued expenses	$	595,655		$	245,340
Capital leases - current		296,116			327,939
Notes payable - current		398,589			1,565,059
Deferred revenue		499,225			421,713
Total current liabilities		1,789,585			2,560,051
Long-term liabilities
Capital leases	$	2,265		$	2,632
Notes payable		76,072			1,162,390
Total long-term liabilities		78,337			1,165,022
TOTAL LIABILITIES		1,867,922			3,725,073
COMMITMENTS AND CONTINGENCY (NOTE 9)
STOCKHOLDERS’ EQUITY
Preferred stock, par value $0.0005 per share; 25,000,000 shares authorized;
818,750 Series A convertible preferred shares issued and outstanding as of December 31, 2012 and 3,126,434 shares issued and outstanding as of December 31, 2011.		409			1,563
Common stock, par value $0.0004 per share; 100,000,000 shares authorized;
22,548,678 shares of voting common stock issued and outstanding as of December 31, 2012 and 16,519,865 shares issued and outstanding as of December 31, 2011.		9,016			6,608
Additional Paid-in Capital		13,597,117			10,645,347
Accumulated deficit		(14,258,667	)		(13,430,659	)
TOTAL STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME		(652,125	)		(2,777,139	)
TOTAL LIABILITIES  AND STOCKHOLDERS’ EQUITY	$	1,215,797		$	947,934

See accompanying notes to financial statements

49

OXYSURE SYSTEMS INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
	For the year ended December 31,
	2012			2011
Revenues, net	$	269,697		$	185,209
Cost of goods sold		95,587			103,389
Gross profit		174,110			81,820
Operating expenses
Selling, general and administrative		1,020,298			1,150,786
Loss from operating expenses		(846,188	)		(1,068,966	)
Other income (expenses)
Other income (expense)		224,639			144,882
Interest expense		(206,722	)		(608,316	)
Total other income (expenses)		17,917			(463,434	)
Net loss		(828,271	)		(1,532,399	)
Accumulated deficit - beginning of the period		(13,430,659	)		(11,898,260	)
Prior period adjustments		263			-
Accumulated deficit - end of the period	$	(14,258,667	)	$	(13,430,659	)
Basic net income (loss) per common share	$	(0.04	)	$	(0.10	)
Diluted net income (loss) per common share	$	(0.04	)	$	(0.10	)
Weighted average common shares outstanding:
Basic		19,862,088			15,930,327
Diluted		19,862,088			15,930,327

See accompanying notes to financial statements

50

OXYSURE SYSTEMS, INC.

STATEMENT OF STOCKHOLDERS' EQUITY

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

	Convertible
	Preferred Stock						Common Stock
	Shares			Par Value			Shares		Par Value		Warrant Issuance			Additional Paid-in Capital - Preferred Stock			Additional Paid-in Capital - Warrants and Options		Additional Paid-in Capital		Deficit Accumulated			Accumulated Other Comprehensive Income/ (Loss)		Total Stockholders' Equity (Deficit)
Balance as of December 31, 2010		3,126,434		$	1,563			15,724,816	$	6,290		167,750		$	3,214,401		$	3,909,615	$	2,272,674	$	(11,898,260	)	$	-	$	(2,325,966	)
								-		-		-						-		-		-					-
- Common stock options exercised								34,750		14		-						-		21,246		-					21,260
- Common stock warrants exercised								294,330		118		(35,000	)					-		36,992		-					2,110
- Common stock issued upon conversion of convertible notes								465,969		186		-						-		465,783		-					465,969
- Common stock options issued for compensation								-		-								104,419		-		-					104,419
- Common stock options and warrants issued for services								-		-								29,354		-		-					29,354
- Common stock warrants issued in connection with convertible loans								-		-								458,114		-		-					458,114
																						-					-
Net Loss for year ending December 31, 2011																						(1,532,399	)				(1,532,399	)
Balance as of December 31, 2011		3,126,434		$	1,563			16,519,865	$	6,608		132,750		$	3,214,401		$	4,501,501	$	2,796,695	$	(13,430,659	)	$	-	$	(2,777,139	)
- Common stock options exercised								374,808		146										98,138							98,284
- Common stock warrants exercised								882,616		353		(85,000	)							90,753							6,106
- Common stock issued upon conversion of convertible preferred stock		(2,307,684	)		(1,154	)		2,815,374		1,126					(2,306,530	)				2,306,558							(0	)
- Common stock issued upon conversion of convertible notes								1,711,952		685										2,433,165							2,433,850
- Common stock issued for cash								68,889		28										41,222							41,250
- Common stock issued for services								97,500		39										20,709							20,748
- Common stock issued in connection with the acquisition of assets								77,674		31										95,031							95,062
- Common stock options issued for compensation																		7,999									7,999
- Common stock options and warrants issued for services																		-									-
- Common stock warrants issued in connection with deferred loan costs																		16,913		232,810							249,723
- Common stock warrants issued in connection with convertible loans																		-									-
- Prior period adjustment: correction to accounting error																						263					263
Net Loss for year ending December 31, 2012																						(828,271	)				(828,271	)
Balance as of December 31, 2012		818,750		$	409			22,548,678	$	9,016		47,750		$	907,871		$	4,526,413	$	8,115,081	$	(14,258,667	)	$	-	$	(652,125	)

See accompanying notes to financial statements

51

OXYSURE SYSTEMS INC.

STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		(828,271	)	$	(1,532,399	)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation		138,936			174,173
Amortization of intangible assets		54,834			29,766
Prior period adjustment		263			-
Amortization of debt discount and warrant fair values related to convertible loans		189,611			546,104
Changes in deferred rent and leasehold improvement allowance		65,079			(18,106	)
Issuance of common stock options to employees as
compensation		7,999			104,419
Issuance of common stock options and warrants in exchange
for services		20,748			29,354
Changes in current assets and liabilities
Accounts receivable		(15,729	)		(2,409	)
Inventory		26,611			(20,265	)
Prepaid expenses and other current assets		-			(40,666	)
Accounts payable and accrued liabilities		141,950			(125,491	)
Deferred revenue		77,512			166,058
NET CASH USED IN OPERATING ACTIVITIES		(120,457)			(689,461	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of intangible assets		(3,172	)		(1,231	)
Other assets		-			(40,142	)
Purchases of property and equipment		(32,876	)		(3,435	)
NET CASH USED IN INVESTING ACTIVITIES		(36,048	)		(44,808	)
CASH FLOWS FROM FINANCING ACTIVITIES
Loan proceeds, net		(8,549	)		763,940
Payment of capital leases		(32,190	)		(27,810	)
Issuance of common stock for cash		41,250			-
Proceeds from exercise of common stock options and warrants		104,392			23,370
NET CASH PROVIDED BY FINANCING ACTIVITIES		104,901			759,500
Net change in cash and cash equivalents		(51,604	)		25,231
Cash and cash equivalents, at beginning of period		65,118			39,887
Cash and cash equivalents, at end of period	$	13,514		$	65,118
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	679		$	4,368
Income taxes	$	-		$	-
Supplemental non-cash investing and financing activities:
Promissory subordinated convertible notes issued in connection with rent satisfaction agreements	$	-		$	200,100
Issuance of common stock upon conversion of convertible notes	$	2,433,850		$	465,969
Issuance of common stock warrants in connection with convertible notes	$	-		$	458,114
Issuance of common stock upon conversion of preferred stock	$	2,307,684		$	-
Website development with financing arrangement	$	143,286		$	-
Issuance of common stock for assets acquired	$	95,062		$	-
Issuance of common stock in connection with deferred loan costs	$	249,723		$	-

See accompanying notes to financial statements

52

OXYSURE® SYSTEMS, INC.

NOTES TO AUDITED FINANCIAL STATEMENTS

DECEMBER 31, 2012 AND 2011

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.

OxySure Systems, Inc. (OXYS: OTCQB) (the “Company,” “OSI,” “we,” “us,” or “our”) was incorporated on January 15, 2004 as a Delaware corporation. The Company is located in Frisco, Texas and is a medical technology company that focuses on the design, manufacture and distribution of specialty respiratory and emergency medical solutions. The company pioneered a safe and easy to use solution to produce medically pure (USP) oxygen from inert powders. The company owns nine (9) issued patents and patents pending on this technology which makes the provision of emergency oxygen safer, more accessible and easier to use than traditional oxygen provision systems. OxySure's products 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.

In 2008 the Company launched its first product utilizing this technology – a portable emergency oxygen system for lay person use, called the OxySure Model 615. On December 9, 2005, the Company received approval from the Food and Drug Administration (510K, Class II) for Model 615. The FDA approval is for over-the-counter purchase, without the need of a prescription.

The Company has, at the present time, not paid any dividends and any dividends that may be paid in the future will depend upon the financial requirements of the Company and other relevant factors.

On July 19, 2004, the Company affected a 1-for-5 reverse stock split of the Company’s common stock. All share numbers and common stock numbers, including stock options and warrants, have been retroactively adjusted to reflect the reverse stock split.

While the Company has effectively managed its working capital deficit the going concern risk remains an issue for the company to manage.  The Company has implemented, and plans to further implement several different strategies in order to help the Company ease the going concern issue.  Refer to Note 15, “Going concern” of the Notes to Financial Statements for a partial list of the Company’s plans to mitigate the going concern issue.

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. Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company’s system of internal accounting control is designed to assure, among other items, that (1) recorded transactions are valid; (2) all valid transactions are recorded; and (3) transactions are recorded in the period in a timely manner to produce financial statements which present fairly the financial condition of the Company.

53

OXYSURE® SYSTEMS, INC.

NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Use of estimates - The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reported period.  Actual results could differ from those estimated.

Revenue Recognition - We recognize revenue when persuasive evidence of an arrangement exists, shipment has occurred, the price is fixed or determinable, and collectability is reasonably assured.  Revenues are recognized from product sales, net of discounts and rebates.  This revenue recognition policy is applied to both customers and distributors.

Fees from licensees desiring to manufacture and distribute our products or derivative products using our intellectual property include initial license fees and royalties.  Initial license fees are generally recognized upon granting of the license to the licensee.  Royalties are recognized in the period earned.

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 $499,225 and $421,713 for the years ended December 31, 2012 and 2011 respectively.

Cash and Cash Equivalents - Cash consists of all highly liquid investments purchased with maturity of three months or less to be cash equivalents. Cash and cash equivalents may at times exceed Federally-insured limits. To minimize this risk, we place our cash and cash equivalents with high credit quality institutions.

Inventory – Our inventory consists 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. We write down our inventory value for estimated obsolescence equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. These factors are impacted by market and economic conditions, technology changes, new product introductions and changes in strategic direction and require estimates that may include uncertain elements. Actual demand may differ from forecasted demand, and such differences may have a material effect on recorded inventory values. Management has established inventory reserves to cover estimated inventory losses for all work-in-process and finished goods related to products we manufactured, as well as raw material and components for those products that had no potential use in products to be manufactured in the future. Management is required to make judgments about the future benefit of our raw materials and components. Actual reserve requirements could differ significantly from Management’s estimates, which could have a significant unfavorable impact on our future gross margins.

At December 31, 2012 inventories consisted of the following:

	December 31, 2012
Parts inventory	$	105,647
Work in process		76,106
Finished goods		39,591
Total inventories	$	221,345

Concentration of Credit Risk – We sell our products throughout the United States as well as in certain other countries.  Sales to its recurring customers in the United States are generally granted on net 30-day credit terms. We perform periodic credit evaluations of our recurring customers and generally do not require collateral. In general, we require prepayment on all sales to customers outside the United States. An allowance for doubtful accounts is maintained for potential credit losses, which losses historically have not been significant.

54

OXYSURE® SYSTEMS, INC.

NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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 $138,936 and $174,173 for the years ended December 31, 2012 and 2011, 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.

55

OXYSURE® SYSTEMS, INC.

NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Amortization expense for patents and trademarks was $29,861 and $29,566 for the years ended December 31, 2012 and 2011, 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. Certain events and circumstances we considered in determining whether the carrying value of identifiable intangible assets may not be recoverable include, but are not limited to: significant changes in performance relative to expected operating results; significant changes in the use of the assets; significant negative industry or economic trends; and changes in its business strategy.  In determining if impairment exists, we estimate the undiscounted cash flows to be generated from the use and ultimate disposition of these assets.  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 years ended December 31, 2012 and 2011.

Other Assets – We record Other Assets net of accumulated amortization. During 2012 we recorded total deferred loan costs in the amount of $249,723. Amortization expense for Other Assets was $24,972 and $0 for the years ended December 31, 2012 and 2011, 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.

Allowance for Doubtful Accounts - We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make payments.  We periodically review these allowances, including an analysis of the customers’ payment history and information regarding the customers’ creditworthiness.  Actual write-offs have not been materially different from the estimated allowance. We recorded bad debt expense of $1,376 and $0 for the years ended December 31, 2012 and 2011, respectively.

Research and Development Costs – Costs associated with the development of our products are charged to expense as incurred.  $25,816 and $260 were incurred in the years ended December 31, 2012 and 2011, respectively.

Income Taxes – In accordance withAccounting Standards Codification (“ASC”) Topic 740, “Income Taxes” (“ASC 740”), we account for income taxes using an asset and liability approach, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our Consolidated Financial Statements, but have not been reflected in our taxable income.  A valuation allowance has been established to reduce deferred tax assets to their estimated realizable value.  Therefore, we provide a valuation allowance to the extent that we do not believe it is more likely than not that we will generate sufficient taxable income in future periods to realize the benefit of our deferred tax assets.  We recognize interest and penalties related to unrecognized tax benefits in income tax expense.

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.

56

OXYSURE® SYSTEMS, INC.

NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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, which was developed for use in estimating the value of traded options that have no vesting restrictions and that are freely transferable. The Black-Scholes model requires the input of certain assumptions.  Changes in the assumptions used in Black-Scholes model can materially affect the fair value estimates. We evaluate the assumptions used to value stock options on an annual basis. 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 employees.  Upon the adoption of the accounting guidance, we continued to use historical volatility in deriving its expected volatility assumption as allowed under GAAP because we believe that future volatility over the expected term of the stock options is not likely to differ materially from the past. The risk-free interest rate assumption is based on 5-year U.S Treasury zero-coupon rates appropriate for the expected term of the stock options. The expected dividend assumption is based on the history and expectation of dividend payouts.  The fair values generated by the Black-Scholes model may not be indicative of the actual fair values of the equity awards, as we do not consider other factors important to those awards to employees, such as continued employment, periodic vesting requirements and limited transferability.  The amount of stock based compensation expenses is net of an estimated forfeiture rate, which is also based on historical data. For the years ended December 31, 2012 and 2011, stock based compensation expense was approximately $7,999 and $104,419 respectively, which consisted primarily of stock-based compensation expense related to stock options recognized under GAAP issued to the employees.

The Company follows ASC Topic 505-50, formerly EITF 96-18, “Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling Goods and Services,” for stock options and warrants issued to consultants and other non-employees. In accordance with ASC Topic 505-50, these stock options and warrants issued as compensation for services to be provided to the Company are accounted for based upon the fair value of the services provided or the estimated fair market value of the option or warrant, whichever can be more clearly determined. We recognize this expense over the period in which the services are provided. For the years ended December 31, 2012 and 2011, stock based compensation expense was approximately $0 and $29,354 respectively, which consisted primarily of stock-based compensation expense related to stock options and warrants recognized under GAAP issued to consultants and other non-employees.

57

OXYSURE® SYSTEMS, INC.

NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The following table shows the components of our stock based compensation expense for employees, consultants and other non-employees:

	Year ended December 31,
	2012		2011
Common Stock options issued for compensation	$	7,999	$	104,419
Common Stock options and warrants issued for services		-		29,354
Total	$	7,999	$	133,773

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.  During the years ended December 31, 2012 and 2011 we incurred $76,427 and $15,141 respectively, in advertising and promotion costs.

Litigation and Settlement Costs - Legal costs are expensed as incurred. We record a charge equal to at least the minimum estimated liability for a loss contingency when both of the following conditions are met: (i) information available prior to issuance of the financial statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements and (ii) accrue the best estimate within a range of loss if there is a loss or, whenthere is no amount within a range that forms a better estimate, we will accrue the minimum amount in the range. We are not presently involved in any legal proceedings, litigation or other legal actions.

Loss Per Share - Basic loss per share, which excludes anti-dilutive securities, is computed by dividing loss available to common shareholders by the weighted-average number of common shares outstanding for that particular period. In contrast, diluted loss per share considers the potential dilution that could occur from other equity instruments that would increase the total number of outstanding shares of common stock. Such amounts include shares potentially issuable under outstanding options, warrants, convertible preferred stock and convertible notes.

58

OXYSURE® SYSTEMS, INC.

NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

A reconciliation of the numerator and denominator used in the calculation of basic and diluted net loss per share follows:

	Year ended December 31,
	2012			2011
Historical net loss per share:
Numerator
Net loss, as reported		(828,271	)		(1,532,399	)
Less: Effect of amortization of interest expense on convertible notes		-			-
Net loss attributed to common stockholders (diluted)		(828,271	)		(1,532,399	)
Denominator
Weighted-average common shares outstanding		19,862,088			15,930,327
Effect of dilutive securities		-			-
Denominator for diluted net loss per share		19,862,088			15,930,327
Basic and diluted net loss per share	$	(0.04	)	$	(0.10	)

The following outstanding options, warrants, convertible preferred shares and convertible note shares were excluded from the computation of basic and diluted net loss per share for the periods presented because including them would have had an anti-dilutive effect.

	Year ended December 31,
	2012		2011
Options to purchase common stock		1,461,096		1,852,204
Warrants to purchase common stock		1,877,034		2,842,983
Common shares issuable upon conversion of convertible preferred stock		998,875		3,814,249
Convertible note shares outstanding		350,560		1,962,935

Restatements and Reclassifications - Certain financial statement items have been reclassified to conform to the current year’s presentation.

59

OXYSURE® SYSTEMS, INC.

NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncements

In April 2011, the FASB issued ASU 2011-02, “Receivables (Topic 310) A Creditors Determination of Whether a Restructuring Is a Troubled Debt Restructuring.”  The update clarifies the guidance on a creditors evaluation of whether it has granted a concession as well as clarifying the guidance when a creditor’s evaluation of whether a debtor is experiencing financial difficulties.  The guidance clarifies when a Company should record impairment due to concessions or the financial difficulties of the debtor.  The new standard is effective for fiscal years and interim periods ending after June 15, 2011.  The guidance should be applied retrospectively to restructurings occurring on or after the beginning of the fiscal year of adoption.  The adoption did not have a material effect on our consolidated financial position or results of operations.

In April 2011, the FASB issued ASU 2011-03, “Transfers and Servicing (Topic 860) Reconsideration of Effective Control for Repurchase Agreements.”  ASU 2011-03 applies to transactions where the seller transfers financial assets that both entitle and obligate the transferor to repurchase or redeem the financial assets before their maturity.  The amendments in this guidance remove from the assessment of effective control the criteria requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms even in the event of default by the transferee and the collateral maintenance guidance related to that criterion.  The new standard is effective for fiscal years and interim periods ending after December 15, 2011 and should be applied on a prospective basis. The adoption did not have a material effect on our consolidated financial position or results of operations.

In May 2011, the FASB issued ASU 2011-04, “Fair Value Measurement (Topic 820), Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS.”  The amendment results in a consistent definition of fair value and ensures the fair value measurement and disclosure requirements are similar between GAAP and International Financial Reporting Standards (“IFRS”). This amendment changes certain fair value measurement principles and enhances the disclosure requirements particularly for Level 3 fair value measurements. This amendment will be effective for the Company on January 1, 2012. The adoption did not have a material effect on our consolidated financial position or results of operations.

In June 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-05, “Comprehensive Income (Topic 220), and Presentation of Comprehensive Income.”  ASU 2011-05 amends the presentation of other comprehensive income and the Statement of Consolidated Operations. Under this amendment, entities will be required to present the total of comprehensive income, the components of net income,  and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. Regardless of which reporting option is selected, the Company is required to present on the face of the financial statements, reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statements where the components of net income and the components of other comprehensive income are presented.   The current option to report other comprehensive income and its components in the statement of changes in equity has been eliminated. This amendment will be effective for the Company on January 1, 2012 and full retrospective application is required. The amendment did not have a material impact on our financial statements.

Effecting certain sections covered under ASU 2011-05, in December, 2011, the FASB issued ASU 2011-12, “Comprehensive Income (Topic 220),” Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items out of Accumulated Other Comprehensive Income in ASU 2011-05.”  The pronouncement is effective for fiscal years and interim periods beginning January 1, 2012 with retrospective application for all comparative periods presented.  The Company’s adoption of the new standard did not have a material effect on our consolidated financial position or results of operations.

In September 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-08, “Intangibles – Goodwill and Other (Topic 350), Testing Goodwill for Impairment.”  ASU 2011-08 amends the required annual impairment testing of goodwill by providing an entity an option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.  If, after assessing the totality of events and circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test under Topic 350-24 and Topic 350-20-35-9 is unnecessary.  However, if an entity concludes otherwise, then it is required to perform the impairment testing under Topic 350-24 by calculating the fair value of the reporting unit and comparing the results with the carrying amount.  If the fair value exceeds the carrying amount, then the entity must perform the second step test of measuring the amount of the impairment test under Topic 350-20-35-9.

60

OXYSURE® SYSTEMS, INC.

NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

An entity has the option to bypass the qualitative assessment and proceed directly to the two step goodwill impairment test.  Additionally, the entity has the option to resume with the qualitative testing in any subsequent period.  The amendment became effective for the Company on January 1, 2012 and did not have a material effect on our consolidated financial position or results of operations.

In December 2011, the FASB issued ASU 2011-11, “Balance Sheet (Topic 210), Disclosures about Offsetting Assets and Liabilities.”  The guidance in this update requires us to disclose information about offsetting and related arrangements to enable users of our financial statements to understand the effect of those arrangements on our financial position.  The pronouncement is effective for fiscal years and interim periods beginning on or after January 1, 2013 with retrospective application for all comparative periods presented.  Our adoption of the new standard is not expected to have a material effect on our consolidated financial position or results of operations.

NOTE 2 - BALANCE SHEET COMPONENTS

	December 31,
	2012			2011
Cash and cash equivalents:
Cash		13,514			65,118
Total cash and cash equivalents	$	13,514		$	65,118
Inventories:
Total inventories	$	221,345		$	247,956
Accounts Receivable, net of allowances	$	18,487		$	2,758
Property and equipment, net:
Machinery and equipment		919,736			919,736
Leasehold improvements		547,856			547,856
Computer equipment and furniture and fixtures		236,797			203,922
Software		10,691			10,691
		1,715,080			1,682,204
Accumulated depreciation and amortization		(1,687,481	)		(1,548,545	)
Total property and equipment, net	$	27,599		$	133,659
Other Assets:
Deferred loan costs, net		224,751			-
Security deposits		53,274			53,274
Website development, software, URLs		238,348			-
	$	516,373		$	53,274
Accounts payable and accrued expenses:
Leasehold Improvement Allowance		-			48,969
Accounts payable		70,141			136,263
Accrued interest		-			40,094
Accrued expenses for website and software		143,286			-
Other accrued liabilities		382,228			20,015
Total accounts payable and accrued expenses	$	595,655		$	245,340

61

OXYSURE® SYSTEMS, INC.

NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 3 – INTANGIBLE ASSETS

We have two types of intangible assets: patents and trademarks. We capitalize expenditures associated with patents and trademarks related to our various technologies. Capitalized costs include amounts paid to third parties for legal fees, application fees and other direct costs incurred in the filing and prosecution of patent and trademark applications. These assets are amortized on a straight-line method over their legal life.

Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable in accordance with applicable accounting guidance. During the years ended December 31, 2012 and 2011 we have had no impairment of intangible assets.

On January 15, 2004, the Company executed an Asset Purchase and Stock Transfer Agreement with entities controlled by the founder of the Company. In connection with this agreement, we acquired certain assets, including certain rights, title and interest to intellectual property, relating to the oxygen method and apparatus, developed by our founder prior to January 15, 2004. As consideration for the purchase, we issued 14,000,000 shares of common stock and a promissory note for $150,000 to these entities. The common stock was valued at $7,000 using the par value of the common stock on the date of issuance (which is not indicative of fair value). The non-recourse promissory note bore interest at 6.5% per annum and was paid in full during 2006.

The carrying values of our amortized acquired intangible assets as of the December 31, 2012 and 2011, respectively, are as follows:

	December 31, 2012							December 31, 2011
	Gross		Accumulated Amortization and write off			Net		Gross		Accumulated Amortization and write off			Net
Patents	$	613,690	$	(232,866	)	$	380,824	$	610,518	$	(205,694	)	$	404,824
Trademarks	$	45,723	$	(8,069	)	$	37,654	$	45,723	$	(5,379	)	$	40,344
	$	659,413	$	(240,934	)	$	418,479	$	656,241	$	(211,073	)	$	445,168

62

OXYSURE® SYSTEMS, INC.

NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 3 – INTANGIBLE ASSETS (CONTINUED)

As of December 31, 2012, we estimate the future amortization expense of the intangible assets for December 31, 2013, 2014, 2015 and 2016, to be as follows:

2013	$	29,957
2014		29,957
2015		29,957
2016		29,957
Thereafter		298,652
	$	418,479

Due to the nature of the intangible assets, we have amortized the cost of the patents and trademarks over their estimated useful lives. The nature of the estimate did not change from 2011 to 2012. Of the net amount of $418,479 in intangible assets as of December 31, 2012, approximately 91% is in patents and 9% is in trademarks.  Included in the $659,413 gross amount for patents and trademarks is $157,000 acquired from entities controlled by the founder of the Company in January 2004. The remaining $502,413 represents amounts paid to third parties for legal fees, application fees and other direct costs incurred in the filing and prosecution of patent and trademark applications.

NOTE 4 – 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. On April 3, 2007 we entered into a note agreement with the City of Frisco, Texas for $243,000 (the “Frisco Note”) pursuant to an economic incentive package provided through the Frisco Economic Development Corporation (“FEDC”). The note required varying annual principal payments through August 2012.  The note was non-interest bearing; however, interest has been imputed at 12.18% per annum. The unamortized discount at December 31, 2010 was $66,198. Individual annual payments were to be forgiven if certain performance targets are achieved, which include the number of full time employees, square feet occupied in the city of Frisco and the taxable value of business and personal property in the City of Frisco. The first annual payment for 2008 in the amount of $30,000 was forgiven and we recognized the entire $30,000 under “Other income” in the Statement of Operations and Accumulated Deficit for the year ended December 31, 2008.  On March 22, 2011 we entered into an Amended and Restated Performance Agreement with the FEDC. In terms of the Amended and Restated Performance Agreement, the FEDC provided us with economic assistance in the form of the renewal and extension of the outstanding forgivable loan of $213,000 together with revised performance credits over 5 years, commencing on March 22, 2011 and ending on the earlier to occur of: (i) the full payment of the economic incentives; or (ii) March 31, 2016.

The renewed Frisco Note requires varying annual principal payments through December 2015. The Frisco Note is non-interest bearing; however, interest has been imputed at 12.34% per annum.

On December 1, 2011 we received the first performance credit from the FEDC in the amount of $26,000 pursuant to the Amended and Restated Performance Agreement. The unamortized discount at December 31, 2011 was $52,752, and the net amount of the Frisco Note as at December 31, 2011 was $134,248.

Effective December 1, 2012 we received the performance credit from the FEDC in the amount of $39,000 pursuant to the Amended and Restated Performance Agreement. The unamortized discount at December 31, 2012 was $40,340, and the net amount of the Frisco Note as at December 31, 2012 was $107,660.

Future principal payments of the Frisco Note payable are as follows:

2013		44,000
2014		52,000
2015		52,000
	$	148,000

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NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 4 – NOTES PAYABLE (CONTINUED)

Agave/JTR Subordinated, Convertible Notes.  During March 2008, we completed a $1 million financing package consisting of a promissory note for $750,000 (“First Note”) and a promissory note with a draw down provision for $250,000 (“Second Note”) (collectively, the “Notes”). The Notes are subordinated notes and are due and payable on the earlier of (i) completion of the next financing Round completed by us or (ii) one year after the Notes are issued. In March 2009 the First Note and the Second Note were modified by extending the maturity date in each case to April 15, 2010. On December 31, 2009, the First Note and the Second Note were further modified by extending the maturity date in each case to April 15, 2011.  In August 2010, the First Note and the Second Note were further modified by extending the maturity date in each case to April 15, 2012. In November 2011, the First Note and the Second Note were further modified by extending the maturity date in each case to April 15, 2013. The holder of the First Note is Agave Resources, LLC (“Agave”), and the President of Agave is Donald Reed, one of our Directors.  In connection with the First Note, on April 15, 2008 Agave was also issued penny warrants to purchase 350,000 shares of common stock.  The warrants are immediately exercisable and expire on April 15, 2013.  The holder of the Second Note is JTR Investments, Limited (“JTR”) a company controlled by Julian T. Ross, our founder and CEO.

As of December 31, 2008 the maximum of $250,000 has been drawn against the Second Note.  In connection with the Second Note, on December 31, 2008 JTR was also issued penny warrants to purchase 116,667 shares of common stock.  Both Notes are non-interest bearing.  The basis for issuing penny warrants in connection with the First Note and the Second Note include, but are not limited to, the fact that no interest is payable on the Notes, our ability to attract new investment at the time, market conditions and other factors.  Given these factors, the Board of Directors has deemed the terms of these transactions to be fair.  No third party fairness opinion was obtained in relation to these transactions.

Conversion Rights: At any time on or prior to the Maturity Date, all or any portion of the then outstanding Principal Amount and accrued but unpaid interest (if any) of the Notes may be converted (the "Optional Conversion") into a number of shares of our common stock (the "Optional Conversion Shares") equal to the amount of the then outstanding Principal Amount plus the then accrued but unpaid interest to be converted, divided by the Conversion Price which shall be $1.50 per Optional Conversion Share.

In accordance with ASC 470-20, Debt with conversions and other options, the proceeds from the First Note were allocated based on the relative fair value of the note without the warrant issued in conjunction with the note and of the warrant itself at the time of issuance. We recorded the relative fair value of the warrant issued to Agave in the amount of $346,936 as a debt discount upon issuance, and amortized this debt discount as interest expense over the life of the note.  Additionally, as a result of issuing the warrant with the subordinated convertible promissory note, a beneficial conversion option was recorded as a debt discount reflecting the incremental conversion option intrinsic value benefit of $96,936, at the time of issuance provided to the holder of the note, which was also amortized as interest expense over the life of the note. We recorded interest expense in the amount of $0 for each of the years ended December 31, 2012 and December 31, 2011 in connection with the First Note.

We recorded the relative fair value of the warrant issued to JTR in connection with the Second Note in the amount of $115,587 as a debt discount upon issuance, and expensed this amount as interest expense upon issuance.  Additionally, as a result of issuing the warrant with the subordinated convertible promissory note, a beneficial conversion option was recorded as a debt discount reflecting the incremental conversion option intrinsic value benefit of $32,254, at the time of issuance provided to the holder of the note, which was also expensed as interest expense upon issuance. We recorded interest expense in the amount of $0 for each of the years ended December 31, 2012 and 2011 in connection with the JTR Second Note.

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NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 4 – NOTES PAYABLE (CONTINUED)

JTR Senior, Convertible Note. In July, 2008, JTR agreed to provide us with additional working capital to fund continuing operations (the “Senior Note Interim Funding”).  On November 1, 2008 the Board agreed with JTR on the terms of a loan with a draw down provision of up to a maximum of $750,000.  This maximum amount was subsequently increased to $2,000,000. This was a senior note (all the tranches under this facility, collectively, the “JTR Senior Note”) with no interest payable.  All amounts advanced by JTR during the Senior Note Interim Funding were draw downs on the JTR Senior Note.  In connection with the JTR Senior Note, we issued JTR .47 penny warrants for every dollar drawn under this facility.

As of December 31, 2012 and 2011 the total number of penny warrants issued to JTR pursuant to the JTR Senior Note was 572,503 and 572,503 respectively.  The basis for issuing penny warrants in connection with the JTR Senior Note include, but are not limited to, the fact that no interest is payable on the note, the Company’s our ability to attract new investment at the time, market conditions, the terms previously agreed to in connection with the First Note and Second Note, and other factors.  Given these factors, the Board of Directors has deemed the terms of this transaction to be fair.  No third party fairness opinion was obtained in relation to this transaction.

Conversion Rights: At any time on or prior to the Maturity Date all or any portion of the then outstanding Principal Amount and accrued but unpaid interest of this Note may be converted (the "Optional Conversion") into a number of shares of our common stock (the "Optional Conversion Shares") equal to the amount of the then outstanding Principal Amount plus the then accrued but unpaid interest to be converted, divided by the Conversion Price which shall be $1.50 per Optional Conversion Share.

Maturity: The total amount outstanding under the Senior Note was classified as current prior to conversion – Please see “Conversion of First Note, Second Note, and JTR Senior Note” below.

In accordance with ASC 470-20, Debt with conversions and other options, the proceeds from the JTR Senior Note 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 recorded the total relative fair values of the warrants issued to JTR in connection with the JTR Senior Note in the cumulative amount of $567,276 as a debt discount upon each issuance, and expensed each debt discount as interest expense upon issuance of each note tranche.  Additionally, as a result of issuing the warrants with the convertible promissory notes, a beneficial conversion option was recorded as a debt discount on each note reflecting the incremental conversion option intrinsic value benefit totaling $168,641, at the time of each issuance provided to JTR in connection with the JTR Senior Note up to and including December 31, 2012. The debt discount for each issuance under the JTR Senior Note is expensed as interest expense upon each issuance. We recorded interest expenses in the amounts of $0 and $262,554 for the years ended December 31, 2012 and December 31, 2011, respectively, in connection with the JTR Senior Note.

Conversion of First Note, Second Note, and JTR Senior Note: On December 31, 2012 the First Note, Second Note and JTR Senior Note were all converted to common stock at their respective stated conversion prices of $1.50. Pursuant to the conversions, a total of $2,018,656 was converted into a total of 1,345,771 shares of common stock as follows: (i) The First Note in the amount of $750,000 was converted into 500,000 shares of common stock at the stated conversion price of $1.50 per share and the First Note was extinguished; (ii) The balance outstanding under the JTR Senior Note as at December 31, 2012 in the amount of $1,018,656 was converted into 679,104 shares of common stock at the stated conversion price of $1.50 per share and the Senior Note was extinguished; and (iii) The Second Note in the amount of $250,000 was converted into 166,667 shares of common stock at the stated conversion price of $1.50 per share and the Second Note was extinguished.

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NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 4 – NOTES PAYABLE (CONTINUED)

Sinacola Subordinated, Convertible Notes.

First Landlord Note; Second Landlord Note:

On December 10, 2009 we entered into a Rent Satisfaction Agreement (the “2009 RSA”) with our landlord, Sinacola Commercial Properties, Ltd. (“Sinacola”). In terms of the 2009 RSA, all of our outstanding rent obligations under our lease agreement, up to and including December 31, 2009 including, but not limited to, base rent, deferred rent, and its share of operating costs, are satisfied in full.

We issued Sinacola two Promissory Notes pursuant to the 2009 RSA, as follows:

First Landlord Note:  The first note (the “First Landlord Note”) was a subordinated convertible note in the principal amount of $125,000. The First Landlord Note carried no interest and was convertible, at Sinacola’s option, into the common stock of the Company at an exercise price of $1.00 per common share on the maturity date.

Second Landlord Note:  The second note (the “Second Landlord Note”) was a subordinated convertible note in the principal amount of $126,407. The Second Landlord Note carried no interest and was convertible into the common stock of the Company at an exercise price of $1.50 per common share on the maturity date.  However, if the common stock has traded at $1.50 or above for four (4) consecutive weeks on a nationally recognized market (based on daily closing prices) then the Second Landlord Note was convertible at the Company’s option.

Maturity Date – Each of the First Landlord Note and the Second Landlord Note had a maturity date defined as follows:

The then outstanding Principal Amount shall become due and payable on the earlier to occur of: (i) December 31, 2011; or (ii) the closing of the next equity financing round (the “Equity Event”) completed by the Company (in each case, the "Maturity Date"); provided that; (a) if the Equity Event is in an amount exceeding $1,000,000 but less than $1,500,000, then only 20% of the Principal Amount shall be due and payable; (b) if the Equity Event is in an amount exceeding $1,500,000 but less than $2,000,000, then only 40% of the Principal Amount shall be due and payable; (c) if the Equity Event is in an amount exceeding $2,000,000 but less than $3,000,000, then only 60% of the Principal Amount shall be due and payable; (d) if the Equity Event is in an amount exceeding $3,000,000 but less than $4,000,000, then only 80% of the Principal Amount shall be due and payable; (e) if the Equity Event is in an amount exceeding $4,000,000, then 100% of the Principal Amount shall be due and payable. For any partial Principal Amount paid under (ii) (a) - (ii) (d) above, the balance of the outstanding Principal Amount would continue to be due and payable on the earlier to occur of this (i) or (ii) (a-e) above.  In the event of a partial payment, any subsequent payment resulting from an Equity Event shall be based on the percentage of the original Principal Amount and not a percentage of the outstanding Principal Amount after a partial payment under this maturity provision.

We also issued Sinacola with 163,415 penny warrants pursuant to the 2009 RSA (the “2009 Landlord Warrant”).  The 2009 Landlord Warrant is convertible into 163,415 shares of our common stock, and is exercisable in whole or in part at any time on or before December 31, 2014 at an exercise price of $.01 per share.  In addition, we agreed to modify that certain prior warrant issued to Sinacola on August 23, 2007 (the “2007 Landlord Warrant”).  The 2007 Landlord Warrant provided for Sinacola to purchase 50,000 shares of common stock on or before March 1, 2012 at an exercise price of $2.00 per share.  Pursuant to the 2009 RSA the exercise price of the 2007 Landlord Warrant was modified to $1.00 per share, while all other terms and conditions remained the same. The 2007 Landlord Warrant expired unexercised.

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NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 4 – NOTES PAYABLE (CONTINUED)

In accordance with ASC 470-20, Debt with conversions and other options, the proceeds from the First Landlord Note and the Second Landlord Note 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 recorded the relative fair value of the warrant issued to First Landlord Note in the amount of $80,521 as a debt discount upon issuance, and amortized this debt discount as interest expense over the life of the note.  Additionally, as a result of issuing the warrant with the subordinated convertible promissory note, a beneficial conversion option was recorded as a debt discount reflecting the incremental conversion option intrinsic value benefit of $44,479, at the time of issuance provided to the holder of the note, which was also amortized as interest expense over the life of the note. We recorded interest expense in the amounts of $0 and $58,854 for the years ended December 31, 2012 and December 31, 2011, respectively, in connection with the First Landlord Note. We recorded the relative fair value of the warrant issued to Second Landlord Note in the amount of $81,428 as a debt discount upon issuance, and amortized this debt discount as interest expense over the life of the note.  Additionally, as a result of issuing the warrant with the subordinated convertible promissory note, a beneficial conversion option was recorded as a debt discount reflecting the incremental conversion option intrinsic value benefit of $39,292, at the time of issuance provided to the holder of the note, which was also amortized as interest expense over the life of the note. We recorded interest expense in the amounts of $0 and $56,839 for the years ended December 31, 2012 and December 31, 2011, respectively, in connection with the Second Landlord Note.

Conversion of First Landlord Note and Second Landlord Note into Common Stock: On May 3, 2012, we received fully executed agreements documenting the extension of the maturities of the First Landlord Note and the Second Landlord Note, and the conversion of these two notes into common stock.

The agreements received on May 3, 2012 provide inter alia, for the following:

(1) With an effective date of March 30, 2012 the First Landlord Note was converted into 125,000 restricted shares of our common stock at a conversion price of $1.00 per share, in accordance with the conversion provisions of the First Landlord Note;

(2) With an effective date of March 30, 2012 the Second Landlord Note was converted into 84,271 restricted shares of our common stock at a conversion price of $1.50 per share, in accordance with the conversion provisions of the Second Landlord Note; and

(3) With an effective date of May 3, 2012, upon receipt of the fully executed agreements our landlord was issued with 21,819 restricted shares of our common stock for no additional consideration.

Third Landlord Note; Fourth Landlord Note:

On December 31, 2010 we entered into a second Rent Satisfaction Agreement (the “2010 RSA”) with our landlord, Sinacola. In terms of the 2010 RSA, all of our outstanding rent obligations for the 2010 financial year under our lease agreement, up to and including December 31, 2010 including, but not limited to, base rent, deferred rent, and our share of operating costs, are satisfied in full.

We issued Sinacola two Promissory Notes pursuant to the 2010 RSA, as follows:

Third Landlord Note:  The first note (the “Third Landlord Note”) is a subordinated convertible note in the principal amount of $110,000. The Third Landlord Note carries no interest and is convertible, at Sinacola’s option, into the common stock of the Company at an exercise price of $1.00 per common share on the maturity date.

Fourth Landlord Note:  The second note (the “Fourth Landlord Note”) is a subordinated convertible note in the principal amount of $110,715. The Fourth Landlord Note carries no interest and is convertible into the common stock of the Company at an exercise price of $1.50 per common share on the maturity date.  However, if the common stock has traded at $1.50 or above for four (4) consecutive weeks on a nationally recognized market (based on daily closing prices) then the Fourth Landlord Note is convertible at the Company’s option.

Maturity Date – Each of the Third Landlord Note and the Fourth Landlord Note had a maturity date of October 31, 2012.

We also issued Sinacola with 143,465 penny warrants pursuant to the 2010 RSA (the “2010 Landlord Warrant”).  The 2010 Landlord Warrant is convertible into 143,465 shares of our common stock, and is exercisable in whole or in part at any time on or before December 31, 2015 at an exercise price of $.01 per share.

In accordance with ASC 470-20, Debt with conversions and other options, the proceeds from the Third Landlord Note and the Fourth Landlord Note 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 recorded the relative fair value of the warrant issued pursuant to the Third Landlord Note in the amount of $70,853 as a debt discount upon issuance, and amortized this debt discount as interest expense over the life of the note.  Additionally, as a result of issuing the warrant with the subordinated convertible promissory note, a beneficial conversion option was recorded as a debt discount reflecting the incremental conversion option intrinsic value benefit of $39,147, at the time of issuance provided to the holder of the note, which was also amortized as interest expense over the life of the note. We recorded interest expense in the amounts of $50,000 and $60,000 for the years ended December 31, 2012 and December 31, 2011, respectively, in connection with the Third Landlord Note.  We recorded the relative fair value of the warrant issued pursuant to the Fourth Landlord Note in the amount of $71,314 as a debt discount upon issuance, and amortized this debt discount as interest expense over the life of the note.  Additionally, as a result of issuing the warrant with the subordinated convertible promissory note, a beneficial conversion option was recorded as a debt discount reflecting the incremental conversion option intrinsic value benefit of $34,409, at the time of issuance provided to the holder of the note, which was also amortized as interest expense over the life of the note. We recorded interest expense in the amounts of $48,056 and $57,667 for the years ended December 31, 2012 and December 31, 2011, respectively, in connection with the Fourth Landlord Note.

Fifth Landlord Note; Sixth Landlord Note:

On March 23, 2011 we entered into a third rent satisfaction agreement (the “2011 RSA”) with our landlord, Sinacola. In terms of the 2011 RSA, certain of our rent obligations for the period January 1, 2011 through June 30, 2011 under our lease agreement, including base rent and deferred rent, are satisfied in full.

We issued Sinacola two Promissory Notes pursuant to the 2011 RSA, as follows:

Fifth Landlord Note:  The first note (the “Fifth Landlord Note”) is a subordinated convertible note in the principal amount of $50,000. The Fifth Landlord Note carries no interest and is convertible, at Sinacola’s option, into the common stock of the Company at an exercise price of $1.00 per common share on the maturity date.

Sixth Landlord Note:  The second note (the “Sixth Landlord Note”) is a subordinated convertible note in the principal amount of $50,000. The Sixth Landlord Note carries no interest and is convertible into the common stock of the Company at an exercise price of $1.50 per common share on the maturity date.

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DECEMBER 31, 2012 AND 2011

NOTE 4 – NOTES PAYABLE (CONTINUED)

However, if the common stock has traded at $1.50 or above for four (4) consecutive weeks on a nationally recognized market (based on daily closing prices) then the Sixth Landlord Note is convertible at the Company’s option.

Maturity Date – Each of the Fifth Landlord Note and the Sixth Landlord Note has a maturity date of June 30, 2013.

We also issued Sinacola with 65,000 penny warrants pursuant to the 2011 RSA (the “2011 Landlord Warrant”).  The 2011 Landlord Warrant is convertible into 65,000 shares of our common stock, and is exercisable in whole or in part at any time on or before March 23, 2016 at an exercise price of $.01 per share.

In accordance with ASC 470-20, Debt with conversions and other options, the proceeds from the Fifth Landlord Note and the Sixth Landlord Note 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 recorded the relative fair value of the warrant issued in connection with the Fifth Landlord Note in the amount of $32,207 as a debt discount upon issuance, and we amortize this debt discount as interest expense over the life of the note.  Additionally, as a result of issuing the warrant with the subordinated convertible promissory note, a beneficial conversion option was recorded as a debt discount reflecting the incremental conversion option intrinsic value benefit of $17,793, at the time of issuance provided to the holder of the note, which we also amortize as interest expense over the life of the note. We recorded interest expense in the amounts of $25,000 and $19,306 for the years ended December 31, 2012 and December 31, 2011, respectively in connection with the Fifth Landlord Note.  We recorded the relative fair value of the warrant issued in connection with the Sixth Landlord Note in the amount of $32,207 as a debt discount upon issuance, and we amortize this debt discount as interest expense over the life of the note.  Additionally, as a result of issuing the warrant with the subordinated convertible promissory note, a beneficial conversion option was recorded as a debt discount reflecting the incremental conversion option intrinsic value benefit of $15,540, at the time of issuance provided to the holder of the note, which we also amortize as interest expense over the life of the note. We recorded interest expense in the amounts of $23,873 and $18,436 for the years ended December 31, 2012 and December 31, 2011, respectively in connection with the Sixth Landlord Note.

Seventh Landlord Note; Eighth Landlord Note:

On August 15, 2011 we entered into a fourth rent satisfaction agreement (the “Second 2011 RSA”) with our landlord, Sinacola. In terms of the Second 2011 RSA, certain of our rent obligations for the period July 1, 2011 through December 31, 2011 under our lease agreement, including base rent and deferred rent, are satisfied in full.

We issued Sinacola two Promissory Notes pursuant to the Second 2011 RSA, as follows:

Seventh Landlord Note:  The first note (the “Seventh Landlord Note”) is a subordinated convertible note in the principal amount of $50,050. The Seventh Landlord Note carries no interest and is convertible, at Sinacola’s option, into the common stock of the Company at an exercise price of $1.00 per common share on the maturity date.

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DECEMBER 31, 2012 AND 2011

NOTE 4 – NOTES PAYABLE (CONTINUED)

Eighth Landlord Note:  The second note (the “Eighth Landlord Note”) is a subordinated convertible note in the principal amount of $50,050. The Eighth Landlord Note carries no interest and is convertible into the common stock of the Company at an exercise price of $1.50 per common share on the maturity date.  However, if the common stock has traded at $1.50 or above for four (4) consecutive weeks on a nationally recognized market (based on daily closing prices) then the Eighth Landlord Note is convertible at the Company’s option.

Maturity Date – Each of the Seventh Landlord Note and the Eighth Landlord Note has a maturity date of November 30, 2013.

We also issued Sinacola with 65,065 penny warrants pursuant to the Second 2011 RSA (the “Second 2011 Landlord Warrant”).  The Second 2011 Landlord Warrant is convertible into 65,065 shares of our common stock, and is exercisable in whole or in part at any time on or before August 15, 2016 at an exercise price of $.01 per share.

In accordance with ASC 470-20, Debt with conversions and other options, the proceeds from the Seventh Landlord Note and the Eighth Landlord Note 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 recorded the relative fair value of the warrant issued in connection with the Seventh Landlord Note in the amount of $32,223 as a debt discount upon issuance, and we amortize this debt discount as interest expense over the life of the note.  Additionally, as a result of issuing the warrant with the subordinated convertible promissory note, a beneficial conversion option was recorded as a debt discount reflecting the incremental conversion option intrinsic value benefit of $17,827, at the time of issuance provided to the holder of the note, which we also amortize as interest expense over the life of the note. We recorded interest expense in the amounts of $21,840 and $6,370 for the years ended December 31, 2012 and December 31, 2011, respectively, in connection with the Seventh Landlord Note.  We recorded the relative fair value of the warrant issued to Eighth Landlord Note in the amount of $32,223 as a debt discount upon issuance, and we amortize this debt discount as interest expense over the life of the note.  Additionally, as a result of issuing the warrant with the subordinated convertible promissory note, a beneficial conversion option was recorded as a debt discount reflecting the incremental conversion option intrinsic value benefit of $15,540, at the time of issuance provided to the holder of the note, which is also amortized as interest expense over the life of the note. We recorded interest expense in the amounts of $20,842 and $6,079 for the years ended December 31, 2012 and December 31, 2011, respectively in connection with the Eighth Landlord Note.

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NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 4 – NOTES PAYABLE (CONTINUED)

We determined the fair values of the common stock warrants issued in connection with convertible notes as at the time of issuance using the Black-Scholes option-pricing model with the following assumptions:

						Fair value assumptions
Issue Date	Activity Description	Number of Warrants  issued		Warrants' Fair Value at Date of Issuance		Expected  remaining  warrant terms  (years)		Risk-free  interest rate			Volatility
4/15/2008	Enter into $750,000 subordinated convertible promissory note		350,000	$	346,936		5		2.68	%		37	%
12/31/2008	Enter into a total of $581,050 subordinated convertible promissory note and senior convertible promissory note		280,485	$	277,889		5		1.55	%		50	%
6/30/2009	Enter into $115,850 senior convertible promissory note		48,358	$	47,932		5		2.54	%		55	%
12/10/2009	Enter into $125,000 subordinated convertible promissory note		81,250	$	80,521		5		2.19	%		55	%
12/10/2009	Enter into $126,407 subordinated convertible promissory note		82,165	$	81,428		5		2.19	%		55	%
12/10/2009	Enter into $100,000 subordinated convertible promissory note		100,000	$	25,535		5		2.19	%		55	%
12/31/2009	Enter into $91,800 senior convertible promissory note		52,640	$	52,180		5		2.69	%		55	%
3/26/2010	Enter into $270,000 subordinated convertible promissory note		270,000	$	70,267		5		2.59	%		55	%
3/31/2010	Enter into a total of $45,000 senior convertible promissory note		21,000	$	20,815		5		2.55	%		54	%
6/30/2010	Enter into $45,000 senior convertible promissory note		21,000	$	20,808		5		1.79	%		19	%
9/30/2010	Enter into $45,000 senior convertible promissory note		21,000	$	20,803		5		1.27	%		20	%

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DECEMBER 31, 2012 AND 2011

NOTE 4 – NOTES PAYABLE (CONTINUED)

12/31/2010	Enter into $81,164 senior convertible promissory note		37,997	$	37,653	5	2.01	%	21	%
12/31/2010	Enter into $110,000 subordinated convertible promissory note		71,500	$	70,853	5	2.01	%	21	%
12/31/2010	Enter into $110,715 subordinated convertible promissory note		71,965	$	71,314	5	2.01	%	21	%
3/23/2011	Enter into $50,000 subordinated convertible promissory note		32,500	$	32,207	5	2.07	%	19	%
3/23/2011	Enter into $50,000 subordinated convertible promissory note		32,500	$	32,207	5	2.07	%	19	%
3/31/2011	Enter into $91,537 senior convertible promissory note		42,872	$	42,489	5	2.24	%	19	%
6/30/2011	Enter into $229,705 senior convertible promissory note		107,811	$	106,824	5	1.76	%	25	%
8/15/2011	Enter into $50,050 subordinated convertible promissory note		32,533	$	32,223	5	0.99	%	20	%
8/15/2011	Enter into $50,050 subordinated convertible promissory note		32,533	$	32,223	5	0.99	%	20	%
9/30/2011	Enter into $74,800 senior convertible promissory note		35,006	$	34,672	5	0.96	%	22	%
12/31/2011	Enter into $45,000 senior convertible promissory note		21,000	$	20,799	5	0.89	%	26	%
		Total		$	1,558,578

71

OXYSURE® SYSTEMS, INC.

NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 4 – NOTES PAYABLE (CONTINUED)

Other subordinated convertible notes payable issued: During 2012 we issued the following subordinated convertible notes payable:

On January 29, 2012 we entered into a note purchase agreement with the M. Nyewe Trust. The agreement provides that the Nyewe Trust purchase a subordinated convertible promissory note (the “Nyewe Trust Note”) from us for $100,000 in cash. The salient terms of the note are as follows:

Principal amount: $100,000

Interest rate: 8% per annum

Maturity: The then outstanding Principal Amount, together with accrued and unpaid interest thereon, or the optional conversion shares (“Optional Conversion Shares”) as the case may be, is due on the 360th day subsequent to January 29, 2012 (the "Maturity Date").

Conversion: The Note is convertible, at the option of either the Company or the Nyewe Trust, at any time on or prior to the Maturity Date. All or any portion of the then outstanding Principal Amount and accrued but unpaid interest of the Note may be converted (the "Optional Conversion") into a number of shares of the Company’s common stock (the "Optional Conversion Shares") equal to the amount of the then outstanding Principal Amount plus the then accrued but unpaid interest to be converted, divided by the conversion price, which is $1.50 per Optional Conversion Share.

Conversion of the Nyewe Trust Note: On June 25, 2012 we received a conversion notice from the M. Nyewe Trust, converting the entire principal and accrued interest totaling $103,156 of Nyewe Trust Note into common stock at a conversion price of $1.50 per share. We issued 68,770 shares of our common stock pursuant to the conversion.

Other subordinated convertible notes payable converted to common stock: During 2012 a total of $60,622 in notes payable issued in prior periods were converted into 66,320 shares of our common stock at an aggregate conversion price of $.91 per share.

The following summarizes notes converted to common stock during 2012:

		Note amount
	Note holder	prior to conversion		Stated interest			Principal		Amount of note converted			Conversion price (per share)			Effective date of conversion	Common stock issued (shares)
1	Sinacola, First Landlord Note	$	125,000		0	%	$	125,000	$	125,000		$	1.00		3/31/2012		125,000
2	Sinacola, Second Landlord Note	$	126,407		0	%	$	126,407	$	126,407		$	1.50		3/31/2012		84,271
3	Sinacola landlord note 1/2	$	-		0	%	$	-	$	-		n/a			5/3/2012		21,819	1
4	Sullivan Trust	$	25,000		8	%	$	25,000	$	25,631	2	$	1.00		4/10/2012		25,622
5	M. Nyewe Trust	$	100,000		8	%	$	100,000	$	103,156	3	$	1.50		6/25/2012		68,771
6	Yisheng Yao	$	15,000		0	%	$	15,000	$	15,000		$	0.86		7/12/2012		17,442
7	Tim Hutton	$	20,000		0	%	$	20,000	$	20,000	4	$	0.86		7/12/2012		23,256
8	Agave Resources, LLC.	$	750,000		0	%	$	750,000	$	750,000	5	$	1.50		12/31/2012		500,000
9	JTR Investments, Limited	$	1,268,656		0	%	$	1,268,656	$	1,268,656	6	$	1.50		12/31/2012		845,771
	Totals	$	2,430,063				$	2,430,063	$	2,433,850		$	1.42	7			1,711,952

1. Common stock issued to Sinacola for no consideration pursuant to the conversions of the First Landlord Note and Second Landlord Note.

2. Includes principal and accrued but unpaid interest converted.

3. Includes principal and accrued but unpaid interest converted.

4. Tim Hutton is the spouse of Vicki Jones, a director of us. Please see Note 10 - "Related Party Transactions."

5. Agave Resources, LLC is an affiliate of us. Don Reed, President of Agave Resources, LLC is also a director of us. Please see Note 10 - "Related Party Transactions."

6. JTR Investments, Limited is an affiliate of us. Julian Ross, our CEO is also President of JTR Management, LLC, general partner of JTR Investments, Limited. Please see Note 10 - "Related Party Transactions."

7. Aggregate conversion price.

72

OXYSURE® SYSTEMS, INC.

NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 4 – NOTES PAYABLE (CONTINUED)

The following table reflects the carrying values of our short-term and long-term notes payable as of December 31, 2012.

	Effective Interest Rate			Principal		Discount		December 31, 2012
Current notes payable
Sinacola, Third Landlord Note		18.18	%		110,000		-		110,000
Sinacola, Fourth Landlord Note		17.36	%		110,715		-		110,715
Sinacola, Fifth Landlord Note		50.00	%		50,000		5,694		44,306
Sinacola, Sixth Landlord Note		47.75	%		50,000		5,438		44,562
Sinacola, Seventh Landlord Note		43.64	%	$	50,050	$	21,840	$	28,210
Sinacola, Eighth Landlord Note		41.64	%		50,050		20,842		29,208
Frisco EDC		12.34	%		44,000		12,412		31,588
Total short-term notes payable				$	464,815	$	66,226	$	398,589
Long-term notes payable
Frisco EDC		12.34	%		104,000		27,928		76,072
Total long-term notes payable				$	104,000	$	27,928	$	76,072
Total short-term and long-term notes payable				$	568,815	$	94,154	$	474,661

The following table reflects the carrying values of our short-term and long-term notes payable as of December 31, 2011.

	Effective Interest Rate			Principal		Discount		December 31, 2011
Current notes payable
JTR, Senior Note		0.02	%	$	1,104,656	$	-	$	1,104,654
Sinacola, First Landlord Note		47.08	%		125,000		-		125,000
Sinacola, Second Landlord Note		44.97	%		126,407		-		126,407
Sinacola, Third Landlord Note		54.55	%	$	110,000	$	50,000	$	60,000
Sinacola, Fourth Landlord Note		52.09	%		110,715		48,056		62,660
Frisco EDC		12.34	%		32,620		6,032		26,588
Related Party Loans		0.00	%		59,750		-		59,750
Total short-term notes payable				$	1,669,148	$	104,088	$	1,565,059
Long-term notes payable
Sinacola, Fifth Landlord Note		38.61	%		50,000		30,694		19,306
Sinacola, Sixth Landlord Note		36.87	%		50,000		29,311		20,689
Sinacola, Seventh Landlord Note		33.20	%		50,050		43,680		6,370
Sinacola, Eighth Landlord Note		31.68	%		50,050		41,684		8,366
Agave, First Note		0.00	%		750,000		-		750,000
JTR, Second Note		0.00	%		250,000		-		250,000
Frisco EDC		12.34	%		154,380		46,720		107,660
Total long-term notes payable				$	1,354,480	$	192,089	$	1,162,390
Total short-term and long-term notes payable				$	3,023,628	$	296,177	$	2,727,449

73

OXYSURE® SYSTEMS, INC.

NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 4 – NOTES PAYABLE (CONTINUED)

The following table summarizes our outstanding notes payable as of December 31, 2012 and December 31, 2011:

	December 31, 2012			December 31, 2011
Current portion of notes payable	$	31,588		$	86,338
Current portion of convertible notes payable		367,001			1,478,722
Current portion of notes payable, net	$	398,589		$	1,565,059
Long-term portion of notes payable	$	104,000		$	154,380
Less: Unamortized discount		(27,928	)		(46,720	)
		76,072			107,660
Long-term portion of convertible notes payable	$	-		$	1,200,100
Less: Unamortized discount		-			(145,370	)
		-			1,054,730
Long-term portion of notes payable, net	$	76,072		$	1,162,390

Aggregate maturities of debt are as follows:

As of December 31, 2012:
2013	$	398,589
2014		39,588
2015		36,485
Thereafter		-
Total	$	474,661

74

OXYSURE® SYSTEMS, INC.

NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 5 - SHAREHOLDERS’ EQUITY

Preferred Shares Rights

On December 31, 2005, the Company’s Board of Directors adopted a Preferred Shares Rights Agreement (the “Agreement” or “Original Rights Agreement”).   Pursuant to the Agreement, the Board authorized the issuance of up to 5,000,000 shares of preferred stock, par value $0.0005 per share. As of December 31, 2012, the Company had authorized the issuance of 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 818,750 and 3,126,434 Series A Preferred shares issued and outstanding as of December 31, 2012 and December 31, 2011, respectively.

During the year ended December 31, 2012 the Company did not issue any shares of the Series A Preferred. During the year ended December 31, 2012 approximately 2,307,684 shares of the Series A Preferred have been converted into approximately 2,815,374 shares of our common stock in cashless conversions at a conversion ratio of 1.22:1.

A summary of the designations and preferences of its Series A Preferred stock is as follows:

Ranking – The Series A Preferred ranks senior to common stock.

Dividends – Series A Preferred may be entitled to receive a quarterly non-cumulative dividend in the amount of $.01 per share upon approval from the Board of Directors.

Liquidation Preference – In the event of any liquidation, dissolution, or winding up of the Company, the holders of Series A Preferred are entitled to receive 100% of the original issue price of $1.00 per share.

Conversion Rights – Each share of Series A Preferred is convertible at any time, at the option of the holder into 1.22 shares of common stock, subject to adjustment. Series A Preferred are subject to automatic conversion upon consummation of underwritten offering by the Company of shares of common stock to the public, in which the aggregate cash proceeds are at least $3 million and the price paid per share is at least $5.00.

Redemption Rights – All of the Series A Preferred may be called at any time by the Company within ten years, but not prior to two years after issuance. The redemption value is $1.00 per share, plus an amount equal to all unpaid dividends thereon.

Voting Rights – The holder of each share of Series A Preferred has the right to one vote for each share of common stock into which such share of Series A Preferred could be converted.

Common Stock

The Company has authorized 100,000,000 shares of $0.0004 par value common stock.

During the year ended December 31, 2012:

(1)   We issued 1,711,952 shares of common stock pursuant to the conversion of convertible subordinated promissory notes totaling $2,433,850 at an aggregate conversion price of $1.42 per share.

(2)   We issued 2,815,374 shares of common stock pursuant to the cashless conversion of 2,307,684 shares of our Series A Preferred at a conversion ratio of 1.22:1.

(3)   We received proceeds of $98,284 from the issuance of 374,808 shares of common stock pursuant to the exercise of 374,808 stock options.

(4)   We received proceeds of $6,106 from the issuance of 882,616 shares of common stock pursuant to the exercise of 882,616 warrants.

(5)   We issued 68,889 shares of common stock for $41,250 in cash at an aggregate price of $.60 per share.

(6)   We issued 97,500shares of common stock for services valued at approximately $20,748.

(7)   We issued 77,674 shares of common stock in connection with the acquisition of assets valued at approximately $95,062.

(8)   As further discussed under Note 6 – Stock Options and Warrants, we recorded $7,999 for the computed fair value of options issued to employees, non-employee directors, and consultants, net of cancellations and forfeitures.

(9)   As further discussed under Note 6 – Stock Options and Warrants, we recorded $0 for the computed fair value of warrants issued for services.

(10)   As further discussed under Note 6 – Stock Options and Warrants, we recorded $0 for the computed fair value of warrants issued in connection with convertible loans.

(11)   As further discussed under Note 6 – Stock Options and Warrants, we recorded $249,723 for the computed fair value of warrants issued in connection with deferred loan costs.

During the year ended December 31, 2011

(1)   We received cash proceeds of $21,260 from the issuance of 34,750 shares of common stock pursuant to the exercise of 34,750 stock options.

(2)   We received cash proceeds of $2,110 from the issuance of 294,330 shares of common stock pursuant to the exercise of 294,330 warrants.

(3)   We issued 465,969 shares of common stock pursuant to the conversion of convertible subordinated promissory notes. A total of $370,000 in principal and $95,969 in accrued but unpaid interest was converted at a conversion price of $1.00 per share. Of the shares issued, 335,880 shares were issued to Afritex Medical Products (Pty) Ltd. (“Afritex”), a South African distributor. Our President, CEO & CFO is a former director and shareholder of Afritex.

(4)   As further discussed under Note 6 – Stock Options and Warrants, we recorded $104,419 for the computed fair value of options issued to employees, nonemployee directors, and consultants, net of cancellations.

(5)   As further discussed under Note 6 – Stock Options and Warrants, we recorded $29,354 for the computed fair value of warrants issued for services.

(6)   We recorded $458,114 for the computed fair value of warrants issued in connection with convertible loans.

75

OXYSURE® SYSTEMS, INC.

NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 5 - SHAREHOLDERS’ EQUITY (CONTINUED)

As of December 31, 2012 and 2011 we had 22,548,678 and 16,519,865 shares respectively, of common stock issued and outstanding.

NOTE 6 - 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 us 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 during 2012 and 2011:

	Employee					Non-Employee
				Weighted					Weighted
	Number			Average		Number			Average		Combined
	Of			Exercise		Of			Exercise		Total
Outstanding at December 31, 2010		1,869,574		$	0.59		74,382		$	0.93		1,943,956
Granted		280,000		$	0.52		-			-		280,000
Exercised		(34,750	)	$	0.61		-			-		(34,750	)
Forfeited/Cancelled		(315,800	)	$	1.27		(21,202	)	$	2.00		(337,002	)
Outstanding at December 31, 2011		1,799,024		$	0.47		53,180		$	0.72		1,852,204
Granted		180,000		$	0.25		-			-		180,000
Exercised		(374,808	)	$	0.26		-			-		(374,808	)
Forfeited/Cancelled		(161,300	)	$	1.37		(35,000	)	$	0.50		(196,300	)
Outstanding at December 31, 2012		1,442,916		$	0.41		18,180		$	2.11		1,461,096

76

OXYSURE® SYSTEMS, INC.

NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 6 - STOCK OPTIONS AND WARRANTS (CONTINUED)

The following table summarizes information about those options that have been forfeited, cancelled or that have expired under the Plan during 2012 and 2011:

	Employee				Non-Employee
			Weighted				Weighted
	Number		Average		Number		Average		Combined
	Of		Exercise		Of		Exercise		Total
	Options		Price		Options		Price		Options
Forfeited/Cancelled
during FY 2011		315,800	$	1.27		21,202	$	2.00		337,002
Forfeited/Cancelled
during FY 2012		161,300	$	1.37		35,000	$	0.50		196,300

Valuation Assumptions

We value our stock-based payment awards granted using the Black-Scholes model, during the years ended December 31, 2012 and 2011.  The Black-Scholes model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. The Black-Scholes model requires the input of certain assumptions. Our stock options have characteristics significantly different from those of traded options, and changes in the assumptions can materially affect the fair value estimates.

For the years ended December 31, 2012 and 2011, respectively, the fair value of options granted were estimated at the date of grant using the Black-Scholes model with the following weighted average assumptions:

	Equity Incentive Plans for Years Ended December 31,
	2012			2011
Expected terms (in years)		5-10			5-10
Volatility		22%-64	%		21	%
Risk-free interest rate		.89%-2.24	%		2.25	%
Expected dividend rate		0.00	%		0.00	%

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 risk-free interest rate assumption is based on the 5-year U.S Treasury zero-coupon rate with a remaining term equal to the expected term used as the assumption in the model.

77

OXYSURE® SYSTEMS, INC.

NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 6 - STOCK OPTIONS AND WARRANTS (CONTINUED)

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 December 20, 2011 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.  The fair value of the underlying common stock has been determined by the board of directors until such time as our common stock commenced trading on the over the counter bulletin board (OTCQB).

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.

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 amortized on a straight-line basis.  For the years ended December 31, 2012 and 2011, stock based compensation expense was approximately $7,999 and $104,419, respectively, which consisted primarily of stock-based compensation expense related to stock options recognized under GAAP issued to employees.  For the years ended December 31, 2012 and 2011, the number of options exercised was 374,808 and 34,750, respectively.

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 December 31, 2012, total unrecognized compensation cost related to stock-based awards granted to employees and non-employee directors was $10,304. This cost will be amortized on a ratable basis over a weighted-average vesting period of approximately 0.08 years.

78

OXYSURE® SYSTEMS, INC.

NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 6 - STOCK OPTIONS AND WARRANTS (CONTINUED)

The following table summarizes information about employee stock options outstanding under the Plan at December 31, 2012:

December 31, 2012
	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number Outstanding		Weighted average remaining  contractual life		Weighted average  exercise price		Number  exercisable		Weighted average remaining contractual life		Weighted  average exercise price
$ 0.20 - $0.25		1,192,488		1.95	$	0.25		1,012,488		2.23	$	0.25
$ 0.50 - $1.00		215,753		1.18	$	0.82		215,753		1.11	$	0.82
$2.00		12,750		0.58	$	2.00		12,750		1.39	$	2.00
$2.50		21,925		1.39	$	2.50		21,925		1.39	$	2.50
		1,442,916						1,262,916

The following table summarizes information about non-employee stock options outstanding under the Plan at December 31, 2012:

December 31, 2012
	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number Outstanding		Weighted average  remaining contractual life		Weighted average exercise price		Number  exercisable		Weighted average remaining contractual life		Weighted  average exercise price
$ 0.20 - $0.25		900		1.16	$	0.25		900		1.16	$	0.25
$ 0.50 - $1.00		15,000		1.00	$	1.00		15,000		1.00	$	1.00
$2.00		-		-	$	-		-		-	$	-
$2.50		2,280		0.16	$	2.50		2,280		0.16	$	2.50
		18,180						18,180

79

OXYSURE® SYSTEMS, INC.

NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 6 - STOCK OPTIONS AND WARRANTS (CONTINUED)

Warrants.

The following table summarizes our warrant activities for the years ended December 31, 2012 and 2011:

				Weighted
	Number			Average
	Of			Exercise
	Warrants			Price
Outstanding at December 31, 2010		2,717,226		$	0.51
Granted		436,754		$	0.20
Exercised		(294,330	)	$	0.09
Forfeited/Cancelled		(100,000	)	$	0.82
Outstanding at December 31, 2011		2,759,650		$	0.48
Granted		55,000		$	0.93
Exercised		(882,616	)	$	0.01
Forfeited/Cancelled		(55,000	)	$	0.92
Outstanding at December 31, 2012		1,877,034		$	0.65

80

OXYSURE® SYSTEMS, INC.

NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 6 - STOCK OPTIONS AND WARRANTS (CONTINUED)

The following table indicates a summary of the significant terms of each of our warrants issued and outstanding as at December 31, 2012, and the accounting treatment of each:

Granted to:		Date of Grant	Number of Shares Underlying Warrants		Exercise Price		Expiration Date	Weighted Average Remaining Life (Years)		Warrants' Fair Value at Date of Issuance		Term of Expense (Years)
NTEC	1	4/8/2004		281,200		0.0005	4/8/2014		1.27	$	78,643		1.00
Agave Resources, LLC	2	4/15/2008		350,000		0.01	4/15/2013		0.29	$	346,936		1.00	1
Sinacola Commercial	3	12/1/2008		7,500		1.00	2/1/2013		0.09	$	3,327		5.00	2
GSAAgent and affiliates (Alan Jensen, James Bello, Charlotte Bello)	4	11/19/2008		88,889		0.01	11/19/2013		0.88	$	99,098	Expensed upon issuance
WLS, LLC.	5	5/7/2008		8,000		0.01	5/7/2013		0.35	$	19,931	Expensed upon issuance
Pearl Ross	6	9/30/2008		7,000		0.01	9/30/2013		0.75	$	6,940	Expensed upon issuance
Dennis O. Harris	7	3/31/2009		2,500		0.01	3/31/2014		1.25	$	2,477	Expensed upon issuance
Carl Dickerson	8	3/31/2009		5,000		0.01	3/31/2014		1.25	$	4,954	Expensed upon issuance
Sinacola Commercial	9	12/31/2009		163,415		0.01	12/31/2014		2.00	$	161,949		2.00	3
Pacific Cattle Corporation	10	4/20/2009		100,000		1.00	4/20/2014		1.30	$	43,039	Expensed upon issuance
Bryan Thomas	11	6/13/2009		30,000		0.59	6/13/2014		1.45	$	17,161	Expensed upon issuance
Alison Freeman	12	2/1/2009		10,000		1.00	2/1/2014		1.09	$	4,563	Expensed upon issuance
Community Foundation of North Texas	13	11/19/2008		25,000		1.00	11/19/2013		0.88	$	10,959	Expensed upon issuance
Alcedo Family Trust	14	12/10/2009		100,000		2.50	12/10/2014		1.94	$	25,535		0.75
Sinacola Commercial	15	12/31/2010		71,500		0.01	12/31/2015		3.00	$	70,853		1.83	4
Sinacola Commercial	16	12/31/2010		71,965		0.01	12/31/2015		3.00	$	71,314		1.83	4
Afritex Medical Products	17	3/26/2010		270,000		2.50	3/26/2015		2.23	$	70,267		0.75	5
Stanley D. Bert	18	1/27/2011		100,000		0.82	1/27/2016		3.07	$	32,023	Expensed upon issuance
Sinacola Commercial	19	3/23/2011		65,000		0.01	3/23/2016		3.23	$	64,414		2.00	6
Sinacola Commercial	20	8/15/2011		65,065		0.01	8/15/2016		3.62	$	64,446		2.29	7
Vencore Solutions, LLC	21	8/29/2012		32,500		1.00	8/29/2017		4.66	$	9,303		5.00	8
Vencore Solutions, LLC	22	8/29/2012		22,500		0.82	8/29/2017		4.66	$	7,610		5.00	8
				1,877,034

1 Issued pursuant to the Agave First Note. Agave Resources, LLC is controlled by one of our Directors, Donald Reed. Please see Note 4 – “Notes Payable,” and Note 10 – “Related Party Transactions.”

2 Issued pursuant to a lease modification. Please see Note 9 – “Commitments and Contingency.”

3 Issued pursuant to the 2009 RSA. Please see Note 4 – “Notes Payable.”

4 Issued pursuant to the 2010 RSA. Please see Note 4 – “Notes Payable.”

5 Issued pursuant to that certain license agreement and distribution agreement with Afritex Medical Products (Pty) Ltd. (“Afritex”), of which our President is a former board member and stockholder.

6 Issued pursuant to the 2011 RSA. Please see Note 4 – “Notes Payable.”

7 Issued pursuant to the Second 2011 RSA. Please see Note 4 – “Notes Payable.”

8 Issued pursuant to that certain Second Payment Moratorium with Vencore Solutions, LLC. Please see Note 9 – “Commitments and Contingency.”

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NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 7 - INCOME TAXES

The Company adopted the provisions of ASC 740, “Accounting for Uncertainty in Income Taxes,” on January 1, 2008.  FASB ASC Topic 740 clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FASB ASC Topic 740 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition.

As a result of the implementation of FASB ASC Topic 740, the Company did not recognize a decrease or increase in the liability for unrecognized tax benefits.

As of December 31, 2012 and 2011, the Company had cumulative net operating loss carry-forwards of approximately $11,648,818 and $10,936,288 respectively, which expire in varying amounts between 2017 and 2027.   Realization of this potential future tax benefit is dependent on generating sufficient taxable income prior to expiration of the loss carry-forward. The deferred tax asset related to this (and other) potential future tax benefits has been offset by a valuation allowance in the same amount. The amount of the deferred tax asset ultimately realizable could be increased in the near term if estimates of future taxable income during the carry-forward period are revised.

Deferred income tax assets of $4,669,594 and $4,390,047 for the years December 31, 2012 and 2011 respectively were offset in full by a valuation allowance.

The components of the Company's net deferred tax assets, including a valuation allowance, for the years 2012 and 2011 are as follows:

Deferred Tax Assets	As of December 31, 2012			As of December 31, 2011
Net operating loss carry-forwards	$	3,960,598		$	3,718,338
Net deferred tax assets before valuation allowance	$	4,669,594		$	4,390,047
Less: Valuation Allowance	$	(4,669,594	)	$	(4,390,047	)
Net deferred tax assets		--			--

Reconciliation between the amounts of income tax benefit determined by applying the applicable U.S. income tax rate to pre-tax loss is as follows:

	As of December 31, 2012			As of December 31, 2011
Statutory federal income tax		34	%		34	%
Change in valuation allowance on deferred tax assets		(34	%)		(34	%)

Due to the inherent uncertainty in forecasts and future events and operating results, the Company has provided for a valuation allowance in an amount equal to gross deferred tax assets resulting in the above figures for the periods audited.

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts more likely than not to be realized.

The Company’s income tax provision is based on calculations and assumptions that will be subject to examination by the Internal Revenue Service and other tax authorities. The potential outcomes of these examinations are regularly assessed in determining the adequacy of the provision for income taxes. Should the actual results differ from the Company’s estimates, the income tax provision would be adjusted in the period in which the facts that give rise to the revision become known. Tax law and rate changes are reflected in the income tax provision in the period in which changes are enacted.

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OXYSURE® SYSTEMS, INC.

NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 8 – LICENSE AND SERVICE AGREEMENTS

We did not enter into any new license agreements during 2012.

We entered into the following service agreements during 2012:

Hagerman service agreement (“Hagerman Agreement”): On October 8, 2012 we entered into an independent contractor agreement with Chris Hagerman, a third party service provider, with the following deliverables, inter alia: Website development; database development (Sequel); Online marketing collateral development; Distribute Company press releases, including via email; marketing efforts to include lead generation; create and place banner ads on Internet; email lead generation and collection; send announcement of new email services to shareholder lists; continuously email news releases to investor database; update investor database with existing shareholders information; list any private placement, annual report, documents; convert documents to online format (html) for e-delivery (download); deliver requested documents online; advanced investment community support; broker network introductions; digitize & broadcast company, product, sales video presentation; link Company’s website to the video presentation; announce video presentation to investor database; announce video presentation to financial advisors; feature company in market newsletters; contract for a third party company research report; distribute research report to financial advisors; distribute research report to select investors; update and maintain Company domain www.oxysure.com; design and host company domain; upgrade current site to have international IR links/lead collection; upgrade current site for mobile/smart phone/tablets; search engine optimization – SEO campaign; register Company’s website on search engines and announce Company’s website to investors. In connection with the Hagerman Agreement, the initial term of the agreement is for a period of one year, and we agreed to issue as total aggregate compensation for all services rendered over 12 months, a total of 176,000 restricted shares of our common stock, as follows: (i) 44,000 shares of common stock was issued upon execution of the Hagerman Agreement; (ii) 66,000 shares of common stock was to be issued on or about January 8, 2013, and (iii) 66,000 shares of common stock is to be issued on or about April 8, 2013.

Wall Street Buy Sell Hold Consulting agreement (“WSBSH Agreement”): On October 22, 2012 we entered into a 3-month consulting agreement with Wall Street Buy Sell Hold Inc. (“WSBSH”) to assist us with strategic business planning, and investor and public relations services. We agreed to compensate WSBSH as follows: we paid a total of five thousand dollars ($5,000.00) and issued a total of twenty five thousand (25,000) shares of the our restricted common stock for the first month of service; we paid seven thousand dollars ($7,000) and issued thirty five thousand (35,000) shares of our restricted common stock for the second month of service. We did not pay WSBSH anything for the third month of service during 2012, as we entered into a modified agreement with WSBSH in January 2013 for the third month of service.

NOTE 9 – COMMITMENTS AND CONTINGENCY

Leases

Operating Lease – During 2007, we entered into a long-term non-cancelable lease for office space, which expired in October 2012. In connection with the execution of this lease agreement, we received leasehold improvements totaling $324,000. The leasehold improvements were recorded as deferred rent and have been amortized as a reduction to rent expense over the lease term. Additionally, we issued 50,000 warrants in connection with the lease agreement. We issued a further 7,500 warrants in connection with a modification to the lease agreement, related to the removal of an escrow requirement of us. As at December 31, 2012 we rented our space on a month to month basis while a new lease is being negotiatedwith our landlord.

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NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 9 – COMMITMENTS AND CONTINGENCY (CONTINUED)

At December 31, 2012, future minimum lease payments under the non-cancelable operating lease for the year ended December 31, 2012 were as follows:

2013		-
Thereafter		-
	$	-

Rental expense for the years ended December 31, 2012 and 2011 was $93,522 and $115,728, respectively.

Capital lease –We lease certain of equipments under capital lease agreements that expired at various dates through 2012.

During 2006 we entered into a master lease agreement with a VenCore Solutions, LLC (“Vencore”) that allowed us to lease up to $750,000 of equipment (the “Vencore Master Lease”). This maximum amount available under this lease was subsequently increased to $805,000. The Vencore Master Lease required a security deposit of 10% of the amount of each individual lease schedule, a payment of Series A Convertible Preferred Stock shares equal to 5% of the lease divided by $1.00, and 36 monthly payments of 3.33% of the lease. We have the option to purchase the equipment at the end of each lease term at the lesser of 12% of the original equipment cost or the fair market value. On March 4, 2011 Vencore agreed to a payment moratorium, which was to continue until the earlier to occur of (i) the execution and completion of a mutually agreed upon cash settlement ("Settlement"), or (ii) the execution of a mutually agreed upon repayment plan ("Plan") or February 29, 2012.

On July 9, 2012 we entered into a second moratorium agreement (“Second Payment Moratorium”) with Vencore. The Second Payment Moratorium provides for the following:

a)  The balance outstanding to Vencore remains the balance outstanding at the end of the first payment moratorium, which was $307,661.83 (“Debt Obligation”);

b)  The term of the Second Payment Moratorium (the “Moratorium Period”) shall expire on the earlier to occur of: (i) July 1, 2013;  (ii) a cash settlement or repayment plan being entered into; or (iii) a merger or acquisition of OxySure or the sale of substantially all of its assets (collectively a “Sale”);

c)  We will not be obligated to make any payments during the Moratorium Period;

d)  No late charges or interest will accrue during the Moratorium Period;

e)  Any amounts we may pay towards the Debt Obligation during the Moratorium Period shall reduce the Debt Obligation;

f)  In the event of a Sale the entire Debt Obligation shall immediately become due and payable; and

g)  Vencore shall make no demands or take any actions against us during the Moratorium Period.

In exchange for the Second Payment Moratorium, we issued to Vencore two warrants (the “Warrants”) as follows:

(a)  A warrant as to 22,500 common shares at an exercise price per share of $0.82; and

(b)  A warrant as to 32,500 common shares at an exercise price per share of $1.00.

The terms of the Warrants are 5 years each and Vencore has the ability to exercise the Warrants on a cashless/net-issuance basis.

Between 2007 and 2012, we entered into agreements with other finance companies (other than Vencore) to acquire equipment with interest rates ranging from 7% to 19% with three to five-year lease terms. Minimum non-cancellable lease payments required under all capital leases as at December 31, 2012 are as follows:

2013	296,077
2014	1,728
2015	576
Total	298,381
Less amounts representing interest	(808	)
Total	297,573

84

OXYSURE® SYSTEMS, INC.

NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 9 – COMMITMENTS AND CONTINGENCY (CONTINUED)

Our gross amounts of assets recorded under capital leases by major class, and the related accumulated amortization at December 31, 2012 are as follows:

Machinery & equipment	916,029
Less accumulated depreciation	(902,965	)
Machinery & equipment, net	13,064
Computer equipment	3,707
Less accumulated depreciation	(3,707	)
Computer equipment, net	-

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. As at December 31, 2012 we were not involved in any legal proceedings.

Indemnification

Under the indemnification provisions of our customer agreements, we routinely agree to indemnify and defend our customers against infringement of any patent, trademark, or copyright of any country or the misappropriation of any trade secret, arising from the customers’ legal use of our products or services. The exposure to us under these indemnification provisions is generally limited to the total amount paid by the customers under pertinent agreements. However, certain indemnification provisions potentially expose us to losses in excess of the aggregate amount received from the customer. To date, there have been no claims against us or our customers pertaining to such indemnification provisions and no amounts have been recorded.

85

OXYSURE® SYSTEMS, INC.

NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 10 – RELATED PARTY TRANSACTIONS

As discussed in Note 4 – “Notes Payable,” several of the notes payable are entered into with related parties.

A summary of the related party financings and notes payable to related parties as at December 31, 2012 is as follows:

	Shareholder advances
Related party	Julian Ross(1)			Other
Amount	$	203,222		$	4,250
Stated interest rate		0	%		0	%
Maturity		n/a			n/a

(1) Our CEO, Mr. Ross provided us with a total of $460,221.66 during 2012 in shareholder cash advances and salary relinquishments to fund working capital from time to time during the year. Of this amount, $157,000 was repaid in cash, and in addition Mr. Ross voluntarily relinquished a total of $100,000. The net amount outstanding as at December 31, 2012 was $203,222.

As some of our related parties provided us non-interest bearing notes at various times, we issued various warrants to these related parties. On December 31, 2012 two of our affiliates, JTR Investments Limited and Agave Resources, LLC converted a total of $2,018,117 in convertible notes to common stock. Pursuant to the conversions: (i) The First Note in the amount of $750,000 was converted into 500,000 shares of common stock at a conversion price of $1.50 per share and the First Note was extinguished. (ii) The JTR Senior Note in the amount of $1,018,656 was converted into 679,104 shares of common stock at a conversion price of $1.50 per share and the JTR Senior Note was extinguished. (iii) The Second Note in the amount of $250,000 was converted into 166,667 shares of common stock at a conversion price of $1.50 per share and the Second Note was extinguished.

Don Reed, President of Agave is also a Director of us. Julian Ross, our CEO is also the President of JTR Management, LLC, the general partner of JTR Investments, Limited. Please refer to Note 4, “Notes Payable,” and Note 6 – “Stock Options and Warrants” for details.

During 2012 Tim Hutton converted $20,000 outstanding into 23,256 shares of our common stock at a conversion price of $.86 per share. Tim Hutton is the spouse of Vicki Jones, a director of us. Please see Note 4 - "Notes payable."

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OXYSURE® SYSTEMS, INC.

NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 11 – NET INCOME (LOSS) PER SHARE

The following table sets forth the computation of net basic and diluted net income (loss) per share:

	Year ended December 31,
	2012			2011
Net income (loss)		(828,271	)		(1,532,399	)
Shares used in computing basic per share amounts (weighted ave.)		19,862,088			15,930,327
Net income (loss) per share:
Basic and Diluted	$	(0.04	)	$	(0.10	)

NOTE 12 – FAIR VALUE MEASUREMENTS

Effective January 1, 2009, the Company adopted new fair value accounting guidance. The adoption of the guidance was limited to financial assets and liabilities and did not have a material effect on our financial condition or results of operations.

The guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact business and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. The guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The guidance establishes three levels of inputs that may be used to measure fair value:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Unobservable inputs to the valuation methodology that is significant to the measurement of fair value of assets or liabilities.

87

OXYSURE® SYSTEMS, INC.

NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 12 – FAIR VALUE MEASUREMENTS (CONTINUED)

Assets Measured at Fair Value on a Recurring Basis

The following table presents our financial assets and liabilities that are measured at fair value on a recurring basis which were comprised of the following types of instruments as of December 31, 2012 and 2011:

	Total		Level 1		Level 2		Level 3
Cash (1)	$	13,514	$	13,514		-		-
Total cash equivalents as of December 31, 2012	$	13,514	$	13,514		-		-
(1) Included in Cash and cash equivalents on the Company's Balance Sheet.
	Total		Level 1		Level 2		Level 3
Cash (1)	$	65,118	$	65,118		-		-
Total cash equivalents as of December 31, 2011	$	65,118	$	65,118		-		-
(1) Included in Cash and cash equivalents on the Company's Balance Sheet.

NOTE 13 – 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.

88

OXYSURE® SYSTEMS, INC.

NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 14 – 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 and accessories. Our chief operating decision-maker is our Chief Executive Officer. Our Chief Executive Officer reviews financial information presented on a consolidated basis 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:

	Year Ended December 31,
	2012		2011
Product Revenue:
United States - product sales	$	146,797	$	102,658
ROW - product sales		86,680		82,551
ROW - license fees/service revenue		36,220		-
Totals	$	269,697	$	185,209

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OXYSURE® SYSTEMS, INC.

NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 15 – 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.  We have been suffering from recurring losses from operations. However, our total notes payable has decreased significantly from $2,727,449 at December 31, 2011 to $474,661 at December 31, 2012. Our long term notes payable has decreased significantly from $1,162,390 at December 31, 2011 to $76,072 at December 31, 2011. Our current notes payable has also decreased significantly from $1,565,059 at December 31, 2011 to $398,589 at December 31, 2012.

Our continuation as a going concern is dependent upon our ability to generate sufficient cash flow from operations to meet our obligations on a timely basis and/or obtain financing as may be required.  As of December 31, 2012 and 2011, we have incurred net losses from operations and had stockholders’ deficits of $14,258,667 and $13,430,659, respectively, since inception.  We had a working capital deficit of $1,536,239 as of December 31, 2012 and $2,244,219 as of December 31, 2011. We have had limited revenues from the marketing of our primary product, the OxySure Model 615 as we are early in its commercialization and it currently operates in this single industry segment.  These factors raise significant doubt about our ability to continue as a going concern.

During the next 12 months, our foreseeable cash requirements will relate to continual development of the operations of our business, maintaining our good standing and making the requisite filings with the Securities and Exchange Commission, and the payment of expenses associated with reviewing or investigating any potential business ventures.  We may experience a cash shortfall and may be required to raise additional capital. Historically, we have relied upon internally generated funds and funds from the sale of shares of stock and loans and advances from our shareholders and private investors to finance our operations and growth. We may raise additional capital through future public or private offerings of our stock or through loans from investors, although there can be no assurance that we will be able to obtain such financing.  Our failure to do so could have a material and adverse effect upon us and our shareholders.

We have a series of plans to mitigate the going concern:

1.   Management is seeking additional sources of equity and/or debt financing on terms that are reasonable for us; however, there is no assurance that any such additional funding will be available.

2.   We anticipate that sales during 2013 and 2014 from existing markets will grow, and we believe that we will be able to generate sales from new markets. Existing markets include education customers such as schools, school districts and colleges, and commercial customers such as manufacturing facilities, churches and other commercial venues. New markets will include, but not be limited to, government customers and new international territories and markets.

3.   We plan to increase our market penetration through the addition of new distributors, both the US and outside the US during 2013 and beyond. We also plan to increase the number of sub-distributors and sales agents we will appoint in the U.S. to sell our products.

4.   We plan to continue to diversify our product range through the addition of complementary products and solutions. Some of these products will be sourced from third party manufacturers and suppliers.

5.   We may seek or consider strategic business combinations with other companies to complement our resources and create synergies.

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OXYSURE® SYSTEMS, INC.

NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 16 – CONCENTRATION OF RISK IN CUSTOMER AND SUPPLIER RELATIONSHIPS

Financial instruments that potentially subject us to credit risk are comprised of cash and cash equivalents, which are maintained at high quality financial institutions. At December 31, 2012 and 2011, we did not have any amounts in excess of the Federal Deposit Insurance Corporation limit of $250,000.

The relative magnitude and the mix of revenue from our largest customers have varied significantly quarter to quarter. During the twelve months ended December 31, 2012 and 2011, one distributor has accounted for significant revenues, varying by period, to our company: Afritex Medical Products (Pty) Ltd., a South African distributor (“Afritex”), in which our President is a former board member and shareholder. For the twelve months ended December 31, 2012 and 2011, the percentages of revenues from Afritex are as follows:

	Year Ended December 31,
	2012			2011
Afritex		29	%		45	%

Over time, as we work to add additional distributors to our network and to grow our distribution business, we anticipate the relative significance to our revenue of any particular customer or distributor will decline. Please see Note 17 – “Subsequent Events.”

NOTE 17 - SUBSEQUENT EVENTS

The Company has evaluated events and transactions subsequent to December 31, 2012 through the date of issuance of the Financial Statements. During the period from January 1, 2012 to the date of issuance, we have had the following material subsequent events:

Aero Healthcare Distribution Agreement:

We entered into an exclusive distribution agreement with Aero Health Holdings Limited (“Aero Australia”) to distribute our products in Australia and New Zealand. Simultaneously, we entered into an exclusive distribution agreement with Aero Healthcare Limited (“Aero UK”) to distribute our products in the United Kingdom.

Aero is a significant, rapidly growing manufacturer and distributor of first aid and healthcare products, including Automated External Defibrillators (AEDs), with locations in Australia, New Zealand, United Kingdom, Germany and the United States. The agreements provide Aero the exclusivity to market and sell our in the Australia, New Zealand and UK markets. In return, the agreements provide that Aero apply for and obtain CE Marking for our Model 615 and related disposable cartridges, as well as approval from the Therapeutic Goods Administration (TGA), a division of the Australian Department of Health and Ageing. Aero is to pursue and obtain a TGA conformity assessment certificate and registration on the Australian Register of Therapeutic Goods. All applications, approvals and certifications are to be pursued and issued in the name of OxySure Systems, Inc.

The agreements also provide that Aero purchase a minimum combined quantity of 4,500 units of OxySure Model 615 during the first two years subsequent to CE Marking and TGA approval.

Expansion of product portfolio with the addition of six AED brands:

In February 2013 we announced that we have expanded our product offerings to include six brands of Automated External Defibrillators (AEDs), as well as all related AED accessories. We believe that our flagship product, the OxySure Model 615 is an excellent companion product for AEDs to allow pre-responders to administer oxygen, post-resuscitation in a cardiac arrest event in public access venues as well as in private settings.

The addition of AEDs and AED accessories from major manufacturers Cardiac Science, Philips, Zoll, Physio Control (formerly Medtronic), Defibtech and Heartsine allows us to offer our customers and distribution partners a complete solution as it relates to their cardiac arrest emergency preparedness needs. We offer most AEDs by these manufacturers, as well as related accessories such as batteries, pads, wall boxes, signage, software, program management, compliance and training. In addition, we provide competitively priced, bundled solutions or “combo packs” comprising both OxySure products and AED products.

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NOTES TO AUDITED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2012 AND 2011

NOTE 17 - SUBSEQUENT EVENTS (CONTINUED)

Expansion of Board of Directors:

In March 2013 we announced that Mr. Jeremy M. (“Jerry”) Jones, former Chairman and CEO of Apria Healthcare has joined our Board of Directors as an independent director effective April 1, 2013.

Mr. Jones brings over 35 years of healthcare industry experience to our Board. Mr. Jones founded Homedco Group, Inc., a home healthcare services company, which he took public in 1991. Homedco merged into Apria Healthcare Group, Inc. (“Apria”) in 1995 and from 1995 through January 1998, Mr. Jones was Chief Executive Officer and Chairman of Apria, which became the largest homecare service provider in the nation under his leadership through merger, acquisitions and increased market dominance, and was sold to the Blackstone Group (NYSE: BX) for $1.7 billion in December 1998. Mr. Jones currently serves as Chairman of On Assignment, Inc. (NYSE: ASGN), a $1.3 billion leader in the healthcare and life sciences sectors focusing on in-demand, skilled medical and technical staffing. At On Assignment he also serves on the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee.

92

ITEM 9—CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A—CONTROLS AND PROCEDURES

Regulations under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) require public companies to maintain “disclosure controls and procedures,” which are defined as controls and other procedures that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

The Company conducted an evaluation, with the participation of its Chief Executive Officer and its Chief Financial Officer, of the effectiveness of its disclosure controls and procedures as of December 31, 2012. Based on such evaluation, its Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2012, the Company’s disclosure controls and procedures were effective.

Management’s Annual Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the issuer’s principal executive and principal financial officers and effected by the issuer’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the U.S. generally accepted accounting principles (“U.S. GAAP”).

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.  Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting.  However, these inherent limitations are known features of the financial reporting process.  Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

As of December 31, 2012, the Company carried out an evaluation based on the criteria for effective internal control over financial reporting established in “Internal Control—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance. Based on such assessment, management concluded that its internal control over financial reporting was effective.

Changes in Internal Control over Financial Reporting

There have been no changes to its internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act) during the period ended December 31, 2012 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

ITEM 9B—OTHER INFORMATION

There is no information to report under this item for the period ended December 31, 2012.

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PART III

ITEM 10—DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

Executive Officers and Directors

Our executive officers and directors are as follows:

Name	Age	Position
Julian T.  Ross	46	Director (Chairman), CEO, President, CFO
Jeremy M. Jones	70	Director
Vicki Jones	50	Director
Donald Reed	79	Director

Julian T. Ross, Chairman, CEO, President & CFO

Mr. Ross is our founder and has managed the development of our technology since inception. Mr. Ross has been our Chief Executive Officer, President, Chief Financial Officer and Secretary since our incorporation in January 2004.  He brings over 25 years’ experience in technology, corporate finance and manufacturing, having functioned both in consulting and operational capacities at senior management level.  In addition to developing our technology, he managed the development of our production capabilities, partnerships and alliances, managed the development of our sales, distribution and licensing partnerships, raised in excess of $14 million in debt and equity to fund our operations, and took us public in 2011 through an S-1 registration with the Securities and Exchange Commission. Mr. Ross enjoyed an Academic Scholarship from Shell Petroleum and an Academic Scholarship from the Edwin L. Cox School of Business at Southern Methodist University, where he received an MBA in Finance.  The above experience, qualifications, attributes and skills led us to the conclusion that Julian T. Ross shall serve as our CEO, President, CFO, and director.

Jeremy M. Jones, Director

In March 2013 we announced that Mr. Jeremy M. (“Jerry”) Jones, former Chairman and CEO of Apria Healthcare has joined our Board of Directors as an independent director effective April 1, 2013. Mr. Jones brings over 35 years of healthcare industry experience to our Board. Mr. Jones founded Homedco Group, Inc., a home healthcare services company, which he took public in 1991. Homedco merged into Apria Healthcare Group, Inc. (“Apria”) in 1995 and from 1995 through January 1998, Mr. Jones was Chief Executive Officer and Chairman of Apria, which became the largest homecare service provider in the nation under his leadership through merger, acquisitions and increased market dominance, and was sold to the Blackstone Group (NYSE: BX) for $1.7 billion in December 1998. Mr. Jones currently serves as Chairman of On Assignment, Inc. (NYSE: ASGN), a $1.3 billion leader in the healthcare and life sciences sectors focusing on in-demand, skilled medical and technical staffing. At On Assignment he also serves on the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee.

Vicki Jones, Director

Ms. Jones has been one of our Directors since November 2008.  Ms. Jones has been the Senior Vice President for AT&T since June 2005.  AT&T is a telecommunications company.  AT&T is not affiliated with us.  Ms. Jones has more than 28 years’ experience in the telecommunications and data networking industry, sales and sales management, installation, and customer service.  Ms. Jones brings to OxySure experience in product management, product development, process re-design, strategy and business development, channel management, and international business.  The above experience, qualifications, attributes and skills led us to the conclusion that Vicki Jones shall serve as one of our directors.

Donald Reed, Director

Mr. Reed has been one of our Directors since June 2006.  Mr. Reed has been the President of Agave Resources, LLC since January 2005.  Agave Resources, LLC is a private company which consults with and invests in early and mid-stage development companies.  Agave Resources is not affiliated with us.  Mr. Reed was the CEO and Chairman of Geotrace Technologies, Inc. from August 1979 through December 2003.  Geotrace was founded by Mr. Reed under the name Geo-Trace Enterprises in 1979, and he was active in its growth and expansion until the company was sold in 2003.  Geotrace is an international reservoir services company specializing in high technology seismic data processing for oil and gas companies.  Geotrace is not affiliated with us.  Mr. Reed has over 40 years of experience in business development, operations, mergers & acquisitions and general management.  Mr. Reed served in the U.S. Infantry as an Intelligence Specialist, and holds a B.A. (Math) and a B.S. (Geology) from the University of Texas.  The above experience, qualifications, attributes and skills led us to the conclusion that Donald Reed shall serve as one of our directors.

Our directors hold office until the next annual meeting of shareholders and until their respective successors have been elected and qualified, or until his prior resignation or removal.  Our executive officers are appointed by the Board of Directors and hold office until resignation or removal by the Board of Directors. 

Identification of Significant Employees

OxySure has twelve full time employees and two part time employees, including Julian T. Ross, the Company’s CEO, President, CFO, Secretary and a Director.

Director Independence

For purposes of determining director independence, we have applied the definitions set out in NASDAQ Rule 5605(a)(2).  The OTCQB on which shares of our common stock are quoted does not have any director independence requirements.  According to the NASDAQ definition, two of our directors are independent directors.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Company’s executive officers, directors and persons who beneficially own more than ten percent of a registered class of the Company’s equity securities, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of the Company’s common stock.  Such officers, directors and persons are required by Securities and Exchange Commission regulation to furnish the Company with copies of all Section 16(a) forms that they file with the SEC.

Based solely on a review of the copies of such forms that were received by the Company, or written representations from certain reporting persons that no Form 5s were required for those persons, the Company is not aware of any failures to file reports or report transactions in a timely manner during the Company’s fiscal year ended December 31, 2012.

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Code of Ethics

The Company has adopted a code of ethics and has filed a copy of the Code of Ethics with the Commission in its registration statement on Form S-1, File no. 333-159402, filed on May 21, 2009, as amended.

Family Relationship

We currently do not have any officers or directors of our Company who are related to each other.

ITEM 11—EXECUTIVE COMPENSATION

Executive Compensation

The following table shows the annual compensation paid by the Company for the years ended December 31, 2012 and 2011 to Julian T. Ross, our Chief Executive Officer, President, and CFO. No other officer had total compensation during either of the previous two years of more than $100,000.

Name and principal position	Year	Salary ($)			Bonus ($)		Option Awards  ($)			Total  ($)
Julian T. Ross, CEO, President, and CFO	2012	$	90,000	(1)	$	-	$	137,381	(2)	$	227,381
	2011	$	180,000		$	-	$	139,886	(3)	$	319,886

(1)   Net of $90,000 in voluntary salary relinquishments.

(2)   Comprises 180,000 options valued at $137,381 using the Black-Scholes pricing model with a volatility of 26% and the following assumptions: no dividend yield, life of five years and a risk-free interest rate of 1.04%. There were no forfeitures during 2012.  Please see Note 6-Stock Options to the footnotes to our financial statements for additional information regarding our stock options awards and valuation assumptions.  Please also see “Employment Agreement with Named Officers” below for further disclosure of Mr. Ross’s employment agreement.

(3)   Comprises 180,000 options valued at $139,886 using the Black-Scholes pricing model with a volatility of 28% and the following assumptions: no dividend yield, life of five years and a risk-free interest rate of 2.24%. There were no forfeitures during 2011.  Please see Note 6-Stock Options to the footnotes to our financial statements for additional information regarding our stock options awards and valuation assumptions.  Please also see “Employment Agreement with Named Officers” below for further disclosure of Mr. Ross’s employment agreement.

The following table sets out equity awards for executive officers as of December 31, 2012.

Name	Number of securities underlying unexercised options (#)exercisable		Number of securities underlying unexercised options (#) unexercisable		Option Exercise Price ($)		Option Expiration Date
Julian T. Ross		457,488		0	$	0.25	1/15/2014
		180,000		0	$	0.25	1/15/2019
		180,000		0	$	0.25	1/15/2020
		180,000		0	$	0.25	1/15/2021
		165,000		15,000	$	0.25	1/15/2022

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Director Compensation

Directors are generally compensated with 1,000 stock options per meeting attended, with exercise prices equal to the prevailing market value of the stock at the time of issuance.  The following table reports all director compensation as of December 31, 2012.

Name	Fees earned or paid in cash ($)		Stock Awards ($)		Option Awards ($)			All Other Compensation ($)		Total ($)
Julian T. Ross	$	-	$	-	$	-	(1)	$	-	$	-
Vicki Jones	$	-	$	-	$	301	(2)	$	-	$	301
Don Reed	$	-	$	-	$	2,610	(3)	$	-	$	2,610
Jeremy  Jones	$	-	$	-	$	-		$	-	$	-

(1)   Does not include options earned as an employee.  Mr. Ross does not receive any compensation for serving on the Board of Directors.

(2)   In April 2009, we issued Ms. Jones 1,000 shares of our common stock at an exercise price of $1.00 per share in connection with her services as a director during 2009.  These options expire on April 1, 2014.

(3)   In December 2008, we issued Mr. Reed 5,000 options to purchase shares of our common stock at an exercise price of $2.00 per share in connection with his services as a director during 2008.  These options expire on December 31, 2013.  In December 2006, we issued Mr. Reed 2,000 options to purchase shares of our common stock at an exercise price of $0.82 per share in connection with his services as a director during 2006.  These options expired unexercised on December 31, 2011.

Employment Agreements with Named Officers

Julian T. Ross, Chief Executive Officer, President, Chief Financial Officer, and Secretary

Our last, as-amended employment agreement with Mr. Ross expired on January 15, 2013. The agreement provided for an annual salary equivalent of $180,000, plus 15,000 options for every month of service with an exercise price of $.25 per share. In addition, the agreement provided that we will pay a sales bonus (the “Sales Bonus”) to Mr. Ross if we achieve the following target net revenues (“TNR”) during the 2012 fiscal year (or any subsequent year, if applicable):

●           If TNR are less than $1.0 million, no Sales Bonus is payable;

●           If TNR are equal to or greater than $1 million, the Sales Bonus is $50,000;

●           If TNR are between $1.0 million and $2.0 million, the Sales Bonus is $75,000;

●           If TNR are between $2.0 million and $3.0 million, the Sales Bonus is $100,000; or

●           If TNR are greater than $3.0 million, the Sales Bonus is $125,000 plus 1% of TNR in excess of $3.0 million.

The agreement also provides that we will pay a stock performance bonus (the “Stock Performance Bonus”) of $100,000 to Mr. Ross, which shall be paid in shares of common stock or in cash, at Mr. Ross’ sole discretion, if our stock price maintains a 6-month average during any period in the Term (as defined in the agreement) of $1.50 or higher.

No Sales Bonus was paid to Mr. Ross for 2012. No Stock Performance Bonus was paid to Mr. Ross for 2012. Further, Mr. Ross voluntarily relinquished $90,000 in salary during 2012.

Mr. Ross is currently acting as our Chief Financial Officer on an interim basis at no additional compensation.  We plan to hire a Chief Financial Officer when we can afford to do so and anticipate paying a salary of approximately $160,000 per year and provide benefits to the Chief Financial Officer.

Stock Options and Related Employee Incentives

2004 Stock Option Plan.  We maintain a 2004 Stock Option Plan (the “2004 Plan”) under which our directors, officers, advisory board, other employees and other key individuals may be granted stock options.  Stock option awards to officers and employees under the 2004 Plan generally vest ratably over five years based on continuous service.  Stock option awards are generally granted with an exercise price equal to the fair value of our common stock at the date of grant and expire no later than ten years from the date of grant. The maximum number of number of Shares to be issued pursuant to the exercise of all options granted under the Plan is 5,000,000.  As at December 31, 2012, there were 3,122,966 options available for future grant under the 2004 Plan.

Long-Term Incentive Plans.  We do not currently provide our officers or employees with pension, stock appreciation rights, long-term incentive or other plans although we may adopt one or more of such plans in the future.

Employee Pension, Profit Sharing or other Retirement Plans.  We do not currently provide our officers or employees with Employee Pension, Profit Sharing or other Retirement Plans although we may adopt one or more of such plans in the future.

Our employment agreements generally provide for assignment of intellectual property rights.  We do not currently maintain any key person insurance on the life or in the event of disability of any of our officers.

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ITEM 12—SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth information as of the date hereof concerning beneficial ownership of our common stock by (i) each director, (ii) each executive officer, (iii) our directors and officers as a group, and (iv) each person known by us to own beneficially more than 5% of our common stock.  All percentages are based on 22,548,678 shares of common stock outstanding as of December 31, 2012.

Name and address of beneficial owner(1)	Amount and nature of beneficial ownership(2)			Percentage of class
Julian T. Ross, Chairman, CEO, President, CFO		16,870,285	(3)		67.67	%
Donald Reed, Director		2,915,000	(4)		11.84	%
Vicki Jones, Director		507,589	(5)		2.25	%
All Officers & Directors as a group (three people)		20,292,874			75.14	%
JTR Investments, Limited(6)		14,125,761	(7)		60.38	%
5100 Eldorado Parkway, Suite 102-801 McKinney, TX  75070
Agave Resources, LLC(8)		2,790,000	(9)		11.33	%
2735 Wind River Ln.,  S-152 Denton, Texas 76210

(1) C/o our address, 10880 John W. Elliott Drive, Suite 600, Frisco, Texas  75033, unless otherwise noted.

(2) Except as otherwise indicated, we believe that the beneficial owners of common stock listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable.  Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities.  Shares of common stock subject to options or warrants currently exercisable, or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage of the person holding such options or warrants, but are not deemed outstanding for purposes of computing the percentage of any other person.

(3) Includes 400,000 shares of common stock held by The Ross Family Trust u/t/a dated December 1999; 14,125,761 shares of common stock held by JTR Investments, Limited; 1,177,488 shares of common stock issuable upon exercise of stock options expiring on dates ranging from 1/15/2014 through 1/15/2022; 81,500 shares of common stock upon exercise of stock options issued to Pearl Ross, the spouse of Mr. Ross, expiring on dates ranging from 3/1/2014 through 3/1/2019; 116,182 shares of common stock held by Pearl Ross; 7,000 shares of common stock issuable upon exercise of warrants held by Pearl Ross; 270,000 shares of common stock issuable upon exercise of warrants issued to Afritex, Medical Products, Ltd. expiring on March 26, 2015; and 335,880 shares of common stock held by Afritex, Medical Products, Ltd.

(4) Includes 120,000 shares of common stock owned by Donald Reed’s spouse, Nancy Reed; 2,440,000 shares of common stock held by Agave Resources, LLC; 5,000 shares of common stock issuable upon exercise of stock options expiring on dates ranging from 12/31/2011 through 12/31/2013; and 350,000 shares of common stock issuable upon exercise of warrants issued to Agave Resources, LLC expiring April 15, 2013.

(5) Includes 1,000 shares of common stock issuable upon exercise of stock options expiring 4/1/2014; and 506,589 shares of common stock owned by Vicki Jones's spouse, Tim Hutton.

(6) Our Chairman, President, CEO, and CFO, Julian T. Ross, has sole voting power and control over JTR Investments, Limited.

(7) Comprises 14,125,761 shares of common stock.

(8) Agave Resources, LLC is controlled by our Director, Don Reed; Tom Reed; John Reed; Maridon Reed; and a member of our Board of Advisors, Craig Turner, all of whom share voting and dispositive power.

(9) Comprises 2,790,000 shares of common stock.

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ITEM 13—CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Related Party Transactions

Agave/JTR Subordinated, Convertible Notes.  During March 2008, we completed a $1 million financing package consisting of a promissory note for $750,000 (“First Note”) and a promissory note with a draw down provision for $250,000 (“Second Note”) (collectively, the “Notes”). The Notes are subordinated notes and are due and payable on the earlier of (i) completion of the next financing Round completed by us or (ii) one year after the Notes are issued. In March 2009 the First Note and the Second Note were modified by extending the maturity date in each case to April 15, 2010. On December 31, 2009, the First Note and the Second Note were further modified by extending the maturity date in each case to April 15, 2011.  In August 2010, the First Note and the Second Note were further modified by extending the maturity date in each case to April 15, 2012. In November 2011, the First Note and the Second Note were further modified by extending the maturity date in each case to April 15, 2013. The holder of the First Note is Agave Resources, LLC (“Agave”), and the President of Agave is Donald Reed, one of our Directors.  In connection with the First Note, on April 15, 2008 Agave was also issued penny warrants to purchase 350,000 shares of common stock.  The warrants are immediately exercisable and expire on April 15, 2013.  The holder of the Second Note is JTR Investments, Limited (“JTR”) a company controlled by Julian T. Ross, our founder and CEO.

As of December 31, 2008 the maximum of $250,000 has been drawn against the Second Note.  In connection with the Second Note, on December 31, 2008 JTR was also issued penny warrants to purchase 116,667 shares of common stock.  Both Notes are non-interest bearing.  The basis for issuing penny warrants in connection with the First Note and the Second Note include, but are not limited to, the fact that no interest is payable on the Notes, our ability to attract new investment at the time, market conditions and other factors.  Given these factors, the Board of Directors has deemed the terms of these transactions to be fair.  No third party fairness opinion was obtained in relation to these transactions.

Conversion Rights: At any time on or prior to the Maturity Date, all or any portion of the then outstanding Principal Amount and accrued but unpaid interest (if any) of the Notes may be converted (the "Optional Conversion") into a number of shares of our common stock (the "Optional Conversion Shares") equal to the amount of the then outstanding Principal Amount plus the then accrued but unpaid interest to be converted, divided by the Conversion Price which shall be $1.50 per Optional Conversion Share.

In accordance with ASC 470-20, Debt with conversions and other options, the proceeds from the First Note were allocated based on the relative fair value of the note without the warrant issued in conjunction with the note and of the warrant itself at the time of issuance. We recorded the relative fair value of the warrant issued to Agave in the amount of $346,936 as a debt discount upon issuance, and amortized this debt discount as interest expense over the life of the note.  Additionally, as a result of issuing the warrant with the subordinated convertible promissory note, a beneficial conversion option was recorded as a debt discount reflecting the incremental conversion option intrinsic value benefit of $96,936, at the time of issuance provided to the holder of the note, which was also amortized as interest expense over the life of the note. We recorded interest expense in the amount of $0 for each of the years ended December 31, 2012 and December 31, 2011 in connection with the First Note.

We recorded the relative fair value of the warrant issued to JTR in connection with the Second Note in the amount of $115,587 as a debt discount upon issuance, and expensed this amount as interest expense upon issuance.  Additionally, as a result of issuing the warrant with the subordinated convertible promissory note, a beneficial conversion option was recorded as a debt discount reflecting the incremental conversion option intrinsic value benefit of $32,254, at the time of issuance provided to the holder of the note, which was also expensed as interest expense upon issuance. We recorded interest expense in the amount of $0 for each of the years ended December 31, 2012 and 2011 in connection with the JTR Second Note.

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JTR Senior, Convertible Note. In July, 2008, JTR agreed to provide us with additional working capital to fund continuing operations (the “Senior Note Interim Funding”).  On November 1, 2008 the Board agreed with JTR on the terms of a loan with a draw down provision of up to a maximum of $750,000.  This maximum amount was subsequently increased to $2,000,000. This was a senior note (all the tranches under this facility, collectively, the “JTR Senior Note”) with no interest payable.  All amounts advanced by JTR during the Senior Note Interim Funding were draw downs on the JTR Senior Note.  In connection with the JTR Senior Note, we issued JTR .47 penny warrants for every dollar drawn under this facility.

As of December 31, 2012 and 2011 the total number of penny warrants issued to JTR pursuant to the JTR Senior Note was 572,503 and 572,503 respectively.  The basis for issuing penny warrants in connection with the JTR Senior Note include, but are not limited to, the fact that no interest is payable on the note, the Company’s our ability to attract new investment at the time, market conditions, the terms previously agreed to in connection with the First Note and Second Note, and other factors.  Given these factors, the Board of Directors has deemed the terms of this transaction to be fair.  No third party fairness opinion was obtained in relation to this transaction.

Conversion Rights: At any time on or prior to the Maturity Date all or any portion of the then outstanding Principal Amount and accrued but unpaid interest of this Note may be converted (the "Optional Conversion") into a number of shares of our common stock (the "Optional Conversion Shares") equal to the amount of the then outstanding Principal Amount plus the then accrued but unpaid interest to be converted, divided by the Conversion Price which shall be $1.50 per Optional Conversion Share.

Maturity: The total amount outstanding under the Senior Note was classified as current prior to conversion – Please see “Conversion of First Note, Second Note, and JTR Senior Note” below.

In accordance with ASC 470-20, Debt with conversions and other options, the proceeds from the JTR Senior Note 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 recorded the total relative fair values of the warrants issued to JTR in connection with the JTR Senior Note in the cumulative amount of $567,276 as a debt discount upon each issuance, and expensed each debt discount as interest expense upon issuance of each note tranche.  Additionally, as a result of issuing the warrants with the convertible promissory notes, a beneficial conversion option was recorded as a debt discount on each note reflecting the incremental conversion option intrinsic value benefit totaling $168,641, at the time of each issuance provided to JTR in connection with the JTR Senior Note up to and including December 31, 2012. The debt discount for each issuance under the JTR Senior Note is expensed as interest expense upon each issuance. We recorded interest expenses in the amounts of $0 and $262,554 for the years ended December 31, 2012 and December 31, 2011, respectively, in connection with the JTR Senior Note.

Conversion of First Note, Second Note, and JTR Senior Note: On December 31, 2012 the First Note, Second Note and JTR Senior Note were all converted to common stock at their respective stated conversion prices of $1.50. Pursuant to the conversions, a total of $2,018,656 was converted into a total of 1,345,771 shares of common stock as follows: (i) The First Note in the amount of $750,000 was converted into 500,000 shares of common stock at the stated conversion price of $1.50 per share and the First Note was extinguished; (ii) The balance outstanding under the JTR Senior Note as at December 31, 2012 in the amount of $1,018,656 was converted into 679,104 shares of common stock at the stated conversion price of $1.50 per share and the Senior Note was extinguished; and (iii) The Second Note in the amount of $250,000 was converted into 166,667 shares of common stock at the stated conversion price of $1.50 per share and the Second Note was extinguished.

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A summary of the related party financings and notes payable to related parties as at December 31, 2012 is as follows:

	Shareholder advances
Related party	Julian Ross(1)			Other
Amount	$	203,222		$	4,250
Stated interest rate		0	%		0	%
Maturity		n/a			n/a

(1) Our CEO, Mr. Ross provided us with a total of $460,221.66 during 2012 in shareholder cash advances and salary relinquishments to fund working capital from time to time during the year. Of this amount, $157,000 was repaid in cash, and in addition Mr. Ross voluntarily relinquished a total of $100,000. The net amount outstanding as at December 31, 2012 was $203,222.

As some of our related parties provided us non-interest bearing notes at various times, we issued various warrants to these related parties. On December 31, 2012 two of our affiliates, JTR Investments Limited and Agave Resources, LLC converted a total of $2,018,117 in convertible notes to common stock. Pursuant to the conversions: (i) The First Note in the amount of $750,000 was converted into 500,000 shares of common stock at a conversion price of $1.50 per share and the First Note was extinguished. (ii) The JTR Senior Note in the amount of $1,018,656 was converted into 679,104 shares of common stock at a conversion price of $1.50 per share and the JTR Senior Note was extinguished. (iii) The Second Note in the amount of $250,000 was converted into 166,667 shares of common stock at a conversion price of $1.50 per share and the Second Note was extinguished.

Don Reed, President of Agave is also a Director of us. Julian Ross, our CEO is also the President of JTR Management, LLC, the general partner of JTR Investments, Limited. Please refer to Note 4, “Notes Payable,” and Note 6 – “Stock Options and Warrants” for details.

During 2012 Tim Hutton converted $20,000 outstanding into 23,256 shares of our common stock at a conversion price of $.86 per share. Tim Hutton is the spouse of Vicki Jones, a director of us. Please see Note 4 - "Notes payable."

Director Independence

The Board of Directors does not currently comprise a majority of independent directors who are deemed to be independent under the definition of independence provided by NASDAQ Stock Market Rule 4200(a)(15). We are not required to maintain a majority of independent directors for OTCQB, where our common stock is currently quoted.

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ITEM 14—PRINCIPAL ACCOUNTANT FEES AND SERVICES

Sam Kan & Company was appointed by the Company to serve as its independent registered public accounting firm for fiscal year 2012. Audit services provided by Sam Kan & Company for 2012 included the examination of the consolidated financial statements of the Company and services related to periodic filings made with the SEC. 

Fees Paid To Independent Registered Public Accounting Firm

Audit Fees

During fiscal year 2012, Sam Kan & Company’s fees for the annual audit of the Company’s financial statements and the quarterly reviews of the financial statements were $22,750. During fiscal year 2011, Sam Kan & Company’s fees for the annual audit of the financial statements and the quarterly reviews of the financial statements were $36,002.

Audit Related Fees

During fiscal year 2012, the Company has not paid Sam Kan & Company for audit-related services. During fiscal year 2011, the Company has not paid Sam Kan & Company for audit-related services.

Tax Fees

The Company has not paid Sam Kan & Company for tax services in fiscal years 2012 and 2011.

All Other Fees

The Company has not paid Sam Kan & Company any other fees in fiscal years 2012 and 2011.

Audit Committee Pre-Approval Policies

Before Sam Kan & Company was engaged by the Company to render audit or non-audit services, Sam Kan & Company was so approved and appointed by the Company’s Board of Directors. All services rendered by Sam Kan & Company have been so approved.

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PART IV

ITEM 15—EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(A)(1) The financial statements and information listed below are included in this report in Part II, Item 8.

● Reports of Independent Registered Public Accounting Firm.

● Balance Sheets as of December 31, 2012 and 2011.

● Statements of Operations for each of the two years ended December 31, 2012 and December 31, 2011.

● Statements of Stockholders’ Equity (Deficit) for each of the two years ended December 31, 2012 and December 31, 2011.

● Statements of Cash Flows for each of the two years ended December 31, 2012 and December 31, 2011.

● Notes to the Financial Statements.

(A)(2) No schedules have been included because they are not applicable or the required information is shown in our consolidated financial statements or our notes thereto.

(A)(3) The exhibits required by Item 601 of Regulation S-K are listed in the Exhibit Index immediately following the signature pages to this report.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	OXYSURE SYSTEMS, INC.
Date: April 2, 2013	By:	/s/ Julian T. Ross
		Julian T. Ross
		Chief Executive Officer, President, Secretary, and Director

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POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that each individual whose signature appears below constitutes and appoints Julian T. Ross his true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute(s), may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By:	/s/ Julian T. Ross	April 2, 2013
	Julian T. Ross	Date
	Chief Executive Officer
	President, Secretary, and Director
	(Principal Executive Officer)
	(Principal Accounting Officer)
	(Principal Financial Officer)
By:	*	April 2, 2013
	Donald Reed	Date
	Director
By:	*	April 2, 2013
	Vicki Jones	Date
	Director
By:	*	April 2, 2013
	Jeremy M. Jones	Date
	Director
By:	/s/ Julian T. Ross	April 2, 2013
	Julian T. Ross, Attorney in Fact	Date
	for Jeremy M. Jones, Donald Reed and Vicki Jones

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EXHIBIT INDEX

Exhibit No.	Description
3.1	Articles of Incorporation, dated January 14, 2004 (1)
3.2	Amendment to Articles of Incorporation, dated August 16, 2004 (1)
3.3	Amendment to Articles of Incorporation, dated April 7, 2009 (1)
3.4	Amendment to Articles of Incorporation, dated May 19, 2009 (1)
3.5	Amended and Restated Articles of Incorporation, dated July 7, 2009 (1)
3.6	Bylaws, dated January 15, 2004 (1)
3.7	Second Amended Certificate of Designations Series A Convertible Preferred Stock (1)
4.1	Form of Warrant, dated December 2008 (1)
4.2	Form of Subscription Agreement for Preferred Stock (March 2005) (1)
4.5	Form of Voting Stock Agreement (February 1, 2004) (1)
5.1	Opinion of Oswald & Yap LLP (1)
10.1	Initial Employment Agreement with Julian T. Ross, dated January 15, 2004 (As Amended July 19, 2004) (1)
10.1.1	Amendment to Initial Employment Agreement with Julian T. Ross, dated August 30, 2008 (1)
10.1.2	Second Employment Agreement with Julian T. Ross, dated January 15, 2009 (1)
10.1.3	Amendment to Second Employment Agreement with Julian T. Ross, dated January 15, 2009 (1)
10.1.4	Second Amendment to Second Employment Agreement with Julian T. Ross, dated January 15, 2009 (1)
10.1.5	As amended Second Employment Agreement with Julian T. Ross, dated January 15, 2009 (1)
10.1.6	Third Amendment to Second Employment Agreement with Julian T. Ross, dated January 15, 2010 (1)
10.1.7	As amended Second Employment Agreement with Julian T. Ross, dated January 15, 2010 (1)
10.1.8	Fourth Amendment to Second Employment Agreement with Julian T. Ross, dated January 15, 2010 (1)*
10.1.9	As amended Second Employment Agreement with Julian T. Ross, dated January 15, 2010 (1)*
10.2.1	Amended and Restated Performance Agreement with the Frisco Economic Development Corporation, dated March 22, 2011 (1)*
10.2.2	Renewed and Extended Promissory Note with the Frisco Economic Development Corporation, dated March 22, 2011 (1)*
10.3	5-Year Lease Agreement with Sinacola Commercial Properties, Limited.  dated March 6, 2007 (1)
10.3.1	First Amendment to the 5-Year Lease Agreement with Sinacola Commercial Properties, Limited, dated August 24, 2007 (1)
10.3.2	Second Amendment to the 5-Year Lease Agreement with Sinacola Commercial Properties, Limited, dated November 24, 2008 (1)
10.3.3	Sinacola Commercial Properties, Ltd. Letter Agreement, dated March 23, 2011 (1)
10.3.4	Sinacola Commercial Properties, Ltd. Letter Agreement, dated August 15, 2011
10.4	First Note extended to Agave Resources, LLC, dated April 15, 2008 (1)
10.4.1	Amendment to First Note extended to Agave Resources, LLC, dated February 20, 2009 (1)
10.4.2	Third Modification of Agreement of Note with Agave Resources, LLC dated August 30, 2010 (1)
10.4.3	Fourth Modification of Agreement of Note with Agave Resources, LLC dated November 14, 2011

105

10.4.4	Notice of Conversion of Note with Agave Resources, LLC dated December 31, 2012*
10.5	“Second Note” extended to JTR Investments, Limited, dated March 1, 2008 (1)
10.5.1	Amendment to “Second Note” extended to JTR Investments, Limited, dated February 20, 2009 (1)
10.5.2	Third Modification of Agreement of Note with JTR Investments, Limited dated August 30, 2010 (1)
10.5.3	Fourth Modification of Agreement of Note with JTR Investments, Limited dated November 14, 2011

10.5.4	Notice of Conversion of Second Note and JTR Senior Note with JTR Investments, Limited dated December 31, 2012*
10.6	“Senior Note” Board Approval, dated November 1, 2008 (1)
10.6.1	“Senior Note” extended to JTR Investments, Limited, dated December 31, 2008 (1)
10.6.2	“Senior Note” extended to JTR Investments, Limited, dated June 30, 2009 (1)
10.6.3	Approval of Borrowing Modification with JTR Investments, Limited dated March 30, 2011 (1)
10.7	Asset Purchase and Stock Transfer Agreement with JTR Investments, Limited, and affiliates, dated January 15, 2004 (1)
10.7.1	Exhibits to Asset Purchase and Stock Transfer Agreement with JTR Investments, Limited, and affiliates, dated January 15, 2004 (1)
10.8	Voting Stock Option Plan, dated February 1, 2004 (1)
10.8.1	Voting Stock Option Plan as Amended and Restated July 19, 2004 (1)
10.9	Form of Subcontractor Agreement and Assignment of Intellectual Property (1)
10.10	Department of Transportation Approval Letter, dated October 3, 2008 (1)
10.11	Master Lease Agreement with VenCore Solutions, LLC, dated October 26, 2006 (1)
10.11.1	Moratorium on Payment Agreement, Vencore Solutions, LLC dated March 4, 2011 (1)
10.11.2	Second Moratorium on Payment Agreement, Vencore Solutions, LLC dated July 9, 2012 (1)*
10.11.3	First warrant issued to Vencore Solutions, LLC pursuant to Second Moratorium on Payment Agreement, dated July 9, 2012 (1)*
10.11.4	Second warrant issued to Vencore Solutions, LLC pursuant to Second Moratorium on Payment Agreement, dated July 9, 2012 (1)*
10.12	North Texas Enterprise Center for Medical Technology License Agreement, dated April 8, 2004 (1)
10.12.1	Amendment of North Texas Enterprise Center for Medical Technology License Agreement, dated August 22, 2004 (1)
10.12.2	Amendment of North Texas Enterprise Center for Medical Technology License Agreement, dated May 26, 2005 (1)
10.13	CitiCapital Lease 1, dated September 13, 2007 (1)
10.14	CitiCapital Lease Agreement 2, dated September 13, 2007 (1)
10.15	CitiCapital Lease Agreement 3, dated September 21, 2007 (1)
10.15.1	Amendment to CitiCapital Lease Agreement 3, dated October 24, 2007 (1)
10.15.2	Satisfaction Agreement for Citi Leases 1 and 2, dated July 19, 2012*
10.15.3	Satisfaction Agreement for Citi Lease 3, dated December 5, 2012*
10.16	Dell Lease 1 Agreement, dated June 5, 2008 (1)
10.17	Dell Lease 2 Agreement, dated June 5, 2008 (1)
10.18	Dell Lease 3 Agreement, dated December 1, 2008 (1)
10.19	Neville Financing Lease Agreement, dated April 12, 2012 (1)*
10.20	NMHG- Yale Lease Agreement, dated December 14, 2007 (1)
10.21	Wachovia Lease Agreement, dated December 20, 2007 (1)
10.22	Sinacola Commercial Properties, Ltd. Letter Agreement, dated December 10, 2009 (1)

106

10.22.1	Sinacola Commercial Properties, Ltd. Extension of Maturity and Notice of Conversion dated May 3, 2012
10.23	Afritex License Agreement dated March 26, 2010 (1)
10.23.1	Amendment To License Agreement dated December 16, 2010 (1)
10.23.2	Modification of Agreement dated December 21, 2010 (1)
10.23.3	Second Modification of Agreement with Afritex Medical Products (Pty) Limited, dated March 25, 2011 (1)
10.24	Afritex Distribution Agreement dated March 26, 2010 (1)
10.25	Afritex Note Purchase Agreement dated March 26, 2010 (1)
10.26	Federal Supply Schedule Contract V797P-41 53b effective November 15, 2008 through November 14, 2013 (1)

10.27	Form of Distribution Agreement (1)
10.28	Memorandum of Understanding dated November 16, 2009 (1)
10.29	Letter Agreement with Sinacola Commercial Properties, Ltd. dated December 15, 2010 (1)
10.30	Promissory Note with Sinacola Commercial Properties, Ltd. dated December 31, 2010 (1)
10.31	Second Promissory Note with Sinacola Commercial Properties, Ltd. dated December 31, 2010 (1)
10.32	Stock Purchase Warrant with Sinacola Commercial Properties, Ltd. dated December 31, 2010 (1)
10.33	Sinacola Commercial Properties, Ltd. Letter Agreement, dated March 23, 2011 (1)
10.34	Second Modification of Agreement with Afritex Medical Products (Pty) Limited, dated March 25, 2011 (1)
10.34.1	As amended Notice of conversion of Afritex Note dated October 13, 2011
10.36	Hagerman agreement dated October 8, 2012*
10.37	Wall Street Buy Sell Hold Consulting Agreement dated October 22, 2012*
14.1	Code of Ethics (1)
16.1	Letter from the Blackwing Group, LLC dated November 10, 2010 (1)
23.1	Consent of Oswald & Yap LLP (included in it opinion set forth in Exhibit 5 hereto) (1)
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350*
99.1	Form of Subscription Agreement (1)
(1)	Incorporated by reference to the registrant’s registration statement on Form S-1, File no. 333-159402, filed on May 21, 2009, as amended.
*	Filed herewith.

107

EX-10.1(8)

Exhibit 10.1.8

MODIFICATION OF AGREEMENT

(FOURTH MODIFICATION)

WHEREAS, OxySure Systems, Inc. (“OxySure”) and Julian T. Ross (“Ross”) (OxySure and Ross jointly, the “Parties”) entered into that certain Employment Agreement (“Agreement”) dated January 15, 2009, as amended, for the second time on June 23, 2009, and as further amended for the third time on January 15, 2010; and

WHEREAS, The Parties have agreed that it is in their best interests to modify the terms of the Agreement.

NOW, WHEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, THE SUFFICIENCY OF WHICH IS HEREBY ACKNOWLEDGED, THE PARTIES AGREE AS FOLLOWS:

Section 3 – “TERM” of the as amended Agreement shall be modified, and shall read as follows:

The employment of the Executive by the Company pursuant to the provisions of this Agreement shall commence on the Effective Date and end on the One Thousand Four Hundred Fortieth (1,440th) day thereafter, unless sooner terminated as hereinafter provided.

All other provisions of the Agreement shall remain unchanged.

Agreed to and accepted:

By:	/s/ Don Reed	By:	/s/ Vicki Jones
Mr. Don Reed, Director		Ms. Vicki Jones, Director
For: OxySure Systems, Inc.		For: OxySure Systems, Inc.
Date:	2/3/1012	Date:	2/3/1012

EX-10.1(9)

Exhibit 10.1.9

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (hereinafter referred to as the "Agreement") is made and entered into as of the    15th       day of January, 2010 (“Effective Date”), by and between OXYSURE SYSTEMS, INC., a corporation duly organized and existing pursuant to the laws of the state of Delaware, (hereinafter referred to as "OSI" or the “Company”), and JULIAN T. ROSS (hereinafter referred to as the "Executive").

W I T N E S S E T H:

WHEREAS, the Company desires to have the benefit of the Executive's efforts and services;

WHEREAS, the Company recognizes that circumstances may arise which may cause uncertainty of continued employment of the Executive without regard to the Executive's competence or past contributions;

WHEREAS, such uncertainties may result in the loss of valuable services of the Executive to the detriment of the Company and its shareholders;

WHEREAS, the Executive will be in a better position to consider the best interests of the Company if the Executive is afforded reasonable security, as provided in this Agreement, against altered conditions of employment which may result from situations now unknown, and

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements hereinafter set forth, the parties hereto mutually covenant and agree as follows:

1.           DEFINITIONS.  Whenever used in this Agreement, the following terms shall have the meanings set forth below:

(a)           "Accrued Benefits" shall mean the amount payable not later than fifteen (15) days following an applicable Termination Date and which shall be equal to the sum of the following amounts:

(i)           All salary earned or accrued through the Termination Date;

(ii)          Reimbursement for any and all moneys advanced in connection with the Executive's employment for pre-approved, reasonable and necessary expenses incurred by the Executive through the Termination Date;

(iii)         Any and all other cash benefits previously earned through the Termination Date and deferred at the election of the Executive or pursuant to any deferred compensation plans then in effect;

(iv)         The full amount of any stated bonus payable to the Executive with respect to the year in which termination occurs provided that the events necessary to have earned said bonus have been achieved; and

(v)           All other payments and benefits to which the Executive may be entitled under the terms of any benefit plan of the Company.

(b)           "Act" shall mean the Securities Exchange Act of 1934;

(c)           "Affiliate" shall have the same meaning as given to that term in Rule 12b-2 of Regulation 12B promulgated under the Act;

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(d)           "Base Period Income" shall be an amount equal to the Executive's annualized compensation calculated pursuant to section 6 herein for the initial term of this agreement;

(e)           "Board" shall mean the Board of Directors of the Company;

(f)           "Cause" shall mean any of the following:

(i)           The engaging by the Executive in illegal or fraudulent conduct, as evidenced by a determination in a binding and final judgment, order or decree of a court or administrative agency of competent jurisdiction, in effect after the exhaustion or lapse of all rights of appeal, in an action, suit or proceeding, whether civil, criminal, administrative or investigative, which the Board determines has a significant adverse impact on the Company in the conduct of the Company’s business;

(ii)          A conviction of a felony, as evidenced by a determination in a binding and final judgment, order or decree of a court or administrative agency of competent jurisdiction, in effect after the exhaustion or lapse of all rights of appeal, in an action, suit or proceeding, whether civil, criminal, administrative or investigative, which the Board determines has a significant adverse impact on the Company in the conduct of the Company’s business;

(iii)        Willful or grossly negligent failure by Executive to perform his duties in a manner consistent with the Company’s best interests; or

(iv)        Willful violation by the Executive of the Company’s policies and procedures.

(g)           "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time;

(h)           “Consolidated Group” means and includes the Company, all of OSI’s current or future subsidiaries and any other corporations or divisions thereof, which are hereafter acquired by or consolidated with the OSI and which collectively carry on the business of OSI, the Company or any part thereof.;

(i)           "Notice of Termination" shall mean the notice described in Section 9 herein;

(j)           "Person" shall mean any individual, partnership, joint venture, association, trust, corporation or other entity, other than an Executive benefit plan of the Company or an entity organized, appointed or established pursuant to the terms of any such benefit plan;

(k)           "Termination Date" shall mean, except as otherwise provided in Section 10 herein,

(i)            The Executive's date of death;

(ii)           Thirty (30) days after the delivery of the Notice of Termination if the Executive's employment is terminated by the Executive voluntarily; and

(iii)          Sixty (60) days after the delivery of the Notice of Termination if the Executive's employment is terminated by the Company for any reason other than Cause.

2             EMPLOYMENT.

The Company hereby agrees to employ the Executive and the Executive hereby agrees to serve the Company, on the terms and conditions set forth herein.

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3.            TERM.

The employment of the Executive by the Company pursuant to the provisions of this Agreement shall commence on the Effective Date and end on the One Thousand Four Hundred Fortieth (1,440th) thereafter, unless sooner terminated as hereinafter provided.

4.            POSITIONS AND DUTIES.

The Executive shall hold the position of Chairman & CEO of the Company. The Executive shall also perform such duties as the Board shall direct and shall serve in such additional capacities as set forth in Section 7 herein.  In connection with the foregoing positions, the Executive shall have such duties, responsibilities and authority as may from time to time be assigned to the Executive by the Board.  The Executive shall devote substantially all of the Executive's working time and efforts to the business and affairs of the Company.

5.            PLACE OF PERFORMANCE.

In connection with the Executive's employment by the Company, the Executive shall be based at the principal Executive offices of the Company in North Dallas, Texas, except for where travel is required, or where otherwise required by the operations of the Company.

6.            COMPENSATION AND RELATED MATTERS.

(a)           Commencing on the Effective Date hereof, and during the Period of Employment, the Company shall compensate the Executive in accordance with Exhibit A hereto. The Company will also issue to the Executive options as to the Common Stock of the Company as outlined in Exhibit A hereto.

(b)           During the term of the Executive's employment hereunder, the Executive shall be entitled to receive prompt reimbursement for all pre-approved, reasonable expenses incurred by the Executive in performing services hereunder, including all business travel and living expenses while away from home on business or at the request of and in the service of the Company, provided that such expenses are incurred and accounted for in accordance with the policies and procedures presently established by the Company and OSI or as may be changed from time to time.

(c)           The Executive shall also be entitled to all other benefits provided by the Company to its general Executives.

7.             OFFICES.

The Executive agrees to serve without additional compensation, if elected or appointed thereto, as a member of the Board of Directors of the Company, or any subsidiary; provided, however, that the Executive is indemnified for serving in any and all such capacities on a basis no less favorable than is currently provided in the Company's bylaws, or otherwise.

8.             (a)           TERMINATION FOR CAUSE.

If the Executive's employment with the Company is terminated by the Company for Cause, subject to the procedures set forth in Section 9 herein, the Executive shall be entitled to receive the Executive's Accrued Benefits as of the Termination Date.  The Executive shall not be entitled to the receipt of any Termination Payment.

(b)           TERMINATION NOT FOR CAUSE.

If the Company terminates the Executive for any reason other than Cause, then the Executive shall be entitled to a Termination Payment equal to Twelve Months Base Salary. Base Salary refers to Base Salary as defined in Exhibit A hereto.

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9.            TERMINATION NOTICE AND PROCEDURE.

Any termination by the Company or the Executive of the Executive's employment during the Employment Period shall be communicated by written Notice of Termination to the Executive, if such Notice of Termination is delivered by the Company, and to the Company, of such Notice of Termination is delivered by the Executive, all in accordance with the following procedures:

(a)           The Notice of Termination shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances alleged to provide a basis for termination.

10.           NONDISCLOSURE OF PROPRIETARY INFORMATION.

(a)           For the purposes of this Paragraph 11, including all subparagraphs, “the Company” shall mean the Company or OSI.  Recognizing that the Company is presently engaged, and may hereafter continue to be engaged, in the research and development of processes, the obtainment and sale of products or performance of services, which involve experimental and inventive work and that the success of its business depends upon the protection of the processes, products and services by patent, copyright or by secrecy and that the Executive has had, or during the course of his engagement may have, access to Proprietary Information, as hereinafter defined, of the Company or other information and data of a secret or proprietary nature of the Company which the Company wishes to keep confidential and the Executive has furnished, or during the course of his engagement may furnish, such information to the Company, the Executive agrees that (a) "Proprietary Information" shall mean any and all methods, inventions, improvements or discoveries, whether or not patentable or copyrightable, and any other information of a similar nature related to the business of the Company disclosed to the Executive or otherwise made known to him as a consequence  of or through his engagement by the Company (including information originated by the Executive) in any technological area previously developed by the Company or developed, engaged in, or researched, by the Company during the term of the Executive's engagement, including, but not limited to, trade secrets, processes, products, formulae, apparatus, techniques, know-how, marketing plans, data, improvements, strategies, forecasts, customer lists, and technical requirements of customers, unless such information is in the public domain to such an extent as to be readily available to competitors.

(b)           The Executive acknowledges that the Company has exclusive property rights to all Proprietary Information and the Executive hereby assigns all rights he might otherwise possess in any Proprietary Information to the Company. Except as required in the performance of his duties to the Company or otherwise as required by law, the Executive will not at any time during or after the term of his engagement, which term shall include any time in which the Executive may be retained by the Company as a consultant, directly or indirectly use, communicate, disclose or disseminate any Proprietary Information or any other information of a secret, proprietary, confidential or generally undisclosed nature relating to the Company, its products, customers, processes and services, including information relating to testing, research, development, manufacturing, marketing and selling.

(c)           All documents, records, notebooks, notes, memoranda and similar repositories of, or containing, Proprietary Information or any other information of a secret, proprietary, confidential or generally undisclosed nature relating to the Company or its operations and activities made or compiled by the Executive at any time or made available to him prior to or during the term of his engagement by the Company, including any and all copies thereof, shall be the property of the Company, shall be held by him in trust solely for the benefit of the Company, and shall be delivered to the Company by him on the termination of his engagement or at any other time on the  request of the Company.

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(d)           The Executive will not assert any rights under any inventions, copyrights, discoveries, concepts or ideas, or improvements thereof, or know-how related thereto, as having been made or acquired by him prior to his being engaged by the Company or during the term of his engagement if based on or otherwise related to Proprietary Information.

11.           ASSIGNMENT OF INVENTIONS.

(a)           For purposes of this Paragraph 12, the term "Inventions" shall mean discoveries, concepts, and ideas, whether patentable or copyrightable or not, including but not limited to improvements, know-how, data, processes, methods, formulae, and techniques, as well as improvements thereof or know-how related thereto, concerning any past, present or prospective activities of the Company which the Executive makes, discovers or conceives (whether or not during the hours of his engagement or with the use of the Company's facilities, materials or personnel), either solely or jointly with others during his engagement by the Company or any affiliate and, if based on or related to Proprietary Information, at any time after termination of such engagement.  All inventions shall be the sole property of the Company, and Executive agrees to perform the provisions of this paragraph 12 with respect thereto without the payment by the Company of any royalty or any consideration therefor other than the regular compensation paid to the Executive in the capacity of an Executive or consultants;

(b)           The Executive shall maintain written notebooks in which he shall set forth, on a current basis, information as to all Inventions, describing in detail the procedures employed and the results achieved as well as information as to any studies or research projects undertaken on the Company's behalf.  The written notebooks shall at all times be the property of the Company and shall be surrendered to the Company upon termination of his engagement or, upon request of the Company, at any time prior thereto.

(c)           The Executive shall apply, at the Company's request and expense, for United States and foreign letters patent or copyrights either in the Executive's name or otherwise as the Company shall desire.

(d)           The Executive hereby assigns to the Company all of his rights to such Inventions, and to applications for United States and/or foreign letters patent or copyrights and to United States and/or foreign letters patent or copyrights granted upon such Inventions.

(e)           The Executive shall acknowledge and deliver promptly to the Company, without charge to the Company, but at its expense, such written instruments (including applications and assignments) and do such other acts, such as giving testimony in support of the Executive's inventorship, as may be necessary in the opinion of the Company to obtain, maintain, extend, reissue and enforce United States and/or foreign letters patent and copyrights relating to the Inventions and to vest the entire right and title thereto in the Company or its nominee.  The Executive acknowledges and agrees that any copyright developed or conceived of by the Executive during the term of Executive's employment which is related to the business of the Company shall be a "work for hire" under the copyright law of the United States and other applicable jurisdictions.

5

(f)           The Executive represents that his performance of all the terms of this Agreement and as an Executive of or consultant to the Company does not and will not breach any trust prior to his employment by the Company.  The Executive agrees not to enter into any agreement either written or oral in conflict herewith and represents and agrees that he has not brought and will not bring with him to the Company or use in the performance of his responsibilities at the Company any materials or documents of a former  employer which are not generally available to the public, unless he has obtained written authorization from the former employer for their possession and use, a copy of which has been provided to the Company.

(g)           No provisions of this Paragraph shall be deemed to limit the restrictions applicable to the Executive under Paragraph 11.

12.           SHOP RIGHTS.

The Company shall also have the royalty-free right to use in its business, and to make, use and sell products, processes and/or services derived from any inventions, discoveries, concepts and ideas, whether or not patentable, including but not limited to processes, methods, formulas and techniques, as well as improvements thereof or know how related thereto, which are not within the scope of Inventions as defined in Paragraph 12 but which are conceived or made by the Executive during the period he is engaged by the Company or with the use or assistance of the Company's facilities, materials or personnel.

13.           NON-COMPETE.

The Executive hereby agrees that during the term of this Agreement and for twelve months (12) months following a termination for any reason, unless otherwise specified in this agreement, shall not:

(a)           Within any jurisdiction or marketing area in the United States in which the Company or any subsidiary thereof is doing business, own, manage, operate or control any business of the engaged in catalytic oxygen generation.  For purposes of this paragraph, ownership of securities of not in excess of five percent (5%) of any class of securities of a public company shall not be considered to be competition with OSI, or any subsidiary thereof; or

(b)           Within any jurisdiction or marketing area in the United States in which the Consolidated Group or any member thereof is doing business, act as, or become employed as, an officer, director, Executive, consultant or agent of any business engaged in catalytic oxygen generation; or

(c)           Solicit any business that is the same as that of the Consolidated Group for, or sell any products involving catalytic oxygen to, any company in the United States, which is, as of the date hereof, a customer or client of the Consolidated Group or any of its members, or was such a customer or client thereof within two years prior to the date of this Agreement; or

(d)           Solicit the employment of, or hire any full time Executive employed by the Company or its subsidiaries as of the date of termination of this Agreement.

Restrictions Reasonable. Executive represents and agrees that the provisions hereof are reasonable in order to protect the business and proprietary interests of the Consolidated Group both as to the duration of time and any geographic limitation therein provided, based on the present business, plans and prospects of the Consolidated Group and the confidential and proprietary information to which Executive has had and will have access, and that compliance with the provisions hereof will not be unduly burdensome on him.  Executive represents that prior to executing and delivering this agreement, he has reviewed the provisions of this agreement with his attorney.

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14.           REMEDIES AND INJUNCTIVE RELIEF

The Executive hereby acknowledges and agrees that a breach or threatened breach by him or the non-performance of certain of the covenants or promises contained herein by him may cause serious and irreparable harm to the Consolidated Group and that any remedy at law, including any award of money damages, may be inadequate.  Accordingly, Executive agrees and accepts that a threatened breach, a breach or a violation of the provisions of this agreement by him shall entitle the Company, as a matter of right, to an injunction issued by any court of competent jurisdiction, restraining any further or continued breach or violation of the provisions of this agreement.  Such right to an injunction shall be cumulative and in addition to, and not in lieu of, any other remedies to which the Company may be entitled. The Executive specifically acknowledges that the requirement of the Consolidated Group or any member thereof to post a bond for the issuance of a temporary restraining order or temporary injunction should be waived.

15.           ATTORNEY’S FEES.

In the event that either party hereunder institutes any legal proceedings in connection with its rights or obligations under this Agreement, the prevailing party in such proceeding shall be entitled to recover from the other party, all costs incurred in connection with such proceeding, including reasonable attorneys' fees, together with interest thereon from the date of demand at the rate of twelve percent (12%) per annum.

16.           SUCCESSORS.

This Agreement and all rights of the Executive shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, estates, executors, administrators, heirs and beneficiaries. In the event of the Executive's death, all amounts payable to the Executive under this Agreement shall be paid to the  Executive's surviving spouse, or the Executive's estate if the Executive  dies without a surviving spouse.  This Agreement shall inure to the benefit of, be binding upon and be enforceable by, any successor, surviving or resulting corporation or other entity to which all or substantially all of the business and assets of the Company shall be transferred whether by merger, consolidation, transfer or sale.

17.           ENFORCEMENT.

The provisions of this Agreement shall be regarded as divisible, and if any of said provisions or any part hereof are declared invalid or unenforceable by a court of competent jurisdiction, the validity and enforceability of the remainder of such provisions or parts hereof and the applicability thereof shall not be affected thereby.

18.           AMENDMENT OR TERMINATION.

This Agreement may be amended, superseded, canceled, renewed or extended, and the terms hereof may be waived, only by written instrument signed by the parties or, in the case of a waiver, by the party waiving compliance; provided, however, that the terms of any renewal or extension shall not more adverse to Executive than the terms provided for herein, as described in Exhibit A hereto. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof.  Nor shall any waiver on the part of any party of any such right, power or privilege, nor any single or partial exercise of any such right, power or privilege, preclude any further exercise thereof or the exercise of any other such right, power or privilege.

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19.           SEVERABILITY.

The provisions of paragraphs 11, 12, 13 and 14 shall survive termination of this Agreement.

20.           ENTIRE AGREEMENT.

This Agreement sets forth the entire agreement between the Executive and the Company with respect to the subject matter hereof, and supersedes all prior oral or written agreements, negotiations, commitments and understandings with respect thereto.  Each party to this Agreement acknowledges that no representations, inducements, or agreements, oral or otherwise, have been made by any party, or anyone acting on behalf of any party, which are not embodied herein, and no other agreement, statement or promise not contained in this Agreement shall be valid or binding.  The parties hereto have had an opportunity to consult with their respective attorneys concerning the meaning and the import of this Agreement and each has read this Agreement, as signified by his/their signatures below, and are executing the same for the purposes and consideration herein expressed.

21.           GOVERNING LAW.

This Agreement and the Executive's and Company's respective rights and obligations hereunder shall be governed by and construed in accordance with the laws of the State of Texas applicable to agreements made and to be performed entirely within such State without giving effect to the provisions, principles, or policies thereof relating to choice or conflict laws, except to the extent that Federal law may apply.

22.           NOTICE.

Any notice or other communication required or permitted hereunder shall be deemed given if in writing and delivered personally, telegraphed, telexed, sent by facsimile transmission or sent by certified, registered or express mail, postage prepaid.  Any such notice shall be deemed given when so delivered personally or sent by overnight air courier or facsimile transmission or, if mailed, two days after the date of deposit in the United States mails, as follows:

if to OSI:

Board of Directors

OxySure® Systems, Inc.

10880 John W. Elliott Road

Suite 600

Frisco, TX  75034

if to the Executive:

Mr. Julian T. Ross

6912 Stony Hill Road

McKinney, TX 75070

Any party may be given notice in accordance with this Section to the other parties designate another address or person for receipt of notices by such party hereunder.

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23.           BINDING EFFECT: NO ASSIGNMENT.

This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and legal representatives.  This Agreement and any rights hereunder are not assignable except by operation of law or by OSI to any of its subsidiaries or affiliates.  Any other purported assignment shall be null and void.

24.           VARIATIONS IN PRONOUNS.

Wherever the context shall so require, all words herein in the male gender shall be deemed to include the female or neuter gender and vice versa, all singular words shall include the plural, and all plural words shall include the singular.  All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may require.

25.           REPRESENTATION BY COUNSEL

Each party acknowledges that it has had the opportunity to be represented by separate independent counsel in the negotiation of this Agreement, that any such respective attorneys were of its own choosing, that each authorized representative has read this Agreement and that he understands its meaning and legal consequences to each party.  The Parties warrant and represent that they have consulted with their attorney of choice concerning the execution, the meaning and the import of this Agreement, and each has read this Agreement and fully understands the terms hereof as signified by their signatures below, and are executing the same of their own free will for the purposes and consideration herein expressed.  The Parties warrant and represent that they have had sufficient time to consider whether to enter into this Agreement and that they are relying solely on their own judgment and the advice of their own counsel in deciding to execute this Agreement.  The Parties warrant and represent that they have read this Agreement in its entirety and have consulted with their attorney concerning the execution of this Agreement. If any or all Parties have chosen not to seek alternative counsel, said party or parties hereby acknowledge that he or they refrained from seeking alternative counsel entirely of his or their own volition and with full knowledge of the consequences of such a decision.

26.           PRESUMPTION AGAINST SCRIVENER

Each party waives the presumption that this Agreement is presumed to be in favor of the party which did not prepare it, in case of a dispute as to interpretation.

27.           CAPACITY

Each party represents and warrants that he has the authority to enter into this Agreement either on his own behalf or in an official capacity on behalf of a corporate party.

28.           OTHER INSTRUMENTS

The Parties hereto covenant and agree that they will execute such other and further instruments and documents as are or may become necessary or convenient to effectuate and carry out the business obligations and duties created by this Agreement.

29.           NO WAIVER.

No waiver by either party at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by the other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same time or any prior or subsequent time.

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30.           HEADINGS.

The headings used in this Agreement are for administrative purposes only and do not constitute substantive matter to be considered in construing the terms and shall not affect the interpretation of this Agreement.

31.           COUNTERPARTS.

This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument.  Each counterpart may consist of a number of copies hereof each signed by less than all, but together signed by all of the parties hereto.

IN WITNESS WHEREOF, the Company, has caused this Agreement to be executed by its duly authorized officer, and the Executive has executed this Agreement, on the date and year first above written.

OXYSURE SYSTEMS, INC.

/s/ Don Reed                                                 

By:           Mr. Don Reed

 Director

EXECUTIVE

/s/ Julian T. Ross                                         

Julian Ross

Executive

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Exhibit A

To the Employment Agreement by and between OxySure Systems, Inc. and

Julian T. Ross

Dated January 15, 2009

(1) Stock Options

Subject to SEC regulations and the provisions of (1) (a)-(b) herein, the Executive shall be issued with Options (the “Option”) as to the Common Stock of OxySure Systems, Inc. (“OSI” or the “Company”) pursuant to the Company’s Voting Stock Option Plan, which Options shall become vested and exercisable in accordance with the following table.

Issue Condition	#Options		Strike Price
Completion of every calendar month of service during the Term of the Employment Agreement		15,000	$	.25
“Total options available for Term”		180,000

Where applicable, option grants will be prorated for partial periods.

(a) Acceleration Upon Change of Control: The Executive shall enjoy full acceleration of the Option hereunder if terminated by the acquirer upon a Change of Control event (as described in the Company’s Voting Stock Option Plan). However, an IPO or a dilution of all the shareholders of OSI through a public offering does not constitute a Change of Control event for the purposes of this provision.

(b) Dilution: There shall be no upward adjustments made to Options granted hereunder upon future stock issuances or option issuances by the Company.

If any of these terms outlined in this §1 conflict with any terms in any other agreements, then the terms outlined in this Exhibit A shall prevail.

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(2) Salary, Bonus and Benefits

(a) Base Salary: Base Salary shall be $180,000 per annum ($15,000.00 per month, payable twice monthly). If applicable, amounts are prorated for partial periods.

(b) Annual Bonus: Sales Bonus: The company will pay a Sales Bonus (the “Sales Bonus”) at the end of the Term if the company achieves certain Target Net Revenues (“TNR”) during the 2009 Fiscal Year (January 1, 2009 through December 31, 2009), in accordance with the following: (i) If TNR is < $1.0 million, then the Sales Bonus is zero; (ii) If TNR is between $1.0 million and $2.0 million, then the Sales Bonus is $75,000; (iv) If TNR is between $2.0 million and $3.0 million, then the Sales Bonus is $100,000; or (v) If TNR is greater than $3.0 million, then the Sales Bonus is $125,000 plus 1% of TNR in excess of $3.0 million. Financing Bonus: The company will pay a Financing Bonus (the “Financing Bonus”) if the company closes any financing during the 2009 Fiscal Year (January 1, 2009 through December 31, 2009) as follows: Two and one half percent (2.5%) of any financing amounts closed by the Company during the 2009 Fiscal Year, payable at the closing of such financing(s) from time to time. Stock Performance Bonus: The company will pay a Stock Performance Bonus (the “Stock Performance Bonus”), which shall be paid in unrestricted shares of Common Stock of the Company or in Cash, at the Executive’s sole discretion, in accordance with the following: If the Company’s stock price maintains a 6-month average during any period in the Term of $1.50 or higher, then the Stock Performance Bonus shall be $100,000.

(c) Executive Benefits:

Participation in OSI benefits established for senior management from time to time, such as for example, 401(k), health insurance, key man insurance, etc. PTO shall be 4 weeks per annum.

(d) Travel: All pre-approved travel expenses reasonably incurred are reimbursed.

(e) Severance Provisions: If the Executive is terminated subsequent to the Effective Date by the Company for anything other than cause, then the Executive shall receive a severance (“Severance”) as follows:

(i)           An amount equal to 12 months’ Base Salary, PROVIDED THAT

If the Executive is terminated by the Acquirer for anything other than cause in a Change of Control event, then the Executive shall receive a severance equal to three times (3X) the Severance defined in §2(e) herein. For the purposes of this §2(e) of the Exhibit A, an IPO or a dilution of all the shareholders of OSI through a public offering does not constitute a Change of Control event.

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EX-10.4(4)

Exhibit 10.4.4

OPTIONAL CONVERSION NOTICE

To:           OxySure Systems, Inc. (“Obligor”)

Date:       December 31, 2012

The undersigned, Agave Resources, LLC ("Holder") holder of that certain subordinated convertible note in the amount of $750,000 and dated April 15, 2008, as amended (“First Note”) hereby irrevocably exercises the option to convert all of the Principal Amount and accrued but unpaid interest (if applicable) outstanding under the First Note into the Conversion Shares at a conversion price of $1.50 per share, in accordance with the terms of the First Note, with an effective date of 12/31/2012. A certificate(s) representing the 500,000 Conversion Shares issuable and deliverable upon this conversion will be issued and delivered to the registered Holder of the First Note unless a different name is provided by the Holder to Obligor in writing. Capitalized terms used in this Conversion Notice and not otherwise defined herein shall have the respective meanings ascribed to such terms in the First Note.

Signed:	/s/ Don Reed
	Don Reed, President
	Agave Resources, LLC

EX-10.5(4)

Exhibit 10.5.4

OPTIONAL CONVERSION NOTICE

To:           OxySure Systems, Inc. (“Obligor”)

Date:        December 31, 2012

The undersigned, JTR Investments, Limited ("Holder") holder of that certain convertible senior note with an outstanding amount of $1,018,656 and dated December 31,2008, as amended (“Senior Note”), and the holder of that certain subordinated convertible note in the amount of $250,000 and dated March 1, 2008 (“Second Note”) (Senior Note and Second Note, collectively, the “Notes”), hereby irrevocably exercises the option to convert all of the Principal Amount and accrued but unpaid interest (if applicable) outstanding under the Notes into the Conversion Shares at a conversion price of $1.50 per share, in accordance with the terms of the Notes, with an effective date of 12/31/2012. A certificate(s) representing the 845,771 Conversion Shares issuable and deliverable upon this conversion will be issued and delivered to the registered Holder of the Notes unless a different name is provided by the Holder to Obligor in writing. Capitalized terms used in this Conversion Notice and not otherwise defined herein shall have the respective meanings ascribed to such terms in the Notes.

Signed:   /s/ Julian T. Ross                                                                                          

Julian T. Ross, President

JTR Management, LLC, General Partner

JTR Investments, Limited

EX-10.11(2)

Exhibit 10.11.2

SECOND PAYMENT MORATORIUM

AND SETTLEMENT AGREEMENT

THIS SECOND PAYMENT MORATORIUM AND SETTLEMENT AGREEMENT (the “Agreement”) is made as of July 9, 2012 by and between VENCORE SOLUTIONS LLC, a Delaware limited liability company (“Vencore”), and OXYSURE® SYSTEMS, INC., a Delaware corporation (“Oxysure”).

RECITALS

A.           Master Lease Agreement Number 6906 (the “MLA”) and Lease Schedule Numbers 01 through and including Number 11 (collectively the “Leases”) were executed between October 30, 2006 and August 20, 2007 by OxySure as Lessee and Vencore as Lessor.

B.           The First Payment Moratorium was granted on March 4, 2011 and specified that the balance was $307,661.83 (“Debt Obligation”) and that no further interest or late charges would accrue until the earlier of i) a cash settlement or repayment plan being entered into or ii) February 29, 2012.

C.           Neither a cash settlement nor a repayment plan were agreed upon and the First Payment Moratorium expired on February 29, 2012.

D.           Subsequent to granting the First Payment Moratorium, Oxysure became a public company trading under the symbol “OXYS”- OTCBB.

NOW, THEREFORE, in consideration of the covenants and mutual agreements contained in this Agreement and for other good and valuable consideration, receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

ARTICLE I

SECOND PAYMNENT MORATORIUM

SECTION 1.01.  Consideration.  As Consideration for Vencore granting this Second Payment Moratorium Oxysure will provide Vencore with warrants to purchase its stock such that Vencore will receive a warrant as to 22,500 common shares at an exercise price per share of $0.82 per share and a warrant as to 32,500 common shares at an exercise price per share of $1.00 (collectively the “Warrants”); term shall be 5 years and provide Vencore with the ability to exercise the Warrants on a cashless/net-issuance basis (“Net Issue”):

            a)  Net Issue language should be similar to:

(i)        In lieu of exercising this Warrant in the manner provided above in Section 1(a), the Registered Holder may elect to receive shares equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with notice of such election in which event the Company shall issue to holder a number of non-restricted shares of Common Stock computed using the following formula:

X =	Y (A – B)
	A

Where:

X = The number of shares of Preferred Stock to be issued to the Registered Holder.

Y = The number of shares of Preferred Stock purchasable under this Warrant (at the date of such calculation).

A = The fair market value of one share of Preferred Stock (at the date of such calculation).

B = The Purchase Price (as adjusted to the date of such calculation).

Oxy-Venc Pmt Moratorium/Settlement Page 1 of  5

(ii)    For purposes of this Section, the fair market value of Common Stock shall be the average price per share the Common Stock trades at for the four week period immediately prior to its being exercised by the Registered Holder.

b)Oxysure shall provide the Warrants to Vencore within 30 days of executing this Agreement, but in no event later than August 31, 2012.

SECTION 1.02. Payment Moratorium.  Upon receipt of the Consideration described in Section 1.01 above, Vencore will Grant Oxysure a Second Payment Moratorium such that during :

a)The term of the Second Payment Moratorium (the “Moratorium Period”) shall expire on the earlier to occur of: (i) July 1, 2013;  (ii) a cash settlement or repayment plan being entered into; or (iii) a merger or acquisition of Oxysure or the sale of substantially all of its assets (collectively a “Sale”);

b)Oxysure will not be obligated to make any payments during the Moratorium Period;

c)No further late charges or interest will accrue during the Moratorium Period;

d)Any amounts Oxysure may pay towards the Debt Obligation during the Moratorium Period shall reduce the Debt Obligation;

e)In the event of a Sale the entire Debt Obligation shall immediately become due and payable; and

f)Vencore shall make no demands or take any actions against Oxysure during the Moratorium Period.

ARTICLE III

CONDITIONS

SECTION 3.01.  Conditions Precedent to Vencore’s Obligations.  Each of the obligations of Vencore under this Agreement is subject to the fulfillment of each and every one of the following conditions precedent:

a)Oxysure shall have executed and returned a pdf copy of this Agreement to Vencore;

Oxy-Venc Pmt Moratorium/Settlement Page 2 of  5

b)Oxysure shall provide the Warrants to Vencore within 30 days of executing this Agreement; and

c)Each of the representations, warranties and acknowledgements of Oxysure set forth in this Agreement shall be true and correct.

ARTICLE III

REPRESENTATIONS

SECTION 3.01. Vencore’s Representations.  Vencore warrants and represents to Oxysure that:

a)Vencore has the requisite power and authority to execute and deliver this Agreement, to perform its obligations hereunder, and to consummate the transactions contemplated hereby;

b)The Leases are an obligation owed to Vencore, and Vencore has not heretofore transferred, assigned or encumbered the Lease or any security interest in the leased equipment, or any interest therein, in whole or in part, to any other person or entity; and

c)When executed and delivered by Vencore, this Agreement shall constitute a legal, valid and binding agreement of Vencore, enforceable against Vencore in accordance with its terms.  The person executing this Agreement on behalf of Vencore has full power and authority to bind Vencore to this Agreement.

SECTION 3.02.  Oxysure’s Representations.  Oxysure represents and warrants to Vencore that:

a)       Oxysure has the requisite power and authority to execute and deliver this Agreement, to perform its obligations hereunder, and to consummate the transactions contemplated hereby; and

b)       When executed and delivered by Oxysure, this Agreement shall constitute a legal, valid and binding agreement of Oxysure, enforceable against Oxysure in accordance with its terms.  The person executing this Agreement on behalf of Oxysure has full power and authority to bind Oxysure to this Agreement.

ARTICLE IV

MISCELLANEOUS

SECTION 4.01.  Governing Law.  This Agreement has been thoroughly reviewed and negotiated by the parties and their respective counsel (if so desired) and, therefore, the language of this Agreement shall not be construed strictly for or against any party hereto.  This Agreement shall be governed by and construed in accordance with the laws of the State of Oregon, exclusive of principles of conflicts of laws.

SECTION 4.02.  Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all such counterparts together shall constitute one and the same document.

SECTION 4.03.  Entire Agreement: Amendments.  Except as specifically set out in this Agreement, this Agreement constitutes the entire agreement between the parties pertaining to the subject matter of this Agreement and supersedes all prior agreements, understandings, negotiations and discussions between the parties in connection with the subject matter of this Agreement (whether oral or written, express or implied, statutory or otherwise).  No amendment or modification of this Agreement shall be valid or binding unless made in writing and duly executed by each of the parties hereto.

Oxy-Venc Pmt Moratorium/Settlement Page 3 of  5

SECTION 4.04.  Successors and Assigns.  This Agreement shall inure to the benefit of, and be binding on, the parties and their respective successors and permitted assigns.  Neither party may assign or transfer all or any part of its respective rights or obligations under this Agreement without the prior written consent of the other party.

SECTION 4.05.  Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which taken together shall be deemed to constitute one and the same instrument.  Counterparts may be executed either in original, faxed or “pdf” form; provided, however, that a party providing its signature in such manner shall promptly forward to the other party an original of the signed copy of this Agreement which was so faxed or sent by pdf.

SECTION 4.06.  Further Assurances.  Each party hereto from time to time hereafter, and upon request, shall execute, acknowledge and deliver such other instruments as reasonably may be required to more effectively carry out the terms and conditions of this Agreement.

SECTION 4.07.  Time Is Of The Essence.  In the event i) an executed copy of this Agreement has not been received by Vencore on or before July 31, 2012 or ii) Vencore has not received the Warrants on or before August 31, 2012 terms of this Agreement shall be null and void effective September 1, 2012.

//////////     SIGNATURE PAGE FOLLOWS     //////////

Oxy-Venc Pmt Moratorium/Settlement Page 4 of  5

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed and delivered by a duly authorized person on the date first set forth above.

VENCORE SOLUTIONS LLC
By:	/s/ James Paul Johnson
Name:	James Paul Johnson
Title:	Chief Operating Officer
OXYSURE SYSTEMS, INC.
By:	/s/ Julian T. Ross
Name:	Julian T. Ross
Title:	CEO

Oxy-Venc Pmt Moratorium/Settlement Page 5 of  5

EX-10.11(3)

Exhibit 10.11.3

STOCK PURCHASE WARRANT

NEITHER THIS WARRANT NOR ANY SECURITIES ON EXERCISE HEREOF HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF REGISTRATION UNDER SUCH ACT AND APPLICABLE LAWS, OR THE AVAILABILITY OF AN EXEMPTION FROM SUCH REGISTRATION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT LEGALLY REQUIRED.

STOCK PURCHASE WARRANT

This Stock Purchase Warrant (this “Warrant”), dated  August 29, 2012, is issued toVencore Solutions LLC (the “Holder”), by OxySure Systems, Inc., a Delaware corporation (the “Company”).

1.                     Purchase of Shares.  Subject to the terms and conditions hereinafter set forth, the Holder is entitled, upon surrender of this Warrant at the principal office of the Company (or at such other place as the Company shall notify the holder hereof in writing), to purchase from the Company 22,500 fully paid and non-assessable shares of Common Stock, par value $_0.0004____ per share (the “Common Stock”), of the Company (as adjusted pursuant to Section 7 hereof, the “Shares”) for the purchase price specified in Section 2 below.

2.                     Purchase Price.  The purchase price for the Shares is $ 0.82 per share.  Such price shall be subject to adjustment pursuant to Section 7 hereof (such price, as adjusted from time to time, is herein referred to as the “Warrant Price”).

3.                     Exercise Period.  This Warrant is exercisable in whole or in part at any time from the date hereof through August 29, 2017.

4.                     Exercise; Payment of Warrant Exercise Price for Cash Exercise or Cashless Exercise.

Payment of the Purchase Price shall be made as follows:

(i) Cash Exercise: The Holder may exercise this Warrant in cash, cashier’s check, wire transfer, or through a reduction of an amount of principal outstanding under any lease amounts then owed to the Holder, if any, equal to the applicable Purchase Price (a “Cash Exercise”).

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(ii) Cashless Exercise: The Holder, at its option, may exercise this Warrant in a cashless exercise transaction pursuant to this subsection (ii) (a “Cashless Exercise”). In order to effect a Cashless Exercise, the Holder shall surrender this Warrant at the principal office of the Company together with an Exercise Form, completed and executed, indicating Holder’s election to effect a Cashless Exercise, in which event the Company shall issue Holder a number of shares of Common Stock computed using the following formula:

X = (Y*(A – B)/A)where:     X = the number of shares of Common Stock to be issued to Holder.

Y = the number of shares of Common Stock for which this Warrant is being Exercised.

A = the Market Price of one (1) share of Common Stock (for purposes of this Section 4(a)(ii), where “Market Price,” means the Average Closing Price (as defined herein) of one (1) share of the Company’s Common Stock during the ten (10) prior Trading Days (as defined below) period immediately preceding the Date of Exercise.

B = the Purchase Price.

As used herein, the “Average Closing Price” for any security as of any date means the average closing sale price on a US national exchange (“Exchange”) as reported by a reliable reporting service, for the prior ten (10) trading days on which a trade(s) has occurred (“Trading Days”). If the Average Closing Price cannot be calculated for such security on such date if the manner provided above for any reason, the average closing price shall be the fair market value as determined in good faith by the Company’s Board of Directors.

For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is intended, understood and acknowledged that the Common Stock issued upon Exercise of this Warrant in a Cashless Exercise transaction shall be deemed to have been acquired at the time this Warrant was issued. Moreover, it is intended, understood and acknowledged that the holding period for the Common Stock issued upon Exercise of this Warrant in a Cashless Exercise transaction shall be deemed to have commenced on the date this Warrant was issued.

5.                     Certificates for Shares; Partial Exercise of Warrants.

(a)                      Upon the exercise of the purchase rights evidenced by this Warrant, one or more certificates for the number of Shares so purchased shall be issued as soon as practicable thereafter, and in any event within thirty (30) days of the delivery of the Exercise Notice.

(b)                      If this Warrant is surrendered for partial exercise, the Company shall execute and deliver to the Holder of the Warrant, without charge to the Holder, a new Warrant exercisable for an aggregate number of shares of Common Stock equal to the unexercised portion of the surrendered Warrant.

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6.                     Reservation of Shares.  The Company covenants that it will at all times keep available such number of authorized shares of its Common Stock, free from all preemptive rights with respect thereto, which will be sufficient to permit the exercise of this Warrant for the full number of Shares specified herein.  The Company further covenants that such Shares, when issued pursuant to the exercise of this Warrant, will be duly and validly issued, fully paid and non-assessable and free from all taxes, liens and charges with respect to the issuance thereof.

7.                     Adjustment of Warrant Price and Number of Shares.  The number and kind of securities purchasable upon exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time as follows:

(a)                      Stock Dividends, Subdivisions, Combinations and Other Issuances.  If the Company shall at any time prior to the expiration of this Warrant subdivide its Common Stock, by stock split or otherwise, combine its Common Stock or issue additional shares of its Common Stock as a dividend with respect to any shares of its Common Stock, the number of Shares issuable on the exercise of this Warrant shall forthwith be proportionately increased in the case of a subdivision or stock dividend and proportionately decreased in the case of a combination.  Appropriate adjustments shall also be made to the purchase price payable per share, but the aggregate purchase price payable for the total number of Shares purchasable under this Warrant (as adjusted) shall remain the same.  Any adjustment under this Section 7(a) shall become effective at the close of business on the date the subdivision or combination becomes effective or as of the record date of such dividend, or, in the event that no record date is fixed, upon the making of such dividend.

(b)                      Reclassification, Reorganization, Merger, Sale or Consolidation.  In the event of any reclassification, capital reorganization or other change in the Common Stock of the Company (other than as a result of a subdivision, combination or stock dividend provided for in Section 7(a) above) or in the event of a consolidation or merger of the Company with or into, or the sale of all or substantially all of the properties and assets of the Company, to any person, and in connection therewith consideration is payable to holders of Common Stock in cash, securities or other property, then as a condition of such reclassification, reorganization or change, consolidation, merger or sale, lawful provision shall be made, and duly executed documents evidencing the same shall be delivered to the Holder, so that the Holder shall have the right at any time prior to the expiration of this Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant immediately prior to such event, the kind and amount of cash, securities or other property receivable in connection with such reclassification, reorganization or change, consolidation, merger or sale, by a holder of the same number of shares of Common Stock as were exercisable by the Holder immediately prior to such reclassification, reorganization or change, consolidation, merger or sale.  In any such case, appropriate provisions shall be made with respect to the rights and interest of the Holder so that the provisions hereof shall thereafter be applicable with respect to any cash, securities or property deliverable upon exercise hereof.  Notwithstanding the foregoing, (i) if the Company merges or consolidates with, or sells all or substantially all of its property and assets to, any other person, and consideration is payable to holders of Common Stock in exchange for their Common Stock in connection with such merger, consolidation or sale which consists solely of cash, or (ii) in the event of the dissolution, liquidation or winding up of the Company, then the Holder shall be entitled to receive distributions on the date of such event on an equal basis with holders of Common Stock as if this Warrant had been exercised immediately prior to such event, less the Warrant Price.  Upon receipt of such payment, if any, the rights of the Holder shall terminate and cease, and this Warrant shall expire.  In case of any such merger, consolidation or sale of assets, the surviving or acquiring person and, in the event of any dissolution, liquidation or winding up of the Company, the Company shall promptly, after receipt of this surrendered Warrant, make payment by delivering a check in such amount as is appropriate (or, in the case of consideration other than cash, such other consideration as is appropriate) to such person as it may be directed in writing by the Holder surrendering this Warrant.

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8.                     Pre-Exercise Rights.  Prior to exercise of this Warrant, the Holder shall not be entitled to any rights of a shareholder with respect to the Shares, including without limitation, the right to vote such Shares, receive preemptive rights or be notified of shareholder meetings, and the Holder shall not be entitled to any notice or other communication concerning the business or affairs of the Company.

9.                     Restricted Securities.  The Holder understands that this Warrant and the Shares purchasable hereunder constitute “restricted securities” under the federal securities laws inasmuch as they are being, or will be, acquired from the Company in transactions not involving a public offering and accordingly may not, under such laws and applicable regulations, be resold or transferred without registration under the Securities Act of 1933, as amended, or an applicable exemption from registration.  The Holder further acknowledges that the Shares and any other securities issued upon exercise of this Warrant shall bear a legend substantially in the form of the legend appearing on the face hereof.

10.                     Certification of Investment Purpose.  Unless a current registration statement under the Securities Act of 1933, as amended, shall be in effect with respect to the securities to be issued upon exercise of this Warrant, the Holder hereof, by accepting this Warrant, covenants and agrees that, at the time of exercise hereof, the Holder will deliver to the Company a written certification that the securities acquired by the Holder are acquired for investments purposes only and that such securities are not acquired with a view to, or for sale in connection with, any distribution thereof.

11.                     Successors and Assigns.  The terms and provisions of this Warrant shall inure to the benefit of, and be binding upon, the Company and the Holder and their respective successors and assigns.

12.                     Governing Law.  This Warrant shall be governed by the laws of the State of Texas, excluding the conflicts of laws provisions thereof.

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IN WITNESS WHEREOF, the undersigned hereby agrees to the terms hereof effective as of   .

COMPANY: OXYSURE SYSTEMS, INC.
By:
Name:	JULIAN ROSS
Title:	CEO
HOLDER: VENCORE SOLUTIONS LLC
By:
Name:
Title:

5

Exhibit A

EXERCISE NOTICE

Dated:  _______________, ____

The undersigned hereby irrevocably elects to exercise the Stock Purchase Warrant, dated ____________________, , issued by _______________________________________, a _______________ corporation (the “Company”), to the undersigned to the extent of purchasing ___________ shares of Common Stock and hereby makes payment of $_________ in payment of the aggregate Warrant Price of such Shares.

COMPANY:

By:

Name: 

Title:

6

EX-10.11(4)

Exhibit 10.11.4

STOCK PURCHASE WARRANT

NEITHER THIS WARRANT NOR ANY SECURITIES ON EXERCISE HEREOF HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF REGISTRATION UNDER SUCH ACT AND APPLICABLE LAWS, OR THE AVAILABILITY OF AN EXEMPTION FROM SUCH REGISTRATION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT LEGALLY REQUIRED.

STOCK PURCHASE WARRANT

This Stock Purchase Warrant (this “Warrant”), dated August 29, 2012, is issued to Vencore Solutions LLC (the “Holder”), by OxySure Systems, Inc., a Delaware corporation (the “Company”).

1.                     Purchase of Shares.  Subject to the terms and conditions hereinafter set forth, the Holder is entitled, upon surrender of this Warrant at the principal office of the Company (or at such other place as the Company shall notify the holder hereof in writing), to purchase from the Company 32,500 fully paid and non-assessable shares of Common Stock, par value $_0.0004____ per share (the “Common Stock”), of the Company (as adjusted pursuant to Section 7 hereof, the “Shares”) for the purchase price specified in Section 2 below.

2.                     Purchase Price.  The purchase price for the Shares is $ 1.00 per share.  Such price shall be subject to adjustment pursuant to Section 7 hereof (such price, as adjusted from time to time, is herein referred to as the “Warrant Price”).

3.                     Exercise Period.  This Warrant is exercisable in whole or in part at any time from the date hereof through August 29, 2017.

4.                     Exercise; Payment of Warrant Exercise Price for Cash Exercise or Cashless Exercise.

Payment of the Purchase Price shall be made as follows:

(i) Cash Exercise: The Holder may exercise this Warrant in cash, cashier’s check, wire transfer, or through a reduction of an amount of principal outstanding under any lease amounts then owed to the Holder, if any, equal to the applicable Purchase Price (a “Cash Exercise”).

(ii) Cashless Exercise: The Holder, at its option, may exercise this Warrant in a cashless exercise transaction pursuant to this subsection (ii) (a “Cashless Exercise”). In order to effect a Cashless Exercise, the Holder shall surrender this Warrant at the principal office of the Company together with an Exercise Form, completed and executed, indicating Holder’s election to effect a Cashless Exercise, in which event the Company shall issue Holder a number of shares of Common Stock computed using the following formula:

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X = (Y*(A – B)/A)where:    X = the number of shares of Common Stock to be issued to Holder.

           Y = the number of shares of Common Stock for which this Warrant is being Exercised.

           A = the Market Price of one (1) share of Common Stock (for purposes of this Section 4(a)(ii), where “Market Price,” means the Average Closing Price (as defined herein) of one (1) share of the Company’s Common Stock during the ten (10) prior Trading Days (as defined below) period immediately preceding the Date of Exercise.

           B = the Purchase Price.

As used herein, the “Average Closing Price” for any security as of any date means the average closing sale price on a US national exchange (“Exchange”) as reported by a reliable reporting service, for the prior ten (10) trading days on which a trade(s) has occurred (“Trading Days”). If the Average Closing Price cannot be calculated for such security on such date if the manner provided above for any reason, the average closing price shall be the fair market value as determined in good faith by the Company’s Board of Directors.

For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is intended, understood and acknowledged that the Common Stock issued upon Exercise of this Warrant in a Cashless Exercise transaction shall be deemed to have been acquired at the time this Warrant was issued. Moreover, it is intended, understood and acknowledged that the holding period for the Common Stock issued upon Exercise of this Warrant in a Cashless Exercise transaction shall be deemed to have commenced on the date this Warrant was issued.

5.                     Certificates for Shares; Partial Exercise of Warrants.

   (a)                    Upon the exercise of the purchase rights evidenced by this Warrant, one or more certificates for the number of Shares so purchased shall be issued as soon as practicable thereafter, and in any event within thirty (30) days of the delivery of the Exercise Notice.

   (b)                    If this Warrant is surrendered for partial exercise, the Company shall execute and deliver to the Holder of the Warrant, without charge to the Holder, a new Warrant exercisable for an aggregate number of shares of Common Stock equal to the unexercised portion of the surrendered Warrant.

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6.                     Reservation of Shares.  The Company covenants that it will at all times keep available such number of authorized shares of its Common Stock, free from all preemptive rights with respect thereto, which will be sufficient to permit the exercise of this Warrant for the full number of Shares specified herein.  The Company further covenants that such Shares, when issued pursuant to the exercise of this Warrant, will be duly and validly issued, fully paid and non-assessable and free from all taxes, liens and charges with respect to the issuance thereof.

7.                    Adjustment of Warrant Price and Number of Shares.  The number and kind of securities purchasable upon exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time as follows:

   (a)                     Stock Dividends, Subdivisions, Combinations and Other Issuances.  If the Company shall at any time prior to the expiration of this Warrant subdivide its Common Stock, by stock split or otherwise, combine its Common Stock or issue additional shares of its Common Stock as a dividend with respect to any shares of its Common Stock, the number of Shares issuable on the exercise of this Warrant shall forthwith be proportionately increased in the case of a subdivision or stock dividend and proportionately decreased in the case of a combination.  Appropriate adjustments shall also be made to the purchase price payable per share, but the aggregate purchase price payable for the total number of Shares purchasable under this Warrant (as adjusted) shall remain the same.  Any adjustment under this Section 7(a) shall become effective at the close of business on the date the subdivision or combination becomes effective or as of the record date of such dividend, or, in the event that no record date is fixed, upon the making of such dividend.

  (b)                      Reclassification, Reorganization, Merger, Sale or Consolidation.  In the event of any reclassification, capital reorganization or other change in the Common Stock of the Company (other than as a result of a subdivision, combination or stock dividend provided for in Section 7(a) above) or in the event of a consolidation or merger of the Company with or into, or the sale of all or substantially all of the properties and assets of the Company, to any person, and in connection therewith consideration is payable to holders of Common Stock in cash, securities or other property, then as a condition of such reclassification, reorganization or change, consolidation, merger or sale, lawful provision shall be made, and duly executed documents evidencing the same shall be delivered to the Holder, so that the Holder shall have the right at any time prior to the expiration of this Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant immediately prior to such event, the kind and amount of cash, securities or other property receivable in connection with such reclassification, reorganization or change, consolidation, merger or sale, by a holder of the same number of shares of Common Stock as were exercisable by the Holder immediately prior to such reclassification, reorganization or change, consolidation, merger or sale.  In any such case, appropriate provisions shall be made with respect to the rights and interest of the Holder so that the provisions hereof shall thereafter be applicable with respect to any cash, securities or property deliverable upon exercise hereof.  Notwithstanding the foregoing, (i) if the Company merges or consolidates with, or sells all or substantially all of its property and assets to, any other person, and consideration is payable to holders of Common Stock in exchange for their Common Stock in connection with such merger, consolidation or sale which consists solely of cash, or (ii) in the event of the dissolution, liquidation or winding up of the Company, then the Holder shall be entitled to receive distributions on the date of such event on an equal basis with holders of Common Stock as if this Warrant had been exercised immediately prior to such event, less the Warrant Price.  Upon receipt of such payment, if any, the rights of the Holder shall terminate and cease, and this Warrant shall expire.  In case of any such merger, consolidation or sale of assets, the surviving or acquiring person and, in the event of any dissolution, liquidation or winding up of the Company, the Company shall promptly, after receipt of this surrendered Warrant, make payment by delivering a check in such amount as is appropriate (or, in the case of consideration other than cash, such other consideration as is appropriate) to such person as it may be directed in writing by the Holder surrendering this Warrant.

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8.                     Pre-Exercise Rights.  Prior to exercise of this Warrant, the Holder shall not be entitled to any rights of a shareholder with respect to the Shares, including without limitation, the right to vote such Shares, receive preemptive rights or be notified of shareholder meetings, and the Holder shall not be entitled to any notice or other communication concerning the business or affairs of the Company.

9.                     Restricted Securities.  The Holder understands that this Warrant and the Shares purchasable hereunder constitute “restricted securities” under the federal securities laws inasmuch as they are being, or will be, acquired from the Company in transactions not involving a public offering and accordingly may not, under such laws and applicable regulations, be resold or transferred without registration under the Securities Act of 1933, as amended, or an applicable exemption from registration.  The Holder further acknowledges that the Shares and any other securities issued upon exercise of this Warrant shall bear a legend substantially in the form of the legend appearing on the face hereof.

10.                   Certification of Investment Purpose.  Unless a current registration statement under the Securities Act of 1933, as amended, shall be in effect with respect to the securities to be issued upon exercise of this Warrant, the Holder hereof, by accepting this Warrant, covenants and agrees that, at the time of exercise hereof, the Holder will deliver to the Company a written certification that the securities acquired by the Holder are acquired for investments purposes only and that such securities are not acquired with a view to, or for sale in connection with, any distribution thereof.

11.                   Successors and Assigns.  The terms and provisions of this Warrant shall inure to the benefit of, and be binding upon, the Company and the Holder and their respective successors and assigns.

12.                   Governing Law.  This Warrant shall be governed by the laws of the State of Texas, excluding the conflicts of laws provisions thereof.

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IN WITNESS WHEREOF, the undersigned hereby agrees to the terms hereof effective as of _________________.

COMPANY: OXYSURE SYSTEMS, INC.
By:
Name:	JULIAN ROSS
Title:	CEO
HOLDER: VENCORE SOLUTIONS LLC
By:
Name:
Title:

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Exhibit A

EXERCISE NOTICE

Dated:  _______________, ____

The undersigned hereby irrevocably elects to exercise the Stock Purchase Warrant, dated ____________________, , issued by _______________________________________, a _______________ corporation (the “Company”), to the undersigned to the extent of purchasing ___________ shares of Common Stock and hereby makes payment of $_________ in payment of the aggregate Warrant Price of such Shares.

COMPANY:

By: 

Name:   

Title:

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EX-10.15(2)

Exhibit 10.15.2

EX-10.15(3)

Exhibit 10.15.3

EX-10.19

Exhibit 10.19

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2

3

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EX-10.22(1)

Exhibit 10.22.1

CONVERSION AGREEMENT

WHEREAS, OxySure Systems, Inc. (“OxySure”) and SINACOLA COMMERCIAL PROPERTIES, LTD. (“Sinacola”) (OxySure and Sinacola jointly, the “Parties”) entered into that certain Rent Satisfaction Agreement (“Agreement”) dated December10, 2009; and

WHEREAS, OxySure has issued Sinacola two convertible promissory notes pursuant to the Agreement, with a face value totaling $251,407; and

WHEREAS, the two convertible promissory notes comprise a convertible promissory note in the amount of $125,000 (the “First Landlord Note”) and a second convertible promissory note in the amount of $126,407 (the “Second Landlord Note”); and

WHEREAS, the First Landlord Note and the Second Landlord Note each had maturity dates of June 30, 2012; and

WHEREAS, the First Landlord Note is convertible into the common stock of OxySure at a conversion price of $1.00 per share, and the Second Landlord Note is convertible into the common stock of OxySure at a conversion price of $1.50 per share.

NOW, WHEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, THE SUFFICIENCY OF WHICH IS HEREBY ACKNOWLEDGED, THE PARTIES AGREE AS FOLLOWS:

(1) Sinacola agrees to convert the First Landlord Note and the Second Landlord Note at their stated conversion prices. Pursuant to this provision, OxySure will issue Sinacola, or any of its designated affiliates 209,271 restricted shares of the common stock of OxySure.

(2) Further, OxySure will issue Sinacola, or any of its designated affiliates a one-time issuance of 21,819 restricted shares of the common stock of OxySure.

Agreed to and accepted:

SINACOLA COMMERCIAL PROPERTIES, LTD.,		OXYSURE SYSTEMS, INC.
a Texas limited partnership
By:  FRISCO INDUSTRIAL, INC., a Texas corporation, its general partner
By:	/s/ Michael A. Sinacola	By:	/s/ Julian T. Ross
	Michael A. Sinacola, President		Julian Ross, CEO
Date:	March 30, 2012	Date:	May 3, 2012

EX-10.36

Exhibit 10.36

OXYSURE SYSTEMS, INC.

INDEPENDENT CONTRACTOR AGREEMENT

This Independent Contract Agreement (the “Agreement”), dated October 8, 2012, between OxySure Systems, Inc., a Delaware corporation (“OxySure”) and Chris Hagerman (collectively reference to as “you”, “your” or “Consultant”) shall constitute the terms and conditions under which Chris Hagerman will provide services to OxySure as an independent contractor.

1.              CONSULTING SERVICES

a. "You" or “Consultant” shall mean any individual, corporation, partnership, or sole proprietorship, subject to the limitations of Section 6 of this Agreement, which (i) possess the requisite level of knowledge and training and agree to perform certain consulting services to be provided to OxySure and (ii) agree to supply OxySure with a member or members of your staff ("Personnel") to perform such consulting services to be provided to OxySure.

b. Under this Agreement you are charged with completing the project as described in the attached hereto in the form of Exhibit A (the “Work Schedule”). Any conflict between such Work Schedule and this Agreement shall be resolved by giving binding effect to the terms of this Agreement without regard to the conflicting terms of Work Schedule. Consultant agrees to provide services, and Personnel, if any, to OxySure pursuant to the specifications described in greater detail on Work Schedule. You shall not have any decision-making authority for any major acquisition, purchase or policy decision relating to OxySure's business.

c. Consultant is not authorized to render opinions on the business affairs of OxySure or its business, nor is it authorized to affix either its name or the name of OxySure to its marketing collateral or other business materials, unless otherwise agreed to in writing.

d. All work performed and services provided hereunder shall be under the direction and satisfaction of OxySure, with or without instructions or supervision from OxySure. OxySure shall provide no training, tools, equipment or other materials to Consultant, unless otherwise agreed to in writing.

e. You shall not, except to the extent inconsistent with the requirements of this Agreement, be prohibited in any way from performing any services for any other individual or company during the period of this Agreement. At any time, OxySure may arrange for other Consultant or OxySure own employees to provide the same or similar services to OxySure.

OxySure Independent Contractor Agmt.

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2.              COMPENSATION

a. You acknowledge and agree that the total compensation set forth in the Work Schedule hereto is the maximum compensation that you may be entitled to for the services rendered pursuant to this Agreement and for the satisfactory completion of the projects identified in the Work Schedule hereto. Such compensation shall be paid in accordance with the terms set forth in the Work Schedule hereto and in the event that the Work Schedule omits such terms, all compensation shall be paid by OxySure in accordance with its payroll practices as in effect from time to time. The parties hereto agree that the withholding of any sum for income tax, unemployment insurance, social security or any other withholding pursuant to any law or requirement of any governmental body applicable to employees is inapplicable hereunder and that all of such payments, withholdings, and benefits, if any, are your sole responsibility.

b. Consultant shall borne all ordinary business expenses incident to the performance of its  services under this Agreement. Any extraordinary business expenses are to be paid by Consultant unless approved in advance by OxySure in writing. Consultant shall provide its own equipment and materials for services to be rendered hereunder at Consultant sole cost and expense.

c. Notwithstanding any other provision of this Agreement, should you fail to make prompt payment of wages or fees to your Personnel performing services hereunder, OxySure, may at its election, contract directly with your Personnel for the performance of the services contemplated by any Work Schedule.

d. In no event shall you or your Personnel be entitled to participate in any employee benefit programs or fringe benefits, which may be offered by OxySure or its affiliates.

e. You shall not, and shall cause your Personnel to not, disclose your or your Personnel rate of pay or remuneration details to any third party, including without limitation, any customer or co-worker. Any such disclosure may result in your and/or your Personnel immediate termination.

3.             RELATIONSHIP/TERM/GUARANTEE

a. It is expressly acknowledged by the parties hereto that you are an independent contractor and nothing in this Agreement is intended or shall be construed to create an employer/employee relationship, or to allow OxySure to exercise control or direction over the manner or method by which you perform the services which are the subject matter of this Agreement; provided always that the services to be provided hereunder by you shall be provided in a manner consistent with professional standards governing such services and the provisions of this Agreement. It is also understood and agreed that you shall not be eligible to participate in any employee benefit plan offered by or through OxySure.

b. You understand that nothing in this Agreement shall confer any right with respect to continuation of engagement by OxySure, nor shall it interfere in any way with your right or OxySure’s right to terminate your engagement at any time, with 30 days written notice. You may terminate this Agreement subject to completion of any outstanding Work Schedules with 30 days written notice.

OxySure Independent Contractor Agmt.

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c. If for any reason OxySure is dissatisfied with Personnel supplied by you, you will remove such person or persons immediately and, if requested by OxySure, provide a replacement or replacements as soon as practicable. If OxySure shall have notified you of its dissatisfaction prior to the conclusion of the person's or persons' third day of work, you will not charge OxySure for the first 24 hours worked.

4.              CONFIDENTIAL INFORMATION/INTELLECTUAL PROPERTY

a. You acknowledge, that in the course of you providing services hereunder, you and your Personnel may be provided with, or have access to, Confidential Information belonging to OxySure, or its affiliates or other parties. Confidential Information includes any and all information which any party may consider proprietary or otherwise wish to keep confidential, including, without limitation, business plans, marketing strategies, product information & specifications, customer lists, vendor lists, computer programs, schematics, source code, object code, pricing, cost or profit figures and projections, credit information, current, future or proposed products or services, plans and technology, business forecasts, financial records, accounting records, litigation documents and procurement requirements, and technical information included in or on tracings, flowcharts, software program code, drawings, field notes, calculations, specifications and engineering data. You agree to hold in strict confidence all Confidential Information which you or your Personnel uses or to which you or your Personnel gain access during the course of performance hereunder, and you shall not use, reproduce, publish, disclose, copy, circulate, forward or otherwise make known to any person or entity any Confidential Information, except to the extent required in the performance of your and your Personnel's services to OxySure hereunder.

This confidentiality clause shall not apply to (a) information that is in the public domain, (b) information that was previously known to you before the engagement, (c) information received from a third party having the right to lawfully possess and disclose such information without breaching this Agreement, (d) information approved for release by prior written authorization by OxySure, and (e) information required to be disclosed by a court of competent jurisdiction, but only to the extent expressly required and only after alerting OxySure of such disclosure requirement.

b. You agree not to disclose, indirectly or directly, to OxySure any information or data the disclosure of which would constitute a violation of any obligation to, or infringe the rights of, any third party.

OxySure Independent Contractor Agmt.

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c. With respect to all deliverables, ideas, inventions or works copyrightable under United States law which are conceived, developed or prepared within the scope of this Agreement, you acknowledge that these works constitute “works made for hire” for the purpose of U.S. copyright law and that pursuant thereto, OxySure owns all right, title and interest in all such works. In the event that these works are held not to be “works for hire”, you agree to automatically assign to OxySure all intellectual and proprietary rights in the works, when and as the same shall arise, or the full term or terms of protection available therefor throughout the world and to comply with all reasonable instructions of OxySure regarding any ideas or inventions (including developments, innovations and improvements to existing OxySure confidential information and materials) whether patentable or not, conceived or made by you along or with others in the course of your performing services under this Agreement or by incorporation in whole or in part of OxySure confidential materials. Therefore, you agree to disclose to OxySure all ideas and inventions and any Confidential Information, which you discover or develop during the course of your performing services under this Agreement. At the expense of OxySure, you agree to execute all applications or registrations for patents and copyrights, and any other instruments deemed necessary or helpful for OxySury to secure and enforce its rights. You shall make no charge or claim for additional compensation or any other consideration for signing such documents. You shall, promptly and without prior request, disclose to OxySure all such inventions, works of authorship and other intellectual property.

d. Upon the termination or completion of services to OxySure, you agree immediately to return, all information, data and any other materials supplied by or obtained from OxySure in the course of your and your Personnel work, along with all copies thereof in your and your Personnel possession and control.

e. You acknowledge and agree that the disclosure of any Confidential Information or any other violation of the terms of this Section 4 would cause immediate and irreparable injury, loss and damage to OxySure and/or its affiliates and that an adequate remedy at law for such injury, loss and damage may not exist, and that in the event of such disclosure or threatened disclosure, OxySure and/or its affiliates shall be entitled to institute and prosecute proceedings in a court of competent jurisdiction to obtain temporary and/or permanent injunctive relief to enforce a provision of this Agreement, without the necessity of proof of actual damage or loss. You agree that you will be responsible for all attorneys’ fees, costs and expenses incurred by OxySure by reason of any action relating to this Agreement and that OxySure will be entitled to such additional relief that a court deems appropriate.

f. You further agree that the provisions of this Section 4 shall be binding upon not only on you and your Personnel, but on you and your Personnel's heirs, executors, administrators, successors and assigns, and that said provisions shall survive the termination of this Agreement for any reason, for five years after the termination date.

g. You shall obtain the written agreement of Personnel to each of the provisions of this Section 4a. - 4f. prior to commencement of work by you or any member of your staff.

h. You shall be responsible for and indemnify OxySure against, any loss, claims or expenses arising from any breach of this Section 4 by you and/or your Personnel.

OxySure Independent Contractor Agmt.

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i. In order to protect OxySure’s Confidential Information, you agree that for the term of this Agreement and for one (1) year after the date of expiration or termination (for any reason) of this Agreement, you will not in any state in which OxySure is doing business or has done business within the prior one year period directly or indirectly, for yourself or on behalf of or in conjunction with any other person or entity:

(i)        solicit, induce, hire, engage, or attempt to hire or engage any employee of OxySure, or in any other way interfere with OxySure’s contractual or employment relations with any of its employees, nor will you hire or engage or attempt to hire or engage any individual who was an employee of OxySure at any time during the one year period immediately prior to the termination of your employment with OxySure; or

(ii)        contact, call upon or solicit any client or customer of OxySure (other than on behalf of OxySure), or otherwise divert or take away from OxySure the business of any client or customer of OxySure; or

(iii)        contact, call upon or solicit any prospective client or prospective customer of OxySure (other than on behalf of OxySure) of whom you became aware or was introduced to in the course of your duties for OxySure for the purpose of or with the intent to offer such prospective client or prospective customer any product or service that competes with the products and services offered by OxySure, or to otherwise divert or take away from OxySure the business of any prospective client or customer of OxySure whose business is a corporate opportunity of OxySure.

5.              REPRESENTATIONS AND WARRANTIES

a. Consultant represents that on or before the commencement of services under any Work Schedule, Consultant shall deliver to OxySure an original personnel agreement executed by all Consultant’s Personnel named in each Work Schedule, if applicable.

b. Consultant represents and warrants that it has the full power and authority to carry on its business as it is now being conducted, and is qualified to conduct business as a foreign corporation, a foreign partnership, or sole proprietorship, subject to the limitations of Section 6, in all jurisdictions in which the nature of the business contemplated by this Agreement requires such qualification.

c. You represent and warrant that maintain books and records in the ordinary course of  business reflecting your business activities.

d. You certify that it is fully in compliance, if applicable, with Executive Order 11246, The Rehabilitation Act of 1973, as amended, and the Vietnam Era Veterans Readjustment Assistance Act of 1974. You further certify that it has maintained records sufficient to document its compliance with these requirements. Both parties agree to comply with all applicable equal employment opportunity laws, including Title VII of the 1964 Civil Rights Act, the Civil Rights Act of 1991, the Americans with Disabilities Act, and, if applicable, the affirmative action requirements of Executive Order 11246, the Rehabilitation Act of 1973, as amended, and the Vietnam Era Veterans Readjustment Assistance Act of 1974, as amended.

OxySure Independent Contractor Agmt.

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e. You warrant that all services provided hereunder shall be of the highest professional standards, quality and workmanship and shall be provided using your and your Personnel independent skill and judgment in the means and manner that are most suitable to perform the work contemplated hereunder and at a level generally acceptable to OxySure, and in accordance with professional standards governing such services and in accordance with the provisions of this Agreement.  You and/or your Personnel shall immediately notify OxySure if it is asked to perform services it is not qualified to perform or if it is not capable of providing any of the services required hereunder. While on the site of OxySure's business, you shall, and shall cause your Personnel to, abide by OxySure's applicable rules and regulations at all times and, upon request, shall promptly provide OxySure with a periodic writing report regarding the milestones of the project and the deliverables.

f. All information provided by you and your Personnel to OxySure or upon which OxySure has relied, including, without limitation, resumes, interviews and references, is complete, true and correct in all material respects. There is no fact which materially and adversely affects your or your Personnel ability to provide the services contemplated hereunder.

g. You and your Personnel shall fully comply, with the employment eligibility verification and other provisions of the Immigration Reform and Control Act of 1986 and regulations promulgated thereunder, as such may be amended from time to time, and you shall not provide to OxySure any Personnel if you know, or has any reason to believe, that such Personnel is not authorized to perform the services required under the applicable Work Schedule in the United States.

h. Consultant represents and warrants that its  execution and delivery of this Agreement and the performance of its duties hereunder do not, and will not, breach or conflict with any obligation of Consultant and/or Consultant’s Personnel to a previous employer, OxySure or other party or any obligation to keep confidential any information acquired by Consultant and Consultant’s Personnel prior to the date hereof. Consultant further represents and warrants that it will not, and shall cause Consultant’s Personnel not to, make use of any proprietary information, ideas or material of others in connection with this Agreement.

6.              INDEMNITY

You agree to hold OxySure harmless against and to indemnify OxySure for, any and all suits, causes of action, proceedings, loss, damage, liability or expense, including defense costs and legal fees and penalties by the Internal Revenue Service or any other taxing authority or other government agency (whether federal, state or local), which may be made against OxySure, and claims of any nature, whether sounding in contract or in tort, including, but not limited to, damage to property and personal injuries, including death, arising out of or resulting from or relating to (1) your failure to pay any taxes, (2) your taking any action which is inconsistent with your status as an independent contractor, (3) any act or omission by you or any of your officers, agents, employees, or subcontractors relating to the performance of this Agreement and (4) any claim of infringement of any patent, trademark, copyright or other intellectual property right with respect to any software, program, service and/or other materials developed by you under this Agreement. You also agree to reimburse OxySure for any resulting payments to the Internal Revenue Service or any other taxing authority or other governmental agency that OxySure must make in respect of such claim. Such indemnification extends to any and all costs, including attorney’s fees, costs and disbursements, incurred by OxySure as a result of any act by you which is inconsistent with your status as an independent contractor, such as a filing by you for unemployment insurance.

OxySure Independent Contractor Agmt.

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7.              ATTORNEYS' FEES AND COSTS

Should any party be required to bring legal action against the other to enforce the terms and conditions of this Agreement, the prevailing party shall be awarded its costs incurred and expended during the pendency of litigation, including reasonable attorneys' fees.

10.           MISCELLANEOUS

a. The obligations contained in Section 4 and 5 of this Agreement shall be binding upon not only you, but on your Personnel, if applicable. You will advise your Personnel of the terms of this Agreement.

b. This Agreement constitutes the entire agreement between the parties with respect to the matters contained herein and supersedes any and all prior and contemporaneous agreements, negotiations, correspondence, undertakings and communications of the parties, oral or written, with respect to that subject matter. If any provision of this Agreement is held to be invalid or unenforceable, such invalidity or unenforceability shall not affect or impair the validity or enforceability of the remaining provisions of this Agreement.

c. You may not, without the express written permission of OxySure, assign, subcontract work or pledge any rights or obligations hereunder.

d. No amendment or modification of this Agreement shall be valid unless evidenced by a written instrument executed by the parties hereto. No waiver by OxySure of any provision or condition of this Agreement shall be deemed a waiver of any similar or dissimilar provision or condition at the same time or any prior or subsequent time.

e. This Agreement shall be effective either as of the first day of your engagement by OxySure or, if you have already signed a similar agreement previously in a form acceptable to OxySure, as of the date first written below. This Agreement shall be governed by the laws of the State of Texas. You hereby agree to consent to the jurisdiction of any state or federal court located in Collin County, Texas for purposes of any dispute arising under this Agreement. IN ANY LITIGATION RELATING TO THIS AGREEMENT OR EMPLOYMENT WITH OXYSURE, YOU HEREBY WAIVE ANY AND ALL RIGHTS TO TRIAL BY JURY.

OxySure Independent Contractor Agmt.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above.

Chris Hagerman, individual		OxySure Systems, Inc.
Signature:	/s/ Chris Hagerman	/s/ Julian T. Ross
Name:	Chris Hagerman	Julian T. Ross
Address:	7914 E. Phillips Circ.	10880 John W. Elliott Drive,
	Centennial, Colorado 80112	Suite 600
		Frisco, Texas 75033

OxySure Independent Contractor Agmt.

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EXHIBIT A

WORK SCHEDULE

This Schedule is made a part of that certain Independent Contractor Agreement, dated October 8, 2012, between OxySure Systems, Inc., a Delaware corporation (“OxySure”) and Chris Hagerman (“Consultant”).

Start Date: October  8, 2012

Estimated Duration: One Year. The estimated duration of this engagement does not constitute a contract or a guarantee of a continued term of the Independent Contractor Agreement for the estimated period. You hereby acknowledge that OxySure may terminate the Independent Contractor Agreement or any services provided thereunder at any time prior to completion and you will only be entitled to payment for services actually rendered or commissions that have accrued through the date of such termination.  Upon termination all rights to any commission or other consideration shall terminate.

Contractor: Chris Hagerman

Address: 7914 E. Phillips Cir. Centennial, Colorado 80112

Project: Consultant shall provide Internet relations program to OxySure.

Deliverables: Distribute Company press releases, including via email; marketing effort-IR leads; create and place banner ads on Internet; email lead generation and collection; send announcement of new email services to shareholder lists; continuously email news releases to investor database; update investor database with existing shareholders information; list any private placement, annual report, documents; convert documents to online format (html) for e-delivery (download); deliver requested documents online; advanced investment community support; broker network introductions; digitize & broadcast company, product, sales video presentation; link Company’s website to the video presentation; announce video presentation to investor database; announce video presentation to financial advisors; feature company in market newsletters; contract for a third party company research report; distribute research report to financial advisors; distribute research report to select investors; update and maintain Company domain www.oxysure.com; design and host company domain; upgrade current site to have international IR links/lead collection; upgrade current site for mobile/smart phone/tablets; search engine optimization – SEO campaign; register Company’s website on search engines and announce Company’s website to investors.

OxySure Independent Contractor Agmt.

9

Scope of work: Consultant shall increase OxySure visibility on the Web and with investors as well as promote OxySure’s website through search engine optimization and upgrading it for mobile, smart phone and tablets.

Compensation: The total aggregate compensation for all services rendered for the Estimated Duration under this Agreement is 176,000 restricted shares of common stock, par value $.0004 per share (“Common Stock”).

Payment Terms: The payment of Consultant’s service will occur in three installments as follows: (i) 44,000 shares of Common Stock shall be issued to Consultant upon execution of this Agreement; (ii) 66,000 shares of Common Stock shall be issued to Consultant on or about January 8, 2013, and (iii) 66,000 shares of Common Stock shall be issued to Consultant on or about April 8, 2013.

Expenses: All costs and expenses associated with the provision of the services under the Agreement, including, but not limited to, purchase of key words, banner ads, research reports, sub-contractors, programmers and programming, marketing and collateral development (including audio and video) shall be borne by Consultant.

OxySure Independent Contractor Agmt.

10

EX-10.37

Exhibit 10.37

CONSULTING AGREEMENT

THIS CONSULTING AGREEMENT (the “Agreement”) is between OxySure Systems, Inc., having its principal place of business at 10880 John West Elliot Drive, Suite 600 Frisco, TX 75033 (hereinafter referred to as “Company”); and Wall Street Buy Sell Hold Inc., having its principal place of business at 135 Glenwood Rd., Glenwood Landing, NY 11547 (hereinafter referred to as the “Consultant”) on this 22nd day of October, 2012.

WHEREAS, the Consultant is in the business of assisting public companies in strategic business planning, and investor and public relations services designed to make the investing public knowledgeable about the benefits of stock ownership in the Company; and

WHEREAS, the Consultant may, during the period of time covered by this Agreement, present to the Company one or more plans of public and investor relations to utilize business entities to achieve the Company’s goals of making the investing public knowledgeable about the benefits of stock ownership in the Company; and

WHEREAS, the Company recognizes that the Consultant is not in the business of stock brokerage, investment advice, activities which require registration under either the Securities Act of 1933 (hereinafter “the Act”) or the Securities and Exchange Act of 1934 (hereinafter “the Exchange Act”), underwriting, banking, is not an insurance Company, nor does it offer services to the Company which may require regulation under federal and state securities laws; and

WHEREAS, the parties agree, after having a complete understanding of the services desired and the services to be provided, that the Company desires to retain Consultant to provide such assistance through its services for the Company, and the Consultant is willing to provide such services to the Company;

NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1. Duties and Involvement.

The Company hereby engages Consultant to provide one or more plans, and for coordination in executing the agreed-upon plan, for using various investors and public relations services as agreed by both parties. The plan may include, but not by way of limitation, the following services: consulting with the Company’s management concerning investor accreditation, availability to expand Company’s investor base, investor support, strategic business planning, broker relations, and recommend financing alternatives and sources. Additionally, the Consultant shall disburse electronically, via email, public information and news releases about the Company. The Consultant shall also discuss this information via use of the telephone to investors interested in investing in growth companies.

1

Relationship among the Parties.

Consultant acknowledges that it is not an officer, director or agent of the Company, it is not, and will not, be responsible for any management decisions on behalf of the Company, and may not commit the Company to any action. The Consultant does not, through stock ownership or otherwise, have the power to either to control the Company, or to exercise any dominating influences over its management.

Consultant understands and acknowledges that this Agreement shall not create or imply any agency relationship among parties, and Consultant will not commit the Company in any manner except when a commitment has been specifically authorized in writing by the Company. The Company and the Consultant agree that the relationship among the parties shall be that of independent contractor.

2. Effective Date, Term and Termination.

Company and Consultant agree that the Consultant will commence significant duties pursuant to Section 1 of this Agreement for a Three Month initial term commencing on October 22nd,  2012, (the “Effective Date”) and shall continue until January 22nd,  2013, (the “Expiration Date”).

3. Option to Renew and Extend.

Company may renew this Agreement for an additional term(s) of three (3) months (each, a “Renewal Term”) and with a compensation rate of Nine Thousand dollars ($9,000) and forty five thousand (45,000) of the Company’s restricted stock or for a higher rate upon agreement by both parties, by providing written notice to Consultant at any time prior to the initial Expiration Date.

4. Compensation and Payment of Expenses.

Compensation payable with respect to services to be delivered from the Effective Date to the Expiration Date of the Initial Term or any Renewal Term, the Company is to pay the Consultant as follows: a total of Five Thousand dollars ($5,000.00) and twenty five thousand (25,000) shares of the Company’s restricted stock for the first month of service; Seven Thousand dollars ($7,000) and thirty five thousand (35,000) of the Company’s restricted stock for the second month of service; and, Nine Thousand dollars ($9,000) and forty five thousand (45,000) of the Company’s restricted stock for the third month of service.  First month compensation is due immediately upon signing of this Agreement.

2

5. Consultant’s Representations.

(a) Receipt of information. Consultant has received all information set forth and referenced to in Company’s press releases and business plan. Furthermore, Consultant has received all information necessary for it to make an informed investment decision.

(b) Investment Experience. Consultant represents that it is experienced in evaluating and investing in securities and in companies similar to Company and acknowledges that it can fend for itself, can bear the economic risk of its investment, and has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the investment. Consultant further represents that it has not been organized solely for the purchase of the Company’s Common Stock.

6. Services Not Exclusive.

Consultant shall devote such of its time and effort necessary to the discharge of its duties hereunder. The Company acknowledges that Consultant is engaged in other business activities, are that it will continue such activities during the term of this Agreement. Consultant shall not be restricted from engaging in other business activities during the term of this Agreement.

7. Confidentiality.

Consultant acknowledges that may have confidential information regarding the Company and its business. Consultant agrees that it will not, during or subsequent to the term of this Agreement, divulge, furnish or make accessible to any person or entity (other than with the written permission of the Company) any knowledge or information or plans of the Company with respect to the Company or its business, including, but not by way of limitation, the products of the Company, whether in the concept or development stage, or being marketed by the Company on the effective date of this Agreement or during the term hereof.

8. Covenant Not to Compete.

During the term of this Agreement, Consultant warrants, represents and agrees that it will not directly participate in the information developed for and by the Company, and will not compete directly with the Company in the Company’s primary industry or related fields.

3

9. Investment Representation.

The Company represents and warrants that it has provided Consultant with access to all information available to the Company concerning its condition, financial and otherwise, its management, its business and its prospects. The Company represents that it has provided to Consultant with all copies of the Company’s financials, merger documents, press releases for the prior twelve (12) months, if any, (the “Disclosure Documents”) made under the rules and regulations promulgated under the Act, as amended, or the Exchange Act, as amended including but not limited to its 15(c) 2-11 filing and all other document relating to its trading on the Over the Counter Bulletin Board. Consultant represents that it and its advisors have been afforded the opportunity to discuss the Company with its management. The Company represents that it has and will continue to provide Consultant with any information or documentation necessary to verify information contained in the Disclosure Documents, and will promptly notify Consultant upon the filing of any registration statement or other periodic reporting documents filed pursuant to the Act or the Exchange Act. The Company hereby represents that it does not currently have any of its securities in registration.

10. Miscellaneous Provisions.

(a) Time. Time is of the essence of this Agreement.

(b) Presumption. This Agreement or any section thereof shall not be construed against any party due to the fact that said Agreement or any section thereof was drafted by said party.

(c) Computation of Time. In computing any period of time pursuant to this Agreement, the day of the act, event or default from which the designated period of time begins to run shall be included, unless it is a Saturday, Sunday or a legal holiday, in which event the period shall begin to run on the next day which is not a Saturday, Sunday or legal holiday, in which event the period shall run until the end of the next day thereafter which is not a Saturday, Sunday or legal holiday.

(d) Titles and Captions. All article, section and paragraph titles or captions contained in this Agreement are for convenience only and shall not be deemed part of the context nor affect the interpretation of this Agreement.

(e) Pronouns and Plurals. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the Person or Persons may require.

(f) Further Action. The parties hereto shall execute and deliver all documents, provide all information and take or forbear from all such action as may be necessary or appropriate to achieve the purpose of this Agreement.

(g) Good Faith, Cooperation and Due Diligence. The parties hereto covenant, warrant and represent to each other good faith, complete cooperation, and the opportunity for proper due diligence. Additionally, will use honesty in fact in the performance of all obligations of the parties pursuant to this Agreement. All promises and covenants are mutual and dependent. Both parties have done so voluntarily.

4

(h) Severability. If any provision of this Agreement, or the application of such provision to any person or circumstance, becomes or is found to be illegal, shall be held invalid, or unenforceable for any reason, such clause provision must first be modified to the extent necessary to make this Agreement legal and enforceable and then if necessary, second, severed from the remainder of the Agreement to allow the remainder of the Agreement to remain in full force and effect.

(i) Assignment. This Agreement may not be assigned by either party hereto without the written consent of the other, but shall be binding upon successors of the parties.

(j) Notices. All notices required or permitted to be given under this Agreement shall be given in writing and shall be delivered, either personally or by express delivery service, to the party to be notified. Notice to each party shall be deemed to have been duly given upon delivery, personally or by courier (such as Federal Express or similar express delivery service), addressed to the attention of the officer at the address set forth heretofore, or to such other officer or addresses as either party may designate, upon at least ten (10) days’ written notice, to the other party.

(k) Governing Law and Venue. The Agreement shall be construed by and enforced in accordance with the internal laws of the State of New York and venue shall rest solely in the state and courts any jurisdiction in the State of New York.

(l) Entire Agreement. This Agreement contains the entire understanding and agreement among the parties. There are no other agreements, conditions or representations, oral or written, express or implied, with regard thereto. This Agreement may be amended only in writing signed by all parties.

(m) Waiver. A delay or failure by any party to exercise a right under this Agreement, or a partial or single exercise of that right, shall not constitute a waiver of that or any other right.

(n) Counterparts. This Agreement may be executed in duplicate counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement. In the event that the document is signed by one party and faxed to another, the parties agree that a fixed signature shall be binding upon the parties to this agreement as thought the signature was an original.

5

EX-31.1

Exhibit 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

I, Julian T. Ross, certify that:

1.   I have reviewed this Annual Report on Form 10-K for the period ended December 31, 2012 of OxySure Systems, Inc.

2.   Based upon my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

3.   Based upon my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.        Designed such disclosure control and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.        Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.        Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.        Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrants’ board of directors (or persons performing the equivalent functions):

a.        All significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.        Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 2, 2013

/s/ Julian T. Ross

Julian T. Ross,

Chief Executive Officer

EX-31.2

Exhibit 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

I, Julian T. Ross, certify that:

1. I have reviewed this Annual Report on Form 10-K for the period ended December 31, 2012 of OxySure Systems, Inc.

2. Based upon my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

3. Based upon my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.       Designed such disclosure control and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.       Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.       Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.       Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrants’ board of directors (or persons performing the equivalent functions):

a.       All significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.       Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 2, 2013

/s/ Julian T. Ross

Julian T. Ross,

Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of OxySure Systems, Inc. (the “Company”) on Form 10-K for the period ending December 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Julian T. Ross, Chief Executive Officer and Chief Financial Officer of the Company, respectively, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:

1.   The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.   The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: April 2, 2013

/s/ Julian T. Ross

Julian T. Ross

Chief Executive Officer and Chief Financial Officer

XML

Summary of Significant Accounting Policies (Details 2) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Numerator
Net income (loss)	$ (828,271)	$ (1,532,399)
Less: Effect of amortization of interest expense on convertible notes
Net loss attributed to common stockholders (diluted)	$ (828,271)	$ (1,532,399)
Denominator
Weighted-average common shares outstanding	19,862,088	15,930,327
Effect of dilutive securities
Denominator for diluted net loss per share	19,862,088	15,930,327
Basic and diluted net loss per share	$ (0.04)	$ (0.10)

XML

Shareholders' Equity (Details) (USD $)	12 Months Ended				12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012 Series A Convertible Preferred Stock [Member]	Dec. 31, 2005 Series A Convertible Preferred Stock [Member]	Dec. 31, 2011 Afritex Medical Products [Member]	Dec. 31, 2012 Warrants [Member]	Dec. 31, 2011 Warrants [Member]	Dec. 31, 2012 Stock Option [Member]	Dec. 31, 2011 Stock Option [Member]	Dec. 31, 2012 Common stock [Member]	Dec. 31, 2011 Common stock [Member]
Shareholders equity (Textual)
Preferred stock, Shares authorized	25,000,000	25,000,000	3,143,237	5,000,000
Series A Convertible Preferred stock, Shares issued	818,750	3,126,434
Series A Convertible Preferred stock, Shares outstanding	818,750	3,126,434
Preferred stock, par value	$ 0.0005	$ 0.0005	$ 1.00	$ 0.0005
Shares of preferred stock converted into common stock			2,307,684
Shares of common stock by conversion from preferred stock			2,815,374
Convertible preferred stock, conversion ratio			1.22:1
Dividend payable on Series A preferred stock, quarterly, non-cumulative			$ 0.01
Percentage of claim upon liquidation			100.00%
Cash proceeds from conversion			$ 3,000,000
Cash proceeds from conversion, price paid per share			$ 5.00
Redemption period, Maximum			10 years
Redemption period minimum			2 years
Redemption value per share			$ 1.00
Preferred stock, voting rights			Holder of each share of Series A Preferred has the right to one vote for each share of common stock into which such share of Series A Preferred could be converted.
Stock option/warrant exercised						882,616	294,330	374,808	34,750	374,808	34,750
Cash proceeds from issuance of common shares, Shares						882,616		374,808	34,750	68,889
Warrant exercised pursuant to common stock							294,330
Cash proceeds from issuance of common shares						6,106	2,110	98,284	21,260	41,250
Fair value of options/warrant issued for services						0	29,354	7,999	104,419
Common shares issued on conversion of convertible subordinated promissory notes	1,711,952	465,969
Common stock issued upon conversion of convertible notes	2,433,850	465,969								685	186
Conversion price of note(s) (aggregate)	$ 1.42	$ 1.00								$ 1.42
Common stock issued for services	20,748									39
Common stock issued for services, shares					335,880					97,500
Share issue price										$ 0.60
Common stock issued under Asset Purchase and Stock Transfer Agreement, value										95,062
Fair value of warrants issued in connection with convertible loans	249,723					0	458,114
Issuance of common stock under Asset Purchase and Stock Transfer Agreement, shares										77,674
Common stock, par value	$ 0.0004	$ 0.0004
Common stock, shares authorized	100,000,000	100,000,000
Common stock, Shares issued	22,548,678	16,519,865
Common stock, Shares outstanding	22,548,678	16,519,865
Common shares issued on conversion of convertible subordinated promissory notes	1,711,952	465,969
Convertible subordinated promissory notes, principal amount		370,000
Convertible subordinated promissory notes, accrued interest		$ 95,969

XML

Notes Payable (Details 2) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Summary of notes converted to common stock
Note amount prior to conversion	$ 2,430,063
Principal	2,430,063
Amount of note converted	2,433,850
Conversion price (per share)	$ 1.42	$ 1.00
Common shares issued on conversion of debt	1,711,952	465,969
Sinacola, First Landlord Note [Member]
Summary of notes converted to common stock
Note amount prior to conversion	125,000
Stated interest	0.00%
Principal	125,000
Amount of note converted	125,000
Conversion price (per share)	$ 1.00
Effective date of conversion	Mar. 31, 2012
Common shares issued on conversion of debt	125,000
Sinacola, Second Landlord Note [Member]
Summary of notes converted to common stock
Note amount prior to conversion	126,407
Stated interest	0.00%
Principal	126,407
Amount of note converted	126,407
Conversion price (per share)	$ 1.50
Effective date of conversion	Mar. 31, 2012
Common shares issued on conversion of debt	84,271
Sinacola landlord note 1/2 [Member]
Summary of notes converted to common stock
Note amount prior to conversion
Stated interest	0.00%
Principal
Amount of note converted
Conversion price (per share)
Effective date of conversion	May 03, 2012
Common shares issued on conversion of debt	21,819
Sullivan Trust [Member]
Summary of notes converted to common stock
Note amount prior to conversion	25,000
Stated interest	8.00%
Principal	25,000
Amount of note converted	25,631
Conversion price (per share)	$ 1.00
Effective date of conversion	Apr. 10, 2012
Common shares issued on conversion of debt	25,622
M. Nyewe Trust [Member]
Summary of notes converted to common stock
Note amount prior to conversion	100,000
Stated interest	8.00%
Principal	100,000
Amount of note converted	103,156
Conversion price (per share)	$ 1.50
Effective date of conversion	Jun. 25, 2012
Common shares issued on conversion of debt	68,771
Yisheng Yao [Member]
Summary of notes converted to common stock
Note amount prior to conversion	15,000
Stated interest	0.00%
Principal	15,000
Amount of note converted	15,000
Conversion price (per share)	$ 0.86
Effective date of conversion	Jul. 12, 2012
Common shares issued on conversion of debt	17,442
Tim Hutton [Member]
Summary of notes converted to common stock
Note amount prior to conversion	20,000
Stated interest	0.00%
Principal	20,000
Amount of note converted	20,000
Conversion price (per share)	$ 0.86
Effective date of conversion	Jul. 12, 2012
Common shares issued on conversion of debt	23,256
Agave Resources Llc [Member]
Summary of notes converted to common stock
Note amount prior to conversion	750,000
Stated interest	0.00%
Principal	750,000
Amount of note converted	750,000
Conversion price (per share)	$ 1.50
Effective date of conversion	Dec. 31, 2012
Common shares issued on conversion of debt	500,000
Jtr Investments Limited [Member]
Summary of notes converted to common stock
Note amount prior to conversion	1,268,656
Stated interest	0.00%
Principal	1,268,656
Amount of note converted	$ 1,268,656
Conversion price (per share)	$ 1.50
Effective date of conversion	Dec. 31, 2012
Common shares issued on conversion of debt	845,771

XML

Commitments and Contingency (Details Textual) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2007	Dec. 31, 2012 Vencore Solutions LLC [Member]	Dec. 31, 2006 Vencore Solutions LLC [Member]	Dec. 31, 2012 Vencore Solution LLC One [Member]
Commitments and contingency (Textual)
Maximum lease allowed for equipment					$ 750,000
Increase in amount of capital lease					805,000
Minimum percentage of security deposit require for lease					10.00%
Payment description of capital lease	Payment of Series A Convertible Preferred Stock shares equal to 5% of the lease divided by $1.00, and 36 monthly payments of 3.33% of the lease.
Purchase of capital lease equipment, Description	Option to purchase the equipment at the end of each lease term at the lesser of 12% of the original equipment cost or the fair market value.
Balance outstanding as debt obligation				307,661.83
Number of Shares Underlying Warrants	1,877,034			22,500		32,500
Exercise Price				$ 0.82		$ 1.00
Warrants ability to exercise term				5 years
Operating lease expiration date	October 2012
Leasehold improvements	324,000
Warrants issued in connection with lease agreement	50,000
Warrants issued in connection with modification to lease agreement	7,500
Total rent expense	$ 93,522	$ 115,728
Capital lease expiration period	2012
Minimum interest rate to acquire equipment			7.00%
Maximum interest rate to acquire equipment			19.00%
Term of lease	Three to five year.

XML

Stock Options and Warrants (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Summary of option activity
Outstanding Options, ending balance	1,877,034
Employee [Member]
Summary of option activity
Outstanding Options, beginning balance	1,799,024	1,869,574
Outstanding options, Weighted Average Exercise Price, beginning balance	$ 0.47	$ 0.59
Granted	180,000	280,000
Granted, Weighted Average Exercise Price	$ 0.25	$ 0.52
Stock option/warrant exercised	(374,808)	(34,750)
Exercised, Weighted Average Exercise Price	$ 0.26	$ 0.61
Forfeited/Cancelled, Shares	(161,300)	(315,800)
Forfeited/Cancelled, Weighted Average Exercise Price	$ 1.37	$ 1.27
Outstanding Options, ending balance	1,442,916	1,799,024
Outstanding Options, Weighted Average Exercise Price, ending balance	$ 0.41	$ 0.47
Non-Employee [Member]
Summary of option activity
Outstanding Options, beginning balance	53,180	74,382
Outstanding options, Weighted Average Exercise Price, beginning balance	$ 0.72	$ 0.93
Granted
Granted, Weighted Average Exercise Price
Stock option/warrant exercised
Exercised, Weighted Average Exercise Price
Forfeited/Cancelled, Shares	(35,000)	(21,202)
Forfeited/Cancelled, Weighted Average Exercise Price	$ 0.50	$ 2.00
Outstanding Options, ending balance	18,180	53,180
Outstanding Options, Weighted Average Exercise Price, ending balance	$ 2.11	$ 0.72
Stock Options [Member]
Summary of option activity
Outstanding Options, beginning balance	1,852,204	1,943,956
Granted	180,000	280,000
Stock option/warrant exercised	(374,808)	(34,750)
Forfeited/Cancelled, Shares	(196,300)	(337,002)
Outstanding Options, ending balance	1,461,096	1,852,204

XML

Concentration of Risk in Customer and Supplier Relationships (Details Textual) (USD $)	12 Months Ended
	Dec. 31, 2012 Customer	Dec. 31, 2011 Customer
Concentration of Risk in Customer and Supplier Relationships (Textual)
Federal deposit insurance corporation limit	$ 250,000	$ 250,000
Number of customers which accounted for significant revenues	1	1

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Notes Payable (Details) (USD $)	Dec. 31, 2012
Future principal payments of Frisco note payable
2013	$ 398,589
2014	39,588
2015	36,485
Note payable, Total	474,661
Frisco Note payable [Member]
Future principal payments of Frisco note payable
2013	44,000
2014	52,000
2015	52,000
Note payable, Total	$ 148,000

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Net Income (Loss) Per Share (Tables)

12 Months Ended

Dec. 31, 2012

Net Income (Loss) Per Share [Abstract]

Summary of Computation of net basic and diluted net income (loss) per share

	Year ended December 31,
	2012			2011
Net income (loss)		(828,271	)		(1,532,399	)
Shares used in computing basic per share amounts (weighted ave.)		19,862,088			15,930,327
Net income (loss) per share:
Basic and Diluted	$	(0.04	)	$	(0.10	)

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Subsequent Events (Details) (USD $) In Billions, except Share data, unless otherwise specified	1 Months Ended		12 Months Ended
	Apr. 30, 2013	Feb. 28, 2013 Brand	Dec. 31, 2012	Dec. 31, 1998
Subsequent Events (Textual)
Number of unit of oxysure model 615 purchase during first two years			4,500
Number of brands in Automated External Defibrillators		6
Healthcare industry experience period of Mr. Jones	35 years
Amount of assets sold				$ 1.7
Net worth of Assignment Inc. in which Mr. Jones serves as chairman			$ 1.3

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Net Income (Loss) Per Share (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Summary of Computation of net basic and diluted net income (loss) per share
Net income (loss)	$ (828,271)	$ (1,532,399)
Weighted-average common shares outstanding	19,862,088	15,930,327
Net income (loss) per share:
Basic and Diluted	$ (0.04)	$ (0.10)

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Stock Options and Warrants (Details 2)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Summary of fair value of options granted were estimated at the date of grant using the Black-Scholes model
Volatility (weighted ave.)		21.00%
Risk-free interest rate (weighted ave.)		2.25%
Expected dividend rate		0.00%
Minimum [Member]
Summary of fair value of options granted were estimated at the date of grant using the Black-Scholes model
Expected terms (in years)	5 years	5 years
Volatility (weighted ave.)	22.00%
Risk-free interest rate (weighted ave.)	0.89%
Expected dividend rate	0.00%
Maximum [Member]
Summary of fair value of options granted were estimated at the date of grant using the Black-Scholes model
Expected terms (in years)	10 years	10 years
Volatility (weighted ave.)	64.00%
Risk-free interest rate (weighted ave.)	2.24%
Expected dividend rate	0.00%

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Going Concern (Details) (USD $)	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Going Concern (Textual)
Notes payable decreased	$ 474,661	$ 2,727,449
Notes payable	76,072	1,162,390
Short-term notes payable	398,589	1,565,059
Accumulated deficit	(14,258,667)	(13,430,659)	(11,898,260)
Working capital deficit	$ 1,536,239	$ 2,244,219

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Concentration of Risk in Customer and Supplier Relationships (Details) (Afritex [Member])	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Afritex [Member]
Summary of percentages of revenues from customer (Afritex)
Percentage of revenue	29.00%	45.00%

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Related Party Transactions (Details) (USD $)	12 Months Ended
	Dec. 31, 2012
Julian Ross [Member]
Summary of the related party financings and notes
Amount	$ 203,222
Stated interest rate	0.00%
Debt instrument, maturity date description	n/a
Other [Member]
Summary of the related party financings and notes
Amount	$ 4,250
Stated interest rate	0.00%
Debt instrument, maturity date description	n/a

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Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2012

Summary Of Significant Accounting Policies [Abstract]

Schedule of inventories

	December 31, 2012
Parts inventory	$	105,647
Work in process		76,106
Finished goods		39,591
Total inventories	$	221,345

Schedule of stock based compensation expense

	Year ended December 31,
	2012		2011
Common Stock options issued for compensation	$	7,999	$	104,419
Common Stock options and warrants issued for services		-		29,354
Total	$	7,999	$	133,773

Schedule of numerator and denominator used in calculation of basic and diluted net loss per share

	Year ended December 31,
	2012			2011
Historical net loss per share:
Numerator
Net loss, as reported		(828,271	)		(1,532,399	)
Less: Effect of amortization of interest expense on convertible notes		-			-
Net loss attributed to common stockholders (diluted)		(828,271	)		(1,532,399	)
Denominator
Weighted-average common shares outstanding		19,862,088			15,930,327
Effect of dilutive securities		-			-
Denominator for diluted net loss per share		19,862,088			15,930,327
Basic and diluted net loss per share	$	(0.04	)	$	(0.10	)

Schedule of antidilutive securities excluded from computation of earnings per share

	Year ended December 31,
	2012		2011
Options to purchase common stock		1,461,096		1,852,204
Warrants to purchase common stock		1,877,034		2,842,983
Common shares issuable upon conversion of convertible preferred stock		998,875		3,814,249
Convertible note shares outstanding		350,560		1,962,935

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Notes Payable (Details 4) (USD $)	Dec. 31, 2012	Dec. 31, 2011
Summary of notes payable outstanding
Current portion of notes payable	$ 31,588	$ 86,338
Current portion of convertible notes payable	367,001	1,478,722
Total short-term notes payable	398,589	1,565,059
Long-term portion of notes payable	104,000	154,380
Less: Unamortized discount	(27,928)	(46,720)
Long-term portion of notes payable, net	76,072	107,660
Long-term portion of convertible notes payable		1,200,100
Less: Unamortized discount		(145,370)
Long-term convertible notes payable net of unamortized discount		1,054,730
Total long-term notes payable	$ 76,072	$ 1,162,390

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Balance Sheet Components (Details) (USD $)	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Cash and cash equivalents
Cash	$ 13,514	$ 65,118
Cash and cash equivalents	13,514	65,118	39,887
Summary of Inventories
Total inventories, net	221,345	247,956
Accounts Receivable, net of allowances	18,487	2,758
Property and equipment, net
Machinery and equipment	919,736	919,736
Leasehold improvements	547,856	547,856
Computer equipment and furniture and fixtures	236,797	203,922
Software	10,691	10,691
Property and equipment, net:	1,715,080	1,682,204
Accumulated depreciation and amortization	(1,687,481)	(1,548,545)
Total property and equipment, net	27,599	133,659
Other Assets:
Deferred loan costs, net	224,751
Security deposits	53,274	53,274
Website development, software, URLs	238,348
Total other assets	516,373	53,274
Accounts payable and accrued expenses
Leasehold Improvement Allowance		48,969
Accounts payable	70,141	136,263
Accrued interest		40,094
Accrued expenses for website and software	143,286
Other accrued liabilities	382,228	20,015
Total accounts payable and accrued expenses	$ 595,655	$ 245,340

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Segment Information (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Schedule of revenue and segment reporting
Total revenues	$ 269,697	$ 185,209
United States - product sales [Member]
Schedule of revenue and segment reporting
Total revenues	146,797	102,658
ROW - product sales [Member]
Schedule of revenue and segment reporting
Total revenues	86,680	82,551
ROW - license fees [Member]
Schedule of revenue and segment reporting
Total revenues	$ 36,220

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Summary of Significant Accounting Policies (Details) (USD $)	Dec. 31, 2012	Dec. 31, 2011
Summary of Inventories
Parts inventory	$ 105,647
Work in process	76,106
Finished goods	39,591
Total inventories	$ 221,345	$ 247,956

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Notes Payable (Details Textual) (USD $)	12 Months Ended		1 Months Ended		12 Months Ended							1 Months Ended		12 Months Ended		0 Months Ended	12 Months Ended			1 Months Ended	12 Months Ended			1 Months Ended	12 Months Ended			1 Months Ended		1 Months Ended			12 Months Ended				1 Months Ended			12 Months Ended				1 Months Ended	12 Months Ended		1 Months Ended	12 Months Ended		1 Months Ended	12 Months Ended			1 Months Ended	12 Months Ended			1 Months Ended	12 Months Ended			1 Months Ended	12 Months Ended			1 Months Ended								1 Months Ended	12 Months Ended		12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Mar. 31, 2011 Frisco Promissory Note [Member]	Apr. 30, 2007 Frisco Promissory Note [Member]	Dec. 31, 2008 Frisco Promissory Note [Member]	Dec. 31, 2012 Frisco Promissory Note [Member]	Dec. 31, 2011 Frisco Promissory Note [Member]	Dec. 01, 2011 Frisco Promissory Note [Member]	Mar. 22, 2011 Frisco Promissory Note [Member]	Dec. 31, 2010 Frisco Promissory Note [Member]	Apr. 03, 2007 Frisco Promissory Note [Member]	Dec. 31, 2008 Agave/JTR subordinated, Convertible notes [Member]	Mar. 31, 2008 Agave/JTR subordinated, Convertible notes [Member]	Dec. 31, 2011 Agave/JTR subordinated, Convertible notes [Member]	Dec. 31, 2012 Agave/JTR subordinated, Convertible notes [Member]	Apr. 01, 2008 First note [Member]	Dec. 31, 2012 First note [Member]	Dec. 31, 2011 First note [Member]	Mar. 31, 2008 First note [Member]	Dec. 31, 2008 Second note [Member]	Dec. 31, 2012 Second note [Member]	Dec. 31, 2011 Second note [Member]	Mar. 31, 2008 Second note [Member]	Nov. 30, 2008 JTR Senior, Convertible note [Member]	Dec. 31, 2012 JTR Senior, Convertible note [Member]	Dec. 31, 2011 JTR Senior, Convertible note [Member]	Dec. 31, 2010 JTR Senior, Convertible note [Member]	Dec. 31, 2009 Alcedo Subordinated Convertible Note [Member]	Dec. 10, 2009 Alcedo Subordinated Convertible Note [Member]	May 31, 2012 First Landlord Note [Member]	Mar. 31, 2012 First Landlord Note [Member]	Dec. 31, 2009 First Landlord Note [Member]	Dec. 31, 2012 First Landlord Note [Member]	Dec. 31, 2011 First Landlord Note [Member]	Mar. 30, 2012 First Landlord Note [Member]	Dec. 10, 2009 First Landlord Note [Member]	May 31, 2012 Second Landlord Note [Member]	Mar. 31, 2012 Second Landlord Note [Member]	Dec. 31, 2009 Second Landlord Note [Member]	Dec. 31, 2012 Second Landlord Note [Member]	Dec. 31, 2011 Second Landlord Note [Member]	Mar. 30, 2012 Second Landlord Note [Member]	Dec. 10, 2009 Second Landlord Note [Member]	Dec. 31, 2010 Third Landlord Note [Member]	Dec. 31, 2012 Third Landlord Note [Member]	Dec. 31, 2011 Third Landlord Note [Member]	Dec. 31, 2010 Fourth Landlord Note [Member]	Dec. 31, 2012 Fourth Landlord Note [Member]	Dec. 31, 2011 Fourth Landlord Note [Member]	Mar. 31, 2011 Fifth Landlord Note [Member]	Dec. 31, 2012 Fifth Landlord Note [Member]	Dec. 31, 2011 Fifth Landlord Note [Member]	Mar. 23, 2011 Fifth Landlord Note [Member]	Mar. 31, 2011 Sixth Landlord Note [Member]	Dec. 31, 2012 Sixth Landlord Note [Member]	Dec. 31, 2011 Sixth Landlord Note [Member]	Mar. 23, 2011 Sixth Landlord Note [Member]	Aug. 31, 2011 Seventh Landlord Note [Member]	Dec. 31, 2012 Seventh Landlord Note [Member]	Dec. 31, 2011 Seventh Landlord Note [Member]	Aug. 15, 2011 Seventh Landlord Note [Member]	Aug. 31, 2011 Eighth Landlord Note [Member]	Dec. 31, 2012 Eighth Landlord Note [Member]	Dec. 31, 2011 Eighth Landlord Note [Member]	Aug. 15, 2011 Eighth Landlord Note [Member]	Aug. 31, 2011 Sinacola Subordinated, Convertible Notes [Member]	Mar. 31, 2011 Sinacola Subordinated, Convertible Notes [Member]	Dec. 31, 2010 Sinacola Subordinated, Convertible Notes [Member]	Dec. 31, 2009 Sinacola Subordinated, Convertible Notes [Member]	Aug. 31, 2007 Sinacola Subordinated, Convertible Notes [Member]	Aug. 15, 2011 Sinacola Subordinated, Convertible Notes [Member]	Mar. 23, 2011 Sinacola Subordinated, Convertible Notes [Member]	Dec. 10, 2009 Sinacola Subordinated, Convertible Notes [Member]	Jan. 31, 2012 Other Subordinated Convertible Notes [Member]	Dec. 31, 2012 Other Subordinated Convertible Notes [Member]	Jan. 29, 2012 Other Subordinated Convertible Notes [Member]	Dec. 31, 2012 First Note and Second Note and JTR Senior Note [Member]
Notes Payable (Textual)
Debt instrument, issuance date				Apr. 03, 2007
Debt instrument, face amount	$ 2,430,063										$ 243,000		$ 1,000,000						$ 750,000				$ 250,000						$ 100,000																																															$ 100,000
Stated interest											12.18%																		16.00%															0.00%			0.00%						0.00%				0.00%				0.00%				0.00%											8.00%
Unamortized discount related to notes payable	27,928	46,720				40,340	52,752			66,198
Loan forgiven amount recognized as other nonoperating income					30,000
Debt instrument, payment terms			(i) the full payment of the economic incentives; or (ii) March 31, 2016										Due and payable on the earlier of (i) completion of the next financing Round completed by us or (ii) one year after the Notes are issued.
Period of performance for debt			5 years
Renewal face amount of debt									213,000
Renewed debt instrument interest rate									12.34%
Proceed from performance credit of the FEDC						39,000		26,000
Unamortized discount	94,154	296,177
Debt instrument outstanding amount						107,660	134,248
Warrants issued (Please see Note 6 - "Stock Options & Warrants" for warrant details)																									572,503	572,503	365,813																																									143,465			65,065	65,000	163,415
Debt instrument, maturity date														Apr. 15, 2013														Dec. 16, 2011																Oct. 31, 2012			Oct. 31, 2012			Jun. 30, 2013				Jun. 30, 2013				Nov. 30, 2013				Nov. 30, 2013						Dec. 31, 2015						Jan. 23, 2013
Debt instrument, maturity date description														In March 2009 the First Note and the Second Note were modified by extending the maturity date in each case to April 15, 2010. On December 31, 2009, the First Note and the Second Note were further modified by extending the maturity date in each case to April 15, 2011. In August 2010, the First Note and the Second Note were further modified by extending the maturity date in each case to April 15, 2012. In November 2011, the First Note and the Second Note were further modified by extending the maturity date in each case to April 15, 2013.																			The then outstanding Principal Amount shall become due and payable on the earlier to occur of: (i) December 31, 2011; or (ii) the closing of the next equity financing round (the "Equity Event") completed by the Company (in each case, the "Maturity Date"); provided that; (a) if the Equity Event is in an amount exceeding $1,000,000 but less than $1,500,000, then only 20% of the Principal Amount shall be due and payable; (b) if the Equity Event is in an amount exceeding $1,500,000 but less than $2,000,000, then only 40% of the Principal Amount shall be due and payable; (c) if the Equity Event is in an amount exceeding $2,000,000 but less than $3,000,000, then only 60% of the Principal Amount shall be due and payable; (d) if the Equity Event is in an amount exceeding $3,000,000 but less than $4,000,000, then only 80% of the Principal Amount shall be due and payable; (e) if the Equity Event is in an amount exceeding $4,000,000, then 100% of the Principal Amount shall be due and payable. For any partial Principal Amount paid under (ii) (a) - (ii) (d) above, the balance of the outstanding Principal Amount would continue to be due and payable on the earlier to occur of this (i) or (ii) (a-e) above. In the event of a partial payment, any subsequent payment resulting from an Equity Event shall be based on the percentage of the original Principal Amount and not a percentage of the outstanding Principal Amount after a partial payment under this maturity provision.							The then outstanding Principal Amount shall become due and payable on the earlier to occur of: (i) December 31, 2011; or (ii) the closing of the next equity financing round (the "Equity Event") completed by the Company (in each case, the "Maturity Date"); provided that; (a) if the Equity Event is in an amount exceeding $1,000,000 but less than $1,500,000, then only 20% of the Principal Amount shall be due and payable; (b) if the Equity Event is in an amount exceeding $1,500,000 but less than $2,000,000, then only 40% of the Principal Amount shall be due and payable; (c) if the Equity Event is in an amount exceeding $2,000,000 but less than $3,000,000, then only 60% of the Principal Amount shall be due and payable; (d) if the Equity Event is in an amount exceeding $3,000,000 but less than $4,000,000, then only 80% of the Principal Amount shall be due and payable; (e) if the Equity Event is in an amount exceeding $4,000,000, then 100% of the Principal Amount shall be due and payable. For any partial Principal Amount paid under (ii) (a) - (ii) (d) above, the balance of the outstanding Principal Amount would continue to be due and payable on the earlier to occur of this (i) or (ii) (a-e) above. In the event of a partial payment, any subsequent payment resulting from an Equity Event shall be based on the percentage of the original Principal Amount and not a percentage of the outstanding Principal Amount after a partial payment under this maturity provision.																													Outstanding Principal Amount shall become due and payable on the earlier to occur of: (i) December 31, 2011; or (ii) the closing of the next equity financing round (the "Equity Event") completed by the Company (in each case, the "Maturity Date"); provided that; (a) if the Equity Event is in an amount exceeding $1,000,000 but less than $1,500,000, then only 20% of the Principal Amount shall be due and payable; (b) if the Equity Event is in an amount exceeding $1,500,000 but less than $2,000,000, then only 40% of the Principal Amount shall be due and payable; (c) if the Equity Event is in an amount exceeding $2,000,000 but less than $3,000,000, then only 60% of the Principal Amount shall be due and payable; (d) if the Equity Event is in an amount exceeding $3,000,000 but less than $4,000,000, then only 80% of the Principal Amount shall be due and payable; (e) if the Equity Event is in an amount exceeding $4,000,000, then 100% of the Principal Amount shall be due and payable. For any partial Principal Amount paid under (ii) (a) - (ii) (d) above, the balance of the outstanding Principal Amount would continue to be due and payable on the earlier to occur of this (i) or (ii) (a-e) above. In the event of a partial payment, any subsequent payment resulting from an Equity Event shall be based on the percentage of the original Principal Amount and not a percentage of the outstanding Principal Amount after a partial payment under this maturity provision.					The outstanding Principal Amount, together with accrued and unpaid interest thereon, or the optional conversion shares ("Optional Conversion Shares") as the case may be, is due on the 360th day subsequent to January 29, 2012 (the "Maturity Date").
Amount of draw down provision, maximum																				250,000				750,000
Increased amount of draw down provision, maximum																								2,000,000
Conversion price of note(s) (aggregate)	$ 1.42	$ 1.00													$ 1.50		$ 1.50				$ 1.50				$ 1.50				$ 1.00						$ 1.00	$ 1.00						$ 1.50	$ 1.50	$ 1.00			$ 1.50						$ 1.00				$ 1.50				$ 1.00				$ 1.50										$ 0.91	$ 1.50
Fair value of warrant issued																	346,936				115,587				567,276								80,521										81,428	70,853			71,314						32,207				32,207				32,223				32,223
Amount of beneficial conversion feature recorded as debt discount																	96,936				32,254				168,641							44,479							39,292					39,147			34,409			17,793				15,540				17,827				15,540
Senior note issuance term																										47 penny warrants for every dollar drawn under this facility.
Amount outstanding of senior note																										1,104,656	696,464
Interest expenses																	0	0			0	0			0	262,554							0	58,854						0	56,839				50,000	60,000		48,056	57,667		25,000	19,306			23,873	18,436			21,840	6,370			20,842	6,079
Principal amount of convertible note																																				125,000							126,407	110,000			110,715						50,000				50,000				50,050				50,050
Warrants, aggregate exercise price		$ 2.00																																																																$ 0.01	$ 0.01	$ 0.01	$ 0.01	$ 2.00
Cash received in exchange for subordinated convertible note																													100,000
Amount of debt converted to stock	$ 2,433,850																$ 750,000				$ 250,000				$ 1,018,656																																																	$ 103,156	$ 60,622		$ 2,018,656
Common shares issued on conversion of debt	1,711,952	465,969															500,000				166,667				679,104																																																	68,770	66,320		1,345,771
Restricted shares issued upon conversion of debt																														21,819	125,000						21,819	84,271
Condition for conversion of convertible notes																																							Common stock has traded at $1.50 or above for four (4) consecutive weeks on a nationally recognized market (based on daily closing prices) then the Second Landlord Note is convertible at the Company's option.								Common stock has traded at $1.50 or above for four (4) consecutive weeks on a nationally recognized market (based on daily closing prices) then the Fourth Landlord Note is convertible at the Company's option.							Common stock has traded at $1.50 or above for four (4) consecutive weeks on a nationally recognized market (based on daily closing prices) then the Sixth Landlord Note is convertible at the Company's option.								Common stock has traded at $1.50 or above for four (4) consecutive weeks on a nationally recognized market (based on daily closing prices) then the Eighth Landlord Note is convertible at the Company's option.
Warrant exercisable date, description																																																																		On or before August 15, 2016	On or before March 23, 2016		On or before December 31, 2014	On or before March 1, 2012
Shares issuable on conversion of warrants												116,667				350,000																																																		65,065	65,000	143,465	163,415	50,000
Modified warrant exercise price																																																																						$ 1.00

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Commitments and Contingency (Details) (USD $)	Dec. 31, 2012
Summary of future minimum lease payments under non-cancelable operating lease
2013
Thereafter
Total future minimum payments due

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Stock Options and Warrants (Details 6) (USD $)	12 Months Ended
	Dec. 31, 2012 PromissoryNote
Summary of significant terms and accounting treatment of warrants issued and outstanding
Number of Shares Underlying Warrants	1,877,034
NTEC [Member]
Summary of significant terms and accounting treatment of warrants issued and outstanding
Number of grants	1
Date of Grant	Apr. 08, 2004
Number of Shares Underlying Warrants	281,200
Exercise Price	$ 0.0005
Expiration Date	Apr. 08, 2014
Weighted Average Remaining Life (Years)	1 year 3 months 7 days
Warrants' Fair Value at Date of Issuance	$ 78,643
Term of Expense (Years)	1.00
Agave Resources Llc [Member]
Summary of significant terms and accounting treatment of warrants issued and outstanding
Number of grants	2
Date of Grant	Apr. 15, 2008
Number of Shares Underlying Warrants	350,000
Exercise Price	$ 0.01
Expiration Date	Apr. 15, 2013
Weighted Average Remaining Life (Years)	3 months 14 days
Warrants' Fair Value at Date of Issuance	346,936
Term of Expense (Years)	1.00
Sinacola Commercial [Member]
Summary of significant terms and accounting treatment of warrants issued and outstanding
Number of grants	3
Date of Grant	Dec. 01, 2008
Number of Shares Underlying Warrants	7,500
Exercise Price	$ 1.00
Expiration Date	Feb. 01, 2013
Weighted Average Remaining Life (Years)	1 month 2 days
Warrants' Fair Value at Date of Issuance	3,327
Term of Expense (Years)	5.00
GSA Agent and affiliates (Alan Jensen, James Bello, Charlotte Bello) [Member]
Summary of significant terms and accounting treatment of warrants issued and outstanding
Number of grants	4
Date of Grant	Nov. 19, 2008
Number of Shares Underlying Warrants	88,889
Exercise Price	$ 0.01
Expiration Date	Nov. 19, 2013
Weighted Average Remaining Life (Years)	10 months 17 days
Warrants' Fair Value at Date of Issuance	99,098
Term of Expense (Years)	Expensed upon issuance
WLS, LLC [Member]
Summary of significant terms and accounting treatment of warrants issued and outstanding
Number of grants	5
Date of Grant	May 07, 2008
Number of Shares Underlying Warrants	8,000
Exercise Price	$ 0.01
Expiration Date	May 07, 2013
Weighted Average Remaining Life (Years)	4 months 6 days
Warrants' Fair Value at Date of Issuance	19,931
Term of Expense (Years)	Expensed upon issuance
Pearl Ross [Member]
Summary of significant terms and accounting treatment of warrants issued and outstanding
Number of grants	6
Date of Grant	Sep. 30, 2008
Number of Shares Underlying Warrants	7,000
Exercise Price	$ 0.01
Expiration Date	Sep. 30, 2013
Weighted Average Remaining Life (Years)	9 months
Warrants' Fair Value at Date of Issuance	6,940
Term of Expense (Years)	Expensed upon issuance
Dennis O. Harris [Member]
Summary of significant terms and accounting treatment of warrants issued and outstanding
Number of grants	7
Date of Grant	Mar. 31, 2009
Number of Shares Underlying Warrants	2,500
Exercise Price	$ 0.01
Expiration Date	Mar. 31, 2014
Weighted Average Remaining Life (Years)	1 year 3 months
Warrants' Fair Value at Date of Issuance	2,477
Term of Expense (Years)	Expensed upon issuance
Carl Dickerson [Member]
Summary of significant terms and accounting treatment of warrants issued and outstanding
Number of grants	8
Date of Grant	Mar. 31, 2009
Number of Shares Underlying Warrants	5,000
Exercise Price	$ 0.01
Expiration Date	Mar. 31, 2014
Weighted Average Remaining Life (Years)	1 year 3 months
Warrants' Fair Value at Date of Issuance	4,954
Term of Expense (Years)	Expensed upon issuance
Sinacola Commercial One [Member]
Summary of significant terms and accounting treatment of warrants issued and outstanding
Number of grants	9
Date of Grant	Dec. 31, 2009
Number of Shares Underlying Warrants	163,415
Exercise Price	$ 0.01
Expiration Date	Dec. 31, 2014
Weighted Average Remaining Life (Years)	2 years
Warrants' Fair Value at Date of Issuance	161,949
Term of Expense (Years)	2.00
Pacific Cattle Corporation [Member]
Summary of significant terms and accounting treatment of warrants issued and outstanding
Number of grants	10
Date of Grant	Apr. 20, 2009
Number of Shares Underlying Warrants	100,000
Exercise Price	$ 1.00
Expiration Date	Apr. 20, 2014
Weighted Average Remaining Life (Years)	1 year 3 months 18 days
Warrants' Fair Value at Date of Issuance	43,039
Term of Expense (Years)	Expensed upon issuance
Bryan Thomas [Member]
Summary of significant terms and accounting treatment of warrants issued and outstanding
Number of grants	11
Date of Grant	Jun. 13, 2009
Number of Shares Underlying Warrants	30,000
Exercise Price	$ 0.59
Expiration Date	Jun. 13, 2014
Weighted Average Remaining Life (Years)	1 year 5 months 12 days
Warrants' Fair Value at Date of Issuance	17,161
Term of Expense (Years)	Expensed upon issuance
Alison Freeman [Member]
Summary of significant terms and accounting treatment of warrants issued and outstanding
Number of grants	12
Date of Grant	Feb. 01, 2009
Number of Shares Underlying Warrants	10,000
Exercise Price	$ 1.00
Expiration Date	Feb. 01, 2014
Weighted Average Remaining Life (Years)	1 year 1 month 2 days
Warrants' Fair Value at Date of Issuance	4,563
Term of Expense (Years)	Expensed upon issuance
Community Foundations Of North Texas [Member]
Summary of significant terms and accounting treatment of warrants issued and outstanding
Number of grants	13
Date of Grant	Nov. 19, 2008
Number of Shares Underlying Warrants	25,000
Exercise Price	$ 1.00
Expiration Date	Nov. 19, 2013
Weighted Average Remaining Life (Years)	10 months 17 days
Warrants' Fair Value at Date of Issuance	10,959
Term of Expense (Years)	Expensed upon issuance
Alcedo Family Trust [Member]
Summary of significant terms and accounting treatment of warrants issued and outstanding
Number of grants	14
Date of Grant	Dec. 10, 2009
Number of Shares Underlying Warrants	100,000
Exercise Price	$ 2.50
Expiration Date	Dec. 12, 2014
Weighted Average Remaining Life (Years)	1 year 11 months 8 days
Warrants' Fair Value at Date of Issuance	25,535
Term of Expense (Years)	0.75
Sinacola Commercial Two [Member]
Summary of significant terms and accounting treatment of warrants issued and outstanding
Number of grants	15
Date of Grant	Dec. 31, 2010
Number of Shares Underlying Warrants	71,500
Exercise Price	$ 0.01
Expiration Date	Dec. 31, 2015
Weighted Average Remaining Life (Years)	3 years
Warrants' Fair Value at Date of Issuance	70,853
Term of Expense (Years)	1.83
Sinacola Commercial Three [Member]
Summary of significant terms and accounting treatment of warrants issued and outstanding
Number of grants	16
Date of Grant	Dec. 31, 2010
Number of Shares Underlying Warrants	71,965
Exercise Price	$ 0.01
Expiration Date	Dec. 31, 2015
Weighted Average Remaining Life (Years)	3 years
Warrants' Fair Value at Date of Issuance	71,314
Term of Expense (Years)	1.83
Afritex Medical Products [Member]
Summary of significant terms and accounting treatment of warrants issued and outstanding
Number of grants	17
Date of Grant	Mar. 26, 2010
Number of Shares Underlying Warrants	270,000
Exercise Price	$ 2.50
Expiration Date	Mar. 26, 2015
Weighted Average Remaining Life (Years)	2 years 2 months 23 days
Warrants' Fair Value at Date of Issuance	70,267
Term of Expense (Years)	0.75
Stanley D. Bert [Member]
Summary of significant terms and accounting treatment of warrants issued and outstanding
Number of grants	18
Date of Grant	Jan. 27, 2011
Number of Shares Underlying Warrants	100,000
Exercise Price	$ 0.82
Expiration Date	Jan. 27, 2016
Weighted Average Remaining Life (Years)	3 years 25 days
Warrants' Fair Value at Date of Issuance	32,023
Term of Expense (Years)	Expensed upon issuance
Sinacola Commercial Four [Member]
Summary of significant terms and accounting treatment of warrants issued and outstanding
Number of grants	19
Date of Grant	Mar. 23, 2011
Number of Shares Underlying Warrants	65,000
Exercise Price	$ 0.01
Expiration Date	Mar. 23, 2016
Weighted Average Remaining Life (Years)	3 years 2 months 23 days
Warrants' Fair Value at Date of Issuance	64,414
Term of Expense (Years)	2.00
Sinacola Commercial Five [Member]
Summary of significant terms and accounting treatment of warrants issued and outstanding
Number of grants	20
Date of Grant	Aug. 15, 2011
Number of Shares Underlying Warrants	65,065
Exercise Price	$ 0.01
Expiration Date	Aug. 15, 2016
Weighted Average Remaining Life (Years)	3 years 7 months 13 days
Warrants' Fair Value at Date of Issuance	64,446
Term of Expense (Years)	2.29
Vencore Solutions Llc [Member]
Summary of significant terms and accounting treatment of warrants issued and outstanding
Number of grants	21
Date of Grant	Aug. 29, 2012
Number of Shares Underlying Warrants	32,500
Exercise Price	$ 1.00
Expiration Date	Aug. 29, 2017
Weighted Average Remaining Life (Years)	4 years 7 months 28 days
Warrants' Fair Value at Date of Issuance	9,303
Term of Expense (Years)	5.00
Vencore Solutions Llc One [Member]
Summary of significant terms and accounting treatment of warrants issued and outstanding
Number of grants	22
Date of Grant	Aug. 29, 2012
Number of Shares Underlying Warrants	22,500
Exercise Price	$ 0.82
Expiration Date	Aug. 29, 2017
Weighted Average Remaining Life (Years)	4 years 7 months 28 days
Warrants' Fair Value at Date of Issuance	$ 7,610
Term of Expense (Years)	5.00

XML

Notes Payable (Details 1) (USD $)	12 Months Ended
	Dec. 31, 2012
Schedule of fair values of common stock warrants issued in connection with convertible notes
Warrants' Fair Value at Date of Issuance	$ 1,558,578
Expected remaining warrant terms (years)	5 years
Warrant one [Member]
Schedule of fair values of common stock warrants issued in connection with convertible notes
Issue date	Apr. 15, 2008
Activity Description	Enter into $750,000 subordinated convertible promissory note.
Number of Warrants issued	350,000
Warrants' Fair Value at Date of Issuance	346,936
Expected remaining warrant terms (years)	5 years
Risk-free Interest rate	2.68%
Volatility	37.00%
Warrant two [Member]
Schedule of fair values of common stock warrants issued in connection with convertible notes
Issue date	Dec. 31, 2008
Activity Description	Enter into a total of $581,050 subordinated convertible promissory note and senior convertible promissory note.
Number of Warrants issued	280,485
Warrants' Fair Value at Date of Issuance	277,889
Expected remaining warrant terms (years)	5 years
Risk-free Interest rate	1.55%
Volatility	50.00%
Warrant three [Member]
Schedule of fair values of common stock warrants issued in connection with convertible notes
Issue date	Jun. 30, 2009
Activity Description	Enter into $115,850 senior convertible promissory note.
Number of Warrants issued	48,358
Warrants' Fair Value at Date of Issuance	47,932
Expected remaining warrant terms (years)	5 years
Risk-free Interest rate	2.54%
Volatility	55.00%
Warrant four [Member]
Schedule of fair values of common stock warrants issued in connection with convertible notes
Issue date	Dec. 10, 2009
Activity Description	Enter into $125,000 subordinated convertible promissory note.
Number of Warrants issued	81,250
Warrants' Fair Value at Date of Issuance	80,521
Expected remaining warrant terms (years)	5 years
Risk-free Interest rate	2.19%
Volatility	55.00%
Warrant five [Member]
Schedule of fair values of common stock warrants issued in connection with convertible notes
Issue date	Dec. 10, 2009
Activity Description	Enter into $126,407 subordinated convertible promissory note.
Number of Warrants issued	82,165
Warrants' Fair Value at Date of Issuance	81,428
Expected remaining warrant terms (years)	5 years
Risk-free Interest rate	2.19%
Volatility	55.00%
Warrant six [Member]
Schedule of fair values of common stock warrants issued in connection with convertible notes
Issue date	Dec. 10, 2009
Activity Description	Enter into $100,000 subordinated convertible promissory note.
Number of Warrants issued	100,000
Warrants' Fair Value at Date of Issuance	25,535
Expected remaining warrant terms (years)	5 years
Risk-free Interest rate	2.19%
Volatility	55.00%
Warrant seven [Member]
Schedule of fair values of common stock warrants issued in connection with convertible notes
Issue date	Dec. 31, 2009
Activity Description	Enter into $91,800 senior convertible promissory note.
Number of Warrants issued	52,640
Warrants' Fair Value at Date of Issuance	52,180
Expected remaining warrant terms (years)	5 years
Risk-free Interest rate	2.69%
Volatility	55.00%
Warrant eight [Member]
Schedule of fair values of common stock warrants issued in connection with convertible notes
Issue date	Mar. 26, 2010
Activity Description	Enter into $270,000 subordinated convertible promissory note.
Number of Warrants issued	270,000
Warrants' Fair Value at Date of Issuance	70,267
Expected remaining warrant terms (years)	5 years
Risk-free Interest rate	2.59%
Volatility	55.00%
Warrant nine [Member]
Schedule of fair values of common stock warrants issued in connection with convertible notes
Issue date	Mar. 31, 2010
Activity Description	Enter into a total of $45,000 senior convertible promissory note.
Number of Warrants issued	21,000
Warrants' Fair Value at Date of Issuance	20,815
Expected remaining warrant terms (years)	5 years
Risk-free Interest rate	2.55%
Volatility	54.00%
Warrant ten [Member]
Schedule of fair values of common stock warrants issued in connection with convertible notes
Issue date	Jun. 30, 2010
Activity Description	Enter into $45,000 senior convertible promissory note.
Number of Warrants issued	21,000
Warrants' Fair Value at Date of Issuance	20,808
Expected remaining warrant terms (years)	5 years
Risk-free Interest rate	1.79%
Volatility	19.00%
Warrant eleven [Member]
Schedule of fair values of common stock warrants issued in connection with convertible notes
Issue date	Sep. 30, 2010
Activity Description	Enter into $45,000 senior convertible promissory note.
Number of Warrants issued	21,000
Warrants' Fair Value at Date of Issuance	20,803
Expected remaining warrant terms (years)	5 years
Risk-free Interest rate	1.27%
Volatility	20.00%
Warrant twelve [Member]
Schedule of fair values of common stock warrants issued in connection with convertible notes
Issue date	Dec. 31, 2010
Activity Description	Enter into $81,164 senior convertible promissory note.
Number of Warrants issued	37,997
Warrants' Fair Value at Date of Issuance	37,653
Expected remaining warrant terms (years)	5 years
Risk-free Interest rate	2.01%
Volatility	21.00%
Warrant thirteen [Member]
Schedule of fair values of common stock warrants issued in connection with convertible notes
Issue date	Dec. 31, 2010
Activity Description	Enter into $110,000 subordinated convertible promissory note.
Number of Warrants issued	71,500
Warrants' Fair Value at Date of Issuance	70,853
Expected remaining warrant terms (years)	5 years
Risk-free Interest rate	2.01%
Volatility	21.00%
Warrant fourteen [Member]
Schedule of fair values of common stock warrants issued in connection with convertible notes
Issue date	Dec. 31, 2010
Activity Description	Enter into $110,715 subordinated convertible promissory note.
Number of Warrants issued	71,965
Warrants' Fair Value at Date of Issuance	71,314
Expected remaining warrant terms (years)	5 years
Risk-free Interest rate	2.01%
Volatility	21.00%
Warrant fifteen [Member]
Schedule of fair values of common stock warrants issued in connection with convertible notes
Issue date	Mar. 23, 2011
Activity Description	Enter into $50,000 subordinated convertible promissory note.
Number of Warrants issued	32,500
Warrants' Fair Value at Date of Issuance	32,207
Expected remaining warrant terms (years)	5 years
Risk-free Interest rate	2.07%
Volatility	19.00%
Warrant sixteen [Member]
Schedule of fair values of common stock warrants issued in connection with convertible notes
Issue date	Mar. 23, 2011
Activity Description	Enter into $50,000 subordinated convertible promissory note.
Number of Warrants issued	32,500
Warrants' Fair Value at Date of Issuance	32,207
Expected remaining warrant terms (years)	5 years
Risk-free Interest rate	2.07%
Volatility	19.00%
Warrant seventeen [Member]
Schedule of fair values of common stock warrants issued in connection with convertible notes
Issue date	Mar. 31, 2011
Activity Description	Enter into $91,537 senior convertible promissory note
Number of Warrants issued	42,872
Warrants' Fair Value at Date of Issuance	42,489
Expected remaining warrant terms (years)	5 years
Risk-free Interest rate	2.24%
Volatility	19.00%
Warrant eighteen [Member]
Schedule of fair values of common stock warrants issued in connection with convertible notes
Issue date	Jun. 30, 2011
Activity Description	Enter into $229,705 senior convertible promissory note
Number of Warrants issued	107,811
Warrants' Fair Value at Date of Issuance	106,824
Expected remaining warrant terms (years)	5 years
Risk-free Interest rate	1.76%
Volatility	25.00%
Warrant nineteen [Member]
Schedule of fair values of common stock warrants issued in connection with convertible notes
Issue date	Aug. 15, 2011
Activity Description	Enter into $50,050 subordinated convertible promissory note
Number of Warrants issued	32,533
Warrants' Fair Value at Date of Issuance	32,223
Expected remaining warrant terms (years)	5 years
Risk-free Interest rate	0.99%
Volatility	20.00%
Warrant twenty [Member]
Schedule of fair values of common stock warrants issued in connection with convertible notes
Issue date	Aug. 15, 2011
Activity Description	Enter into $50,050 subordinated convertible promissory note.
Number of Warrants issued	32,533
Warrants' Fair Value at Date of Issuance	32,223
Expected remaining warrant terms (years)	5 years
Risk-free Interest rate	0.99%
Volatility	20.00%
Warrant twenty one [Member]
Schedule of fair values of common stock warrants issued in connection with convertible notes
Issue date	Sep. 30, 2011
Activity Description	Enter into $74,800 senior convertible promissory note.
Number of Warrants issued	35,006
Warrants' Fair Value at Date of Issuance	34,672
Expected remaining warrant terms (years)	5 years
Risk-free Interest rate	0.96%
Volatility	22.00%
Warrant twenty two [Member]
Schedule of fair values of common stock warrants issued in connection with convertible notes
Issue date	Dec. 31, 2011
Activity Description	Enter into $45,000 senior convertible promissory note.
Number of Warrants issued	21,000
Warrants' Fair Value at Date of Issuance	$ 20,799
Expected remaining warrant terms (years)	5 years
Risk-free Interest rate	0.89%
Volatility	26.00%

XML

Intangible Assets

12 Months Ended

Dec. 31, 2012

Intangible Assets [Abstract]

INTANGIBLE ASSETS

NOTE 3 – INTANGIBLE ASSETS

We have two types of intangible assets: patents and trademarks. We capitalize expenditures associated with patents and trademarks related to our various technologies. Capitalized costs include amounts paid to third parties for legal fees, application fees and other direct costs incurred in the filing and prosecution of patent and trademark applications. These assets are amortized on a straight-line method over their legal life.

Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable in accordance with applicable accounting guidance. During the years ended December 31, 2012 and 2011 we have had no impairment of intangible assets.

On January 15, 2004, the Company executed an Asset Purchase and Stock Transfer Agreement with entities controlled by the founder of the Company. In connection with this agreement, we acquired certain assets, including certain rights, title and interest to intellectual property, relating to the oxygen method and apparatus, developed by our founder prior to January 15, 2004. As consideration for the purchase, we issued 14,000,000 shares of common stock and a promissory note for $150,000 to these entities. The common stock was valued at $7,000 using the par value of the common stock on the date of issuance (which is not indicative of fair value). The non-recourse promissory note bore interest at 6.5% per annum and was paid in full during 2006.

The carrying values of our amortized acquired intangible assets as of the December 31, 2012 and 2011, respectively, are as follows:

	December 31, 2012							December 31, 2011
	Gross		Accumulated Amortization and write off			Net		Gross		Accumulated Amortization and write off			Net
Patents	$	613,690	$	(232,866	)	$	380,824	$	610,518	$	(205,694	)	$	404,824
Trademarks	$	45,723	$	(8,069	)	$	37,654	$	45,723	$	(5,379	)	$	40,344
	$	659,413	$	(240,934	)	$	418,479	$	656,241	$	(211,073	)	$	445,168

As of December 31, 2012, we estimate the future amortization expense of the intangible assets for December 31, 2013, 2014, 2015 and 2016, to be as follows:

2013	$	29,957
2014		29,957
2015		29,957
2016		29,957
Thereafter		298,652
	$	418,479

Due to the nature of the intangible assets, we have amortized the cost of the patents and trademarks over their estimated useful lives. The nature of the estimate did not change from 2011 to 2012. Of the net amount of $418,479 in intangible assets as of December 31, 2012, approximately 91% is in patents and 9% is in trademarks.  Included in the $659,413 gross amount for patents and trademarks is $157,000 acquired from entities controlled by the founder of the Company in January 2004. The remaining $502,413 represents amounts paid to third parties for legal fees, application fees and other direct costs incurred in the filing and prosecution of patent and trademark applications.

XML

Stock Options and Warrants (Details Textual) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Apr. 30, 2004
Stock option and warrants (Textual)
Maximum number of shares acquired under voting stock option plan			5,000,000
Expiration period of option, Maximum	10 years
Expiration period of option, Minimum	5 years
Termination period of option for ineligible individual	90 days
Fair value assumptions, expected term, Description	The risk-free interest rate assumption is based on 5-year U.S Treasury zero-coupon rates appropriate for the expected term of the stock options.
Issuance of common stock options to employees as compensation	$ 7,999	$ 104,419
Expected dividend rate		0.00%
Unrecognized compensation costs related to non-vested stock option	$ 10,304
Original exercise price of warrant		$ 2.00

XML

Intangible Assets (Details) (USD $)	Dec. 31, 2012	Dec. 31, 2011
Carrying values of amortized acquired intangible assets
Finite-lived intangible assets, Gross	$ 659,413	$ 656,241
Finite-Lived Intangible Assets, Accumulated Amortization	(240,934)	(211,073)
Finite-lived intangible assets, Net	418,479	445,168
Patents [Member]
Carrying values of amortized acquired intangible assets
Finite-lived intangible assets, Gross	613,690	610,518
Finite-Lived Intangible Assets, Accumulated Amortization	(232,866)	(205,694)
Finite-lived intangible assets, Net	380,824	404,824
Trademarks [Member]
Carrying values of amortized acquired intangible assets
Finite-lived intangible assets, Gross	45,723	45,723
Finite-Lived Intangible Assets, Accumulated Amortization	(8,069)	(5,379)
Finite-lived intangible assets, Net	$ 37,654	$ 40,344

XML

Stock Options and Warrants (Tables)

12 Months Ended

Dec. 31, 2012

Stock Options and Warrants [Abstract]

Summary of option activity

	Employee					Non-Employee
				Weighted					Weighted
	Number			Average		Number			Average		Combined
	Of			Exercise		Of			Exercise		Total
Outstanding at December 31, 2010		1,869,574		$	0.59		74,382		$	0.93		1,943,956
Granted		280,000		$	0.52		-			-		280,000
Exercised		(34,750	)	$	0.61		-			-		(34,750	)
Forfeited/Cancelled		(315,800	)	$	1.27		(21,202	)	$	2.00		(337,002	)
Outstanding at December 31, 2011		1,799,024		$	0.47		53,180		$	0.72		1,852,204
Granted		180,000		$	0.25		-			-		180,000
Exercised		(374,808	)	$	0.26		-			-		(374,808	)
Forfeited/Cancelled		(161,300	)	$	1.37		(35,000	)	$	0.50		(196,300	)
Outstanding at December 31, 2012		1,442,916		$	0.41		18,180		$	2.11		1,461,096

Summary of stock option forfeited, cancelled under the Plan

	Employee				Non-Employee
			Weighted				Weighted
	Number		Average		Number		Average		Combined
	Of		Exercise		Of		Exercise		Total
	Options		Price		Options		Price		Options
Forfeited/Cancelled
during FY 2011		315,800	$	1.27		21,202	$	2.00		337,002
Forfeited/Cancelled
during FY 2012		161,300	$	1.37		35,000	$	0.50		196,300

Summary of assumptions to estimate the fair value of options granted

	Equity Incentive Plans for Years Ended December 31,
	2012			2011
Expected terms (in years)		5-10			5-10
Volatility		22%-64	%		21	%
Risk-free interest rate		.89%-2.24	%		2.25	%
Expected dividend rate		0.00	%		0.00	%

Summary of employee stock options outstanding under the Plan

December 31, 2012
	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number Outstanding		Weighted average remaining  contractual life		Weighted average  exercise price		Number  exercisable		Weighted average remaining contractual life		Weighted  average exercise price
$ 0.20 - $0.25		1,192,488		1.95	$	0.25		1,012,488		2.23	$	0.25
$ 0.50 - $1.00		215,753		1.18	$	0.82		215,753		1.11	$	0.82
$2.00		12,750		0.58	$	2.00		12,750		1.39	$	2.00
$2.50		21,925		1.39	$	2.50		21,925		1.39	$	2.50
		1,442,916						1,262,916

Summary of non-employee stock options outstanding under the Plan

December 31, 2012
	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number Outstanding		Weighted average  remaining contractual life		Weighted average exercise price		Number  exercisable		Weighted average remaining contractual life		Weighted  average exercise price
$ 0.20 - $0.25		900		1.16	$	0.25		900		1.16	$	0.25
$ 0.50 - $1.00		15,000		1.00	$	1.00		15,000		1.00	$	1.00
$2.00		-		-	$	-		-		-	$	-
$2.50		2,280		0.16	$	2.50		2,280		0.16	$	2.50
		18,180						18,180

Summary of warrant activity

				Weighted
	Number			Average
	Of			Exercise
	Warrants			Price
Outstanding at December 31, 2010		2,717,226		$	0.51
Granted		436,754		$	0.20
Exercised		(294,330	)	$	0.09
Forfeited/Cancelled		(100,000	)	$	0.82
Outstanding at December 31, 2011		2,759,650		$	0.48
Granted		55,000		$	0.93
Exercised		(882,616	)	$	0.01
Forfeited/Cancelled		(55,000	)	$	0.92
Outstanding at December 31, 2012		1,877,034		$	0.65

Summary of significant terms and accounting treatment of warrants issued and outstanding

Granted to:		Date of Grant	Number of Shares Underlying Warrants		Exercise Price		Expiration Date	Weighted Average Remaining Life (Years)		Warrants' Fair Value at Date of Issuance		Term of Expense (Years)
NTEC	1	4/8/2004		281,200		0.0005	4/8/2014		1.27	$	78,643		1.00
Agave Resources, LLC	2	4/15/2008		350,000		0.01	4/15/2013		0.29	$	346,936		1.00	1
Sinacola Commercial	3	12/1/2008		7,500		1.00	2/1/2013		0.09	$	3,327		5.00	2
GSAAgent and affiliates (Alan Jensen, James Bello, Charlotte Bello)	4	11/19/2008		88,889		0.01	11/19/2013		0.88	$	99,098	Expensed upon issuance
WLS, LLC.	5	5/7/2008		8,000		0.01	5/7/2013		0.35	$	19,931	Expensed upon issuance
Pearl Ross	6	9/30/2008		7,000		0.01	9/30/2013		0.75	$	6,940	Expensed upon issuance
Dennis O. Harris	7	3/31/2009		2,500		0.01	3/31/2014		1.25	$	2,477	Expensed upon issuance
Carl Dickerson	8	3/31/2009		5,000		0.01	3/31/2014		1.25	$	4,954	Expensed upon issuance
Sinacola Commercial	9	12/31/2009		163,415		0.01	12/31/2014		2.00	$	161,949		2.00	3
Pacific Cattle Corporation	10	4/20/2009		100,000		1.00	4/20/2014		1.30	$	43,039	Expensed upon issuance
Bryan Thomas	11	6/13/2009		30,000		0.59	6/13/2014		1.45	$	17,161	Expensed upon issuance
Alison Freeman	12	2/1/2009		10,000		1.00	2/1/2014		1.09	$	4,563	Expensed upon issuance
Community Foundations of North Texas	13	11/19/2008		25,000		1.00	11/19/2013		0.88	$	10,959	Expensed upon issuance
Alcedo Family Trust	14	12/10/2009		100,000		2.50	12/10/2014		1.94	$	25,535		0.75
Sinacola Commercial	15	12/31/2010		71,500		0.01	12/31/2015		3.00	$	70,853		1.83	4
Sinacola Commercial	16	12/31/2010		71,965		0.01	12/31/2015		3.00	$	71,314		1.83	4
Afritex Medical Products	17	3/26/2010		270,000		2.50	3/26/2015		2.23	$	70,267		0.75	5
Stanley D. Bert	18	1/27/2011		100,000		0.82	1/27/2016		3.07	$	32,023	Expensed upon issuance
Sinacola Commercial	19	3/23/2011		65,000		0.01	3/23/2016		3.23	$	64,414		2.00	6
Sinacola Commercial	20	8/15/2011		65,065		0.01	8/15/2016		3.62	$	64,446		2.29	7
Vencore Solutions, LLC	21	8/29/2012		32,500		1.00	8/29/2017		4.66	$	9,303		5.00	8
Vencore Solutions, LLC	22	8/29/2012		22,500		0.82	8/29/2017		4.66	$	7,610		5.00	8
				1,877,034

1 Issued pursuant to the Agave First Note. Agave Resources, LLC is controlled by one of our Directors, Donald Reed. Please see Note 4 – “Notes Payable,” and Note 10 – “Related Party Transactions.”

2 Issued pursuant to a lease modification. Please see Note 9 – “Commitments and Contingency.”

3 Issued pursuant to the 2009 RSA. Please see Note 4 – “Notes Payable.”

4 Issued pursuant to the 2010 RSA. Please see Note 4 – “Notes Payable.”

5 Issued pursuant to that certain license agreement and distribution agreement with Afritex Medical Products (Pty) Ltd. (“Afritex”), of which our President is a former board member and stockholder.

6 Issued pursuant to the 2011 RSA. Please see Note 4 – “Notes Payable.”

7 Issued pursuant to the Second 2011 RSA. Please see Note 4 – “Notes Payable.”

8 Issued pursuant to that certain Second Payment Moratorium with Vencore Solutions, LLC. Please see Note 9 – “Commitments and Contingency.”

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Notes Payable (Tables)

12 Months Ended

Dec. 31, 2012

Debt Instrument [Line Items]

Schedule of fair values of common stock warrants issued in connection with convertible notes

						Fair value assumptions
Issue Date	Activity Description	Number of Warrants  issued		Warrants' Fair Value at Date of Issuance		Expected  remaining  warrant terms  (years)		Risk-free  interest rate			Volatility
4/15/2008	Enter into $750,000 subordinated convertible promissory note		350,000	$	346,936		5		2.68	%		37	%
12/31/2008	Enter into a total of $581,050 subordinated convertible promissory note and senior convertible promissory note		280,485	$	277,889		5		1.55	%		50	%
6/30/2009	Enter into $115,850 senior convertible promissory note		48,358	$	47,932		5		2.54	%		55	%
12/10/2009	Enter into $125,000 subordinated convertible promissory note		81,250	$	80,521		5		2.19	%		55	%
12/10/2009	Enter into $126,407 subordinated convertible promissory note		82,165	$	81,428		5		2.19	%		55	%
12/10/2009	Enter into $100,000 subordinated convertible promissory note		100,000	$	25,535		5		2.19	%		55	%
12/31/2009	Enter into $91,800 senior convertible promissory note		52,640	$	52,180		5		2.69	%		55	%
3/26/2010	Enter into $270,000 subordinated convertible promissory note		270,000	$	70,267		5		2.59	%		55	%
3/31/2010	Enter into a total of $45,000 senior convertible promissory note		21,000	$	20,815		5		2.55	%		54	%
6/30/2010	Enter into $45,000 senior convertible promissory note		21,000	$	20,808		5		1.79	%		19	%
9/30/2010	Enter into $45,000 senior convertible promissory note		21,000	$	20,803		5		1.27	%		20	%

12/31/2010	Enter into $81,164 senior convertible promissory note		37,997	$	37,653	5	2.01	%	21	%
12/31/2010	Enter into $110,000 subordinated convertible promissory note		71,500	$	70,853	5	2.01	%	21	%
12/31/2010	Enter into $110,715 subordinated convertible promissory note		71,965	$	71,314	5	2.01	%	21	%
3/23/2011	Enter into $50,000 subordinated convertible promissory note		32,500	$	32,207	5	2.07	%	19	%
3/23/2011	Enter into $50,000 subordinated convertible promissory note		32,500	$	32,207	5	2.07	%	19	%
3/31/2011	Enter into $91,537 senior convertible promissory note		42,872	$	42,489	5	2.24	%	19	%
6/30/2011	Enter into $229,705 senior convertible promissory note		107,811	$	106,824	5	1.76	%	25	%
8/15/2011	Enter into $50,050 subordinated convertible promissory note		32,533	$	32,223	5	0.99	%	20	%
8/15/2011	Enter into $50,050 subordinated convertible promissory note		32,533	$	32,223	5	0.99	%	20	%
9/30/2011	Enter into $74,800 senior convertible promissory note		35,006	$	34,672	5	0.96	%	22	%
12/31/2011	Enter into $45,000 senior convertible promissory note		21,000	$	20,799	5	0.89	%	26	%
		Total		$	1,558,578

Summary of notes converted to common stock

		Note amount
	Note holder	prior to conversion		Stated interest			Principal		Amount of note converted			Conversion price (per share)			Effective date of conversion	Common stock issued (shares)
1	Sinacola, First Landlord Note	$	125,000		0	%	$	125,000	$	125,000		$	1.00		3/31/2012		125,000
2	Sinacola, Second Landlord Note	$	126,407		0	%	$	126,407	$	126,407		$	1.50		3/31/2012		84,271
3	Sinacola landlord note 1/2	$	-		0	%	$	-	$	-		n/a			5/3/2012		21,819	1
4	Sullivan Trust	$	25,000		8	%	$	25,000	$	25,631	2	$	1.00		4/10/2012		25,622
5	M. Nyewe Trust	$	100,000		8	%	$	100,000	$	103,156	3	$	1.50		6/25/2012		68,771
6	Yisheng Yao	$	15,000		0	%	$	15,000	$	15,000		$	0.86		7/12/2012		17,442
7	Tim Hutton	$	20,000		0	%	$	20,000	$	20,000	4	$	0.86		7/12/2012		23,256
8	Agave Resources, LLC.	$	750,000		0	%	$	750,000	$	750,000	5	$	1.50		12/31/2012		500,000
9	JTR Investments, Limited	$	1,268,656		0	%	$	1,268,656	$	1,268,656	6	$	1.50		12/31/2012		845,771
	Totals	$	2,430,063				$	2,430,063	$	2,433,850		$	1.42	7			1,711,952

1. Common stock issued to Sinacola for no consideration pursuant to the conversions of the First Landlord Note and Second Landlord Note.

2. Includes principal and accrued but unpaid interest converted.

3. Includes principal and accrued but unpaid interest converted.

4. Tim Hutton is the spouse of Vicki Jones, a director of us. Please see Note 10 - "Related Party Transactions."

5. Agave Resources, LLC is an affiliate of us. Don Reed, President of Agave Resources, LLC is also a director of us. Please see Note 10 - "Related Party Transactions."

6. JTR Investments, Limited is an affiliate of us. Julian Ross, our CEO is also President of JTR Management, LLC, general partner of JTR Investments, Limited. Please see Note 10 - "Related Party Transactions."

7. Aggregate conversion price.

Carrying values of short-term and long-term notes payable

	Effective Interest Rate			Principal		Discount		December 31, 2012
Current notes payable
Sinacola, Third Landlord Note		18.18	%		110,000		-		110,000
Sinacola, Fourth Landlord Note		17.36	%		110,715		-		110,715
Sinacola, Fifth Landlord Note		50.00	%		50,000		5,694		44,306
Sinacola, Sixth Landlord Note		47.75	%		50,000		5,438		44,562
Sinacola, Seventh Landlord Note		43.64	%	$	50,050	$	21,840	$	28,210
Sinacola, Eighth Landlord Note		41.64	%		50,050		20,842		29,208
Frisco EDC		12.34	%		44,000		12,412		31,588
Total short-term notes payable				$	464,815	$	66,226	$	398,589
Long-term notes payable
Frisco EDC		12.34	%		104,000		27,928		76,072
Total long-term notes payable				$	104,000	$	27,928	$	76,072
Total short-term and long-term notes payable				$	568,815	$	94,154	$	474,661

As of December 31, 2011.

	Effective Interest Rate			Principal		Discount		December 31, 2011
Current notes payable
JTR, Senior Note		0.02	%	$	1,104,656	$	-	$	1,104,654
Sinacola, First Landlord Note		47.08	%		125,000		-		125,000
Sinacola, Second Landlord Note		44.97	%		126,407		-		126,407
Sinacola, Third Landlord Note		54.55	%	$	110,000	$	50,000	$	60,000
Sinacola, Fourth Landlord Note		52.09	%		110,715		48,056		62,660
Frisco EDC		12.34	%		32,620		6,032		26,588
Related Party Loans		0.00	%		59,750		-		59,750
Total short-term notes payable				$	1,669,148	$	104,088	$	1,565,059
Long-term notes payable
Sinacola, Fifth Landlord Note		38.61	%		50,000		30,694		19,306
Sinacola, Sixth Landlord Note		36.87	%		50,000		29,311		20,689
Sinacola, Seventh Landlord Note		33.20	%		50,050		43,680		6,370
Sinacola, Eighth Landlord Note		31.68	%		50,050		41,684		8,366
Agave, First Note		0.00	%		750,000		-		750,000
JTR, Second Note		0.00	%		250,000		-		250,000
Frisco EDC		12.34	%		154,380		46,720		107,660
Total long-term notes payable				$	1,354,480	$	192,089	$	1,162,390
Total short-term and long-term notes payable				$	3,023,628	$	296,177	$	2,727,449

Summary of notes payable outstanding

	December 31, 2012			December 31, 2011
Current portion of notes payable	$	31,588		$	86,338
Current portion of convertible notes payable		367,001			1,478,722
Current portion of notes payable, net	$	398,589		$	1,565,059
Long-term portion of notes payable	$	104,000		$	154,380
Less: Unamortized discount		(27,928	)		(46,720	)
		76,072			107,660
Long-term portion of convertible notes payable	$	-		$	1,200,100
Less: Unamortized discount		-			(145,370	)
		-			1,054,730
Long-term portion of notes payable, net	$	76,072		$	1,162,390

Schedule of aggregate maturities of debt

As of December 31, 2012:
2013	$	398,589
2014		39,588
2015		36,485
Thereafter		-
Total	$	474,661

Frisco Note payable [Member]

Debt Instrument [Line Items]

Future principal payments of Frisco note payable

2013		44,000
2014		52,000
2015		52,000
	$	148,000

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Stock Options and Warrants (Details 1) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Employee [Member]
Summary of stock option forfeited/Cancelled under the Plan
Forfeited/Cancelled, Shares	161,300	315,800
Forfeited/Cancelled, Weighted Average Exercise Price	$ 1.37	$ 1.27
Non-Employee [Member]
Summary of stock option forfeited/Cancelled under the Plan
Forfeited/Cancelled, Shares	35,000	21,202
Forfeited/Cancelled, Weighted Average Exercise Price	$ 0.50	$ 2.00
Stock Options [Member]
Summary of stock option forfeited/Cancelled under the Plan
Forfeited/Cancelled, Shares	196,300	337,002

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Intangible Assets (Details 1) (USD $)	Dec. 31, 2012	Dec. 31, 2011
Summary of estimated future amortization expense of intangible assets
2013	$ 29,957
2014	29,957
2015	29,957
2016	29,957
Thereafter	298,652
Finite-lived intangible assets, Net	$ 418,479	$ 445,168

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Income Taxes [Abstract]

Summary of net deferred tax assets, including valuation allowance

Deferred Tax Assets	As of December 31, 2012			As of December 31, 2011
Net operating loss carry-forwards	$	3,960,598		$	3,718,338
Net deferred tax assets before valuation allowance	$	4,669,594		$	4,390,047
Less: Valuation Allowance	$	(4,669,594	)	$	(4,390,047	)
Net deferred tax assets		--			--

Summary of reconciliation between U.S. income tax rate to pre-tax loss

	As of December 31, 2012			As of December 31, 2011
Statutory federal income tax		34	%		34	%
Change in valuation allowance on deferred tax assets		(34	%)		(34	%)

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Commitments and Contingency (Tables)

12 Months Ended

Dec. 31, 2012

Commitments and Contingency [Abstract]

Summary of future minimum lease payments under non-cancelable operating lease

2013		-
Thereafter		-
	$	-

Summary of minimum non-cancellable lease payments required under capital leases

2013	296,077
2014	1,728
2015	576
Total	298,381
Less amounts representing interest	(808	)
Total	297,573

Summary of gross amounts of assets recorded under capital leases by major class, and related accumulated amortization

Machinery & equipment	916,029
Less accumulated depreciation	(902,965	)
Machinery & equipment, net	13,064
Computer equipment	3,707
Less accumulated depreciation	(3,707	)
Computer equipment, net	-

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Balance Sheet Components

12 Months Ended

Dec. 31, 2012

Balance Sheet Components [Abstract]

BALANCE SHEET COMPONENTS

NOTE 2 - BALANCE SHEET COMPONENTS

	December 31,
	2012			2011
Cash and cash equivalents:
Cash		13,514			65,118
Total cash and cash equivalents	$	13,514		$	65,118
Inventories:
Total inventories	$	221,345		$	247,956
Accounts Receivable, net of allowances	$	18,487		$	2,758
Property and equipment, net:
Machinery and equipment		919,736			919,736
Leasehold improvements		547,856			547,856
Computer equipment and furniture and fixtures		236,797			203,922
Software		10,691			10,691
		1,715,080			1,682,204
Accumulated depreciation and amortization		(1,687,481	)		(1,548,545	)
Total property and equipment, net	$	27,599		$	133,659
Other Assets:
Deferred loan costs, net		224,751			-
Security deposits		53,274			53,274
Website development, software, URLs		238,348			-
	$	516,373		$	53,274
Accounts payable and accrued expenses:
Leasehold Improvement Allowance		-			48,969
Accounts payable		70,141			136,263
Accrued interest		-			40,094
Accrued expenses for website and software		143,286			-
Other accrued liabilities		382,228			20,015
Total accounts payable and accrued expenses	$	595,655		$	245,340

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Related Party Transactions (Tables)

12 Months Ended

Dec. 31, 2012

Related Party Transactions [Abstract]

Summary of the related party financings and notes payable

	Shareholder advances
Related party	Julian Ross(1)			Other
Amount	$	203,222		$	4,250
Stated interest rate		0	%		0	%
Maturity		n/a			n/a

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Summary of Significant Accounting Policies (Details 3)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Options to purchase common stock [Member]
Schedule of antidilutive securities excluded from computation of earnings per share
Antidilutive securities excluded from computation of earnings per share, amount	1,461,096	1,852,204
Warrants [Member]
Schedule of antidilutive securities excluded from computation of earnings per share
Antidilutive securities excluded from computation of earnings per share, amount	1,877,034	2,842,983
Convertible Preferred Stock
Schedule of antidilutive securities excluded from computation of earnings per share
Antidilutive securities excluded from computation of earnings per share, amount	998,875	3,814,249
Convertible note shares outstanding [Member]
Schedule of antidilutive securities excluded from computation of earnings per share
Antidilutive securities excluded from computation of earnings per share, amount	350,560	1,962,935

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Notes Payable (Details Textual 1) (USD $)	Dec. 31, 2012
Warrant one [Member]
Notes Payable (Textual)
Subordinated convertible promissory note	$ 750,000
Warrant two [Member]
Notes Payable (Textual)
Subordinated convertible promissory note and senior convertible promissory note	581,050
Warrant three [Member]
Notes Payable (Textual)
Senior convertible promissory note	115,850
Warrant four [Member]
Notes Payable (Textual)
Subordinated convertible promissory note	125,000
Warrant five [Member]
Notes Payable (Textual)
Subordinated convertible promissory note	126,407
Warrant six [Member]
Notes Payable (Textual)
Subordinated convertible promissory note	100,000
Warrant seven [Member]
Notes Payable (Textual)
Senior convertible promissory note	91,800
Warrant eight [Member]
Notes Payable (Textual)
Subordinated convertible promissory note	270,000
Warrant nine [Member]
Notes Payable (Textual)
Senior convertible promissory note	45,000
Warrant ten [Member]
Notes Payable (Textual)
Senior convertible promissory note	45,000
Warrant eleven [Member]
Notes Payable (Textual)
Senior convertible promissory note	45,000
Warrant twelve [Member]
Notes Payable (Textual)
Senior convertible promissory note	81,164
Warrant thirteen [Member]
Notes Payable (Textual)
Subordinated convertible promissory note	110,000
Warrant fourteen [Member]
Notes Payable (Textual)
Subordinated convertible promissory note	110,715
Warrant fifteen [Member]
Notes Payable (Textual)
Subordinated convertible promissory note	50,000
Warrant sixteen [Member]
Notes Payable (Textual)
Subordinated convertible promissory note	50,000
Warrant seventeen [Member]
Notes Payable (Textual)
Senior convertible promissory note	91,537
Warrant eighteen [Member]
Notes Payable (Textual)
Senior convertible promissory note	229,705
Warrant nineteen [Member]
Notes Payable (Textual)
Subordinated convertible promissory note	50,050
Warrant twenty [Member]
Notes Payable (Textual)
Subordinated convertible promissory note	50,050
Warrant twenty one [Member]
Notes Payable (Textual)
Senior convertible promissory note	74,800
Warrant twenty two [Member]
Notes Payable (Textual)
Senior convertible promissory note	$ 45,000

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Related Party Transactions (Details Textual) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Related party transaction (Textual)
Amount of debt converted to stock	$ 2,433,850
Common shares issued on conversion of debt	1,711,952	465,969
Conversion price of note(s) (aggregate)	$ 1.42	$ 1.00
JTR Investment Limited and Agave Resources, LLC [Member]
Related party transaction (Textual)
Amount of debt converted to stock	2,018,117
First note [Member]
Related party transaction (Textual)
Amount of debt converted to stock	750,000
Common shares issued on conversion of debt	500,000
Conversion price of note(s) (aggregate)	$ 1.50
JTR Senior, Convertible note [Member]
Related party transaction (Textual)
Amount of debt converted to stock	1,018,656
Common shares issued on conversion of debt	679,104
Conversion price of note(s) (aggregate)	$ 1.50
Second note [Member]
Related party transaction (Textual)
Amount of debt converted to stock	250,000
Common shares issued on conversion of debt	166,667
Conversion price of note(s) (aggregate)	$ 1.50
Tim Hutton [Member]
Related party transaction (Textual)
Amount of debt converted to stock	20,000
Common shares issued on conversion of debt	23,256
Conversion price of note(s) (aggregate)	$ 0.86
Chief Executive Officer [Member]
Related party transaction (Textual)
Working capital fund received from related party	460,221.66
Amount repaid in cash to related party	157,000
Amount voluntarily relinquished by related party	100,000
Notes payable amount outstanding to related party	$ 203,222

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Balance Sheets (USD $)	Dec. 31, 2012	Dec. 31, 2011
Current assets
Cash and cash equivalents	$ 13,514	$ 65,118
Accounts receivable, net of allowances for sales returns and allowance for doubtful accounts	18,487	2,758
Inventories	221,345	247,956
Prepaid expenses and other current assets
Total current assets	253,346	315,833
Property and equipment, net	27,599	133,659
Intangible assets, net	418,479	445,168
Other assets	516,373	53,274
TOTAL ASSETS	1,215,797	947,934
Current liabilities
Accounts payable and accrued expenses	595,655	245,340
Capital leases - current	296,116	327,939
Notes payable - current	398,589	1,565,059
Deferred revenue	499,225	421,713
Total current liabilities	1,789,585	2,560,051
Long-term liabilities
Capital leases	2,265	2,632
Notes payable	76,072	1,162,390
Total long-term liabilities	78,337	1,165,022
TOTAL LIABILITIES	1,867,922	3,725,073
COMMITMENTS AND CONTINGENCY (NOTE 9)
STOCKHOLDERS' EQUITY
Preferred stock, par value $0.0005 per share; 25,000,000 shares authorized; 818,750 Series A convertible preferred shares issued and outstanding as of December 31, 2012 and 3,126,434 shares issued and outstanding as of December 31, 2011.	409	1,563
Common stock, par value $0.0004 per share; 100,000,000 shares authorized; 22,548,678 shares of voting common stock issued and outstanding as of December 31, 2012 and 16,519,865 shares issued and outstanding as of December 31, 2011.	9,016	6,608
Additional Paid-in Capital	13,597,117	10,645,347
Accumulated deficit	(14,258,667)	(13,430,659)
TOTAL STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME	(652,125)	(2,777,139)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 1,215,797	$ 947,934

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Intangible Assets (Details Textual) (USD $)	12 Months Ended		1 Months Ended		12 Months Ended		12 Months Ended		12 Months Ended
	Dec. 31, 2012 Intangible_Asset	Dec. 31, 2011	Jan. 31, 2004 Asset purchase and stock transfer agreement [Member]	Jan. 15, 2004 Asset purchase and stock transfer agreement [Member]	Dec. 31, 2011 Patents [Member]	Dec. 31, 2012 Patents [Member]	Dec. 31, 2011 Trademarks [Member]	Dec. 31, 2012 Trademarks [Member]	Dec. 31, 2012 Patents and Trademarks [Member]	Dec. 31, 2011 Patents and Trademarks [Member]
Intangible Assets (Textual)
Impairment of intangible assets	$ 0	$ 0
Issuance of common stock under Asset Purchase and Stock Transfer Agreement, shares			14,000,000
Promissory notes issued under Asset Purchase and Stock Transfer Agreement			150,000
Common stock issued under Asset Purchase and Stock Transfer Agreement, value			7,000
Non-recourse promissory note bore interest rate				6.50%
Aggregate intangible assets, Asset percentage					91.00%		9.00%
Gross amount of acquired intangible assets	659,413	656,241			610,518	613,690	45,723	45,723		157,000
Amounts paid to third parties for legal fees, application fees and other direct costs									502,413
Number of intangible assets	2
Intangible assets, net	$ 418,479	$ 445,168

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Statements of Cash Flows (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss	$ (828,271)	$ (1,532,399)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation	138,936	174,173
Amortization of intangible assets	54,834	29,766
Prior period adjustment	263
Amortization of debt discount and warrant fair values related to convertible loans	189,611	546,104
Changes in deferred rent and leasehold improvement allowance	65,079	(18,106)
Issuance of common stock options to employees as compensation	7,999	104,419
Issuance of common stock options and warrants in exchange for services	20,748	29,354
Changes in current assets and liabilities
Accounts receivable	(15,729)	(2,409)
Inventory	26,611	(20,265)
Prepaid expenses and other current assets		(40,666)
Accounts payable and accrued liabilities	141,950	(125,491)
Deferred revenue	77,512	166,058
NET CASH USED IN OPERATING ACTIVITIES	(120,457)	(689,461)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of intangible assets	(3,172)	(1,231)
Other assets		(40,142)
Purchases of property and equipment	(32,876)	(3,435)
NET CASH USED IN INVESTING ACTIVITIES	(36,048)	(44,808)
CASH FLOWS FROM FINANCING ACTIVITIES
Loan proceeds, net	(8,549)	763,940
Payment of capital leases	(32,190)	(27,810)
Issuance of common stock for cash	41,250
Proceeds from exercise of common stock options and warrants	104,392	23,370
NET CASH PROVIDED BY FINANCING ACTIVITIES	104,901	759,500
Net change in cash and cash equivalents	(51,604)	25,231
Cash and cash equivalents, at beginning of period	65,118	39,887
Cash and cash equivalents, at end of period	13,514	65,118
Cash paid during the period for:
Interest	679	4,368
Income taxes
Supplemental non-cash investing and financing activities:
Promissory subordinated convertible notes issued in connection with rent satisfaction agreements		200,100
Issuance of common stock upon conversion of convertible notes	2,433,850	465,969
Issuance of common stock warrants in connection with convertible notes		458,114
Issuance of common stock upon conversion of preferred stock	2,307,684
Website development with financing arrangement	143,286
Issuance of common stock for assets acquired	95,062
Issuance of common stock in connection with deferred loan costs	$ 249,723

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Stock Options and Warrants (Details 4) (Non-Employee Stock Option [Member], USD $)	12 Months Ended
	Dec. 31, 2012
Summary about non employee stock options outstanding
Number Outstanding	18,180
Number exercisable, Options Exercisable	18,180
Range One [Member]
Summary about non employee stock options outstanding
Range of Exercise Prices, Lower Range Limit	$ 0.20
Range of Exercise Prices, Upper Range Limit	$ 0.25
Number Outstanding	900
Weighted average remaining contractual life	1 year 1 month 28 days
Weighted average exercise price	$ 0.25
Number exercisable, Options Exercisable	900
Weighted average remaining contractual life, Options Exercisable	1 year 1 month 28 days
Weighted average exercise price, Options Exercisable	$ 0.25
Range Two [Member]
Summary about non employee stock options outstanding
Range of Exercise Prices, Lower Range Limit	$ 0.50
Range of Exercise Prices, Upper Range Limit	$ 1.00
Number Outstanding	15,000
Weighted average remaining contractual life	1 year
Weighted average exercise price	$ 1.00
Number exercisable, Options Exercisable	15,000
Weighted average remaining contractual life, Options Exercisable	1 year
Weighted average exercise price, Options Exercisable	$ 1.00
Range Three [Member]
Summary about non employee stock options outstanding
Range of Exercise Prices, Upper Range Limit	$ 2.00
Number Outstanding
Weighted average remaining contractual life	0 years
Weighted average exercise price
Number exercisable, Options Exercisable
Weighted average remaining contractual life, Options Exercisable	0 years
Weighted average exercise price, Options Exercisable
Range Four [Member]
Summary about non employee stock options outstanding
Range of Exercise Prices, Upper Range Limit	$ 2.50
Number Outstanding	2,280
Weighted average remaining contractual life	1 year 1 month 28 days
Weighted average exercise price	$ 2.50
Number exercisable, Options Exercisable	2,280
Weighted average remaining contractual life, Options Exercisable	1 year 1 month 28 days
Weighted average exercise price, Options Exercisable	$ 2.50

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Segment Information (Tables)

12 Months Ended

Dec. 31, 2012

Segment Information [Abstract]

Revenue by geographic region

	Year Ended December 31,
	2012		2011
Product Revenue:
United States - product sales	$	146,797	$	102,658
ROW - product sales		86,680		82,551
ROW - license fees/service revenue		36,220		-
Totals	$	269,697	$	185,209

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Income Taxes (Details Textual) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Income Taxes (Textual)
Cumulative net operating loss carry-forwards	$ 11,648,818	$ 10,936,288
Operating loss carryforwards, expiration dates	Between 2017 and 2027.
Net deferred tax assets before valuation allowance	$ 4,669,594	$ 4,390,047

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Concentration Of Risk In Customer and Supplier Relationships

12 Months Ended

Dec. 31, 2012

Concentration Of Risk In Customer and Supplier Relationships [Abstract]

Concentration of Risk in Customer and Supplier Relationships

NOTE 16 – CONCENTRATION OF RISK IN CUSTOMER AND SUPPLIER RELATIONSHIPS

Financial instruments that potentially subject us to credit risk are comprised of cash and cash equivalents, which are maintained at high quality financial institutions. At December 31, 2012 and 2011, we did not have any amounts in excess of the Federal Deposit Insurance Corporation limit of $250,000.

The relative magnitude and the mix of revenue from our largest customers have varied significantly quarter to quarter. During the twelve months ended December 31, 2012 and 2011, one distributor has accounted for significant revenues, varying by period, to our company: Afritex Medical Products (Pty) Ltd., a South African distributor (“Afritex”), in which our President is a former board member and shareholder. For the twelve months ended December 31, 2012 and 2011, the percentages of revenues from Afritex are as follows:

	Year Ended December 31,
	2012			2011
Afritex		29	%		45	%

Over time, as we work to add additional distributors to our network and to grow our distribution business, we anticipate the relative significance to our revenue of any particular customer or distributor will decline. Please see Note 17 – “Subsequent Events.”

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Concentration Of Risk In Customer and Supplier Relationships (Tables)

12 Months Ended

Dec. 31, 2012

Concentration Of Risk In Customer and Supplier Relationships [Abstract]

Summary of percentages of revenues from customer (Afritex)

	Year Ended December 31,
	2012			2011
Afritex		29	%		45	%

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2012

New Accounting Pronouncements or Change in Accounting Principle [Line Items]

Basis of Presentation

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. Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company’s system of internal accounting control is designed to assure, among other items, that (1) recorded transactions are valid; (2) all valid transactions are recorded; and (3) transactions are recorded in the period in a timely manner to produce financial statements which present fairly the financial condition of the Company.

Use of estimates

Use of estimates - The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reported period.  Actual results could differ from those estimated.

Revenue Recognition

Revenue Recognition - We recognize revenue when persuasive evidence of an arrangement exists, shipment has occurred, the price is fixed or determinable, and collectability is reasonably assured.  Revenues are recognized from product sales, net of discounts and rebates.  This revenue recognition policy is applied to both customers and distributors.

Fees from licensees desiring to manufacture and distribute our products or derivative products using our intellectual property include initial license fees and royalties.  Initial license fees are generally recognized upon granting of the license to the licensee.  Royalties are recognized in the period earned.

Deferred Revenue and Income

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 $499,225 and $421,713 for the years ended December 31, 2012 and 2011 respectively.

Cash and cash equivalents

Cash and Cash Equivalents - Cash consists of all highly liquid investments purchased with maturity of three months or less to be cash equivalents. Cash and cash equivalents may at times exceed Federally-insured limits. To minimize this risk, we place our cash and cash equivalents with high credit quality institutions.

Inventory

Inventory – Our inventory consists 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. We write down our inventory value for estimated obsolescence equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. These factors are impacted by market and economic conditions, technology changes, new product introductions and changes in strategic direction and require estimates that may include uncertain elements. Actual demand may differ from forecasted demand, and such differences may have a material effect on recorded inventory values. Management has established inventory reserves to cover estimated inventory losses for all work-in-process and finished goods related to products we manufactured, as well as raw material and components for those products that had no potential use in products to be manufactured in the future. Management is required to make judgments about the future benefit of our raw materials and components. Actual reserve requirements could differ significantly from Management’s estimates, which could have a significant unfavorable impact on our future gross margins.

At December 31, 2012 inventories consisted of the following:

	December 31, 2012
Parts inventory	$	105,647
Work in process		76,106
Finished goods		39,591
Total inventories	$	221,345

Concentration of Credit Risk

Concentration of Credit Risk – We sell our products throughout the United States as well as in certain other countries.  Sales to its recurring customers in the United States are generally granted on net 30-day credit terms. We perform periodic credit evaluations of our recurring customers and generally do not require collateral. In general, we require prepayment on all sales to customers outside the United States. An allowance for doubtful accounts is maintained for potential credit losses, which losses historically have not been significant.

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

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 – 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 $138,936 and $174,173 for the years ended December 31, 2012 and 2011, respectively.

Other Long-Lived Assets

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 $29,861 and $29,566 for the years ended December 31, 2012 and 2011, 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. Certain events and circumstances we considered in determining whether the carrying value of identifiable intangible assets may not be recoverable include, but are not limited to: significant changes in performance relative to expected operating results; significant changes in the use of the assets; significant negative industry or economic trends; and changes in its business strategy.  In determining if impairment exists, we estimate the undiscounted cash flows to be generated from the use and ultimate disposition of these assets.  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 years ended December 31, 2012 and 2011.

Other assets

Other Assets – We record Other Assets net of accumulated amortization. During 2012 we recorded total deferred loan costs in the amount of $249,723. Amortization expense for Other Assets was $24,972 and $0 for the years ended December 31, 2012 and 2011, respectively.

Capitalization of software

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.

Allowance for Doubtful Accounts

 Allowance for Doubtful Accounts - We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make payments.  We periodically review these allowances, including an analysis of the customers’ payment history and information regarding the customers’ creditworthiness.  Actual write-offs have not been materially different from the estimated allowance. We recorded bad debt expense of $1,376 and $0 for the years ended December 31, 2012 and 2011, respectively.

Research and Development Costs

Research and Development Costs – Costs associated with the development of our products are charged to expense as incurred.  $25,816 and $260 were incurred in the years ended December 31, 2012 and 2011, respectively.

Income Taxes

Income Taxes – In accordance withAccounting Standards Codification (“ASC”) Topic 740, “Income Taxes” (“ASC 740”), we account for income taxes using an asset and liability approach, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our Consolidated Financial Statements, but have not been reflected in our taxable income.  A valuation allowance has been established to reduce deferred tax assets to their estimated realizable value.  Therefore, we provide a valuation allowance to the extent that we do not believe it is more likely than not that we will generate sufficient taxable income in future periods to realize the benefit of our deferred tax assets.  We recognize interest and penalties related to unrecognized tax benefits in income tax expense.

Equity Warrants

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

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, which was developed for use in estimating the value of traded options that have no vesting restrictions and that are freely transferable. The Black-Scholes model requires the input of certain assumptions.  Changes in the assumptions used in Black-Scholes model can materially affect the fair value estimates. We evaluate the assumptions used to value stock options on an annual basis. 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 employees.  Upon the adoption of the accounting guidance, we continued to use historical volatility in deriving its expected volatility assumption as allowed under GAAP because we believe that future volatility over the expected term of the stock options is not likely to differ materially from the past. The risk-free interest rate assumption is based on 5-year U.S Treasury zero-coupon rates appropriate for the expected term of the stock options. The expected dividend assumption is based on the history and expectation of dividend payouts.  The fair values generated by the Black-Scholes model may not be indicative of the actual fair values of the equity awards, as we do not consider other factors important to those awards to employees, such as continued employment, periodic vesting requirements and limited transferability.  The amount of stock based compensation expenses is net of an estimated forfeiture rate, which is also based on historical data. For the years ended December 31, 2012 and 2011, stock based compensation expense was approximately $7,999 and $104,419 respectively, which consisted primarily of stock-based compensation expense related to stock options recognized under GAAP issued to the employees.

The Company follows ASC Topic 505-50, formerly EITF 96-18, “Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling Goods and Services,” for stock options and warrants issued to consultants and other non-employees. In accordance with ASC Topic 505-50, these stock options and warrants issued as compensation for services to be provided to the Company are accounted for based upon the fair value of the services provided or the estimated fair market value of the option or warrant, whichever can be more clearly determined. We recognize this expense over the period in which the services are provided. For the years ended December 31, 2012 and 2011, stock based compensation expense was approximately $0 and $29,354 respectively, which consisted primarily of stock-based compensation expense related to stock options and warrants recognized under GAAP issued to consultants and other non-employees.

The following table shows the components of our stock based compensation expense for employees, consultants and other non-employees:

	Year ended December 31,
	2012		2011
Common Stock options issued for compensation	$	7,999	$	104,419
Common Stock options and warrants issued for services		-		29,354
Total	$	7,999	$	133,773

Shipping and Handling Costs

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 - Advertising costs are charged to operations when incurred.  During the years ended December 31, 2012 and 2011 we incurred $76,427 and $15,141 respectively, in advertising and promotion costs.

Litigation and Settlement Costs

Litigation and Settlement Costs - Legal costs are expensed as incurred. We record a charge equal to at least the minimum estimated liability for a loss contingency when both of the following conditions are met: (i) information available prior to issuance of the financial statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements and (ii) accrue the best estimate within a range of loss if there is a loss or, whenthere is no amount within a range that forms a better estimate, we will accrue the minimum amount in the range. We are not presently involved in any legal proceedings, litigation or other legal actions.

Loss Per Share

Loss Per Share - Basic loss per share, which excludes anti-dilutive securities, is computed by dividing loss available to common shareholders by the weighted-average number of common shares outstanding for that particular period. In contrast, diluted loss per share considers the potential dilution that could occur from other equity instruments that would increase the total number of outstanding shares of common stock. Such amounts include shares potentially issuable under outstanding options, warrants, convertible preferred stock and convertible notes.

A reconciliation of the numerator and denominator used in the calculation of basic and diluted net loss per share follows:

	Year ended December 31,
	2012			2011
Historical net loss per share:
Numerator
Net loss, as reported		(828,271	)		(1,532,399	)
Less: Effect of amortization of interest expense on convertible notes		-			-
Net loss attributed to common stockholders (diluted)		(828,271	)		(1,532,399	)
Denominator
Weighted-average common shares outstanding		19,862,088			15,930,327
Effect of dilutive securities		-			-
Denominator for diluted net loss per share		19,862,088			15,930,327
Basic and diluted net loss per share	$	(0.04	)	$	(0.10	)

The following outstanding options, warrants, convertible preferred shares and convertible note shares were excluded from the computation of basic and diluted net loss per share for the periods presented because including them would have had an anti-dilutive effect.

	Year ended December 31,
	2012		2011
Options to purchase common stock		1,461,096		1,852,204
Warrants to purchase common stock		1,877,034		2,842,983
Common shares issuable upon conversion of convertible preferred stock		998,875		3,814,249
Convertible note shares outstanding		350,560		1,962,935

Restatements and Reclassifications

Restatements and Reclassifications - Certain financial statement items have been reclassified to conform to the current year’s presentation.

Accounting Standards Update 2011-02

New Accounting Pronouncements or Change in Accounting Principle [Line Items]

Recent Accounting Pronouncements

In April 2011, the FASB issued ASU 2011-02, “Receivables (Topic 310) A Creditors Determination of Whether a Restructuring Is a Troubled Debt Restructuring.”  The update clarifies the guidance on a creditors evaluation of whether it has granted a concession as well as clarifying the guidance when a creditor’s evaluation of whether a debtor is experiencing financial difficulties.  The guidance clarifies when a Company should record impairment due to concessions or the financial difficulties of the debtor.  The new standard is effective for fiscal years and interim periods ending after June 15, 2011.  The guidance should be applied retrospectively to restructurings occurring on or after the beginning of the fiscal year of adoption.  The adoption did not have a material effect on our consolidated financial position or results of operations.

Accounting Standards Update 2011-03

New Accounting Pronouncements or Change in Accounting Principle [Line Items]

Recent Accounting Pronouncements

In April 2011, the FASB issued ASU 2011-03, “Transfers and Servicing (Topic 860) Reconsideration of Effective Control for Repurchase Agreements.”  ASU 2011-03 applies to transactions where the seller transfers financial assets that both entitle and obligate the transferor to repurchase or redeem the financial assets before their maturity.  The amendments in this guidance remove from the assessment of effective control the criteria requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms even in the event of default by the transferee and the collateral maintenance guidance related to that criterion.  The new standard is effective for fiscal years and interim periods ending after December 15, 2011 and should be applied on a prospective basis. The adoption did not have a material effect on our consolidated financial position or results of operations.

Accounting Standards Update 2011-04

New Accounting Pronouncements or Change in Accounting Principle [Line Items]

Recent Accounting Pronouncements

In May 2011, the FASB issued ASU 2011-04, “Fair Value Measurement (Topic 820), Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS.”  The amendment results in a consistent definition of fair value and ensures the fair value measurement and disclosure requirements are similar between GAAP and International Financial Reporting Standards (“IFRS”). This amendment changes certain fair value measurement principles and enhances the disclosure requirements particularly for Level 3 fair value measurements. This amendment will be effective for the Company on January 1, 2012. The adoption did not have a material effect on our consolidated financial position or results of operations.

Accounting Standards Update 2011-05

New Accounting Pronouncements or Change in Accounting Principle [Line Items]

Recent Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-05, “Comprehensive Income (Topic 220), and Presentation of Comprehensive Income.”  ASU 2011-05 amends the presentation of other comprehensive income and the Statement of Consolidated Operations. Under this amendment, entities will be required to present the total of comprehensive income, the components of net income,  and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. Regardless of which reporting option is selected, the Company is required to present on the face of the financial statements, reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statements where the components of net income and the components of other comprehensive income are presented.   The current option to report other comprehensive income and its components in the statement of changes in equity has been eliminated. This amendment will be effective for the Company on January 1, 2012 and full retrospective application is required. The amendment did not have a material impact on our financial statements.

Effecting certain sections covered under ASU 2011-05, in December, 2011, the FASB issued ASU 2011-12, “Comprehensive Income (Topic 220),” Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items out of Accumulated Other Comprehensive Income in ASU 2011-05.”  The pronouncement is effective for fiscal years and interim periods beginning January 1, 2012 with retrospective application for all comparative periods presented.  The Company’s adoption of the new standard did not have a material effect on our consolidated financial position or results of operations.

Accounting Standards Update 2011-08

New Accounting Pronouncements or Change in Accounting Principle [Line Items]

Recent Accounting Pronouncements

In September 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-08, “Intangibles – Goodwill and Other (Topic 350), Testing Goodwill for Impairment.”  ASU 2011-08 amends the required annual impairment testing of goodwill by providing an entity an option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.  If, after assessing the totality of events and circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test under Topic 350-24 and Topic 350-20-35-9 is unnecessary.  However, if an entity concludes otherwise, then it is required to perform the impairment testing under Topic 350-24 by calculating the fair value of the reporting unit and comparing the results with the carrying amount.  If the fair value exceeds the carrying amount, then the entity must perform the second step test of measuring the amount of the impairment test under Topic 350-20-35-9.

An entity has the option to bypass the qualitative assessment and proceed directly to the two step goodwill impairment test.  Additionally, the entity has the option to resume with the qualitative testing in any subsequent period.  The amendment became effective for the Company on January 1, 2012 and did not have a material effect on our consolidated financial position or results of operations.

Accounting Standards Update 2011-11

New Accounting Pronouncements or Change in Accounting Principle [Line Items]

Recent Accounting Pronouncements

In December 2011, the FASB issued ASU 2011-11, “Balance Sheet (Topic 210), Disclosures about Offsetting Assets and Liabilities.”  The guidance in this update requires us to disclose information about offsetting and related arrangements to enable users of our financial statements to understand the effect of those arrangements on our financial position.  The pronouncement is effective for fiscal years and interim periods beginning on or after January 1, 2013 with retrospective application for all comparative periods presented.  Our adoption of the new standard is not expected to have a material effect on our consolidated financial position or results of operations.

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Commitments and Contingency (Details 1) (USD $)	Dec. 31, 2012
Summary of minimum non-cancellable lease payments required under capital leases
2013	$ 296,077
2014	1,728
2015	576
Total	298,381
Less amounts representing interest	(808)
Total	$ 297,573

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Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2012

Summary Of Significant Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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.

OxySure Systems, Inc. (OXYS: OTCQB) (the “Company,” “OSI,” “we,” “us,” or “our”) was incorporated on January 15, 2004 as a Delaware corporation. The Company is located in Frisco, Texas and is a medical technology company that focuses on the design, manufacture and distribution of specialty respiratory and emergency medical solutions. The company pioneered a safe and easy to use solution to produce medically pure (USP) oxygen from inert powders. The company owns nine (9) issued patents and patents pending on this technology which makes the provision of emergency oxygen safer, more accessible and easier to use than traditional oxygen provision systems. OxySure's products 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.

In 2008 the Company launched its first product utilizing this technology – a portable emergency oxygen system for lay person use, called the OxySure Model 615. On December 9, 2005, the Company received approval from the Food and Drug Administration (510K, Class II) for Model 615. The FDA approval is for over-the-counter purchase, without the need of a prescription.

The Company has, at the present time, not paid any dividends and any dividends that may be paid in the future will depend upon the financial requirements of the Company and other relevant factors.

On July 19, 2004, the Company affected a 1-for-5 reverse stock split of the Company’s common stock. All share numbers and common stock numbers, including stock options and warrants, have been retroactively adjusted to reflect the reverse stock split.

While the Company has effectively managed its working capital deficit the going concern risk remains an issue for the company to manage.  The Company has implemented, and plans to further implement several different strategies in order to help the Company ease the going concern issue.  Refer to Note 15, “Going concern” of the Notes to Financial Statements for a partial list of the Company’s plans to mitigate the going concern issue.

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. Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company’s system of internal accounting control is designed to assure, among other items, that (1) recorded transactions are valid; (2) all valid transactions are recorded; and (3) transactions are recorded in the period in a timely manner to produce financial statements which present fairly the financial condition of the Company.

Use of estimates - The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reported period.  Actual results could differ from those estimated.

Revenue Recognition - We recognize revenue when persuasive evidence of an arrangement exists, shipment has occurred, the price is fixed or determinable, and collectability is reasonably assured.  Revenues are recognized from product sales, net of discounts and rebates.  This revenue recognition policy is applied to both customers and distributors.

Fees from licensees desiring to manufacture and distribute our products or derivative products using our intellectual property include initial license fees and royalties.  Initial license fees are generally recognized upon granting of the license to the licensee.  Royalties are recognized in the period earned.

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 $499,225 and $421,713 for the years ended December 31, 2012 and 2011 respectively.

Cash and Cash Equivalents - Cash consists of all highly liquid investments purchased with maturity of three months or less to be cash equivalents. Cash and cash equivalents may at times exceed Federally-insured limits. To minimize this risk, we place our cash and cash equivalents with high credit quality institutions.

Inventory – Our inventory consists 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. We write down our inventory value for estimated obsolescence equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. These factors are impacted by market and economic conditions, technology changes, new product introductions and changes in strategic direction and require estimates that may include uncertain elements. Actual demand may differ from forecasted demand, and such differences may have a material effect on recorded inventory values. Management has established inventory reserves to cover estimated inventory losses for all work-in-process and finished goods related to products we manufactured, as well as raw material and components for those products that had no potential use in products to be manufactured in the future. Management is required to make judgments about the future benefit of our raw materials and components. Actual reserve requirements could differ significantly from Management’s estimates, which could have a significant unfavorable impact on our future gross margins.

At December 31, 2012 inventories consisted of the following:

	December 31, 2012
Parts inventory	$	105,647
Work in process		76,106
Finished goods		39,591
Total inventories	$	221,345

Concentration of Credit Risk – We sell our products throughout the United States as well as in certain other countries.  Sales to its recurring customers in the United States are generally granted on net 30-day credit terms. We perform periodic credit evaluations of our recurring customers and generally do not require collateral. In general, we require prepayment on all sales to customers outside the United States. An allowance for doubtful accounts is maintained for potential credit losses, which losses historically have not been significant.

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 $138,936 and $174,173 for the years ended December 31, 2012 and 2011, 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 $29,861 and $29,566 for the years ended December 31, 2012 and 2011, 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. Certain events and circumstances we considered in determining whether the carrying value of identifiable intangible assets may not be recoverable include, but are not limited to: significant changes in performance relative to expected operating results; significant changes in the use of the assets; significant negative industry or economic trends; and changes in its business strategy.  In determining if impairment exists, we estimate the undiscounted cash flows to be generated from the use and ultimate disposition of these assets.  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 years ended December 31, 2012 and 2011.

Other Assets – We record Other Assets net of accumulated amortization. During 2012 we recorded total deferred loan costs in the amount of $249,723. Amortization expense for Other Assets was $24,972 and $0 for the years ended December 31, 2012 and 2011, 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.

Allowance for Doubtful Accounts - We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make payments.  We periodically review these allowances, including an analysis of the customers’ payment history and information regarding the customers’ creditworthiness.  Actual write-offs have not been materially different from the estimated allowance. We recorded bad debt expense of $1,376 and $0 for the years ended December 31, 2012 and 2011, respectively.

Research and Development Costs – Costs associated with the development of our products are charged to expense as incurred.  $25,816 and $260 were incurred in the years ended December 31, 2012 and 2011, respectively.

Income Taxes – In accordance withAccounting Standards Codification (“ASC”) Topic 740, “Income Taxes” (“ASC 740”), we account for income taxes using an asset and liability approach, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our Consolidated Financial Statements, but have not been reflected in our taxable income.  A valuation allowance has been established to reduce deferred tax assets to their estimated realizable value.  Therefore, we provide a valuation allowance to the extent that we do not believe it is more likely than not that we will generate sufficient taxable income in future periods to realize the benefit of our deferred tax assets.  We recognize interest and penalties related to unrecognized tax benefits in income tax expense.

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, which was developed for use in estimating the value of traded options that have no vesting restrictions and that are freely transferable. The Black-Scholes model requires the input of certain assumptions.  Changes in the assumptions used in Black-Scholes model can materially affect the fair value estimates. We evaluate the assumptions used to value stock options on an annual basis. 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 employees.  Upon the adoption of the accounting guidance, we continued to use historical volatility in deriving its expected volatility assumption as allowed under GAAP because we believe that future volatility over the expected term of the stock options is not likely to differ materially from the past. The risk-free interest rate assumption is based on 5-year U.S Treasury zero-coupon rates appropriate for the expected term of the stock options. The expected dividend assumption is based on the history and expectation of dividend payouts.  The fair values generated by the Black-Scholes model may not be indicative of the actual fair values of the equity awards, as we do not consider other factors important to those awards to employees, such as continued employment, periodic vesting requirements and limited transferability.  The amount of stock based compensation expenses is net of an estimated forfeiture rate, which is also based on historical data. For the years ended December 31, 2012 and 2011, stock based compensation expense was approximately $7,999 and $104,419 respectively, which consisted primarily of stock-based compensation expense related to stock options recognized under GAAP issued to the employees.

The Company follows ASC Topic 505-50, formerly EITF 96-18, “Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling Goods and Services,” for stock options and warrants issued to consultants and other non-employees. In accordance with ASC Topic 505-50, these stock options and warrants issued as compensation for services to be provided to the Company are accounted for based upon the fair value of the services provided or the estimated fair market value of the option or warrant, whichever can be more clearly determined. We recognize this expense over the period in which the services are provided. For the years ended December 31, 2012 and 2011, stock based compensation expense was approximately $0 and $29,354 respectively, which consisted primarily of stock-based compensation expense related to stock options and warrants recognized under GAAP issued to consultants and other non-employees.

The following table shows the components of our stock based compensation expense for employees, consultants and other non-employees:

	Year ended December 31,
	2012		2011
Common Stock options issued for compensation	$	7,999	$	104,419
Common Stock options and warrants issued for services		-		29,354
Total	$	7,999	$	133,773

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.  During the years ended December 31, 2012 and 2011 we incurred $76,427 and $15,141 respectively, in advertising and promotion costs.

Litigation and Settlement Costs - Legal costs are expensed as incurred. We record a charge equal to at least the minimum estimated liability for a loss contingency when both of the following conditions are met: (i) information available prior to issuance of the financial statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements and (ii) accrue the best estimate within a range of loss if there is a loss or, whenthere is no amount within a range that forms a better estimate, we will accrue the minimum amount in the range. We are not presently involved in any legal proceedings, litigation or other legal actions.

Loss Per Share - Basic loss per share, which excludes anti-dilutive securities, is computed by dividing loss available to common shareholders by the weighted-average number of common shares outstanding for that particular period. In contrast, diluted loss per share considers the potential dilution that could occur from other equity instruments that would increase the total number of outstanding shares of common stock. Such amounts include shares potentially issuable under outstanding options, warrants, convertible preferred stock and convertible notes.

A reconciliation of the numerator and denominator used in the calculation of basic and diluted net loss per share follows:

	Year ended December 31,
	2012			2011
Historical net loss per share:
Numerator
Net loss, as reported		(828,271	)		(1,532,399	)
Less: Effect of amortization of interest expense on convertible notes		-			-
Net loss attributed to common stockholders (diluted)		(828,271	)		(1,532,399	)
Denominator
Weighted-average common shares outstanding		19,862,088			15,930,327
Effect of dilutive securities		-			-
Denominator for diluted net loss per share		19,862,088			15,930,327
Basic and diluted net loss per share	$	(0.04	)	$	(0.10	)

The following outstanding options, warrants, convertible preferred shares and convertible note shares were excluded from the computation of basic and diluted net loss per share for the periods presented because including them would have had an anti-dilutive effect.

	Year ended December 31,
	2012		2011
Options to purchase common stock		1,461,096		1,852,204
Warrants to purchase common stock		1,877,034		2,842,983
Common shares issuable upon conversion of convertible preferred stock		998,875		3,814,249
Convertible note shares outstanding		350,560		1,962,935

Restatements and Reclassifications - Certain financial statement items have been reclassified to conform to the current year’s presentation.

Recent Accounting Pronouncements

In April 2011, the FASB issued ASU 2011-02, “Receivables (Topic 310) A Creditors Determination of Whether a Restructuring Is a Troubled Debt Restructuring.”  The update clarifies the guidance on a creditors evaluation of whether it has granted a concession as well as clarifying the guidance when a creditor’s evaluation of whether a debtor is experiencing financial difficulties.  The guidance clarifies when a Company should record impairment due to concessions or the financial difficulties of the debtor.  The new standard is effective for fiscal years and interim periods ending after June 15, 2011.  The guidance should be applied retrospectively to restructurings occurring on or after the beginning of the fiscal year of adoption.  The adoption did not have a material effect on our consolidated financial position or results of operations.

In April 2011, the FASB issued ASU 2011-03, “Transfers and Servicing (Topic 860) Reconsideration of Effective Control for Repurchase Agreements.”  ASU 2011-03 applies to transactions where the seller transfers financial assets that both entitle and obligate the transferor to repurchase or redeem the financial assets before their maturity.  The amendments in this guidance remove from the assessment of effective control the criteria requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms even in the event of default by the transferee and the collateral maintenance guidance related to that criterion.  The new standard is effective for fiscal years and interim periods ending after December 15, 2011 and should be applied on a prospective basis. The adoption did not have a material effect on our consolidated financial position or results of operations.

In May 2011, the FASB issued ASU 2011-04, “Fair Value Measurement (Topic 820), Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS.”  The amendment results in a consistent definition of fair value and ensures the fair value measurement and disclosure requirements are similar between GAAP and International Financial Reporting Standards (“IFRS”). This amendment changes certain fair value measurement principles and enhances the disclosure requirements particularly for Level 3 fair value measurements. This amendment will be effective for the Company on January 1, 2012. The adoption did not have a material effect on our consolidated financial position or results of operations.

In June 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-05, “Comprehensive Income (Topic 220), and Presentation of Comprehensive Income.”  ASU 2011-05 amends the presentation of other comprehensive income and the Statement of Consolidated Operations. Under this amendment, entities will be required to present the total of comprehensive income, the components of net income,  and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. Regardless of which reporting option is selected, the Company is required to present on the face of the financial statements, reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statements where the components of net income and the components of other comprehensive income are presented.   The current option to report other comprehensive income and its components in the statement of changes in equity has been eliminated. This amendment will be effective for the Company on January 1, 2012 and full retrospective application is required. The amendment did not have a material impact on our financial statements.

Effecting certain sections covered under ASU 2011-05, in December, 2011, the FASB issued ASU 2011-12, “Comprehensive Income (Topic 220),” Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items out of Accumulated Other Comprehensive Income in ASU 2011-05.”  The pronouncement is effective for fiscal years and interim periods beginning January 1, 2012 with retrospective application for all comparative periods presented.  The Company’s adoption of the new standard did not have a material effect on our consolidated financial position or results of operations.

In September 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-08, “Intangibles – Goodwill and Other (Topic 350), Testing Goodwill for Impairment.”  ASU 2011-08 amends the required annual impairment testing of goodwill by providing an entity an option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.  If, after assessing the totality of events and circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test under Topic 350-24 and Topic 350-20-35-9 is unnecessary.  However, if an entity concludes otherwise, then it is required to perform the impairment testing under Topic 350-24 by calculating the fair value of the reporting unit and comparing the results with the carrying amount.  If the fair value exceeds the carrying amount, then the entity must perform the second step test of measuring the amount of the impairment test under Topic 350-20-35-9.

An entity has the option to bypass the qualitative assessment and proceed directly to the two step goodwill impairment test.  Additionally, the entity has the option to resume with the qualitative testing in any subsequent period.  The amendment became effective for the Company on January 1, 2012 and did not have a material effect on our consolidated financial position or results of operations.

In December 2011, the FASB issued ASU 2011-11, “Balance Sheet (Topic 210), Disclosures about Offsetting Assets and Liabilities.”  The guidance in this update requires us to disclose information about offsetting and related arrangements to enable users of our financial statements to understand the effect of those arrangements on our financial position.  The pronouncement is effective for fiscal years and interim periods beginning on or after January 1, 2013 with retrospective application for all comparative periods presented.  Our adoption of the new standard is not expected to have a material effect on our consolidated financial position or results of operations.

XML

Balance Sheets (Parenthetical) (USD $)	Dec. 31, 2012	Dec. 31, 2011
Balance Sheets [Abstract]
Preferred stock, par value	$ 0.0005	$ 0.0005
Preferred stock, Shares authorized	25,000,000	25,000,000
Series A Convertible Preferred stock, Shares issued	818,750	3,126,434
Series A Convertible Preferred stock, Shares outstanding	818,750	3,126,434
Common stock, par value	$ 0.0004	$ 0.0004
Common stock, shares authorized	100,000,000	100,000,000
Voting common stock, Shares issued	22,548,678	16,519,865
Voting common stock, Shares outstanding	22,548,678	16,519,865

XML

Net Income (Loss) Per Share

12 Months Ended

Dec. 31, 2012

Net Income (Loss) Per Share [Abstract]

NET INCOME (LOSS) PER SHARE

NOTE 11 – NET INCOME (LOSS) PER SHARE

The following table sets forth the computation of net basic and diluted net income (loss) per share:

	Year ended December 31,
	2012			2011
Net income (loss)		(828,271	)		(1,532,399	)
Shares used in computing basic per share amounts (weighted ave.)		19,862,088			15,930,327
Net income (loss) per share:
Basic and Diluted	$	(0.04	)	$	(0.10	)

XML

Document and Entity Information (USD $)	12 Months Ended
	Dec. 31, 2012	Apr. 01, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	OxySure Systems Inc
Entity Central Index Key	0001413797
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Type	10-K
Document Period End Date	Dec. 31, 2012
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2012
Entity Well-Known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float		$ 3,190,659
Entity Common Stock, Shares Outstanding		23,101,496

XML

Fair Value Measurements

12 Months Ended

Dec. 31, 2012

Fair Value Measurements [Abstract]

FAIR VALUE MEASUREMENTS

NOTE 12 – FAIR VALUE MEASUREMENTS

Effective January 1, 2009, the Company adopted new fair value accounting guidance. The adoption of the guidance was limited to financial assets and liabilities and did not have a material effect on our financial condition or results of operations.

The guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact business and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. The guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The guidance establishes three levels of inputs that may be used to measure fair value:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Unobservable inputs to the valuation methodology that is significant to the measurement of fair value of assets or liabilities.

Assets Measured at Fair Value on a Recurring Basis

The following table presents our financial assets and liabilities that are measured at fair value on a recurring basis which were comprised of the following types of instruments as of December 31, 2012 and 2011:

	Total		Level 1		Level 2		Level 3
Cash (1)	$	13,514	$	13,514		-		-
Total cash equivalents as of December 31, 2012	$	13,514	$	13,514		-		-
(1) Included in Cash and cash equivalents on the Company's Balance Sheet.
	Total		Level 1		Level 2		Level 3
Cash (1)	$	65,118	$	65,118		-		-
Total cash equivalents as of December 31, 2011	$	65,118	$	65,118		-		-
(1) Included in Cash and cash equivalents on the Company's Balance Sheet.

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Statements of Operations and Accumulated Deficit (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Statements Of Operations and Accumulated Deficit [Abstract]
Revenues, net	$ 269,697	$ 185,209
Cost of goods sold	95,587	103,389
Gross profit	174,110	81,820
Operating expenses
Selling, general and administrative	1,020,298	1,150,786
Loss from operating expenses	(846,188)	(1,068,966)
Other income (expenses)
Other income (expense)	224,639	144,882
Interest expense	(206,722)	(608,316)
Total other income (expenses)	17,917	(463,434)
Net loss	(828,271)	(1,532,399)
Accumulated deficit - beginning of the period	(13,430,659)	(11,898,260)
Prior period adjustments	263
Accumulated deficit - end of the period	$ (14,258,667)	$ (13,430,659)
Basic net income (loss) per common share	$ (0.04)	$ (0.10)
Diluted net income (loss) per common share	$ (0.04)	$ (0.10)
Weighted average common shares outstanding:
Basic	19,862,088	15,930,327
Diluted	19,862,088	15,930,327

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Stock Options and Warrants

12 Months Ended

Dec. 31, 2012

Stock Options and Warrants [Abstract]

STOCK OPTIONS AND WARRANTS

NOTE 6 - 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 us 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 during 2012 and 2011:

	Employee					Non-Employee
				Weighted					Weighted
	Number			Average		Number			Average		Combined
	Of			Exercise		Of			Exercise		Total
Outstanding at December 31, 2010		1,869,574		$	0.59		74,382		$	0.93		1,943,956
Granted		280,000		$	0.52		-			-		280,000
Exercised		(34,750	)	$	0.61		-			-		(34,750	)
Forfeited/Cancelled		(315,800	)	$	1.27		(21,202	)	$	2.00		(337,002	)
Outstanding at December 31, 2011		1,799,024		$	0.47		53,180		$	0.72		1,852,204
Granted		180,000		$	0.25		-			-		180,000
Exercised		(374,808	)	$	0.26		-			-		(374,808	)
Forfeited/Cancelled		(161,300	)	$	1.37		(35,000	)	$	0.50		(196,300	)
Outstanding at December 31, 2012		1,442,916		$	0.41		18,180		$	2.11		1,461,096

The following table summarizes information about those options that have been forfeited, cancelled or that have expired under the Plan during 2012 and 2011:

	Employee				Non-Employee
			Weighted				Weighted
	Number		Average		Number		Average		Combined
	Of		Exercise		Of		Exercise		Total
	Options		Price		Options		Price		Options
Forfeited/Cancelled
during FY 2011		315,800	$	1.27		21,202	$	2.00		337,002
Forfeited/Cancelled
during FY 2012		161,300	$	1.37		35,000	$	0.50		196,300

Valuation Assumptions

We value our stock-based payment awards granted using the Black-Scholes model, during the years ended December 31, 2012 and 2011.  The Black-Scholes model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. The Black-Scholes model requires the input of certain assumptions. Our stock options have characteristics significantly different from those of traded options, and changes in the assumptions can materially affect the fair value estimates.

For the years ended December 31, 2012 and 2011, respectively, the fair value of options granted were estimated at the date of grant using the Black-Scholes model with the following weighted average assumptions:

	Equity Incentive Plans for Years Ended December 31,
	2012			2011
Expected terms (in years)		5-10			5-10
Volatility		22%-64	%		21	%
Risk-free interest rate		.89%-2.24	%		2.25	%
Expected dividend rate		0.00	%		0.00	%

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 risk-free interest rate assumption is based on the 5-year U.S Treasury zero-coupon rate with a remaining term equal to the expected term used as the assumption in the model.

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 December 20, 2011 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.  The fair value of the underlying common stock has been determined by the board of directors until such time as our common stock commenced trading on the over the counter bulletin board (OTCQB).

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.

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 amortized on a straight-line basis.  For the years ended December 31, 2012 and 2011, stock based compensation expense was approximately $7,999 and $104,419, respectively, which consisted primarily of stock-based compensation expense related to stock options recognized under GAAP issued to employees.  For the years ended December 31, 2012 and 2011, the number of options exercised was 374,808 and 34,750, respectively.

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 December 31, 2012, total unrecognized compensation cost related to stock-based awards granted to employees and non-employee directors was $10,304. This cost will be amortized on a ratable basis over a weighted-average vesting period of approximately 0.08 years.

The following table summarizes information about employee stock options outstanding under the Plan at December 31, 2012:

December 31, 2012
	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number Outstanding		Weighted average remaining  contractual life		Weighted average  exercise price		Number  exercisable		Weighted average remaining contractual life		Weighted  average exercise price
$ 0.20 - $0.25		1,192,488		1.95	$	0.25		1,012,488		2.23	$	0.25
$ 0.50 - $1.00		215,753		1.18	$	0.82		215,753		1.11	$	0.82
$2.00		12,750		0.58	$	2.00		12,750		1.39	$	2.00
$2.50		21,925		1.39	$	2.50		21,925		1.39	$	2.50
		1,442,916						1,262,916

The following table summarizes information about non-employee stock options outstanding under the Plan at December 31, 2012:

December 31, 2012
	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number Outstanding		Weighted average  remaining contractual life		Weighted average exercise price		Number  exercisable		Weighted average remaining contractual life		Weighted  average exercise price
$ 0.20 - $0.25		900		1.16	$	0.25		900		1.16	$	0.25
$ 0.50 - $1.00		15,000		1.00	$	1.00		15,000		1.00	$	1.00
$2.00		-		-	$	-		-		-	$	-
$2.50		2,280		0.16	$	2.50		2,280		0.16	$	2.50
		18,180						18,180

Warrants.

The following table summarizes our warrant activities for the years ended December 31, 2012 and 2011:

				Weighted
	Number			Average
	Of			Exercise
	Warrants			Price
Outstanding at December 31, 2010		2,717,226		$	0.51
Granted		436,754		$	0.20
Exercised		(294,330	)	$	0.09
Forfeited/Cancelled		(100,000	)	$	0.82
Outstanding at December 31, 2011		2,759,650		$	0.48
Granted		55,000		$	0.93
Exercised		(882,616	)	$	0.01
Forfeited/Cancelled		(55,000	)	$	0.92
Outstanding at December 31, 2012		1,877,034		$	0.65

The following table indicates a summary of the significant terms of each of our warrants issued and outstanding as at December 31, 2012, and the accounting treatment of each:

Granted to:		Date of Grant	Number of Shares Underlying Warrants		Exercise Price		Expiration Date	Weighted Average Remaining Life (Years)		Warrants' Fair Value at Date of Issuance		Term of Expense (Years)
NTEC	1	4/8/2004		281,200		0.0005	4/8/2014		1.27	$	78,643		1.00
Agave Resources, LLC	2	4/15/2008		350,000		0.01	4/15/2013		0.29	$	346,936		1.00	1
Sinacola Commercial	3	12/1/2008		7,500		1.00	2/1/2013		0.09	$	3,327		5.00	2
GSAAgent and affiliates (Alan Jensen, James Bello, Charlotte Bello)	4	11/19/2008		88,889		0.01	11/19/2013		0.88	$	99,098	Expensed upon issuance
WLS, LLC.	5	5/7/2008		8,000		0.01	5/7/2013		0.35	$	19,931	Expensed upon issuance
Pearl Ross	6	9/30/2008		7,000		0.01	9/30/2013		0.75	$	6,940	Expensed upon issuance
Dennis O. Harris	7	3/31/2009		2,500		0.01	3/31/2014		1.25	$	2,477	Expensed upon issuance
Carl Dickerson	8	3/31/2009		5,000		0.01	3/31/2014		1.25	$	4,954	Expensed upon issuance
Sinacola Commercial	9	12/31/2009		163,415		0.01	12/31/2014		2.00	$	161,949		2.00	3
Pacific Cattle Corporation	10	4/20/2009		100,000		1.00	4/20/2014		1.30	$	43,039	Expensed upon issuance
Bryan Thomas	11	6/13/2009		30,000		0.59	6/13/2014		1.45	$	17,161	Expensed upon issuance
Alison Freeman	12	2/1/2009		10,000		1.00	2/1/2014		1.09	$	4,563	Expensed upon issuance
Community Foundation of North Texas	13	11/19/2008		25,000		1.00	11/19/2013		0.88	$	10,959	Expensed upon issuance
Alcedo Family Trust	14	12/10/2009		100,000		2.50	12/10/2014		1.94	$	25,535		0.75
Sinacola Commercial	15	12/31/2010		71,500		0.01	12/31/2015		3.00	$	70,853		1.83	4
Sinacola Commercial	16	12/31/2010		71,965		0.01	12/31/2015		3.00	$	71,314		1.83	4
Afritex Medical Products	17	3/26/2010		270,000		2.50	3/26/2015		2.23	$	70,267		0.75	5
Stanley D. Bert	18	1/27/2011		100,000		0.82	1/27/2016		3.07	$	32,023	Expensed upon issuance
Sinacola Commercial	19	3/23/2011		65,000		0.01	3/23/2016		3.23	$	64,414		2.00	6
Sinacola Commercial	20	8/15/2011		65,065		0.01	8/15/2016		3.62	$	64,446		2.29	7
Vencore Solutions, LLC	21	8/29/2012		32,500		1.00	8/29/2017		4.66	$	9,303		5.00	8
Vencore Solutions, LLC	22	8/29/2012		22,500		0.82	8/29/2017		4.66	$	7,610		5.00	8
				1,877,034

1 Issued pursuant to the Agave First Note. Agave Resources, LLC is controlled by one of our Directors, Donald Reed. Please see Note 4 – “Notes Payable,” and Note 10 – “Related Party Transactions.”

2 Issued pursuant to a lease modification. Please see Note 9 – “Commitments and Contingency.”

3 Issued pursuant to the 2009 RSA. Please see Note 4 – “Notes Payable.”

4 Issued pursuant to the 2010 RSA. Please see Note 4 – “Notes Payable.”

5 Issued pursuant to that certain license agreement and distribution agreement with Afritex Medical Products (Pty) Ltd. (“Afritex”), of which our President is a former board member and stockholder.

6 Issued pursuant to the 2011 RSA. Please see Note 4 – “Notes Payable.”

7 Issued pursuant to the Second 2011 RSA. Please see Note 4 – “Notes Payable.”

8 Issued pursuant to that certain Second Payment Moratorium with Vencore Solutions, LLC. Please see Note 9 – “Commitments and Contingency.”

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Shareholders' Equity

12 Months Ended

Dec. 31, 2012

Shareholders' Equity [Abstract]

SHAREHOLDERS' EQUITY

NOTE 5 - SHAREHOLDERS’ EQUITY

Preferred Shares Rights

On December 31, 2005, the Company’s Board of Directors adopted a Preferred Shares Rights Agreement (the “Agreement” or “Original Rights Agreement”).   Pursuant to the Agreement, the Board authorized the issuance of up to 5,000,000 shares of preferred stock, par value $0.0005 per share. As of December 31, 2012, the Company had authorized the issuance of 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 818,750 and 3,126,434 Series A Preferred shares issued and outstanding as of December 31, 2012 and December 31, 2011, respectively.

During the year ended December 31, 2012 the Company did not issue any shares of the Series A Preferred. During the year ended December 31, 2012 approximately 2,307,684 shares of the Series A Preferred have been converted into approximately 2,815,374 shares of our common stock in cashless conversions at a conversion ratio of 1.22:1.

A summary of the designations and preferences of its Series A Preferred stock is as follows:

Ranking – The Series A Preferred ranks senior to common stock.

Dividends – Series A Preferred may be entitled to receive a quarterly non-cumulative dividend in the amount of $.01 per share upon approval from the Board of Directors.

Liquidation Preference – In the event of any liquidation, dissolution, or winding up of the Company, the holders of Series A Preferred are entitled to receive 100% of the original issue price of $1.00 per share.

Conversion Rights – Each share of Series A Preferred is convertible at any time, at the option of the holder into 1.22 shares of common stock, subject to adjustment. Series A Preferred are subject to automatic conversion upon consummation of underwritten offering by the Company of shares of common stock to the public, in which the aggregate cash proceeds are at least $3 million and the price paid per share is at least $5.00.

Redemption Rights – All of the Series A Preferred may be called at any time by the Company within ten years, but not prior to two years after issuance. The redemption value is $1.00 per share, plus an amount equal to all unpaid dividends thereon.

Voting Rights – The holder of each share of Series A Preferred has the right to one vote for each share of common stock into which such share of Series A Preferred could be converted.

Common Stock

The Company has authorized 100,000,000 shares of $0.0004 par value common stock.

During the year ended December 31, 2012:

(1)   We issued 1,711,952 shares of common stock pursuant to the conversion of convertible subordinated promissory notes totaling $2,433,850 at an aggregate conversion price of $1.42 per share.

(2)   We issued 2,815,374 shares of common stock pursuant to the cashless conversion of 2,307,684 shares of our Series A Preferred at a conversion ratio of 1.22:1.

(3)   We received proceeds of $98,284 from the issuance of 374,808 shares of common stock pursuant to the exercise of 374,808 stock options.

(4)   We received proceeds of $6,106 from the issuance of 882,616 shares of common stock pursuant to the exercise of 882,616 warrants.

(5)   We issued 68,889 shares of common stock for $41,250 in cash at an aggregate price of $.60 per share.

(6)   We issued 97,500shares of common stock for services valued at approximately $20,748.

(7)   We issued 77,674 shares of common stock in connection with the acquisition of assets valued at approximately $95,062.

(8)   As further discussed under Note 6 – Stock Options and Warrants, we recorded $7,999 for the computed fair value of options issued to employees, non-employee directors, and consultants, net of cancellations and forfeitures.

(9)   As further discussed under Note 6 – Stock Options and Warrants, we recorded $0 for the computed fair value of warrants issued for services.

(10)   As further discussed under Note 6 – Stock Options and Warrants, we recorded $0 for the computed fair value of warrants issued in connection with convertible loans.

(11)   As further discussed under Note 6 – Stock Options and Warrants, we recorded $249,723 for the computed fair value of warrants issued in connection with deferred loan costs.

During the year ended December 31, 2011

(1)   We received cash proceeds of $21,260 from the issuance of 34,750 shares of common stock pursuant to the exercise of 34,750 stock options.

(2)   We received cash proceeds of $2,110 from the issuance of 294,330 shares of common stock pursuant to the exercise of 294,330 warrants.

(3)   We issued 465,969 shares of common stock pursuant to the conversion of convertible subordinated promissory notes. A total of $370,000 in principal and $95,969 in accrued but unpaid interest was converted at a conversion price of $1.00 per share. Of the shares issued, 335,880 shares were issued to Afritex Medical Products (Pty) Ltd. (“Afritex”), a South African distributor. Our President, CEO & CFO is a former director and shareholder of Afritex.

(4)   As further discussed under Note 6 – Stock Options and Warrants, we recorded $104,419 for the computed fair value of options issued to employees, nonemployee directors, and consultants, net of cancellations.

(5)   As further discussed under Note 6 – Stock Options and Warrants, we recorded $29,354 for the computed fair value of warrants issued for services.

(6)   We recorded $458,114 for the computed fair value of warrants issued in connection with convertible loans.

As of December 31, 2012 and 2011 we had 22,548,678 and 16,519,865 shares respectively, of common stock issued and outstanding.

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Subsequent Events

12 Months Ended

Dec. 31, 2012

Subsequent Events [Abstract]

Subsequent Events

NOTE 17 - SUBSEQUENT EVENTS

The Company has evaluated events and transactions subsequent to December 31, 2012 through the date of issuance of the Financial Statements. During the period from January 1, 2012 to the date of issuance, we have had the following material subsequent events:

Aero Healthcare Distribution Agreement:

We entered into an exclusive distribution agreement with Aero Health Holdings Limited (“Aero Australia”) to distribute our products in Australia and New Zealand. Simultaneously, we entered into an exclusive distribution agreement with Aero Healthcare Limited (“Aero UK”) to distribute our products in the United Kingdom.

Aero is a significant, rapidly growing manufacturer and distributor of first aid and healthcare products, including Automated External Defibrillators (AEDs), with locations in Australia, New Zealand, United Kingdom, Germany and the United States. The agreements provide Aero the exclusivity to market and sell our in the Australia, New Zealand and UK markets. In return, the agreements provide that Aero apply for and obtain CE Marking for our Model 615 and related disposable cartridges, as well as approval from the Therapeutic Goods Administration (TGA), a division of the Australian Department of Health and Ageing. Aero is to pursue and obtain a TGA conformity assessment certificate and registration on the Australian Register of Therapeutic Goods. All applications, approvals and certifications are to be pursued and issued in the name of OxySure Systems, Inc.

The agreements also provide that Aero purchase a minimum combined quantity of 4,500 units of OxySure Model 615 during the first two years subsequent to CE Marking and TGA approval.

Expansion of product portfolio with the addition of six AED brands:

In February 2013 we announced that we have expanded our product offerings to include six brands of Automated External Defibrillators (AEDs), as well as all related AED accessories. We believe that our flagship product, the OxySure Model 615 is an excellent companion product for AEDs to allow pre-responders to administer oxygen, post-resuscitation in a cardiac arrest event in public access venues as well as in private settings.

The addition of AEDs and AED accessories from major manufacturers Cardiac Science, Philips, Zoll, Physio Control (formerly Medtronic), Defibtech and Heartsine allows us to offer our customers and distribution partners a complete solution as it relates to their cardiac arrest emergency preparedness needs. We offer most AEDs by these manufacturers, as well as related accessories such as batteries, pads, wall boxes, signage, software, program management, compliance and training. In addition, we provide competitively priced, bundled solutions or “combo packs” comprising both OxySure products and AED products.

Expansion of Board of Directors:

In March 2013 we announced that Mr. Jeremy M. (“Jerry”) Jones, former Chairman and CEO of Apria Healthcare has joined our Board of Directors as an independent director effective April 1, 2013.

Mr. Jones brings over 35 years of healthcare industry experience to our Board. Mr. Jones founded Homedco Group, Inc., a home healthcare services company, which he took public in 1991. Homedco merged into Apria Healthcare Group, Inc. (“Apria”) in 1995 and from 1995 through January 1998, Mr. Jones was Chief Executive Officer and Chairman of Apria, which became the largest homecare service provider in the nation under his leadership through merger, acquisitions and increased market dominance, and was sold to the Blackstone Group (NYSE: BX) for $1.7 billion in December 1998. Mr. Jones currently serves as Chairman of On Assignment, Inc. (NYSE: ASGN), a $1.3 billion leader in the healthcare and life sciences sectors focusing on in-demand, skilled medical and technical staffing. At On Assignment he also serves on the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee.

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Off Balance Sheet Arrangements and Contractual Obligations

12 Months Ended

Dec. 31, 2012

Off Balance Sheet Arrangements and Contractual Obligations [Abstract]

OFF BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

NOTE 13 – 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.

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Commitments and Contingency

12 Months Ended

Dec. 31, 2012

Commitments and Contingency [Abstract]

COMMITMENTS AND CONTINGENCY

NOTE 9 – COMMITMENTS AND CONTINGENCY

Leases

Operating Lease – During 2007, we entered into a long-term non-cancelable lease for office space, which expired in October 2012. In connection with the execution of this lease agreement, we received leasehold improvements totaling $324,000. The leasehold improvements were recorded as deferred rent and have been amortized as a reduction to rent expense over the lease term. Additionally, we issued 50,000 warrants in connection with the lease agreement. We issued a further 7,500 warrants in connection with a modification to the lease agreement, related to the removal of an escrow requirement of us. As at December 31, 2012 we rented our space on a month to month basis while a new lease is being negotiatedwith our landlord.

At December 31, 2012, future minimum lease payments under the non-cancelable operating lease for the year ended December 31, 2012 were as follows:

2013		-
Thereafter		-
	$	-

Rental expense for the years ended December 31, 2012 and 2011 was $93,522 and $115,728, respectively.

Capital lease –We lease certain of equipments under capital lease agreements that expired at various dates through 2012.

During 2006 we entered into a master lease agreement with a VenCore Solutions, LLC (“Vencore”) that allowed us to lease up to $750,000 of equipment (the “Vencore Master Lease”). This maximum amount available under this lease was subsequently increased to $805,000. The Vencore Master Lease required a security deposit of 10% of the amount of each individual lease schedule, a payment of Series A Convertible Preferred Stock shares equal to 5% of the lease divided by $1.00, and 36 monthly payments of 3.33% of the lease. We have the option to purchase the equipment at the end of each lease term at the lesser of 12% of the original equipment cost or the fair market value. On March 4, 2011 Vencore agreed to a payment moratorium, which was to continue until the earlier to occur of (i) the execution and completion of a mutually agreed upon cash settlement ("Settlement"), or (ii) the execution of a mutually agreed upon repayment plan ("Plan") or February 29, 2012.

On July 9, 2012 we entered into a second moratorium agreement (“Second Payment Moratorium”) with Vencore. The Second Payment Moratorium provides for the following:

a)  The balance outstanding to Vencore remains the balance outstanding at the end of the first payment moratorium, which was $307,661.83 (“Debt Obligation”);

b)  The term of the Second Payment Moratorium (the “Moratorium Period”) shall expire on the earlier to occur of: (i) July 1, 2013;  (ii) a cash settlement or repayment plan being entered into; or (iii) a merger or acquisition of OxySure or the sale of substantially all of its assets (collectively a “Sale”);

c)  We will not be obligated to make any payments during the Moratorium Period;

d)  No late charges or interest will accrue during the Moratorium Period;

e)  Any amounts we may pay towards the Debt Obligation during the Moratorium Period shall reduce the Debt Obligation;

f)  In the event of a Sale the entire Debt Obligation shall immediately become due and payable; and

g)  Vencore shall make no demands or take any actions against us during the Moratorium Period.

In exchange for the Second Payment Moratorium, we issued to Vencore two warrants (the “Warrants”) as follows:

(a)  A warrant as to 22,500 common shares at an exercise price per share of $0.82; and

(b)  A warrant as to 32,500 common shares at an exercise price per share of $1.00.

The terms of the Warrants are 5 years each and Vencore has the ability to exercise the Warrants on a cashless/net-issuance basis.

Between 2007 and 2012, we entered into agreements with other finance companies (other than Vencore) to acquire equipment with interest rates ranging from 7% to 19% with three to five-year lease terms. Minimum non-cancellable lease payments required under all capital leases as at December 31, 2012 are as follows:

2013	296,077
2014	1,728
2015	576
Total	298,381
Less amounts representing interest	(808	)
Total	297,573

Our gross amounts of assets recorded under capital leases by major class, and the related accumulated amortization at December 31, 2012 are as follows:

Machinery & equipment	916,029
Less accumulated depreciation	(902,965	)
Machinery & equipment, net	13,064
Computer equipment	3,707
Less accumulated depreciation	(3,707	)
Computer equipment, net	-

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. As at December 31, 2012 we were not involved in any legal proceedings.

Indemnification

Under the indemnification provisions of our customer agreements, we routinely agree to indemnify and defend our customers against infringement of any patent, trademark, or copyright of any country or the misappropriation of any trade secret, arising from the customers’ legal use of our products or services. The exposure to us under these indemnification provisions is generally limited to the total amount paid by the customers under pertinent agreements. However, certain indemnification provisions potentially expose us to losses in excess of the aggregate amount received from the customer. To date, there have been no claims against us or our customers pertaining to such indemnification provisions and no amounts have been recorded.

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Stock Options and Warrants (Details 5) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Summary of warrants activity
Outstanding Options, ending balance	1,877,034
Warrants [Member]
Summary of warrants activity
Outstanding Options, beginning balance	2,759,650	2,717,226
Outstanding options, Weighted Average Exercise Price, beginning balance	$ 0.48	$ 0.51
Granted	55,000	436,754
Granted, Weighted Average Exercise Price	$ 0.93	$ 0.20
Stock option/warrant exercised	(882,616)	(294,330)
Exercised, Weighted Average Exercise Price	$ 0.01	$ 0.09
Forfeited/Cancelled, Shares	(55,000)	(100,000)
Forfeited/Cancelled, Weighted Average Exercise Price	$ 0.92	$ 0.82
Outstanding Options, ending balance	1,877,034	2,759,650
Outstanding Options, Weighted Average Exercise Price, ending balance	$ 0.65	$ 0.48

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Income Taxes

12 Months Ended

Dec. 31, 2012

Income Taxes [Abstract]

INCOME TAXES

NOTE 7 - INCOME TAXES

The Company adopted the provisions of ASC 740, “Accounting for Uncertainty in Income Taxes,” on January 1, 2008.  FASB ASC Topic 740 clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FASB ASC Topic 740 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition.

As a result of the implementation of FASB ASC Topic 740, the Company did not recognize a decrease or increase in the liability for unrecognized tax benefits.

As of December 31, 2012 and 2011, the Company had cumulative net operating loss carry-forwards of approximately $11,648,818 and $10,936,288 respectively, which expire in varying amounts between 2017 and 2027.   Realization of this potential future tax benefit is dependent on generating sufficient taxable income prior to expiration of the loss carry-forward. The deferred tax asset related to this (and other) potential future tax benefits has been offset by a valuation allowance in the same amount. The amount of the deferred tax asset ultimately realizable could be increased in the near term if estimates of future taxable income during the carry-forward period are revised.

Deferred income tax assets of $4,669,594 and $4,390,047 for the years December 31, 2012 and 2011 respectively were offset in full by a valuation allowance.

The components of the Company's net deferred tax assets, including a valuation allowance, for the years 2012 and 2011 are as follows:

Deferred Tax Assets	As of December 31, 2012			As of December 31, 2011
Net operating loss carry-forwards	$	3,960,598		$	3,718,338
Net deferred tax assets before valuation allowance	$	4,669,594		$	4,390,047
Less: Valuation Allowance	$	(4,669,594	)	$	(4,390,047	)
Net deferred tax assets		--			--

Reconciliation between the amounts of income tax benefit determined by applying the applicable U.S. income tax rate to pre-tax loss is as follows:

	As of December 31, 2012			As of December 31, 2011
Statutory federal income tax		34	%		34	%
Change in valuation allowance on deferred tax assets		(34	%)		(34	%)

Due to the inherent uncertainty in forecasts and future events and operating results, the Company has provided for a valuation allowance in an amount equal to gross deferred tax assets resulting in the above figures for the periods audited.

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts more likely than not to be realized.

The Company’s income tax provision is based on calculations and assumptions that will be subject to examination by the Internal Revenue Service and other tax authorities. The potential outcomes of these examinations are regularly assessed in determining the adequacy of the provision for income taxes. Should the actual results differ from the Company’s estimates, the income tax provision would be adjusted in the period in which the facts that give rise to the revision become known. Tax law and rate changes are reflected in the income tax provision in the period in which changes are enacted.

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License and Service Agreements

12 Months Ended

Dec. 31, 2012

License and Service Agreements [Abstract]

LICENSE AND SERVICE AGREEMENTS

NOTE 8 – LICENSE AND SERVICE AGREEMENTS

We did not enter into any new license agreements during 2012.

We entered into the following service agreements during 2012:

Hagerman service agreement (“Hagerman Agreement”): On October 8, 2012 we entered into an independent contractor agreement with Chris Hagerman, a third party service provider, with the following deliverables, inter alia: Website development; database development (Sequel); Online marketing collateral development; Distribute Company press releases, including via email; marketing efforts to include lead generation; create and place banner ads on Internet; email lead generation and collection; send announcement of new email services to shareholder lists; continuously email news releases to investor database; update investor database with existing shareholders information; list any private placement, annual report, documents; convert documents to online format (html) for e-delivery (download); deliver requested documents online; advanced investment community support; broker network introductions; digitize & broadcast company, product, sales video presentation; link Company’s website to the video presentation; announce video presentation to investor database; announce video presentation to financial advisors; feature company in market newsletters; contract for a third party company research report; distribute research report to financial advisors; distribute research report to select investors; update and maintain Company domain www.oxysure.com; design and host company domain; upgrade current site to have international IR links/lead collection; upgrade current site for mobile/smart phone/tablets; search engine optimization – SEO campaign; register Company’s website on search engines and announce Company’s website to investors. In connection with the Hagerman Agreement, the initial term of the agreement is for a period of one year, and we agreed to issue as total aggregate compensation for all services rendered over 12 months, a total of 176,000 restricted shares of our common stock, as follows: (i) 44,000 shares of common stock was issued upon execution of the Hagerman Agreement; (ii) 66,000 shares of common stock was to be issued on or about January 8, 2013, and (iii) 66,000 shares of common stock is to be issued on or about April 8, 2013.

Wall Street Buy Sell Hold Consulting agreement (“WSBSH Agreement”): On October 22, 2012 we entered into a 3-month consulting agreement with Wall Street Buy Sell Hold Inc. (“WSBSH”) to assist us with strategic business planning, and investor and public relations services. We agreed to compensate WSBSH as follows: we paid a total of five thousand dollars ($5,000.00) and issued a total of twenty five thousand (25,000) shares of the our restricted common stock for the first month of service; we paid seven thousand dollars ($7,000) and issued thirty five thousand (35,000) shares of our restricted common stock for the second month of service. We did not pay WSBSH anything for the third month of service during 2012, as we entered into a modified agreement with WSBSH in January 2013 for the third month of service.

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Related Party Transactions

12 Months Ended

Dec. 31, 2012

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

NOTE 10 – RELATED PARTY TRANSACTIONS

As discussed in Note 4 – “Notes Payable,” several of the notes payable are entered into with related parties.

A summary of the related party financings and notes payable to related parties as at December 31, 2012 is as follows:

	Shareholder advances
Related party	Julian Ross(1)			Other
Amount	$	203,222		$	4,250
Stated interest rate		0	%		0	%
Maturity		n/a			n/a

(1) Our CEO, Mr. Ross provided us with a total of $460,221.66 during 2012 in shareholder cash advances and salary relinquishments to fund working capital from time to time during the year. Of this amount, $157,000 was repaid in cash, and in addition Mr. Ross voluntarily relinquished a total of $100,000. The net amount outstanding as at December 31, 2012 was $203,222.

As some of our related parties provided us non-interest bearing notes at various times, we issued various warrants to these related parties. On December 31, 2012 two of our affiliates, JTR Investments Limited and Agave Resources, LLC converted a total of $2,018,117 in convertible notes to common stock. Pursuant to the conversions: (i) The First Note in the amount of $750,000 was converted into 500,000 shares of common stock at a conversion price of $1.50 per share and the First Note was extinguished. (ii) The JTR Senior Note in the amount of $1,018,656 was converted into 679,104 shares of common stock at a conversion price of $1.50 per share and the JTR Senior Note was extinguished. (iii) The Second Note in the amount of $250,000 was converted into 166,667 shares of common stock at a conversion price of $1.50 per share and the Second Note was extinguished.

Don Reed, President of Agave is also a Director of us. Julian Ross, our CEO is also the President of JTR Management, LLC, the general partner of JTR Investments, Limited. Please refer to Note 4, “Notes Payable,” and Note 6 – “Stock Options and Warrants” for details.

During 2012 Tim Hutton converted $20,000 outstanding into 23,256 shares of our common stock at a conversion price of $.86 per share. Tim Hutton is the spouse of Vicki Jones, a director of us. Please see Note 4 - "Notes payable."

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Income Taxes (Details 1)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Summary of reconciliation between U.S. income tax rate to pre-tax loss
Statutory federal income tax	34.00%	34.00%
Change in valuation allowance on deferred tax assets	(34.00%)	(34.00%)

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License and Service Agreements (Details) (USD $)	0 Months Ended	12 Months Ended	1 Months Ended	12 Months Ended
	Oct. 08, 2012 Hangerman Agreement [Member]	Dec. 31, 2012 Hangerman Agreement [Member]	Oct. 22, 2012 Wall Street Buy Sell Hold Consulting Agreement [Member]	Dec. 31, 2012 Wall Street Buy Sell Hold Consulting Agreement [Member]
License and Service Agreements (Textual)
Initial term of agreement	1 year		3 months
Aggregate number of restricted shares of common stock issued under agreement	176,000
Restricted shares of common stock issued upon execution date	44,000
Restricted shares of common stock to be issued on or about January 8, 2013		66,000
Restricted shares of common stock to be issued on or about April 8, 2013		66,000
Compensation expenses paid for first month of service				$ 5,000
Restricted shares of common stock issued for first month of service				25,000
Compensation expenses paid for second month of service				$ 7,000
Restricted shares of common stock issued for second month of service				35,000

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Income Taxes (Details) (USD $)	Dec. 31, 2012	Dec. 31, 2011
Deferred Tax Assets
Net operating loss carry-forwards	$ 3,960,598	$ 3,718,338
Net deferred tax assets before valuation allowance	4,669,594	4,390,047
Less: Valuation Allowance	(4,669,594)	(4,390,047)
Net deferred tax assets

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Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2012

Fair Value Measurements [Abstract]

Summary of Financial assets and liabilities measured at fair value on a recurring basis

	Total		Level 1		Level 2		Level 3
Cash (1)	$	13,514	$	13,514		-		-
Total cash equivalents as of December 31, 2012	$	13,514	$	13,514		-		-
(1) Included in Cash and cash equivalents on the Company's Balance Sheet.
	Total		Level 1		Level 2		Level 3
Cash (1)	$	65,118	$	65,118		-		-
Total cash equivalents as of December 31, 2011	$	65,118	$	65,118		-		-
(1) Included in Cash and cash equivalents on the Company's Balance Sheet.

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Notes Payable (Details 5) (USD $)	Dec. 31, 2012
Schedule of aggregate maturities of debt
2013	$ 398,589
2014	39,588
2015	36,485
Thereafter
Note payable, Total	$ 474,661

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Going Concern

12 Months Ended

Dec. 31, 2012

Going Concern [Abstract]

GOING CONCERN

NOTE 15 – 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.  We have been suffering from recurring losses from operations. However, our total notes payable has decreased significantly from $2,727,449 at December 31, 2011 to $474,661 at December 31, 2012. Our long term notes payable has decreased significantly from $1,162,390 at December 31, 2011 to $76,072 at December 31, 2011. Our current notes payable has also decreased significantly from $1,565,059 at December 31, 2011 to $398,589 at December 31, 2012.

Our continuation as a going concern is dependent upon our ability to generate sufficient cash flow from operations to meet our obligations on a timely basis and/or obtain financing as may be required.  As of December 31, 2012 and 2011, we have incurred net losses from operations and had stockholders’ deficits of $14,258,667 and $13,430,659, respectively, since inception.  We had a working capital deficit of $1,536,239 as of December 31, 2012 and $2,244,219 as of December 31, 2011. We have had limited revenues from the marketing of our primary product, the OxySure Model 615 as we are early in its commercialization and it currently operates in this single industry segment.  These factors raise significant doubt about our ability to continue as a going concern.

During the next 12 months, our foreseeable cash requirements will relate to continual development of the operations of our business, maintaining our good standing and making the requisite filings with the Securities and Exchange Commission, and the payment of expenses associated with reviewing or investigating any potential business ventures.  We may experience a cash shortfall and may be required to raise additional capital. Historically, we have relied upon internally generated funds and funds from the sale of shares of stock and loans and advances from our shareholders and private investors to finance our operations and growth. We may raise additional capital through future public or private offerings of our stock or through loans from investors, although there can be no assurance that we will be able to obtain such financing.  Our failure to do so could have a material and adverse effect upon us and our shareholders.

We have a series of plans to mitigate the going concern:

1.   Management is seeking additional sources of equity and/or debt financing on terms that are reasonable for us; however, there is no assurance that any such additional funding will be available.

2.   We anticipate that sales during 2013 and 2014 from existing markets will grow, and we believe that we will be able to generate sales from new markets. Existing markets include education customers such as schools, school districts and colleges, and commercial customers such as manufacturing facilities, churches and other commercial venues. New markets will include, but not be limited to, government customers and new international territories and markets.

3.   We plan to increase our market penetration through the addition of new distributors, both the US and outside the US during 2013 and beyond. We also plan to increase the number of sub-distributors and sales agents we will appoint in the U.S. to sell our products.

4.   We plan to continue to diversify our product range through the addition of complementary products and solutions. Some of these products will be sourced from third party manufacturers and suppliers.

5.   We may seek or consider strategic business combinations with other companies to complement our resources and create synergies.

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Balance Sheet Components (Tables)

12 Months Ended

Dec. 31, 2012

Balance Sheet Components [Abstract]

Components of balance sheet

	December 31,
	2012			2011
Cash and cash equivalents:
Cash		13,514			65,118
Total cash and cash equivalents	$	13,514		$	65,118
Inventories:
Total inventories	$	221,345		$	247,956
Accounts Receivable, net of allowances	$	18,487		$	2,758
Property and equipment, net:
Machinery and equipment		919,736			919,736
Leasehold improvements		547,856			547,856
Computer equipment and furniture and fixtures		236,797			203,922
Software		10,691			10,691
		1,715,080			1,682,204
Accumulated depreciation and amortization		(1,687,481	)		(1,548,545	)
Total property and equipment, net	$	27,599		$	133,659
Other Assets:
Deferred loan costs, net		224,751			-
Security deposits		53,274			53,274
Website development, software, URLs		238,348			-
	$	516,373		$	53,274
Accounts payable and accrued expenses:
Leasehold Improvement Allowance		-			48,969
Accounts payable		70,141			136,263
Accrued interest		-			40,094
Accrued expenses for website and software		143,286			-
Other accrued liabilities		382,228			20,015
Total accounts payable and accrued expenses	$	595,655		$	245,340

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Notes Payable (Details 3) (USD $)	Dec. 31, 2012	Dec. 31, 2011
Carrying values of short-term and long-term notes payable
Total short-term notes payable, Principal	$ 464,815	$ 1,669,148
Total short-term notes payable, Discount	66,226	104,088
Total short-term notes payable	398,589	1,565,059
Total long-term notes payable, Principal	104,000	1,354,480
Total long-term notes payable, Discount	27,928	192,089
Total long-term notes payable	76,072	1,162,390
Total short-term and long-term notes payable, Principal	568,815	3,023,628
Total short-term and long-term notes payable, Discount	94,154	296,177
Total short-term and long-term notes payable	474,661	2,727,449
JTR, Senior note [Member]
Carrying values of short-term and long-term notes payable
Effective Interest Rate		0.02%
Total short-term notes payable, Principal		1,104,656
Total short-term notes payable, Discount
Total short-term notes payable		1,104,654
Sinacola, First Landlord Note [Member]
Carrying values of short-term and long-term notes payable
Effective Interest Rate		47.08%
Total short-term notes payable, Principal		125,000
Total short-term notes payable, Discount
Total short-term notes payable		125,000
Sinacola, Second Landlord Note [Member]
Carrying values of short-term and long-term notes payable
Effective Interest Rate		44.97%
Total short-term notes payable, Principal		126,407
Total short-term notes payable, Discount
Total short-term notes payable		126,407
Sinacola, Third Landlord Note [Member]
Carrying values of short-term and long-term notes payable
Effective Interest Rate	18.18%	54.55%
Total short-term notes payable, Principal	110,000	110,000
Total short-term notes payable, Discount		50,000
Total short-term notes payable	110,000	60,000
Sinacola, Fourth Landlord Note [Member]
Carrying values of short-term and long-term notes payable
Effective Interest Rate	17.36%	52.09%
Total short-term notes payable, Principal	110,715	110,715
Total short-term notes payable, Discount		48,056
Total short-term notes payable	110,715	62,660
Sinacola, Fifth Landlord Note [Member]
Carrying values of short-term and long-term notes payable
Effective Interest Rate	50.00%	38.61%
Total short-term notes payable, Principal	50,000
Total short-term notes payable, Discount	5,694
Total short-term notes payable	44,306
Total long-term notes payable, Principal		50,000
Total long-term notes payable, Discount		30,694
Total long-term notes payable		19,306
Sinacola, Sixth Landlord Note [Member]
Carrying values of short-term and long-term notes payable
Effective Interest Rate	47.75%	36.87%
Total short-term notes payable, Principal	50,000
Total short-term notes payable, Discount	5,438
Total short-term notes payable	44,562
Total long-term notes payable, Principal		50,000
Total long-term notes payable, Discount		29,311
Total long-term notes payable		20,689
Frisco EDC [Member]
Carrying values of short-term and long-term notes payable
Effective Interest Rate	12.34%	12.34%
Total short-term notes payable, Principal	44,000	32,620
Total short-term notes payable, Discount	12,412	6,032
Total short-term notes payable	31,588	26,588
Total long-term notes payable, Principal	104,000	154,380
Total long-term notes payable, Discount	27,928	46,720
Total long-term notes payable	76,072	107,660
Agave, First note [Member]
Carrying values of short-term and long-term notes payable
Effective Interest Rate		0.00%
Total long-term notes payable, Principal		750,000
Total long-term notes payable, Discount
Total long-term notes payable		750,000
JTR, Second note [Member]
Carrying values of short-term and long-term notes payable
Effective Interest Rate		0.00%
Total long-term notes payable, Principal		250,000
Total long-term notes payable, Discount
Total long-term notes payable		250,000
Sinacola, Seventh Landlord Note [Member]
Carrying values of short-term and long-term notes payable
Effective Interest Rate	43.64%	33.20%
Total short-term notes payable, Principal	50,050
Total short-term notes payable, Discount	21,840
Total short-term notes payable	28,210
Total long-term notes payable, Principal		50,050
Total long-term notes payable, Discount		43,680
Total long-term notes payable		6,370
Sinacola, Eighth Landlord Note [Member]
Carrying values of short-term and long-term notes payable
Effective Interest Rate	41.64%	31.68%
Total short-term notes payable, Principal	50,050
Total short-term notes payable, Discount	20,842
Total short-term notes payable	29,208
Total long-term notes payable, Principal		50,050
Total long-term notes payable, Discount		41,684
Total long-term notes payable		8,366
Related Party Loans [Member]
Carrying values of short-term and long-term notes payable
Effective Interest Rate		0.00%
Total short-term notes payable, Principal		59,750
Total short-term notes payable, Discount
Total short-term notes payable		$ 59,750

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Summary of Significant Accounting Policies (Details Textual) (USD $)	1 Months Ended	12 Months Ended
	Jul. 31, 2004	Dec. 31, 2012 Patent	Dec. 31, 2011
Summary of Significant Accounting Policies (Textual)
Accumulated amortization of patents and trademarks		$ 240,934	$ 211,073
Number of issued patents own by company		9
Stockholders' equity, reverse stock split	1-for-5
Deferred revenue		499,225	421,713
Credit period granted to recurring customers on sales		30 days
Depreciation		138,936	174,173
Impairment charges for patents		0	0
Deferred loan cost of other assets		249,723
Amortization expense of other assets		24,972	0
Bad debts expenses		1,376	0
Research and development expense		25,816	260
Expected term of the stock options		5 years
Issuance of common stock options to employees as compensation		7,999	104,419
Common stock options and warrants issued for services		0	29,354
Advertising and promotion costs		76,427	15,141
Patents and Trademarks [Member]
Summary of Significant Accounting Policies (Textual)
Accumulated amortization of patents and trademarks		$ 29,861	$ 29,566
Furniture and Fixtures [Member]
Summary of Significant Accounting Policies (Textual)
Property and equipment, useful life		5 years
Software [Member]
Summary of Significant Accounting Policies (Textual)
Property and equipment, useful life		3 years
Software [Member] | Minimum [Member]
Summary of Significant Accounting Policies (Textual)
Property and equipment, useful life		3 years
Software [Member] | Maximum [Member]
Summary of Significant Accounting Policies (Textual)
Property and equipment, useful life		5 years
Machinery and Equipment [Member] | Minimum [Member]
Summary of Significant Accounting Policies (Textual)
Property and equipment, useful life		5 years
Machinery and Equipment [Member] | Maximum [Member]
Summary of Significant Accounting Policies (Textual)
Property and equipment, useful life		7 years
Leasehold Improvements [Member] | Minimum [Member]
Summary of Significant Accounting Policies (Textual)
Property and equipment, useful life		3 years
Leasehold Improvements [Member] | Maximum [Member]
Summary of Significant Accounting Policies (Textual)
Property and equipment, useful life		7 years

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Statement of Stockholders' Equity (USD $)	Total	Convertible Preferred Stock	Common Stock	Warrant Issuance	Additional Paid-in Capital - Preferred Stock	Additional Paid-in Capital - Warrants and Options	Additional Paid-in Capital	Deficit Accumulated	Accumulated Other Comprehensive Income/ (Loss)
Beginning Balance at Dec. 31, 2010	$ (2,325,966)	$ 1,563	$ 6,290	$ 167,750	$ 3,214,401	$ 3,909,615	$ 2,272,674	$ (11,898,260)
Beginning Balance, Shares at Dec. 31, 2010		3,126,434	15,724,816
- Common Stock options exercised	21,260		14				21,246
- Common Stock options exercised, Shares			34,750	294,330
- Common Stock warrants exercised	2,110		118	(35,000)			36,992
Common Stock warrants exercised, Shares			294,330
Common stock issued upon conversion of convertible notes	465,969		186				465,783
- Common Stock issued upon conversion of convertible notes, Shares			465,969
- Common stock issued in connection with the acquisition of assets
- Common Stock options issued for compensation	104,419					104,419
- Common Stock options and warrants issued for services	29,354					29,354
- Common stock warrants issued in connection with deferred loan costs
- Common Stock Warrants issued in connection with convertible loans	458,114					458,114
Net Loss	(1,532,399)							(1,532,399)
Balance at Dec. 31, 2011	(2,777,139)	1,563	6,608	132,750	3,214,401	4,501,501	2,796,695	(13,430,659)
Balance, Shares at Dec. 31, 2011		3,126,434	16,519,865
- Common Stock options exercised	98,284		146				98,138
- Common Stock options exercised, Shares			374,808	882,616
- Common Stock warrants exercised	6,106		353	(85,000)			90,753
Common Stock warrants exercised, Shares			882,616
- Common stock issued upon conversion of convertible preferred stock	0	(1,154)	1,126		(2,306,530)		2,306,558
- Common stock issued upon conversion of convertible preferred stock, Shares		(2,307,684)	2,815,374
Common stock issued upon conversion of convertible notes	2,433,850		685				2,433,165
- Common Stock issued upon conversion of convertible notes, Shares			1,711,952
- Common stock issued for cash	41,250		28				41,222
- Common stock issued for cash, shares			68,889	882,616
Common stock issued for services	20,748		39				20,709
Common stock issued for services, shares			97,500
- Common stock issued in connection with the acquisition of assets	95,062		31				95,031
- Common stock issued in connection with the acquisition of assets, shares			77,674
- Common Stock options issued for compensation	7,999					7,999
- Common Stock options and warrants issued for services
- Common stock warrants issued in connection with deferred loan costs	249,723					16,913	232,810
- Common Stock Warrants issued in connection with convertible loans
- Prior period adjustment: correction to accounting error	263							263
Net Loss	(828,271)							(828,271)
Balance at Dec. 31, 2012	$ (652,125)	$ 409	$ 9,016	$ 47,750	$ 907,871	$ 4,526,413	$ 8,115,081	$ (14,258,667)
Balance, Shares at Dec. 31, 2012		818,750	22,548,678

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Notes Payable

12 Months Ended

Dec. 31, 2012

Notes Payable [Abstract]

NOTES PAYABLE

NOTE 4 – 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. On April 3, 2007 we entered into a note agreement with the City of Frisco, Texas for $243,000 (the “Frisco Note”) pursuant to an economic incentive package provided through the Frisco Economic Development Corporation (“FEDC”). The note required varying annual principal payments through August 2012.  The note was non-interest bearing; however, interest has been imputed at 12.18% per annum. The unamortized discount at December 31, 2010 was $66,198. Individual annual payments were to be forgiven if certain performance targets are achieved, which include the number of full time employees, square feet occupied in the city of Frisco and the taxable value of business and personal property in the City of Frisco. The first annual payment for 2008 in the amount of $30,000 was forgiven and we recognized the entire $30,000 under “Other income” in the Statement of Operations and Accumulated Deficit for the year ended December 31, 2008.  On March 22, 2011 we entered into an Amended and Restated Performance Agreement with the FEDC. In terms of the Amended and Restated Performance Agreement, the FEDC provided us with economic assistance in the form of the renewal and extension of the outstanding forgivable loan of $213,000 together with revised performance credits over 5 years, commencing on March 22, 2011 and ending on the earlier to occur of: (i) the full payment of the economic incentives; or (ii) March 31, 2016.

The renewed Frisco Note requires varying annual principal payments through December 2015. The Frisco Note is non-interest bearing; however, interest has been imputed at 12.34% per annum.

On December 1, 2011 we received the first performance credit from the FEDC in the amount of $26,000 pursuant to the Amended and Restated Performance Agreement. The unamortized discount at December 31, 2011 was $52,752, and the net amount of the Frisco Note as at December 31, 2011 was $134,248.

Effective December 1, 2012 we received the performance credit from the FEDC in the amount of $39,000 pursuant to the Amended and Restated Performance Agreement. The unamortized discount at December 31, 2012 was $40,340, and the net amount of the Frisco Note as at December 31, 2012 was $107,660.

Future principal payments of the Frisco Note payable are as follows:

2013		44,000
2014		52,000
2015		52,000
	$	148,000

Agave/JTR Subordinated, Convertible Notes.  During March 2008, we completed a $1 million financing package consisting of a promissory note for $750,000 (“First Note”) and a promissory note with a draw down provision for $250,000 (“Second Note”) (collectively, the “Notes”). The Notes are subordinated notes and are due and payable on the earlier of (i) completion of the next financing Round completed by us or (ii) one year after the Notes are issued. In March 2009 the First Note and the Second Note were modified by extending the maturity date in each case to April 15, 2010. On December 31, 2009, the First Note and the Second Note were further modified by extending the maturity date in each case to April 15, 2011.  In August 2010, the First Note and the Second Note were further modified by extending the maturity date in each case to April 15, 2012. In November 2011, the First Note and the Second Note were further modified by extending the maturity date in each case to April 15, 2013. The holder of the First Note is Agave Resources, LLC (“Agave”), and the President of Agave is Donald Reed, one of our Directors.  In connection with the First Note, on April 15, 2008 Agave was also issued penny warrants to purchase 350,000 shares of common stock.  The warrants are immediately exercisable and expire on April 15, 2013.  The holder of the Second Note is JTR Investments, Limited (“JTR”) a company controlled by Julian T. Ross, our founder and CEO.

As of December 31, 2008 the maximum of $250,000 has been drawn against the Second Note.  In connection with the Second Note, on December 31, 2008 JTR was also issued penny warrants to purchase 116,667 shares of common stock.  Both Notes are non-interest bearing.  The basis for issuing penny warrants in connection with the First Note and the Second Note include, but are not limited to, the fact that no interest is payable on the Notes, our ability to attract new investment at the time, market conditions and other factors.  Given these factors, the Board of Directors has deemed the terms of these transactions to be fair.  No third party fairness opinion was obtained in relation to these transactions.

Conversion Rights: At any time on or prior to the Maturity Date, all or any portion of the then outstanding Principal Amount and accrued but unpaid interest (if any) of the Notes may be converted (the "Optional Conversion") into a number of shares of our common stock (the "Optional Conversion Shares") equal to the amount of the then outstanding Principal Amount plus the then accrued but unpaid interest to be converted, divided by the Conversion Price which shall be $1.50 per Optional Conversion Share.

In accordance with ASC 470-20, Debt with conversions and other options, the proceeds from the First Note were allocated based on the relative fair value of the note without the warrant issued in conjunction with the note and of the warrant itself at the time of issuance. We recorded the relative fair value of the warrant issued to Agave in the amount of $346,936 as a debt discount upon issuance, and amortized this debt discount as interest expense over the life of the note.  Additionally, as a result of issuing the warrant with the subordinated convertible promissory note, a beneficial conversion option was recorded as a debt discount reflecting the incremental conversion option intrinsic value benefit of $96,936, at the time of issuance provided to the holder of the note, which was also amortized as interest expense over the life of the note. We recorded interest expense in the amount of $0 for each of the years ended December 31, 2012 and December 31, 2011 in connection with the First Note.

We recorded the relative fair value of the warrant issued to JTR in connection with the Second Note in the amount of $115,587 as a debt discount upon issuance, and expensed this amount as interest expense upon issuance.  Additionally, as a result of issuing the warrant with the subordinated convertible promissory note, a beneficial conversion option was recorded as a debt discount reflecting the incremental conversion option intrinsic value benefit of $32,254, at the time of issuance provided to the holder of the note, which was also expensed as interest expense upon issuance. We recorded interest expense in the amount of $0 for each of the years ended December 31, 2012 and 2011 in connection with the JTR Second Note.

JTR Senior, Convertible Note. In July, 2008, JTR agreed to provide us with additional working capital to fund continuing operations (the “Senior Note Interim Funding”).  On November 1, 2008 the Board agreed with JTR on the terms of a loan with a draw down provision of up to a maximum of $750,000.  This maximum amount was subsequently increased to $2,000,000. This was a senior note (all the tranches under this facility, collectively, the “JTR Senior Note”) with no interest payable.  All amounts advanced by JTR during the Senior Note Interim Funding were draw downs on the JTR Senior Note.  In connection with the JTR Senior Note, we issued JTR .47 penny warrants for every dollar drawn under this facility.

As of December 31, 2012 and 2011 the total number of penny warrants issued to JTR pursuant to the JTR Senior Note was 572,503 and 572,503 respectively.  The basis for issuing penny warrants in connection with the JTR Senior Note include, but are not limited to, the fact that no interest is payable on the note, the Company’s our ability to attract new investment at the time, market conditions, the terms previously agreed to in connection with the First Note and Second Note, and other factors.  Given these factors, the Board of Directors has deemed the terms of this transaction to be fair.  No third party fairness opinion was obtained in relation to this transaction.

Conversion Rights: At any time on or prior to the Maturity Date all or any portion of the then outstanding Principal Amount and accrued but unpaid interest of this Note may be converted (the "Optional Conversion") into a number of shares of our common stock (the "Optional Conversion Shares") equal to the amount of the then outstanding Principal Amount plus the then accrued but unpaid interest to be converted, divided by the Conversion Price which shall be $1.50 per Optional Conversion Share.

Maturity: The total amount outstanding under the Senior Note was classified as current prior to conversion – Please see “Conversion of First Note, Second Note, and JTR Senior Note” below.

In accordance with ASC 470-20, Debt with conversions and other options, the proceeds from the JTR Senior Note 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 recorded the total relative fair values of the warrants issued to JTR in connection with the JTR Senior Note in the cumulative amount of $567,276 as a debt discount upon each issuance, and expensed each debt discount as interest expense upon issuance of each note tranche.  Additionally, as a result of issuing the warrants with the convertible promissory notes, a beneficial conversion option was recorded as a debt discount on each note reflecting the incremental conversion option intrinsic value benefit totaling $168,641, at the time of each issuance provided to JTR in connection with the JTR Senior Note up to and including December 31, 2012. The debt discount for each issuance under the JTR Senior Note is expensed as interest expense upon each issuance. We recorded interest expenses in the amounts of $0 and $262,554 for the years ended December 31, 2012 and December 31, 2011, respectively, in connection with the JTR Senior Note.

Conversion of First Note, Second Note, and JTR Senior Note: On December 31, 2012 the First Note, Second Note and JTR Senior Note were all converted to common stock at their respective stated conversion prices of $1.50. Pursuant to the conversions, a total of $2,018,656 was converted into a total of 1,345,771 shares of common stock as follows: (i) The First Note in the amount of $750,000 was converted into 500,000 shares of common stock at the stated conversion price of $1.50 per share and the First Note was extinguished; (ii) The balance outstanding under the JTR Senior Note as at December 31, 2012 in the amount of $1,018,656 was converted into 679,104 shares of common stock at the stated conversion price of $1.50 per share and the Senior Note was extinguished; and (iii) The Second Note in the amount of $250,000 was converted into 166,667 shares of common stock at the stated conversion price of $1.50 per share and the Second Note was extinguished.

Sinacola Subordinated, Convertible Notes.

First Landlord Note; Second Landlord Note:

On December 10, 2009 we entered into a Rent Satisfaction Agreement (the “2009 RSA”) with our landlord, Sinacola Commercial Properties, Ltd. (“Sinacola”). In terms of the 2009 RSA, all of our outstanding rent obligations under our lease agreement, up to and including December 31, 2009 including, but not limited to, base rent, deferred rent, and its share of operating costs, are satisfied in full.

We issued Sinacola two Promissory Notes pursuant to the 2009 RSA, as follows:

First Landlord Note:  The first note (the “First Landlord Note”) was a subordinated convertible note in the principal amount of $125,000. The First Landlord Note carried no interest and was convertible, at Sinacola’s option, into the common stock of the Company at an exercise price of $1.00 per common share on the maturity date.

Second Landlord Note:  The second note (the “Second Landlord Note”) was a subordinated convertible note in the principal amount of $126,407. The Second Landlord Note carried no interest and was convertible into the common stock of the Company at an exercise price of $1.50 per common share on the maturity date.  However, if the common stock has traded at $1.50 or above for four (4) consecutive weeks on a nationally recognized market (based on daily closing prices) then the Second Landlord Note was convertible at the Company’s option.

Maturity Date – Each of the First Landlord Note and the Second Landlord Note had a maturity date defined as follows:

The then outstanding Principal Amount shall become due and payable on the earlier to occur of: (i) December 31, 2011; or (ii) the closing of the next equity financing round (the “Equity Event”) completed by the Company (in each case, the "Maturity Date"); provided that; (a) if the Equity Event is in an amount exceeding $1,000,000 but less than $1,500,000, then only 20% of the Principal Amount shall be due and payable; (b) if the Equity Event is in an amount exceeding $1,500,000 but less than $2,000,000, then only 40% of the Principal Amount shall be due and payable; (c) if the Equity Event is in an amount exceeding $2,000,000 but less than $3,000,000, then only 60% of the Principal Amount shall be due and payable; (d) if the Equity Event is in an amount exceeding $3,000,000 but less than $4,000,000, then only 80% of the Principal Amount shall be due and payable; (e) if the Equity Event is in an amount exceeding $4,000,000, then 100% of the Principal Amount shall be due and payable. For any partial Principal Amount paid under (ii) (a) - (ii) (d) above, the balance of the outstanding Principal Amount would continue to be due and payable on the earlier to occur of this (i) or (ii) (a-e) above.  In the event of a partial payment, any subsequent payment resulting from an Equity Event shall be based on the percentage of the original Principal Amount and not a percentage of the outstanding Principal Amount after a partial payment under this maturity provision.

We also issued Sinacola with 163,415 penny warrants pursuant to the 2009 RSA (the “2009 Landlord Warrant”).  The 2009 Landlord Warrant is convertible into 163,415 shares of our common stock, and is exercisable in whole or in part at any time on or before December 31, 2014 at an exercise price of $.01 per share.  In addition, we agreed to modify that certain prior warrant issued to Sinacola on August 23, 2007 (the “2007 Landlord Warrant”).  The 2007 Landlord Warrant provided for Sinacola to purchase 50,000 shares of common stock on or before March 1, 2012 at an exercise price of $2.00 per share.  Pursuant to the 2009 RSA the exercise price of the 2007 Landlord Warrant was modified to $1.00 per share, while all other terms and conditions remained the same. The 2007 Landlord Warrant expired unexercised.

In accordance with ASC 470-20, Debt with conversions and other options, the proceeds from the First Landlord Note and the Second Landlord Note 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 recorded the relative fair value of the warrant issued to First Landlord Note in the amount of $80,521 as a debt discount upon issuance, and amortized this debt discount as interest expense over the life of the note.  Additionally, as a result of issuing the warrant with the subordinated convertible promissory note, a beneficial conversion option was recorded as a debt discount reflecting the incremental conversion option intrinsic value benefit of $44,479, at the time of issuance provided to the holder of the note, which was also amortized as interest expense over the life of the note. We recorded interest expense in the amounts of $0 and $58,854 for the years ended December 31, 2012 and December 31, 2011, respectively, in connection with the First Landlord Note. We recorded the relative fair value of the warrant issued to Second Landlord Note in the amount of $81,428 as a debt discount upon issuance, and amortized this debt discount as interest expense over the life of the note.  Additionally, as a result of issuing the warrant with the subordinated convertible promissory note, a beneficial conversion option was recorded as a debt discount reflecting the incremental conversion option intrinsic value benefit of $39,292, at the time of issuance provided to the holder of the note, which was also amortized as interest expense over the life of the note. We recorded interest expense in the amounts of $0 and $56,839 for the years ended December 31, 2012 and December 31, 2011, respectively, in connection with the Second Landlord Note.

Conversion of First Landlord Note and Second Landlord Note into Common Stock: On May 3, 2012, we received fully executed agreements documenting the extension of the maturities of the First Landlord Note and the Second Landlord Note, and the conversion of these two notes into common stock.

The agreements received on May 3, 2012 provide inter alia, for the following:

(1) With an effective date of March 30, 2012 the First Landlord Note was converted into 125,000 restricted shares of our common stock at a conversion price of $1.00 per share, in accordance with the conversion provisions of the First Landlord Note;

(2) With an effective date of March 30, 2012 the Second Landlord Note was converted into 84,271 restricted shares of our common stock at a conversion price of $1.50 per share, in accordance with the conversion provisions of the Second Landlord Note; and

(3) With an effective date of May 3, 2012, upon receipt of the fully executed agreements our landlord was issued with 21,819 restricted shares of our common stock for no additional consideration.

Third Landlord Note; Fourth Landlord Note:

On December 31, 2010 we entered into a second Rent Satisfaction Agreement (the “2010 RSA”) with our landlord, Sinacola. In terms of the 2010 RSA, all of our outstanding rent obligations for the 2010 financial year under our lease agreement, up to and including December 31, 2010 including, but not limited to, base rent, deferred rent, and our share of operating costs, are satisfied in full.

We issued Sinacola two Promissory Notes pursuant to the 2010 RSA, as follows:

Third Landlord Note:  The first note (the “Third Landlord Note”) is a subordinated convertible note in the principal amount of $110,000. The Third Landlord Note carries no interest and is convertible, at Sinacola’s option, into the common stock of the Company at an exercise price of $1.00 per common share on the maturity date.

Fourth Landlord Note:  The second note (the “Fourth Landlord Note”) is a subordinated convertible note in the principal amount of $110,715. The Fourth Landlord Note carries no interest and is convertible into the common stock of the Company at an exercise price of $1.50 per common share on the maturity date.  However, if the common stock has traded at $1.50 or above for four (4) consecutive weeks on a nationally recognized market (based on daily closing prices) then the Fourth Landlord Note is convertible at the Company’s option.

Maturity Date – Each of the Third Landlord Note and the Fourth Landlord Note had a maturity date of October 31, 2012.

We also issued Sinacola with 143,465 penny warrants pursuant to the 2010 RSA (the “2010 Landlord Warrant”).  The 2010 Landlord Warrant is convertible into 143,465 shares of our common stock, and is exercisable in whole or in part at any time on or before December 31, 2015 at an exercise price of $.01 per share.

In accordance with ASC 470-20, Debt with conversions and other options, the proceeds from the Third Landlord Note and the Fourth Landlord Note 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 recorded the relative fair value of the warrant issued pursuant to the Third Landlord Note in the amount of $70,853 as a debt discount upon issuance, and amortized this debt discount as interest expense over the life of the note.  Additionally, as a result of issuing the warrant with the subordinated convertible promissory note, a beneficial conversion option was recorded as a debt discount reflecting the incremental conversion option intrinsic value benefit of $39,147, at the time of issuance provided to the holder of the note, which was also amortized as interest expense over the life of the note. We recorded interest expense in the amounts of $50,000 and $60,000 for the years ended December 31, 2012 and December 31, 2011, respectively, in connection with the Third Landlord Note.  We recorded the relative fair value of the warrant issued pursuant to the Fourth Landlord Note in the amount of $71,314 as a debt discount upon issuance, and amortized this debt discount as interest expense over the life of the note.  Additionally, as a result of issuing the warrant with the subordinated convertible promissory note, a beneficial conversion option was recorded as a debt discount reflecting the incremental conversion option intrinsic value benefit of $34,409, at the time of issuance provided to the holder of the note, which was also amortized as interest expense over the life of the note. We recorded interest expense in the amounts of $48,056 and $57,667 for the years ended December 31, 2012 and December 31, 2011, respectively, in connection with the Fourth Landlord Note.

Fifth Landlord Note; Sixth Landlord Note:

On March 23, 2011 we entered into a third rent satisfaction agreement (the “2011 RSA”) with our landlord, Sinacola. In terms of the 2011 RSA, certain of our rent obligations for the period January 1, 2011 through June 30, 2011 under our lease agreement, including base rent and deferred rent, are satisfied in full.

We issued Sinacola two Promissory Notes pursuant to the 2011 RSA, as follows:

Fifth Landlord Note:  The first note (the “Fifth Landlord Note”) is a subordinated convertible note in the principal amount of $50,000. The Fifth Landlord Note carries no interest and is convertible, at Sinacola’s option, into the common stock of the Company at an exercise price of $1.00 per common share on the maturity date.

Sixth Landlord Note:  The second note (the “Sixth Landlord Note”) is a subordinated convertible note in the principal amount of $50,000. The Sixth Landlord Note carries no interest and is convertible into the common stock of the Company at an exercise price of $1.50 per common share on the maturity date.

However, if the common stock has traded at $1.50 or above for four (4) consecutive weeks on a nationally recognized market (based on daily closing prices) then the Sixth Landlord Note is convertible at the Company’s option.

Maturity Date – Each of the Fifth Landlord Note and the Sixth Landlord Note has a maturity date of June 30, 2013.

We also issued Sinacola with 65,000 penny warrants pursuant to the 2011 RSA (the “2011 Landlord Warrant”).  The 2011 Landlord Warrant is convertible into 65,000 shares of our common stock, and is exercisable in whole or in part at any time on or before March 23, 2016 at an exercise price of $.01 per share.

In accordance with ASC 470-20, Debt with conversions and other options, the proceeds from the Fifth Landlord Note and the Sixth Landlord Note 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 recorded the relative fair value of the warrant issued in connection with the Fifth Landlord Note in the amount of $32,207 as a debt discount upon issuance, and we amortize this debt discount as interest expense over the life of the note.  Additionally, as a result of issuing the warrant with the subordinated convertible promissory note, a beneficial conversion option was recorded as a debt discount reflecting the incremental conversion option intrinsic value benefit of $17,793, at the time of issuance provided to the holder of the note, which we also amortize as interest expense over the life of the note. We recorded interest expense in the amounts of $25,000 and $19,306 for the years ended December 31, 2012 and December 31, 2011, respectively in connection with the Fifth Landlord Note.  We recorded the relative fair value of the warrant issued in connection with the Sixth Landlord Note in the amount of $32,207 as a debt discount upon issuance, and we amortize this debt discount as interest expense over the life of the note.  Additionally, as a result of issuing the warrant with the subordinated convertible promissory note, a beneficial conversion option was recorded as a debt discount reflecting the incremental conversion option intrinsic value benefit of $15,540, at the time of issuance provided to the holder of the note, which we also amortize as interest expense over the life of the note. We recorded interest expense in the amounts of $23,873 and $18,436 for the years ended December 31, 2012 and December 31, 2011, respectively in connection with the Sixth Landlord Note.

Seventh Landlord Note; Eighth Landlord Note:

On August 15, 2011 we entered into a fourth rent satisfaction agreement (the “Second 2011 RSA”) with our landlord, Sinacola. In terms of the Second 2011 RSA, certain of our rent obligations for the period July 1, 2011 through December 31, 2011 under our lease agreement, including base rent and deferred rent, are satisfied in full.

We issued Sinacola two Promissory Notes pursuant to the Second 2011 RSA, as follows:

Seventh Landlord Note:  The first note (the “Seventh Landlord Note”) is a subordinated convertible note in the principal amount of $50,050. The Seventh Landlord Note carries no interest and is convertible, at Sinacola’s option, into the common stock of the Company at an exercise price of $1.00 per common share on the maturity date.

Eighth Landlord Note:  The second note (the “Eighth Landlord Note”) is a subordinated convertible note in the principal amount of $50,050. The Eighth Landlord Note carries no interest and is convertible into the common stock of the Company at an exercise price of $1.50 per common share on the maturity date.  However, if the common stock has traded at $1.50 or above for four (4) consecutive weeks on a nationally recognized market (based on daily closing prices) then the Eighth Landlord Note is convertible at the Company’s option.

Maturity Date – Each of the Seventh Landlord Note and the Eighth Landlord Note has a maturity date of November 30, 2013.

We also issued Sinacola with 65,065 penny warrants pursuant to the Second 2011 RSA (the “Second 2011 Landlord Warrant”).  The Second 2011 Landlord Warrant is convertible into 65,065 shares of our common stock, and is exercisable in whole or in part at any time on or before August 15, 2016 at an exercise price of $.01 per share.

In accordance with ASC 470-20, Debt with conversions and other options, the proceeds from the Seventh Landlord Note and the Eighth Landlord Note 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 recorded the relative fair value of the warrant issued in connection with the Seventh Landlord Note in the amount of $32,223 as a debt discount upon issuance, and we amortize this debt discount as interest expense over the life of the note.  Additionally, as a result of issuing the warrant with the subordinated convertible promissory note, a beneficial conversion option was recorded as a debt discount reflecting the incremental conversion option intrinsic value benefit of $17,827, at the time of issuance provided to the holder of the note, which we also amortize as interest expense over the life of the note. We recorded interest expense in the amounts of $21,840 and $6,370 for the years ended December 31, 2012 and December 31, 2011, respectively, in connection with the Seventh Landlord Note.  We recorded the relative fair value of the warrant issued to Eighth Landlord Note in the amount of $32,223 as a debt discount upon issuance, and we amortize this debt discount as interest expense over the life of the note.  Additionally, as a result of issuing the warrant with the subordinated convertible promissory note, a beneficial conversion option was recorded as a debt discount reflecting the incremental conversion option intrinsic value benefit of $15,540, at the time of issuance provided to the holder of the note, which is also amortized as interest expense over the life of the note. We recorded interest expense in the amounts of $20,842 and $6,079 for the years ended December 31, 2012 and December 31, 2011, respectively in connection with the Eighth Landlord Note.

We determined the fair values of the common stock warrants issued in connection with convertible notes as at the time of issuance using the Black-Scholes option-pricing model with the following assumptions:

						Fair value assumptions
Issue Date	Activity Description	Number of Warrants  issued		Warrants' Fair Value at Date of Issuance		Expected  remaining  warrant terms  (years)		Risk-free  interest rate			Volatility
4/15/2008	Enter into $750,000 subordinated convertible promissory note		350,000	$	346,936		5		2.68	%		37	%
12/31/2008	Enter into a total of $581,050 subordinated convertible promissory note and senior convertible promissory note		280,485	$	277,889		5		1.55	%		50	%
6/30/2009	Enter into $115,850 senior convertible promissory note		48,358	$	47,932		5		2.54	%		55	%
12/10/2009	Enter into $125,000 subordinated convertible promissory note		81,250	$	80,521		5		2.19	%		55	%
12/10/2009	Enter into $126,407 subordinated convertible promissory note		82,165	$	81,428		5		2.19	%		55	%
12/10/2009	Enter into $100,000 subordinated convertible promissory note		100,000	$	25,535		5		2.19	%		55	%
12/31/2009	Enter into $91,800 senior convertible promissory note		52,640	$	52,180		5		2.69	%		55	%
3/26/2010	Enter into $270,000 subordinated convertible promissory note		270,000	$	70,267		5		2.59	%		55	%
3/31/2010	Enter into a total of $45,000 senior convertible promissory note		21,000	$	20,815		5		2.55	%		54	%
6/30/2010	Enter into $45,000 senior convertible promissory note		21,000	$	20,808		5		1.79	%		19	%
9/30/2010	Enter into $45,000 senior convertible promissory note		21,000	$	20,803		5		1.27	%		20	%
12/31/2010	Enter into $81,164 senior convertible promissory note		37,997	$	37,653		5		2.01	%		21	%
12/31/2010	Enter into $110,000 subordinated convertible promissory note		71,500	$	70,853		5		2.01	%		21	%
12/31/2010	Enter into $110,715 subordinated convertible promissory note		71,965	$	71,314		5		2.01	%		21	%
3/23/2011	Enter into $50,000 subordinated convertible promissory note		32,500	$	32,207		5		2.07	%		19	%
3/23/2011	Enter into $50,000 subordinated convertible promissory note		32,500	$	32,207		5		2.07	%		19	%
3/31/2011	Enter into $91,537 senior convertible promissory note		42,872	$	42,489		5		2.24	%		19	%
6/30/2011	Enter into $229,705 senior convertible promissory note		107,811	$	106,824		5		1.76	%		25	%
8/15/2011	Enter into $50,050 subordinated convertible promissory note		32,533	$	32,223		5		0.99	%		20	%
8/15/2011	Enter into $50,050 subordinated convertible promissory note		32,533	$	32,223		5		0.99	%		20	%
9/30/2011	Enter into $74,800 senior convertible promissory note		35,006	$	34,672		5		0.96	%		22	%
12/31/2011	Enter into $45,000 senior convertible promissory note		21,000	$	20,799		5		0.89	%		26	%
		Total		$	1,558,578

Other subordinated convertible notes payable issued: During 2012 we issued the following subordinated convertible notes payable:

On January 29, 2012 we entered into a note purchase agreement with the M. Nyewe Trust. The agreement provides that the Nyewe Trust purchase a subordinated convertible promissory note (the “Nyewe Trust Note”) from us for $100,000 in cash. The salient terms of the note are as follows:

Principal amount: $100,000

Interest rate: 8% per annum

Maturity: The then outstanding Principal Amount, together with accrued and unpaid interest thereon, or the optional conversion shares (“Optional Conversion Shares”) as the case may be, is due on the 360th day subsequent to January 29, 2012 (the "Maturity Date").

Conversion: The Note is convertible, at the option of either the Company or the Nyewe Trust, at any time on or prior to the Maturity Date. All or any portion of the then outstanding Principal Amount and accrued but unpaid interest of the Note may be converted (the "Optional Conversion") into a number of shares of the Company’s common stock (the "Optional Conversion Shares") equal to the amount of the then outstanding Principal Amount plus the then accrued but unpaid interest to be converted, divided by the conversion price, which is $1.50 per Optional Conversion Share.

Conversion of the Nyewe Trust Note: On June 25, 2012 we received a conversion notice from the M. Nyewe Trust, converting the entire principal and accrued interest totaling $103,156 of Nyewe Trust Note into common stock at a conversion price of $1.50 per share. We issued 68,770 shares of our common stock pursuant to the conversion.

Other subordinated convertible notes payable converted to common stock: During 2012 a total of $60,622 in notes payable issued in prior periods were converted into 66,320 shares of our common stock at an aggregate conversion price of $.91 per share.

The following summarizes notes converted to common stock during 2012:

		Note amount
	Note holder	prior to conversion		Stated interest			Principal		Amount of note converted			Conversion price (per share)			Effective date of conversion	Common stock issued (shares)
1	Sinacola, First Landlord Note	$	125,000		0	%	$	125,000	$	125,000		$	1.00		3/31/2012		125,000
2	Sinacola, Second Landlord Note	$	126,407		0	%	$	126,407	$	126,407		$	1.50		3/31/2012		84,271
3	Sinacola landlord note 1/2	$	-		0	%	$	-	$	-		n/a			5/3/2012		21,819	1
4	Sullivan Trust	$	25,000		8	%	$	25,000	$	25,631	2	$	1.00		4/10/2012		25,622
5	M. Nyewe Trust	$	100,000		8	%	$	100,000	$	103,156	3	$	1.50		6/25/2012		68,771
6	Yisheng Yao	$	15,000		0	%	$	15,000	$	15,000		$	0.86		7/12/2012		17,442
7	Tim Hutton	$	20,000		0	%	$	20,000	$	20,000	4	$	0.86		7/12/2012		23,256
8	Agave Resources, LLC.	$	750,000		0	%	$	750,000	$	750,000	5	$	1.50		12/31/2012		500,000
9	JTR Investments, Limited	$	1,268,656		0	%	$	1,268,656	$	1,268,656	6	$	1.50		12/31/2012		845,771
	Totals	$	2,430,063				$	2,430,063	$	2,433,850		$	1.42	7			1,711,952

1. Common stock issued to Sinacola for no consideration pursuant to the conversions of the First Landlord Note and Second Landlord Note.

2. Includes principal and accrued but unpaid interest converted.

3. Includes principal and accrued but unpaid interest converted.

4. Tim Hutton is the spouse of Vicki Jones, a director of us. Please see Note 10 - "Related Party Transactions."

5. Agave Resources, LLC is an affiliate of us. Don Reed, President of Agave Resources, LLC is also a director of us. Please see Note 10 - "Related Party Transactions."

6. JTR Investments, Limited is an affiliate of us. Julian Ross, our CEO is also President of JTR Management, LLC, general partner of JTR Investments, Limited. Please see Note 10 - "Related Party Transactions."

7. Aggregate conversion price.

The following table reflects the carrying values of our short-term and long-term notes payable as of December 31, 2012.

	Effective Interest Rate			Principal		Discount		December 31, 2012
Current notes payable
Sinacola, Third Landlord Note		18.18	%		110,000		-		110,000
Sinacola, Fourth Landlord Note		17.36	%		110,715		-		110,715
Sinacola, Fifth Landlord Note		50.00	%		50,000		5,694		44,306
Sinacola, Sixth Landlord Note		47.75	%		50,000		5,438		44,562
Sinacola, Seventh Landlord Note		43.64	%	$	50,050	$	21,840	$	28,210
Sinacola, Eighth Landlord Note		41.64	%		50,050		20,842		29,208
Frisco EDC		12.34	%		44,000		12,412		31,588
Total short-term notes payable				$	464,815	$	66,226	$	398,589
Long-term notes payable
Frisco EDC		12.34	%		104,000		27,928		76,072
Total long-term notes payable				$	104,000	$	27,928	$	76,072
Total short-term and long-term notes payable				$	568,815	$	94,154	$	474,661

The following table reflects the carrying values of our short-term and long-term notes payable as of December 31, 2011.

	Effective Interest Rate			Principal		Discount		December 31, 2011
Current notes payable
JTR, Senior Note		0.02	%	$	1,104,656	$	-	$	1,104,654
Sinacola, First Landlord Note		47.08	%		125,000		-		125,000
Sinacola, Second Landlord Note		44.97	%		126,407		-		126,407
Sinacola, Third Landlord Note		54.55	%	$	110,000	$	50,000	$	60,000
Sinacola, Fourth Landlord Note		52.09	%		110,715		48,056		62,660
Frisco EDC		12.34	%		32,620		6,032		26,588
Related Party Loans		0.00	%		59,750		-		59,750
Total short-term notes payable				$	1,669,148	$	104,088	$	1,565,059
Long-term notes payable
Sinacola, Fifth Landlord Note		38.61	%		50,000		30,694		19,306
Sinacola, Sixth Landlord Note		36.87	%		50,000		29,311		20,689
Sinacola, Seventh Landlord Note		33.20	%		50,050		43,680		6,370
Sinacola, Eighth Landlord Note		31.68	%		50,050		41,684		8,366
Agave, First Note		0.00	%		750,000		-		750,000
JTR, Second Note		0.00	%		250,000		-		250,000
Frisco EDC		12.34	%		154,380		46,720		107,660
Total long-term notes payable				$	1,354,480	$	192,089	$	1,162,390
Total short-term and long-term notes payable				$	3,023,628	$	296,177	$	2,727,449

The following table summarizes our outstanding notes payable as of December 31, 2012 and December 31, 2011:

	December 31, 2012			December 31, 2011
Current portion of notes payable	$	31,588		$	86,338
Current portion of convertible notes payable		367,001			1,478,722
Current portion of notes payable, net	$	398,589		$	1,565,059
Long-term portion of notes payable	$	104,000		$	154,380
Less: Unamortized discount		(27,928	)		(46,720	)
		76,072			107,660
Long-term portion of convertible notes payable	$	-		$	1,200,100
Less: Unamortized discount		-			(145,370	)
		-			1,054,730
Long-term portion of notes payable, net	$	76,072		$	1,162,390

Aggregate maturities of debt are as follows:

As of December 31, 2012:
2013	$	398,589
2014		39,588
2015		36,485
Thereafter		-
Total	$	474,661

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Stock Options and Warrants (Details 3) (Employee Stock Option [Member], USD $)	12 Months Ended
	Dec. 31, 2012
Summary about employee stock options outstanding
Number Outstanding	1,442,916
Number exercisable, Options Exercisable	1,262,916
Range One [Member]
Summary about employee stock options outstanding
Range of Exercise Prices, Lower Range Limit	$ 0.20
Range of Exercise Prices, Upper Range Limit	$ 0.25
Number Outstanding	1,192,488
Weighted average remaining contractual life	1 year 11 months 12 days
Weighted average exercise price	$ 0.25
Number exercisable, Options Exercisable	1,012,488
Weighted average remaining contractual life, Options Exercisable	2 years 2 months 23 days
Weighted average exercise price, Options Exercisable	$ 0.25
Range Two [Member]
Summary about employee stock options outstanding
Range of Exercise Prices, Lower Range Limit	$ 0.50
Range of Exercise Prices, Upper Range Limit	$ 1.00
Number Outstanding	215,753
Weighted average remaining contractual life	1 year 2 months 5 days
Weighted average exercise price	$ 0.82
Number exercisable, Options Exercisable	215,753
Weighted average remaining contractual life, Options Exercisable	1 year 1 month 10 days
Weighted average exercise price, Options Exercisable	$ 0.82
Range Three [Member]
Summary about employee stock options outstanding
Range of Exercise Prices, Upper Range Limit	$ 2.00
Number Outstanding	12,750
Weighted average remaining contractual life	6 months 29 days
Weighted average exercise price	$ 2.00
Number exercisable, Options Exercisable	12,750
Weighted average remaining contractual life, Options Exercisable	1 year 4 months 20 days
Weighted average exercise price, Options Exercisable	$ 2.00
Range Four [Member]
Summary about employee stock options outstanding
Range of Exercise Prices, Upper Range Limit	$ 2.50
Number Outstanding	21,925
Weighted average remaining contractual life	1 year 4 months 20 days
Weighted average exercise price	$ 2.50
Number exercisable, Options Exercisable	21,925
Weighted average remaining contractual life, Options Exercisable	1 year 4 months 20 days
Weighted average exercise price, Options Exercisable	$ 2.50

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Commitments and Contingency (Details 2) (USD $)	Dec. 31, 2012
Machinery and Equipment [Member]
Summary of gross amounts of assets recorded under capital leases by major class, and related accumulated amortization
Gross	$ 916,029
Less accumulated depreciation	(902,965)
Net	13,064
Computer Equipment [Member]
Summary of gross amounts of assets recorded under capital leases by major class, and related accumulated amortization
Gross	3,707
Less accumulated depreciation	(3,707)
Net

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Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2012

Intangible Assets [Abstract]

Carrying values of amortized acquired intangible assets

	December 31, 2012							December 31, 2011
	Gross		Accumulated Amortization and write off			Net		Gross		Accumulated Amortization and write off			Net
Patents	$	613,690	$	(232,866	)	$	380,824	$	610,518	$	(205,694	)	$	404,824
Trademarks	$	45,723	$	(8,069	)	$	37,654	$	45,723	$	(5,379	)	$	40,344
	$	659,413	$	(240,934	)	$	418,479	$	656,241	$	(211,073	)	$	445,168

Summary of estimated future amortization expense of intangible assets

2013	$	29,957
2014		29,957
2015		29,957
2016		29,957
Thereafter		298,652
	$	418,479

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Fair Value Measurements (Details) (USD $)	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Summary of Financial assets and liabilities measured at fair value on a recurring basis
Total cash equivalents	$ 13,514	$ 65,118	$ 39,887
Fair Value, Measurements, Recurring [Member] | Cash [Member]
Summary of Financial assets and liabilities measured at fair value on a recurring basis
Total cash equivalents	13,514	65,118
Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Summary of Financial assets and liabilities measured at fair value on a recurring basis
Total cash equivalents	13,514	65,118
Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Cash [Member]
Summary of Financial assets and liabilities measured at fair value on a recurring basis
Total cash equivalents	13,514	65,118
Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Summary of Financial assets and liabilities measured at fair value on a recurring basis
Total cash equivalents
Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Cash [Member]
Summary of Financial assets and liabilities measured at fair value on a recurring basis
Total cash equivalents
Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Summary of Financial assets and liabilities measured at fair value on a recurring basis
Total cash equivalents
Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Cash [Member]
Summary of Financial assets and liabilities measured at fair value on a recurring basis
Total cash equivalents

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Summary of Significant Accounting Policies (Details 1) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Schedule of stock based compensation expense
Stock based compensation expense	$ 7,999	$ 104,419
Common stock options and warrants issued for services	0	29,354
Total	$ 7,999	$ 133,773

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Segment Information

12 Months Ended

Dec. 31, 2012

Segment Information [Abstract]

SEGMENT INFORMATION

NOTE 14 – 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 and accessories. Our chief operating decision-maker is our Chief Executive Officer. Our Chief Executive Officer reviews financial information presented on a consolidated basis 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:

	Year Ended December 31,
	2012		2011
Product Revenue:
United States - product sales	$	146,797	$	102,658
ROW - product sales		86,680		82,551
ROW - license fees/service revenue		36,220		-
Totals	$	269,697	$	185,209